As filed with the Securities and Exchange Commission on March 15, 2019
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2018
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 1-15170
GlaxoSmithKline plc
(Exact name of Registrant as specified in its charter)
England
(Jurisdiction of incorporation or organization)
980 Great West Road, Brentford, Middlesex TW8 9GS England
(Address of principal executive offices)
Victoria Whyte
Company Secretary
GlaxoSmithKline plc
980 Great West Road
Brentford, TW8 9GS
England
+44 20 8047 5000
company.secretary@gsk.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Name of Each Exchange On Which Registered | |
American Depositary Shares, each representing 2 Ordinary Shares, Par value 25 pence |
New York Stock Exchange | |
3.125% Notes due 2021 | New York Stock Exchange | |
Floating Rate Notes due 2021 | New York Stock Exchange | |
2.850% Notes due 2022 | New York Stock Exchange | |
2.800% Notes due 2023 | New York Stock Exchange | |
3.375% Notes due 2023 | New York Stock Exchange | |
3.625% Notes due 2025 | New York Stock Exchange | |
3.875% Notes due 2028 | New York Stock Exchange | |
5.375% Notes due 2034 | London Stock Exchange | |
6.375% Notes due 2038 | New York Stock Exchange | |
4.200% Notes due 2043 | New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of class)
Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.
Ordinary Shares of Par value 25 pence each | 5,379,067,624 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☒ Yes ☐ 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
Note Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports 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, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act:
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐
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 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 ☒ |
Other ☐ |
If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
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
2 | ||||||
Item 1. Identity of Directors, Senior Management and Advisers |
2 | |||||
2 | ||||||
2 | ||||||
12 | ||||||
13 | ||||||
13 | ||||||
25 | ||||||
26 | ||||||
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Item 11. Quantitative and Qualitative Disclosures About Market Risk |
31 | |||||
Item 12. Description of Securities Other than Equity Securities |
31 | |||||
32 | ||||||
32 | ||||||
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds |
32 | |||||
32 | ||||||
Item 16. [Reserved] |
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34 | ||||||
34 | ||||||
35 | ||||||
Item 16D. Exemptions from the Listing Standards for Audit Committees |
35 | |||||
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
35 | |||||
35 | ||||||
35 | ||||||
43 | ||||||
43 | ||||||
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1
Pursuant to Rule 12b-23(a) of the Securities Exchange Act of 1934, as amended, the information for GlaxoSmithKline plcs Form 20- F for the year ended December 31, 2018 as set out below is being incorporated by reference from the GSK Annual Report 2018 included as exhibit 15.3 to this Form 20-F dated and submitted on March 15, 2019 (the GSK Annual Report 2018).
All references in this Form 20-F to GlaxoSmithKline, the Group, GSK, we or our mean GlaxoSmithKline plc and its subsidiaries; the company means GlaxoSmithKline plc.
References below to major headings include all information under such major headings, including subheadings, unless such reference is a reference to a subheading, in which case such reference includes only the information contained under such subheading.
In addition to the information set out below, the information set forth under the headings Cautionary statement on the inside back cover, Directors Report on page 94, Directors statement of responsibilities on pages 126 to 127, Share capital and control on pages 251 to 252, Financial calendar, Results announcements and Financial reports on page 253, Annual General Meeting 2019 on page 254, Registrar on page 256, ADS Depositary, Glaxo Wellcome and SmithKline Beecham Corporate PEPs, Donating shares to Save the Children, Contacts and Share scam alert page 257, Section 13(r) of the US Securities Exchange Act on page 259 and Glossary of terms on page 271 in each case of the GSK Annual Report 2018 is incorporated by reference.
Notice regarding limitations on Director Liability under English Law
Under the UK Companies Act 2006, a safe harbour limits the liability of Directors in respect of statements in and omissions from certain portions of the GSK Annual Report 2018 incorporated by reference herein, namely the Directors Report (for which see page 94 thereof), the Strategic Report (pages 1 to 64 thereof, portions of which are incorporated by reference as described below) and the Remuneration Report (pages 95 to 124 portions of which are incorporated by reference as described below). These reports have been drawn up and presented in accordance with, and in reliance upon, English company law. Under English law, the Directors would be liable to the company, but not to any third party, if these sections of the GSK Annual Report 2018 contain errors as a result of recklessness or knowing misstatement or dishonest concealment of a material fact, but would not otherwise be liable.
Portions of the GSK Annual Report 2018 incorporated by reference herein contain references to our website. Information on our website or any other website referenced in the GSK Annual Report 2018 is not incorporated into this Form 20-F and should not be considered to be part of this Form 20-F. We have included any website as an inactive textual reference only.
Item 1. | Identity of Directors, Senior Management and Advisers |
Not applicable.
Item 2. | Offer Statistics and Expected Timetable |
Not applicable.
Item 3. | Key Information |
3.A | Selected financial data |
The information set forth under the heading:
| Five year record on pages 229 to 231 (except the heading and the information under the heading Financial results Adjusted on page 230); and |
| Dividends on page 253 |
of the GSK Annual Report 2018 is incorporated herein by reference.
3.B | Capitalization and indebtedness |
Not applicable.
3.C | Reasons for the offer and use of proceeds |
Not applicable.
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3.D | Risk Factors |
Principal risks and uncertainties
The principal risks discussed below are the risks and uncertainties relevant to our business, financial condition and results of operations that may affect our performance and ability to achieve our objectives. The risks below are those that we believe could cause our actual results to differ materially from expected and historical results. During 2018 we have evolved the cycle of management of these risks which helps us Identify, manage and report on our most important risks in a proportionate and consistent way.
We must adapt to and comply with a broad range of laws and regulations which apply to research and development, manufacturing, testing, approval, distribution, sales and marketing of Pharmaceutical, Vaccine and Consumer Healthcare products. These affect not only the cost of product development but also the time required to reach the market and the likelihood of doing so successfully on a continuous basis.
Also, during 2018 we have improved consistency of risk management across the organisation through evolution of our enterprise risk management and reporting cycle.
As rules and regulations change, and governmental interpretation evolves, the nature of a particular risk may change. Changes to certain regulatory regimes may be substantial. Any change in, and any failure to comply with, applicable law and regulations could materially and adversely affect our financial results.
Similarly, our global business exposes us to litigation and government investigations, including but not limited to product liability litigation, patent and antitrust litigation and sales and marketing litigation. Litigation and government investigations, including related provisions we may make for unfavourable outcomes and increases in related costs such as insurance premiums, could materially and adversely affect our financial results.
More detail on the status and various uncertainties involved in our significant unresolved disputes and potential litigation is set out in Note 45, Legal proceedings, on pages 215 to 218 of the GSK Annual Report 2018.
Patient safety
Risk definition
Failure to appropriately collect, review, follow up, or report human safety information (HSI), including adverse events from all potential sources, and to act on any relevant findings in a timely manner.
Risk impact
The risk impact has the potential to compromise our ability to conduct robust safety signal detection and interpretation and to ensure that appropriate decisions are taken with respect to the risk/ benefit profile of our products, including the completeness and accuracy of product labels and the pursuit of additional studies/ analyses, as appropriate. This could lead to potential harm to patients, reputational damage, product liability claims or other litigation, governmental investigation, regulatory action such as fines, penalties or loss of product authorisation.
Context
Pre-clinical and clinical trials are conducted during the development of investigational Pharmaceutical, Vaccine and Consumer Healthcare products to determine the safety and efficacy of the products for use by humans. Notwithstanding the efforts we make to determine the safety of our products through appropriate pre-clinical and clinical trials, unanticipated side effects may become evident only when products are widely introduced into the marketplace. Questions about the safety of our products may be raised not only by our ongoing safety surveillance and post-marketing studies but also by governmental agencies and third parties that may analyse publicly available clinical trial results. Constant vigilance and flexibility is required in order to respond to a varied regulatory environment which continues to evolve and diverge globally.
The Group is currently a defendant in a number of product liability lawsuits, including class actions, that involve significant claims for damages related to our products. Litigation, particularly in the US, is inherently unpredictable. Class actions that seek to sweep together all persons who take our products increase the potential liability. Claims for pain and suffering and punitive damages are frequently asserted in product liability actions and, if allowed, can represent potentially open-ended exposure and thus, could materially and adversely affect the Groups financial results.
Product quality
Risk definition
Failure to comply with current Good Manufacturing Practices (cGMP) or inadequate controls and governance of quality in the supply chain covering supplier standards, manufacturing and distribution of products.
Risk impact
A failure to ensure product quality could have far reaching implications in terms of patient and consumer safety resulting in product launch delays, supply interruptions and product recalls. This would have the potential to do damage to our reputation, as well as result in other regulatory, legal and financial consequences.
Context
Patients, consumers and HCPs trust the quality of our products. Product quality may be influenced by many factors including product and process understanding, consistency of manufacturing components, compliance with GMP, accuracy of labelling, reliability of the external supply chain, and the embodiment of an overarching quality culture. The internal and external environment continues to evolve as new products and new legislation are introduced. Critically, we are addressing the impact of Brexit on our supply chain management and quality oversight between the UK and the EU and are developing and deploying appropriate contingency plans to avoid interruption of supply to patients.
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Financial controls and reporting
Risk definition
Failure to comply with current tax laws or incurring significant losses due to treasury activities; failure to report accurate financial information in compliance with accounting standards and applicable legislation.
Risk impact
Non-compliance with existing or new financial reporting and disclosure requirements, or changes to the recognition of income and expenses, could expose us to litigation and regulatory action and could materially and adversely affect our financial results. Changes in tax laws or in their application with respect to matters such as transfer pricing, foreign dividends, controlled companies, R&D tax credits, taxation of intellectual property or a restriction in tax relief allowed on the interest on debt funding, could impact our effective tax rate. Significant losses may arise from inconsistent application of treasury policies, transactional or settlement errors, or counterparty defaults.
Any changes in the substance or application of the governing tax laws, failure to comply with such tax laws or significant losses due to treasury activities could materially and adversely affect our financial results.
Context
The Group is required by the laws of various jurisdictions to disclose publicly its financial results and events that could materially affect the financial results of the Group. Regulators routinely review the financial statements of listed companies for compliance with new, revised or existing accounting and regulatory requirements. The Group believes that it complies with the appropriate regulatory requirements concerning our financial statements and disclosure of material information including any transactions relating to business restructuring such as acquisitions and divestitures. However, should we be subject to an investigation into potential non-compliance with accounting and disclosure requirements, this may lead to restatements of previously reported results and significant penalties.
Our Treasury group deals in high value transactions, mostly foreign exchange and cash management transactions, on a daily basis. These transactions involve market volatility and counterparty risk.
The Groups effective tax rate reflects rates of tax in the jurisdictions in which the Group operates that are both higher and lower than the UK rate and takes into account regimes that encourage innovation and investment in science by providing tax incentives which, if changed, could affect the Groups tax rate. In addition, the worldwide nature of our operations means that our intellectual property, R&D and manufacturing operations are centered in a number of key locations. A consequence of this is that our cross-border supply routes, necessary to ensure supplies of medicines into numerous end markets, can be complex and result in conflicting claims from tax authorities as to the profits to be taxed in individual countries. Tax legislation itself is also complex and differs across the countries in which we operate. As such, tax risk can also arise due to differences in the interpretation of such legislation. The tax charge included in our financial statements is our best estimate of tax liability pending audits by tax authorities.
We expect there to be continued focus on tax reform in 2019 and future years driven by initiatives of the Organisation for Economic Cooperation & Development to address the taxation of the digital economy and European Commission initiatives including the use of fiscal state aid investigations. Together with domestic initiatives around the world, these may result in significant changes to established tax principles and an increase in tax authority disputes. These, regardless of their merit or outcomes, can be costly, divert management attention and may adversely impact our reputation and relationship with key stakeholders.
Anti-bribery and corruption (ABAC)
Risk definition
Failure of GSK employees, consultants and third parties to comply with our Anti-bribery & corruption (ABAC) principles and standards, as well as with all applicable legislation.
Risk impact
Failure to mitigate this risk could expose the Group and associated persons to governmental investigation, regulatory action, and civil and criminal liability and may compromise the Groups ability to supply its products under certain government contracts. In addition to legal and financial penalties, a failure to prevent bribery through complying with ABAC legislation and regulations could have substantial implications for the reputation of the company, the credibility of senior leaders, and an erosion of investor confidence in our governance and risk management.
Context
We are exposed to bribery and corruption risk through our global business operations. In some markets, the government structure and the rule of law are less developed, and this has a bearing on our bribery and corruption risk exposure. In addition to the global nature of our business, the healthcare sector by its very nature maintains relationships with government bodies, is highly competitive and subject to regulation. This increases the instances where we are exposed to bribery and corruption risk.
The Group has been subject to a number of ABAC inquiries. We reached a resolution with the US authorities in 2016 regarding their ABAC inquiry, following which we were subject to a self-monitoring arrangement. The self-monitorship concluded in September 2018. Government investigations regarding our China and other business operations are ongoing. These investigations are discussed further in Note 45, Legal proceedings on pages 215 to 218 of the GSK Annual Report 2018.
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Commercial practices
Risk definition
Failure to engage in commercial activities that are consistent with the letter and spirit of the law, industry, or the Groups requirements relating to marketing and communications about our medicines and associated therapeutic areas; appropriate interactions with healthcare professionals (HCPs) and patients; and legitimate and transparent transfer of value.
Risk impact
Failure to manage risks related to commercial practices could materially and adversely affect our ability to grow a diversified global business and deliver more products of value for patients and consumers. Failure to comply with applicable laws, rules and regulations may result in governmental investigation, regulatory action and legal proceedings brought against the Group by governmental and private plaintiffs which could result in government sanctions, and criminal and/or financial penalties. Failure to provide accurate and complete information related to our products may result in incomplete awareness of the risk/benefit profile of our products and possibly suboptimal treatment of patients and consumers.
Any practices that are found to be misaligned with our values could also result in reputational harm and dilute trust established with external stakeholders.
Context
We operate on a global basis in an industry that is both highly competitive and highly regulated. Our competitors may make significant product innovations and technical advances and may intensify price competition. In light of this competitive environment, continued development of commercially viable new products and the development of additional uses for existing products that reflect insights which help ensure those products address the needs of patients/consumers, HCPs, and payers are critical to achieve our strategic objectives.
As other pharmaceutical, vaccine and consumer companies, we face downward price pressure in major markets, declining emerging market growth, and negative foreign exchange impact.
Developing new Pharmaceutical, Vaccine and Consumer Healthcare products is a costly, lengthy and an uncertain process. A product candidate may fail at any stage, including after significant economic and human resources have been invested. Our competitors products or pricing strategies, or any failure on our part to develop commercially successful products, or to develop additional uses for existing products, could materially and adversely affect our ability to achieve our strategic objectives.
We are committed to the ethical and responsible commercialisation of our products to support our mission to improve the quality of human life by enabling people to do more, feel better, and live longer. To accomplish this mission, we engage the healthcare community in various ways to provide important information about our medicines. Promotion of approved products seeks to ensure that HCPs globally have access to information they need, that patients and consumers have access to the information and products they need and that products are prescribed, recommended or used in a manner that provides the maximum healthcare benefit to patients and consumers. We are committed to communicating information related to our approved products in a responsible, legal and ethical manner.
Privacy
Risk definition
The failure to collect, secure, use and destroy personal information (PI) in accordance with applicable data privacy laws.
Risk impact
Non-compliance can lead to harm to individuals (e.g. financial loss, distress, prejudice) and GSK (e.g. fines, management time, operational inefficiency, out of pocket costs, and reputational damage). It can also damage trust between GSK and individuals, communities, business partners and government authorities.
The General Data Protection Regulation (GDPR) increased the enforcement powers of EU supervisory authorities, including by allowing them to impose fines of up to 4% of global revenue, and to require the suspension of processing PI in certain circumstances. GDPR also gives individuals the right to bring collective legal actions against GSK for failure to comply with data privacy laws.
Context
Data Privacy laws are diverse, with limited harmonisation, despite Europes adoption of GDPR. In many countries in which GSK operates, local data privacy laws govern how GSK can collect and use PI. It is challenging for multi-nationals to standardise their approach to compliance with data privacy laws due to the high-level of local variation. Governments are enforcing compliance with data privacy laws more rigorously. There is an increasing focus on the ethical use of PI, over and above compliance with data privacy laws, and individuals are increasingly aware of their rights under data privacy laws.
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Research practices
Risk definition
Failure to adequately conduct ethical and sound preclinical and clinical research. In addition, failure to engage in scientific activities that are consistent with the letter and spirit of the law, industry, or the Groups requirements, and failure to secure adequate patent protection for GSKs products.
Risk impact
The impacts of the risk include harm to human subjects, reputational damage, failure to obtain the necessary regulatory approvals for our products, governmental investigation, legal proceedings brought against the Group by governmental and private plaintiffs (product liability suits and claims for damages), loss of revenue due to inadequate patent protection or inability to supply GSK products, and regulatory action such as fines, penalties, or loss of product authorisation. Any of these consequences could materially and adversely affect our financial results and cause loss of trust from our customers and patients.
Context
Research relating to animals can raise ethical concerns. While we attempt to address this proactively, animal studies remain a vital part of our research. In many cases, they are the only method that can be used to investigate the effects of a potential new medicine in a living body before it is studied in humans. Animal research can provide critical information about the causes of diseases and how they develop. Nonetheless, we are continually seeking ways in which we can minimise our use of animals in research, whilst complying with regulatory requirements.
Clinical trials in healthy volunteers and patients are used to assess and demonstrate an investigational products efficacy and safety or further evaluate the product once it has been approved for marketing. We also work with human biological samples. These samples are fundamental to the discovery, development and safety monitoring of our products.
The integrity of our data is essential to success in all stages of the research data lifecycle: design, generation, recording and management, analysis, reporting, storage and retrieval. Our research data is governed by legislation and regulatory requirements. Research data and supporting documents are core components at various stages of pipeline progression decision-making and form the content of regulatory submissions, publications and patent filings. Poor data integrity can compromise our research efforts and negatively impact company reputation.
There are innate complexities and interdependencies required for regulatory filings, particularly given our global research and development footprint. Continually changing and increasingly stringent submission requirements continue to increase the complexity of worldwide product registration.
Scientific engagement (SE), defined as the interaction and exchange of information between GSK and external communities to advance scientific and medical understanding, including the appropriate development and use of our products, is an essential part of scientific discourse. Such non-promotional engagement with external stakeholder groups is vital to GSKs mission and necessary for scientific and medical advance. SE activities are essential but present legal, regulatory, and reputational risk if the sharing of data, invited media coverage or payments to HCPs have, or are perceived to have, promotional intent.
A wide variety of biological materials are used by GSK in discovery, research and development phases. Through the Convention on Biological Diversity (CBD) and the Nagoya Protocol, the international community has established a global framework regulating access to, and use of, genetic resources of non-human origin in Research and Development (R&D). We support the principles of access and benefit sharing to genetic resources as outlined in the CBD and the Nagoya Protocol, recognising the importance of appropriate, effective and proportionate implementation measures at national and regional levels.
Patent rights play an important role in providing GSK with a competitive advantage in the market. Any loss of patent protection in a market for GSKs products developed through our R&D, including reducing the availability or scope of patent rights, could materially and adversely affect our financial results in that market. Absence of adequate patent or data exclusivity protection, which could lead to, for example, competition from manufacturers of generic pharmaceutical products, could limit the opportunity to rely on such markets for future sales growth for our products, which could also materially and adversely impact our financial results. Following expiration of certain intellectual property rights, a generic manufacturer may lawfully produce a generic version of a product. Introduction of generic products typically leads to a rapid and dramatic loss of sales and reduces our revenues and margins for our proprietary products.
Third party oversight risk (TPO)
Risk definition
Failure to maintain adequate governance and oversight over third party relationships and failure of third parties to meet their contractual, regulatory, confidentiality or other obligations.
Risk impact
Failure to adequately manage third party relationships could result in business disruption and exposure to risks ranging from sub-optimal contractual terms and conditions, to severe business and legal sanctions and/or significant reputational damage. Any of these consequences could materially and adversely affect our business operations and financial results.
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Context
Third parties are critical to our business delivery and are an integral part of the solution to meeting our business objectives. We rely on third parties, including suppliers, advisors, distributors, individual contractors, licensees, and other pharmaceutical and biotechnology collaboration partners for discovery, manufacture, and marketing of our products and for supporting other important business processes.
These business relationships present a material risk. For example, we share critical and sensitive information such as marketing plans, clinical data, and employee data with specific third parties who are conducting the relevant outsourced business activities. Inadequate protection or misuse of this information by third parties could have significant business impact. Similarly, we use distributors and agents in a range of activities such as promotion and tendering which have inherent risks such as inappropriate promotion or corruption. Insufficient internal compliance and controls by the distributors could affect our reputation. These risks are further increased by the complexities of working with large numbers of third parties across a diverse geographical spread.
Environment, health & safety and sustainability (EHS&S)
Risk definition
Failure to manage environment, health & safety and sustainability (EHS&S) risks in line with our objectives and policies and with relevant laws and regulations.
Risk impact
Failure to manage EHS&S risks could lead to significant harm to people, the environment and communities in which we operate, fines, failure to meet stakeholder expectations and regulatory requirements, litigation or regulatory action, and damage to the Groups reputation, which could materially and adversely affect our financial results.
Context
We are subject to health, safety and environmental laws of various jurisdictions. These laws impose duties to protect people, the environment, and the communities in which we operate, as well as potential obligations to remediate contaminated sites. We have also been identified as a potentially responsible party under the US Comprehensive Environmental Response Compensation and Liability Act at a number of sites for remediation costs relating to our use or ownership of such sites in the US. Failure to manage these environmental risks properly could result in litigation, regulatory action and additional remedial costs that may materially and adversely affect our financial results. See Note 45 to the financial statements, Legal proceedings, for a discussion of the environmental related proceedings in which we are involved. We routinely accrue amounts related to our liabilities for such matters.
Information security
Risk definition
The risk to GSK business activities if information becomes disclosed to those not authorised to see it, or if information or systems fail to be available or are corrupted, typically because of cybersecurity threats, although accident or malicious insider-action may be contributory causes.
Risk impact
Failure to adequately protect critical and sensitive systems and information may result in loss of commercial or strategic advantage and could materially affect our ongoing business operations, such as scientific research, clinical trials and manufacturing and supply chain activities.
Context
We rely on critical and sensitive systems and data, such as corporate strategic plans, intellectual property, manufacturing systems and trade secrets. There is the potential that our computer systems or information may be exposed to misuse or unauthorised disclosure.
We believe that the cyber security incidents that we have experienced to date have not resulted in significant disruptions to our operations and have not had a significant adverse effect on our results of operations, or on third parties. However, as the threats evolve we cannot provide assurance that our significant efforts in protecting and monitoring our systems and information will always be successful in preventing compromise or disruption in future. They increasingly involve highly-resourced threat actors such as nation-states and organised criminals. Combined with the size and complexity of our IT systems and those of our supply chain partners (including outsourced operations), this means that our systems and information have been, and are expected to continue to be, the subject of cyber-attacks of various types.
Supply continuity
Risk definition
Failure to deliver a continuous supply of compliant finished product; inability to respond effectively to a crisis incident in a timely manner to recover and sustain critical operations, including key supply chains.
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Risk impact
We recognise that failure to supply our products can adversely impact consumers and patients who rely on them. A material interruption of supply or exclusion from healthcare programmes could expose us to litigation or regulatory action and financial penalties that could adversely affect the Groups financial results. The Groups international operations, and those of its partners, expose our workforce, facilities, operations and information technology to potential disruption from natural events (e.g. storm, earthquake), man-made events (e.g. civil unrest, terrorism), and global emergencies (e.g. Ebola outbreak, flu pandemic). It is important that we have robust crisis management and recovery plans in place to manage such events.
Context
Our supply chain operations are subject to review and approval by various regulatory agencies that effectively provide our license to operate. Failure by our manufacturing and distribution facilities or by suppliers of key services and materials could lead to litigation or regulatory action such as product recalls and seizures, interruption of supply, delays in the approval of new products, and suspension of manufacturing operations pending resolution of manufacturing or logistics issues.
We rely on materials and services provided by third party suppliers to make our products, including active pharmaceutical ingredients (API), antigens, intermediates, commodities, and components for the manufacture and packaging of Pharmaceutical, Vaccine and Consumer Healthcare products. Some of the third party services procured, such as services provided by contract manufacturing and clinical research organisations to support development of key products, are important to ensure continuous operation of our business.
Although we undertake risk mitigation we recognise that certain events could nevertheless still result in delays or service interruptions. We use effective crisis management and business continuity planning to provide for the health and safety of our people and to minimise impact to us, by maintaining functional operations following a natural or man-made disaster, or a public health emergency.
Risks associated with the Consumer Healthcare Joint Venture with Pfizer
Completion of the transaction with Pfizer is subject to the satisfaction (or waiver, where applicable) of a number of conditions which, if not satisfied, may result in the transaction not proceeding and, in certain circumstances, could also result in the payment by GSK of a break fee
Completion of the transaction between GSK and Pfizer to form the Consumer Healthcare Joint Venture (the Transaction) is subject to the satisfaction (or waiver, where applicable) of a number of conditions on or before September 30, 2019 (which date may be extended by either party to December 31, 2019 or March 31, 2020 in the case of the conditions relating to the receipt of antitrust clearances), including:
| the approval of the resolution in respect of the Transaction by GSKs shareholders at the General Meeting of shareholders; |
| the receipt of various antitrust clearances in respect of the Transaction, including merger clearances by the EU Commission, expiry of any applicable waiting periods under the HSR Act and receipt of various other antitrust approvals; |
| there being no governmental orders restraining or otherwise prohibiting the Transaction; |
| the other partys representations and warranties generally being true and correct as at completion of the Transaction, except to the extent that any failure to be true and correct (individually or in the aggregate) would not have a material adverse effect in relation to that partys respective contributed business; and |
| each of GSK and Pfizer having performed and complied in all material respects with its respective pre-closing covenants. |
There is no guarantee that these (or any other) conditions will be satisfied (or waived, if applicable). If any of the conditions are not satisfied (or waived, if applicable), the Transaction may not complete. If the Transaction fails to complete, the anticipated benefits of the Transaction will not be achieved and GSK would nonetheless have incurred costs in connection with the Transaction. In certain circumstances where the condition relating to the approval by GSKs shareholders of the shareholders resolution in respect of the Transaction is not satisfied, GSK may also be required to pay a break fee of $900 million to Pfizer by way of compensation.
The terms on which antitrust and regulatory approvals are provided may jeopardize or delay the Transaction, result in additional expenditure and/or reduce the anticipated benefits of the Transaction
As a condition to their clearance of the Transaction, antitrust and regulatory authorities may require the modification of the terms of the Transaction or divestitures of parts of the GSK consumer healthcare business and/or the Pfizer consumer healthcare business or may otherwise place restrictions on the conduct of the business of the GSK Group following the acquisition of the Pfizer consumer healthcare business (the Enlarged Group). In addition, GSK may give undertakings,
8
which may include proposing divestments or excluding certain assets from the Transaction, in order to obtain such clearances. Any such modifications, divestments or restrictions could jeopardise or delay completion of the Transaction, impose significant additional costs on the Enlarged Group and/or may reduce the anticipated benefits of the Transaction, any of which could materially and adversely affect the financial results of the Enlarged Group.
The outcome of the various antitrust and regulatory clearance applications is not yet known and is not within the control of GSK or Pfizer. As a result, there can be no certainty or assurance as to the outcome of such applications or that any such applications will be successful. In the event that antitrust and regulatory approvals are not received in each jurisdiction in which they are required, the Transaction may not be consummated either in that specific jurisdiction or, in certain circumstances, at all.
In addition, GSK and Pfizer are both obliged to take all actions and do all things necessary under applicable antitrust laws to consummate the Transaction. Without limiting the generality of this obligation, there is no limit on the number or value of any divestitures, undertakings or commitments that GSK may be required under the Stock and Asset Purchase Agreement with Pfizer to give in order to ensure that all antitrust and regulatory approvals required in connection with the Transaction are obtained. Any such divestitures, undertakings or commitments could reduce the anticipated benefits of the Transaction, including the realization of anticipated synergies, and could materially and adversely affect the results and operations of the Enlarged Group.
The Enlarged Group may experience difficulties in integrating the Pfizer consumer healthcare business with the GSK consumer healthcare business
The future prospects of the Enlarged Group will, in part, be dependent upon the Enlarged Groups ability to integrate the Pfizer consumer healthcare business with the existing GSK consumer healthcare business, and the ability of the Enlarged Group to realize the anticipated benefits and cost savings from combining the respective businesses. Some of the potential challenges relating to integration may not become known until after completion of the Transaction.
The key potential difficulties in integrating the businesses include the following:
| the complexity of transferring employees and assets (including intellectual property, third party contracts, real estate and marketing authorizations and other licenses/permits) and consolidating operations, infrastructure, procedures, systems, facilities, services and policies across many different countries, jurisdictions, regulatory systems and business cultures; |
| maintaining employee engagement and retaining and incentivizing key employees; |
| the diversion of management time and resources away from the day-to-day operations of the Group; |
| ensuring readiness upon completion of the Transaction and limiting disruption to the ongoing businesses of the Enlarged Group, including minimizing the risk of supply chain interruptions and ensuring that necessary transitional arrangements between Pfizer and the Enlarged Group function successfully; |
| replacing and/or integrating IT systems used by the Pfizer consumer healthcare business with those used by the GSK consumer healthcare business and transferring relevant data from Pfizer IT systems to GSK IT systems; |
| technical transfer of manufacturing and other processes and services, upon expiry of transitional manufacturing and services arrangements and/or in-sourcing of third party supply contracts; and |
| maintaining business continuity throughout integration. |
Difficulties experienced in the integration process could potentially lead to the interruption of operations of the businesses, or a loss of customers, suppliers or key personnel, which could have a material adverse effect on the business, results of operations or financial condition of the Enlarged Group.
Transaction-related costs may exceed GSKs expectations
GSK expects to incur costs in relation to the Transaction, including integration and post-completion costs in order to implement the Transaction successfully and deliver anticipated costs savings. The actual costs may exceed those estimated and there may be additional and unforeseen expenses incurred in connection with the Transaction. In addition, GSK has incurred and will incur legal, accounting and transaction fees and other costs relating to the Transaction, a material part of which are payable whether or not the Transaction completes. Such costs could materially and adversely affect the realization of synergies and the results of operations of the Group or the Enlarged Group.
9
The Enlarged Group may fail to realize, or it may take longer than expected to realize, the anticipated benefits of the Transaction
The expected benefits of the Transaction, including any identified synergies, may not be achieved, or may take longer than expected to realize, and other assumptions upon which the terms of the Transaction have been determined may prove to be incorrect. To the extent that GSK incurs higher integration costs, achieves lower margin benefits or fewer cost savings than expected, the results of operations and financial condition of the Enlarged Group may suffer, which may materially and adversely affect GSKs share price.
The Stock and Asset Purchase Agreement with Pfizer contains certain representations, warranties and indemnities, which could require GSK or GlaxoSmithKline Consumer Healthcare Holdings Limited (GSK Consumer Healthcare) to make payments to Pfizer
The Stock and Asset Purchase Agreement with Pfizer contains certain representations, warranties and indemnities given by GSK and GSK Consumer Healthcare in favor of Pfizer. Any payment required under those representations, warranties and indemnities may have a material and adverse effect on the cash flow and financial condition of the Enlarged Group.
The consumer healthcare joint venture with Pfizer and the Enlarged Group may not have full recourse to Pfizer under the Stock and Asset Purchase Agreement
Under the terms of the Stock and Asset Purchase Agreement, Pfizer provides GSK Consumer Healthcare and GSK with certain representations, warranties and indemnities. However, these representations, warranties and indemnities may not cover all potential liabilities associated with the Pfizer consumer healthcare business, and they are in certain circumstances limited in their scope, duration and/or the amount which may be claimed under them. Accordingly, GSK Consumer Healthcare and GSK may not have recourse against Pfizer, or may not recover in full from Pfizer, for losses which it may suffer in respect of a breach of those warranties, or in respect of the subject matter of any of the indemnities, or otherwise in respect of the consumer healthcare joint venture. This could materially and adversely affect the operations and financial results of the consumer healthcare joint venture and, following completion of the Transaction, the Enlarged Group.
Events or developments may occur which have an adverse effect on the businesses that are the subject of the Transaction but do not entitle GSK to terminate the Transaction
Pursuant to the Stock and Asset Purchase Agreement, GSK will only be entitled to terminate the Transaction: (i) if agreed between the parties; (ii) if completion of the Transaction has not occurred by September 30, 2019 (which date may be extended by either party to December 31, 2019 or March 31, 2020 if the Transaction has not completed as a result of a failure to satisfy (or waive, as applicable) any of the conditions relating to the receipt of antitrust clearances); (iii) if Pfizer fails to perform its obligations at completion of the Transaction; (iv) if any breach of Pfizers representations and warranties as at completion of the Transaction constitutes a material adverse effect in relation to the Pfizer consumer healthcare business; (v) Pfizer has materially breached its covenants and agreements to be performed or complied with prior to completion of the Transaction; (vi) there being a governmental order permanently prohibiting the Transaction; or (vii) if GSKs shareholders do not approve the shareholders resolution in relation to the Transaction at the General Meeting of shareholders.
During the period prior to completion of the Transaction, events or developments may occur which have an adverse effect on the Pfizer consumer healthcare business but do not enable GSK to terminate the Transaction under the terms of the Stock and Asset Purchase Agreement. GSK would then be required to proceed to completion of the Transaction notwithstanding the adverse events or developments, and this could have a material and adverse effect on the business, financial condition and results of GSK.
Failure to obtain third party consents from contractual counterparties of the Pfizer consumer healthcare business may reduce the anticipated benefits of the Transaction
The Pfizer group is party to a number of contracts relating to the Pfizer consumer healthcare business with third parties in respect of which it is intended that either the relevant contracting entity within the Pfizer group will be transferred to the consumer healthcare joint venture or the contract will be assigned to the consumer healthcare joint venture. Certain of those contracts may provide the counterparty with a right to terminate as a result of (i) the change of control of, or assignment by, the Pfizer contracting party; and/or (ii) breach of applicable non-compete restrictions as a result of the contract being held within the Enlarged Group. If such contracts are terminated or the counterparties do not grant consents/waivers on favourable terms, this may reduce the anticipated benefits of the Transaction and could have a material adverse effect on the Enlarged Groups business, financial condition and/or results of operations.
Risks of executing the Transaction could cause the market price of GSK shares to decline
The market price of GSKs shares may decline as a result of the Transaction, among other reasons, if:
| the integration of the Pfizer consumer healthcare business into the Group is delayed or unsuccessful; |
10
| GSK does not achieve the anticipated benefits of the Transaction as rapidly, or to the extent anticipated by GSKs management, analysts or investors, or at all; |
| the effect of the Transaction on GSKs financial results is not consistent with the expectations of analysts or investors; or |
| GSKs shareholders sell a significant number of shares following completion of the Transaction. |
The successful completion of a separation of the consumer healthcare joint venture initiated by GSK may be dependent on a number of factors that are outside GSKs control, including favorable conditions in public equity markets and public or private debt markets and changes in applicable law and regulation
GSKs ability to exit the consumer healthcare joint venture through a listing and admission to trading of shares of GSK Consumer Healthcare on the London Stock Exchange, the Nasdaq Stock Market or the New York Stock Exchange (the Separation) initiated by GSK may be dependent on a number of factors such as (i) the condition of public or private debt markets being such that the consumer healthcare joint venture is able to raise, on terms acceptable to the Group, sufficient levels of debt finance to undertake a pre-separation recapitalization and distribution of the proceeds to GSK and Pfizer and (ii) the condition of public equity markets being such as to enable a successful sale or demerger of shares in the consumer healthcare joint venture. Conditions in public equity markets and public or private debt markets are not within GSKs control and disruption in those markets may impede GSKs ability to exit the consumer healthcare joint venture at the desired time or in the desired way.
In addition, GSKs ability to implement a successful Separation initiated by GSK, including by way of a demerger of its equity stake and a listing of the consumer healthcare joint venture on the London Stock Exchange, the Nasdaq Stock Market or the New York Stock Exchange, may be impeded or prevented by any change of law, regulation or the rules of any authority to which GSK is subject (including, for example, any rules or guidance issued by the U.K. Financial Conduct Authority or H. M. Revenue & Customs) or any change to the way in which applicable law and regulation is interpreted and applied by the relevant authorities. Such changes are outside the control of GSK and there can be no guarantee that GSKs preferred strategy in relation to the Separation will be capable of being implemented.
If GSK is not able to execute a successful Separation, including by undertaking a pre-separation recapitalization of the consumer healthcare joint venture and completing a demerger of its equity stake, at a time and on terms acceptable to it, the Group may not be able to implement its preferred strategy, including in relation to its pharmaceuticals and vaccines business, the reduction of leverage associated with those businesses, and the support for those businesses ongoing investment requirements (especially the Groups R&D pipeline). This may have a material and adverse effect on the business, financial condition, results and operations of the Enlarged Group.
The expected benefits of a successful completion of a Separation initiated by GSK of the consumer healthcare joint venture from the Group may not be realized and such a Separation may be detrimental to the consumer healthcare joint venture and/or the Group
Following a successful Separation, there can be no guarantee that the expected benefits of such a Separation will be realized. In particular, if such a Separation does proceed, both the consumer healthcare joint venture and the Group (excluding the consumer healthcare business) will form smaller, less diversified groups. As a result, each separate group may be more exposed to cyclical, sector-specific or other risks than the Group and, following completion of the Transaction, the Enlarged Group are currently. In addition, consistent with their smaller sizes, each separate group may not be able to obtain future debt or equity financing or put in place other contractual arrangements on terms as favorable as the Group and, following completion of the Transaction, the Enlarged Group are currently able to achieve. Were any of these risks to be realized following a Separation, this may have a material and adverse effect on the business, financial condition, results and operations of the consumer healthcare joint venture and/or the Group (excluding the consumer healthcare business).
The completion of a Separation initiated by Pfizer, causing the consumer healthcare joint venture to become a listed, publicly traded company, would reduce GSKs control over the consumer healthcare joint venture
Under the terms of the Shareholders Agreement between GSK and Pfizer in relation to the consumer healthcare joint venture, in the event that GSK has not exercised its exit rights in respect of the consumer healthcare joint venture within five years following completion of the Transaction, Pfizer will be entitled to initiate a Separation from that point in time. While GSK would not be required to sell or demerge any of its shares in the consumer healthcare joint venture as part of such a Separation initiated by Pfizer and could therefore retain its proportionate equity stake, GSKs rights to appoint directors to the board of directors of the joint venture and other control rights would be reduced to a customary level for a company listed on the same exchange as the primary listing of the consumer
11
healthcare joint venture, such that GSK would lose overall control of the board of directors of the consumer healthcare joint venture and its control rights under the Shareholders Agreement would cease to apply. In that event, GSK may not be able to direct the business and operations of the consumer healthcare joint venture in accordance with the strategy and objectives of the Enlarged Group, which could have a material and adverse effect on the business, financial condition and results of the Enlarged Group.
Item 4. | Information on the Company |
4.A | History and development of the company |
The information set forth under the heading:
| About GSK on the inside back cover; |
| Head Office and Registered Office on the outside back cover; and |
| Note 38 Acquisitions and disposals on pages 191 to 193 |
of the GSK Annual Report 2018 is incorporated herein by reference.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. GSKs Internet address is gsk.com.
4.B | Business overview |
| See Item 3.D Risk factors above; |
In addition, the information set forth under the headings:
| GSK at a glance on page 1; |
| Chairmans statement on page 2; |
| CEOs statement on page 3; |
| Our long-term priorities on page 7; |
| Industry trends on pages 9 to 10; |
| Stakeholder engagement on page 11; |
| Our business model on page 12; |
| Pharmaceuticals on pages 13 to 17; |
| Vaccines on pages 18 to 20; |
| Consumer Healthcare on pages 21 to 23; |
| Trust on pages 24 to 33 (excluding the heading and the paragraph under the heading Our approach to reporting on page 24); |
| Note 6 Turnover and segment information on pages 153 to 156; |
| Note 38 Acquisitions and disposals on pages 191 to 193; |
| Pharmaceutical products, competition and intellectual property on pages 238 to 239; |
| Vaccines products, competition and intellectual property on page 239; and |
| Consumer Healthcare products and competition on page 240 |
of the GSK Annual Report 2018 is incorporated herein by reference.
4.C | Organizational structure |
The information set forth under the heading:
| Note 44 Principal Group companies on page 214; and |
| Group Companies on pages 260 to 270 |
of the GSK Annual Report 2018 is incorporated herein by reference.
4.D | Property, plant and equipment |
The information set forth under the headings:
| Property, plant and equipment within Group financial review on page 58; |
12
| Note 6 Turnover and segment information on pages 153 to 156; and |
| Note 17 Property, plant and equipment on pages 165 to 166 |
of the GSK Annual Report 2018 is incorporated herein by reference.
Item 4A. | Unresolved Staff Comments |
Not applicable.
Item 5. | Operating and Financial Review and Prospects |
5.A | Operating results |
The information set forth under the headings:
| Regulatory environment on page 10; |
| Our approach to Brexit within Risk management on page 36; |
| Non-controlling interests in ViiV Healthcare on page 41; |
| Cash generation and conversion on pages 56 to 57; |
| Financial position and resources on pages 58 to 62; |
| Treasury policies on pages 62 to 63; and |
| Critical accounting policies on pages 63 to 64 |
of the GSK Annual Report 2018 is incorporated herein by reference.
13
The following tables reconcile Total results to Adjusted results. References in the GSK Annual Report 2018 to the reconciliations on page 51 of that report should be read to refer to the information in these tables.
Adjusted results reconciliation 31 December 2018 |
| |||||||||||||||||||||||||||
Divestments, | ||||||||||||||||||||||||||||
Intangible | Intangible | significant | ||||||||||||||||||||||||||
Total | asset | asset | Major | Transaction |
legal and | Adjusted | ||||||||||||||||||||||
results | amortisation | impairment | restructuring | -related | other items | results | ||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
Gross profit |
20,580 | 536 | 69 | 443 | 15 | 21,643 | ||||||||||||||||||||||
Operating profit |
5,483 | 580 | 116 | 809 | 1,977 | (220 | ) | 8,745 | ||||||||||||||||||||
Profit before taxation |
4,800 | 580 | 116 | 813 | 1,974 | (205 | ) | 8,078 | ||||||||||||||||||||
Profit after taxation |
4,046 | 471 | 97 | 643 | 1,735 | (449 | ) | 6,543 | ||||||||||||||||||||
Earnings per share |
73.7 | p | 9.6 | p | 2.0 | p | 13.1 | p | 30.2 | p | (9.2 | )p | 119.4 | p | ||||||||||||||
Weighted average number of shares (millions) |
4,914 | 4,914 | ||||||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted gross profit |
| |||||||||||||||||||||||||||
Cost of sales |
(10,241 | ) | 536 | 69 | 443 | 15 | (9,178 | ) | ||||||||||||||||||||
The following adjustments are made in arriving at Adjusted operating profit |
| |||||||||||||||||||||||||||
Selling, general and administration |
(9,915 | ) | 2 | 315 | 98 | 38 | (9,462 | ) | ||||||||||||||||||||
Research and development |
(3,893 | ) | 44 | 45 | 49 | 20 | (3,735 | ) | ||||||||||||||||||||
Other operating income |
(1,588 | ) | 2 | 1,864 | (278 | ) | | |||||||||||||||||||||
The following adjustments are made in arriving at Adjusted profit before tax |
| |||||||||||||||||||||||||||
Net finance costs |
(717 | ) | 4 | (3 | ) | 18 | (698 | ) | ||||||||||||||||||||
Profit on disposal of associates |
3 | (3 | ) | | ||||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted profit after tax |
| |||||||||||||||||||||||||||
Taxation |
(754 | ) | (109 | ) | (19 | ) | (170 | ) | (239 | ) | (244 | ) | (1,535 | ) |
Adjusted results reconciliation 31 December 2017 |
| |||||||||||||||||||||||||||||||
Divestments, | ||||||||||||||||||||||||||||||||
Intangible | Intangible | significant | ||||||||||||||||||||||||||||||
Total | asset | asset | Major | Transaction | legal and | US tax | Adjusted | |||||||||||||||||||||||||
results | amortisation | impairment | restructuring | -related | other items | reform | results | |||||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | £m | |||||||||||||||||||||||||
Gross profit |
19,844 | 546 | 400 | 545 | 80 | 21,415 | ||||||||||||||||||||||||||
Operating profit |
4,087 | 591 | 688 | 1,056 | 1,599 | (119 | ) | 666 | 8,568 | |||||||||||||||||||||||
Profit before taxation |
3,525 | 591 | 688 | 1,060 | 1,599 | (205 | ) | 666 | 7,924 | |||||||||||||||||||||||
Profit after taxation |
2,169 | 457 | 512 | 851 | 980 | (456 | ) | 1,744 | 6,257 | |||||||||||||||||||||||
Earnings per share |
31.4 | p | 9.4 | p | 10.5 | p | 17.4 | p | 19.2 | p | (9.4 | )p | 33.3 | p | 111.8 | p | ||||||||||||||||
Weighted average number of shares (millions) |
4,886 | 4,886 | ||||||||||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted gross profit |
| |||||||||||||||||||||||||||||||
Cost of sales |
(10,342 | ) | 546 | 400 | 545 | 80 | (8,771 | ) | ||||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted operating profit |
| |||||||||||||||||||||||||||||||
Selling, general and administration |
(9,672 | ) | 248 | 83 | (9,341 | ) | ||||||||||||||||||||||||||
Research and development |
(4,476 | ) | 45 | 288 | 263 | 18 | (3,862 | ) | ||||||||||||||||||||||||
Other operating income |
(1,965 | ) | 1,519 | (220 | ) | 666 | | |||||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted profit before tax |
| |||||||||||||||||||||||||||||||
Net finance costs |
(669 | ) | 4 | 8 | (657 | ) | ||||||||||||||||||||||||||
Profit on disposal of associates |
94 | (94 | ) | | ||||||||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted profit after tax |
| |||||||||||||||||||||||||||||||
Taxation |
(1,356 | ) | (134 | ) | (176 | ) | (209 | ) | (619 | ) | (251 | ) | 1,078 | (1,667 | ) |
14
Adjusted results reconciliation 31 December 2016 |
| |||||||||||||||||||||||||||
Divestments, | ||||||||||||||||||||||||||||
Intangible | Intangible | significant | ||||||||||||||||||||||||||
Total | asset | asset | Major | Transaction | legal and | Adjusted | ||||||||||||||||||||||
results | amortisation | impairment | restructuring | -related | other items | results | ||||||||||||||||||||||
£m | £m | £m | £m | £m | £m | £m | ||||||||||||||||||||||
Gross profit |
18,599 | 547 | 7 | 297 | 86 | 2 | 19,538 | |||||||||||||||||||||
Operating profit |
2,598 | 588 | 20 | 970 | 3.919 | (424 | ) | 7,671 | ||||||||||||||||||||
Profit before taxation |
1,939 | 588 | 20 | 974 | 3,919 | (416 | ) | 7,024 | ||||||||||||||||||||
Profit after taxation |
1,062 | 458 | 15 | 757 | 3,480 | (246 | ) | 5,526 | ||||||||||||||||||||
Earnings per share |
18.8 | p | 9.4 | p | 0.3 | p | 15.6 | p | 61.6 | p | (5.1 | )p | 100.6 | p | ||||||||||||||
Weighted average number of shares (millions) |
4,860 | 4,860 | ||||||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted gross profit |
| |||||||||||||||||||||||||||
Cost of sales |
(9,290 | ) | 547 | 7 | 297 | 86 | 2 | (8,351 | ) | |||||||||||||||||||
The following adjustments are made in arriving at Adjusted operating profit |
| |||||||||||||||||||||||||||
Selling, general and administration |
(9,366 | ) | 514 | 55 | (8,797 | ) | ||||||||||||||||||||||
Research and development |
(3,628 | ) | 41 | 13 | 159 | (81 | ) | 28 | (3,468 | ) | ||||||||||||||||||
Other operating income |
(3,405 | ) | 3,914 | (509 | ) | | ||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted profit before tax |
| |||||||||||||||||||||||||||
Net finance costs |
(664 | ) | 4 | 8 | (652 | ) | ||||||||||||||||||||||
The following adjustments are made in arriving at Adjusted profit after tax |
| |||||||||||||||||||||||||||
Taxation |
(877 | ) | (130 | ) | (5 | ) | (217 | ) | (439 | ) | 170 | (1,498 | ) |
Financial review 2018
The information set forth in the Group financial review on pages 37 to 64 of the GSK Annual Report 2018 is incorporated herein by reference excluding the following sections:
| Viability Statement on pages 39 and 44; |
| Outlook on page 39; |
| Non-controlling interests in ViiV Healthcare on page 41; |
| Our approach to tax on page 43; and |
| Adjusting items on page 51. |
Outlook
In 2019, we expect Adjusted EPS to decline in the range of -5 to -9% at CER. This guidance reflects the expected impact of the Tesaro acquisition and the significant investments we are making behind its products and pipeline. It also reflects the completion of the other recently announced transactions, as well as the approval of a substitutable generic competitor to Advair in the US.
We are not able to give guidance for Total results as we cannot reliably forecast certain material elements of our Total results such as impairments of intangible assets and the future fair value movements on contingent consideration and put options, including those arising from changes in foreign exchange rates, and therefore a reconciliation of the guidance for Adjusted results to equivalent guidance for Total results is not available without unreasonable effort.
Financial review 2017
Group turnover 2017
Group turnover
2017 £m |
2016 £m |
Growth £% |
Growth CER% |
|||||||||||||
Pharmaceuticals |
17,276 | 16,104 | 7 | 3 | ||||||||||||
Vaccines |
5,160 | 4,592 | 12 | 6 | ||||||||||||
Consumer Healthcare |
7,750 | 7,193 | 8 | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Group turnover |
30,186 | 27,889 | 8 | 3 | ||||||||||||
|
|
|
|
|
|
|
|
Group turnover for the year increased 8% AER, 3% CER to £30,186 million, with growth delivered by all three businesses.
Pharmaceuticals sales were up 7% AER, 3% CER, reflecting the continued strong growth of the new Respiratory and HIV products, partly offset by declines in older Respiratory products, including Seretide/Advair and Established Pharmaceuticals, including the impact of recent divestments.
Vaccines sales were up 12% AER, 6% CER, reflecting a strong performance from Meningitis and Influenza vaccines and higher demand for Established Vaccines, as well as the benefit of favourable year-on-year US CDC stockpile movements.
15
Consumer Healthcare sales grew 8% AER, 2% CER reflecting a strong performance from power brands in the Pain and Oral health categories, partly offset by the impact of continued competitive pressures in the US allergy category and a broader market slowdown in key categories. In addition, reported growth was impacted by the Nigerian beverages business divestment in Q3 2016 and the implementation of the Goods & Service Tax (GST) in India on 1 July 2017.
Group turnover by geographic region
2017 £m |
2016 £m |
Growth £% |
Growth CER% |
|||||||||||||
US |
11,263 | 10,197 | 10 | 6 | ||||||||||||
Europe |
7,943 | 7,476 | 6 | | ||||||||||||
International |
10,980 | 10,216 | 7 | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
30,186 | 27,889 | 8 | 3 | |||||||||||||
|
|
|
|
|
|
|
|
The US sales growth of 10% AER, 6% CER was driven by continued strong performances from Triumeq and Tivicay and growth in the Respiratory portfolio, together with strong performances in the US from Hepatitis and Meningitis vaccines.
Europe sales grew 6% AER, but were flat at CER as growth from Triumeq, Tivicay and Meningitis vaccines was offset by the decline in Established Pharmaceuticals, including the impact of the disposal of the Romanian distribution business in Q4 2016. Respiratory sales were up 5% AER, but flat at CER, as the decline in Seretide offset the growth in the new Respiratory products.
In International, sales growth of 7% AER, 3% CER reflected strong growth in Triumeq, Tivicay and the Respiratory portfolio, with Established Pharmaceuticals flat, including the impact of divestments. Growth in Emerging Markets of 8% AER, 4% CER was also impacted by divestments.
Sales from new Pharmaceutical and Vaccine products
2017 £m |
2016 £m |
Growth £% |
Growth CER% |
|||||||||||||
Respiratory |
||||||||||||||||
Anoro Ellipta |
342 | 201 | 70 | 63 | ||||||||||||
Arnuity Ellipta |
35 | 15 | >100 | >100 | ||||||||||||
Incruse Ellipta |
201 | 114 | 76 | 68 | ||||||||||||
Nucala |
344 | 102 | >100 | >100 | ||||||||||||
Relvar/Breo Ellipta |
1,006 | 620 | 62 | 55 | ||||||||||||
CVMU |
||||||||||||||||
Eperzan/Tanzeum |
87 | 121 | (28 | ) | (31 | ) | ||||||||||
HIV |
||||||||||||||||
Tivicay |
1,404 | 953 | 47 | 40 | ||||||||||||
Triumeq |
2,461 | 1,735 | 42 | 35 | ||||||||||||
Pharmaceuticals |
5,880 | 3,861 | 52 | 45 | ||||||||||||
Bexsero |
556 | 390 | 43 | 34 | ||||||||||||
Menveo |
274 | 202 | 36 | 29 | ||||||||||||
Shingrix |
22 | | ||||||||||||||
Vaccines |
852 | 592 | 44 | 36 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
6,732 | 4,453 | 51 | 44 | |||||||||||||
|
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|
|
|
|
|
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In 2015, GSK identified a series of New Pharmaceutical and Vaccine products that were expected to deliver at least £6 billion of revenues per annum on a CER basis by 2020. Those products are as set out above and do not include Trelegy Ellipta and Juluca, which had initial sales in 2017 of £2 million and £5 million, respectively. The Group has previously announced its plans to withdraw Tanzeum. At 2015 exchange rates the equivalent value of the 2017 sales was £5.7 billion.
Sales of New Pharmaceutical and Vaccine products were £6,732 million, grew £2,279 million in Sterling terms (51% AER, 44% CER) and represented approximately 30% of Pharmaceuticals and Vaccines turnover in the year.
Pharmaceuticals turnover
2017 £m |
2016 £m |
Growth £% |
Growth CER% |
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Respiratory |
6,991 | 6,510 | 7 | 3 | ||||||||||||
HIV |
4,350 | 3,556 | 22 | 16 | ||||||||||||
Immuno-inflammation |
377 | 340 | 11 | 6 | ||||||||||||
Established Pharmaceuticals |
5,558 | 5,698 | (2 | ) | (5 | ) | ||||||||||
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17,276 | 16,104 | 7 | 3 | |||||||||||||
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Pharmaceuticals turnover in 2017 was £17,276 million, up 7% AER, 3% CER. Respiratory sales grew 7% AER, 3% CER to £6,991 million, driven by the Ellipta portfolio and Nucala, while HIV sales were up 22% AER, 16% CER to £4,350 million, driven by increases in market share for Triumeq and Tivicay. Sales of Established Pharmaceuticals declined 2% AER, 5% CER, reflecting a three percentage point impact of recent divestments. These divestments reduced overall Pharmaceuticals CER growth by one percentage point, most significantly impacting the contribution from Europe and Emerging Markets.
In the US, sales growth of 11% AER, 6% CER was driven by the HIV portfolio and new Respiratory products. Europe sales grew 3% AER but declined 3% CER, reflecting the continued transition of the Respiratory portfolio and generic competition to Kivexa as well as the disposal of the Romanian distribution business during Q4 2016 which reduced growth by three percentage points. Reported International sales growth was impacted by the benefit to Q1 2016 of the accelerated sale of inventory under supply agreements to Novartis as well as the disposal of the thrombosis and anaesthesia businesses to Aspen in Q1 2017, which reduced reported growth in International by one percentage point and in Emerging Markets by two percentage points to 7% AER, 5% CER. Sales in Japan grew 6% AER, 3% CER.
Respiratory
Total Respiratory portfolio sales were up 7% AER, 3% CER, with the US up 8% AER, 3% CER, Europe up 5% AER but flat at CER and International up 9% AER, 5% CER. Growth of the new Respiratory products more than offset the decline in Seretide/Advair.
The new Respiratory products recorded combined sales of £1,930 million in 2017 with sales of Ellipta products up 67% AER, 59% CER driven by continued strong growth in the US and the ongoing roll-out across Europe and International. Sales of Nucala were £344 million, a Sterling increase of £242 million, and included sales of £236 million in the US.
The aggregate growth of the Ellipta products was driven primarily by the contribution of the US, where sales were up 72% AER, 65% CER on the back of further market share gains. Total Relvar/Breo Ellipta sales grew 62% AER, 55% CER to £1,006 million, with the US up 75% AER, 67% CER to £602 million. Anoro Ellipta sales grew 70% AER, 63% CER to £342 million, also reflecting market share gains in the US. All Ellipta products, Breo, Anoro, Incruse and Arnuity, continued to grow market share in the US in the year.
Seretide/Advair sales declined 10% AER, 14% CER to £3,130 million. Sales in the US declined 12% AER, 16% CER (5% volume decline and a 11% negative impact of price), with payer rebate adjustments related to prior periods favourably impacting sales in the year. In Europe, Seretide sales were down 12% AER, 17% CER to £736 million (11% volume decline and a 6% negative impact of price), reflecting continued competition from generics and the transition of the Respiratory portfolio to newer products. In International, sales of Seretide declined 5% AER, 8% CER to £784 million (6% volume decline and a 2% negative impact of price), also reflecting increased generic competition and the transition to the newer Respiratory products.
16
Pricing pressures also affected other older products with Ventolin sales declining 2% AER, 6% CER to £767 million, including the negative impact of payer rebate adjustments related to prior periods in the US. Flixotide/Flovent sales were down 6% AER, 10% CER to £596 million, with the US down 15% AER, 18% CER.
The net impact of adjustments to payer rebates for prior periods across the US Respiratory portfolio was broadly neutral to reported US Respiratory sales.
HIV
HIV sales increased 22% AER, 16% CER to £4,350 million in the year, with the US up 26% AER, 21% CER, Europe up 10% AER, 3% CER and International up 33% AER, 26% CER. The growth in all three regions was driven by continued increases in market share for Triumeq and Tivicay, partly offset by the impact of generic competition to Epzicom/Kivexa, particularly affecting the European market. The ongoing increase in patient numbers for both Triumeq and Tivicay resulted in sales of £2,461 million and £1,404 million, respectively, in the year. Juluca was approved in the US in November 2017, and recorded initial sales of £5 million.
Epzicom/Kivexa sales declined 59% AER, 61% CER to £234 million, reflecting the ongoing generic competition since Q3 2016.
Immuno-inflammation
Sales grew 11% AER, 6% CER in the year. The negative impact of the divestment of raxibacumab, which recorded strong sales in Q4 2016, was more than offset by the growth of Benlysta, up 23% AER, 17% CER to £375 million, driven by a strong US performance.
Established Pharmaceuticals
Sales of Established Pharmaceuticals in 2017 were £5,558 million, declining 2% AER, 5% CER, impacted by the comparison with the accelerated sale of inventory under supply agreements to Novartis in Q1 2016 as well as the disposal of the thrombosis and anaesthesia businesses to Aspen in Q1 2017 and the disposal of the Romanian distribution business in Q4 2016. The impact of these disposals on the growth of the Established Pharmaceuticals portfolio was approximately three percentage points.
The Avodart franchise declined 3% AER, 9% CER to £613 million primarily due to the loss of exclusivity in the US and Europe and the impact of favourable RAR adjustments in 2016.
Dermatology sales grew 16% AER, 11% CER to £456 million, reflecting improved supply in Emerging Markets and growth in Japan, while Augmentin sales grew 4% AER, 2% CER to £587 milliion.
17
Vaccines turnover
2017 £m |
2016 £m |
Growth £% |
Growth CER% |
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Meningitis |
890 | 662 | 34 | 27 | ||||||||||||
Influenza |
488 | 414 | 18 | 12 | ||||||||||||
Shingles |
22 | | ||||||||||||||
Established Vaccines |
3,760 | 3,516 | 7 | 1 | ||||||||||||
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5,160 | 4,592 | 12 | 6 | |||||||||||||
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Vaccines turnover grew 12% AER, 6% CER to £5,160 million, primarily driven by Meningitis vaccines, with Bexsero growing across all regions and Menveo growing in the US and Europe, and higher sales of influenza products, primarily in the US and Europe. Established Vaccines growth was driven by Hepatitis vaccines, mainly due to a competitor supply shortage in the US, higher demand for Boostrix and Rotarix and the launch of Cervarix in China. Favourable year-on-year CDC stockpile movements for Infanrix, Pediarix and Menveo in the US also contributed to growth. These were partly offset by increasing competitive pressures on Infanrix, Pediarix in the US and Europe, and lower Synflorix sales, driven primarily by lower pricing in developing countries.
Meningitis
Meningitis sales grew 34% AER, 27% CER to £890 million. Bexsero sales growth of 43% AER, 34% CER was driven by new national immunisation programmes, private market sales and regional tenders in Europe, as well as growing demand and share gains in the US, together with strong private market sales in International. Menveo sales grew 36% AER, 29% CER, primarily driven by the impact of favourable year-on-year CDC stockpile movements, partly offset by supply constraints in International.
Influenza
Fluarix/FluLaval sales were up 18% AER, 12% CER to £488 million, reflecting strong sales execution, primarily in the US, and higher demand in Europe.
Shingles
Shingrix recorded initial sales into the channel of £22 million in the US after its FDA approval and favourable ACIP recommendations.
Established Vaccines
Sales of the DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) were up 5% AER, but flat at CER. Boostrix sales grew 19% AER, 13% CER, benefiting from higher demand across all regions. Infanrix, Pediarix sales were down 3% AER, 8% CER, mainly driven by increased competitive pressures in the US and Europe, together with a new market entrant in Europe, partly offset by favourable year-on-year CDC stockpile movements in the US.
Hepatitis vaccines grew 15% AER, 10% CER to £693 million, benefiting from a competitor supply shortage and higher demand in the US, partly offset by the unfavourable impact of CDC stockpile movements in the US and supply constraints in Europe and International.
Rotarix was up 12% AER, 6% CER to £524 million, reflecting higher demand in Europe and International.
Synflorix sales were up 1% AER, but down 6% CER to £509 million, due to lower pricing in Emerging Markets partly offset by higher demand elsewhere in International.
Priorix/Priorix Tetra/Varilrix sales were flat at AER, but down 5% CER to £301 million, mainly due to supply constraints in International.
Cervarix sales increased by 65% AER, 57% CER to £134 million, driven by its recent launch in China.
Consumer Healthcare turnover
2017 £m |
2016 £m |
Growth £% |
Growth CER% |
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Wellness |
4,001 | 3,726 | 7 | 2 | ||||||||||||
Oral health |
2,466 | 2,223 | 11 | 6 | ||||||||||||
Nutrition |
680 | 674 | 1 | (5 | ) | |||||||||||
Skin health |
603 | 570 | 6 | | ||||||||||||
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7,750 | 7,193 | 8 | 2 | |||||||||||||
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2017 £m |
2016 £m |
Growth £% |
Growth CER% |
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US |
1,826 | 1,761 | 4 | (1 | ) | |||||||||||
Europe |
2,360 | 2,169 | 9 | 3 | ||||||||||||
International |
3,564 | 3,263 | 9 | 4 | ||||||||||||
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7,750 | 7,193 | 8 | 2 | |||||||||||||
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Consumer Healthcare turnover was up 8% AER, 2% CER at £7,750 million, impacted by slower global growth in key categories. A strong performance by power brands across Wellness and Oral health was partly offset by competitive pressures in the US allergy category, impacting Flonase OTC, as well as lower sales of tail brands across the Nutrition and Skin health categories and a broader market slowdown in key categories. In addition, reported growth was impacted by the disposal of the Nigeria beverages business in Q3 2016 and the implementation of the Goods & Service Tax (GST) in India in July, the net effects of which were partly offset by the benefit of the comparison with the impact of demonetisation in India in Q4 2016. The divestment, GST and demonetisation combined to reduce overall Consumer Healthcare CER growth by approximately one percentage point.
Sales from new GSK innovations (product introductions within the last three years on a rolling basis) represented approximately 13% of sales in the period. Notable launches this year included parodontax and Flonase Sensimist in the US, the continued global roll out of Flonase OTC and several line extensions for Sensodyne, including next generation Sensodyne Rapid Relief and Sensodyne Deep Clean.
Wellness
Wellness sales grew 7% AER, 2% CER to £4,001 million. This reflected a strong performance from Voltaren and Cold & flu seasonal products, partly offset by a weaker performance from US allergy products.
Respiratory sales were up 7% AER, 2% CER as strong broadly-based growth from Theraflu and Otrivin, particularly in Europe and International, was partly offset by competitive pressures in the US for Flonase OTC from private label products.
Pain relief sales were up 10% AER, 4% CER, driven significantly by Voltaren with growth across all regions, benefiting from momentum in the 12-hour variant, strong in-store and marketing activation, expansion of expert detailing and strong performances in International markets. Panadol also grew strongly in Europe, benefiting from new advertising campaigns, and in International in low single digits.
Oral health
Oral health sales grew 11% AER, 6% CER to £2,466 million. Sensodyne continued to drive performance, reporting growth of 12% AER, 8% CER, with strong delivery in all regions following the roll out of next generation Sensodyne Rapid Relief and the launch of Pronamel Strong & Bright. Sales of parodontax continued to grow strongly, reflecting double-digit performances in Europe and International, driven by a brand reset and increases in dentist recommendations, as well as the US launch in the first quarter. Denture care grew in mid-single digits with double-digit growth in emerging markets partly offset by slower consumption growth in the US and Germany.
Nutrition
Nutrition sales grew 1% AER and declined 5% CER to £680 million, adversely impacted by the sale of the Nigeria beverages business in Q3 2016 and the implementation of GST on 1 July, as well as continued competitive pressures for Horlicks in India. The net impact of the divestment of the Nigeria beverages business, implementation of GST offset by the favourable comparison with the impact of demonetisation in the prior year reduced Nutrition CER growth by approximately six percentage points.
18
Skin health
Skin health sales grew 6% AER, but were flat at CER at £603 million, with low single-digit growth in the US, a slight decline within Europe and International flat. Fenistil sales grew strongly, with good performances in Central & Eastern Europe, Germany and the Middle East, following digital activation and new media campaigns. Physiogel and Lamisil continued to be impacted by competitor activity, whilst Lip care sales grew in mid-single digits.
The total results of the Group are set out below.
2017 | 2016 | |||||||||||||||||||||||
% of | % of | Growth | ||||||||||||||||||||||
£m | turnover | £m | turnover | £% | CER% | |||||||||||||||||||
Turnover |
30,186 | 100 | 27,889 | 100 | 8 | 3 | ||||||||||||||||||
Cost of sales |
(10,342 | ) | (34.3 | ) | (9,290 | ) | (33.3 | ) | 11 | 8 | ||||||||||||||
Selling, general and administration |
(9,672 | ) | (32.0 | ) | (9,366 | ) | (33.6 | ) | 3 | (1 | ) | |||||||||||||
Research and development |
(4,476 | ) | (14.8 | ) | (3,628 | ) | (13.0 | ) | 23 | 19 | ||||||||||||||
Royalty income |
356 | 1.1 | 398 | 1.4 | (11 | ) | (13 | ) | ||||||||||||||||
Other operating income/(expense) |
(1,965 | ) | (6.5 | ) | (3,405 | ) | (12.2 | ) | ||||||||||||||||
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Operating profit |
4,087 | 13.5 | 2,598 | 9.3 | 57 | 39 | ||||||||||||||||||
Net finance costs |
(669 | ) | (664 | ) | ||||||||||||||||||||
Profit on disposal of interest in associates |
94 | | ||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
13 | 5 | ||||||||||||||||||||||
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Profit before taxation |
3,525 | 1,939 | 82 | 58 | ||||||||||||||||||||
Taxation |
(1,356 | ) | (877 | ) | ||||||||||||||||||||
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Profit after taxation for the year |
2,169 | 1,062 | >100 | 71 | ||||||||||||||||||||
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Profit attributable to shareholders |
1,532 | 912 | ||||||||||||||||||||||
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Earnings per share (p) |
31.4 | 18.8 | 67 | 36 | ||||||||||||||||||||
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Earnings per ADS (US$) |
0.82 | 0.51 |
Cost of sales
Cost of sales as a percentage of turnover was 34.3%, up 1.0 percentage points in Sterling terms and up 1.4 percentage points in CER terms compared with 2016. This primarily reflected the phasing of costs of manufacturing restructuring programmes including non-cash write downs as a result of plant closures and the write down of assets related to the progressive withdrawal of Tanzeum, as well as continued adverse pricing pressure in Pharmaceuticals, primarily Respiratory, and additional supply chain investments. This was partly offset by a more favourable product mix across all three businesses, particularly in Pharmaceuticals, reflecting the impact of higher HIV sales, and in Vaccines, reflecting the benefit of a settlement for lost third party supply volume and a favourable year-on-year comparison to inventory adjustments in 2016. There was also a continued contribution from integration and restructuring savings in all three businesses.
Selling, general and administration
SG&A costs were 32.0% of turnover, 1.5 percentage points lower than in 2016 in Sterling and CER terms. This primarily reflected lower restructuring costs and tight control of ongoing operating costs, particularly in Consumer Healthcare, as well as continued cost reductions in Pharmaceuticals, including the benefits of the Pharmaceuticals restructuring programme, and integration benefits in Vaccines and Consumer Healthcare. This was partly offset by an increased investment in promotional product support, particularly for new launches in Respiratory, HIV and Vaccines.
Research and development
R&D expenditure was £4,476 million (14.8% of turnover), 23% higher than in 2016 at AER and 19% higher at CER. This included charges of £106 million from the utilisation of the Priority Review Voucher in 2017 as well as increased investment in the progression of a number of mid and late-stage programmes. In addition, there were higher restructuring costs, primarily as a result of the provision for future clinical obligations as a result of the progressive withdrawal of Tanzeum and the decision to terminate the rights to sirukumab, and higher intangible asset impairments.
2017 | 2016 |
Growth | ||||||||||||||
£m | £m | £% | CER% | |||||||||||||
Discovery |
1,020 | 821 | 24 | 21 | ||||||||||||
Development |
1,450 | 1,249 | 16 | 13 | ||||||||||||
Facilities and central support functions |
536 | 558 | (4 | ) | (7 | ) | ||||||||||
Total Pharmaceuticals |
3,006 | 2,628 | 14 | 11 | ||||||||||||
Vaccines R&D |
621 | 597 | 4 | (2 | ) | |||||||||||
Consumer Healthcare R&D |
235 | 243 | (3 | ) | (7 | ) | ||||||||||
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3,862 | 3,468 | 11 | 8 | |||||||||||||
Items reconciling Adjusted R&D to Total R&D |
614 | 160 | ||||||||||||||
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Research and development |
4,476 | 3,628 | 23 | 19 | ||||||||||||
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The growth in Development expenditure was driven by the progression of a number of mid and late-stage programmes in HIV, Respiratory and Anaemia, together with the utilisation of the Priority Review Voucher in Q2 2017. The continuing high growth in Discovery expenditure reflected further investment in the early stage Oncology portfolio.
19
Royalty and other operating income/(expense)
Net other operating expense of £1,609 million (2016 £3,007 million) primarily reflected lower accounting charges arising from the re-measurement of the contingent consideration liabilities related to the former Shionogi-ViiV Healthcare joint venture and the acquisition of the former Novartis Vaccines business, the value attributable to the Consumer Healthcare Joint Venture put option and the liabilities for the Pfizer put option and Pfizer and Shionogi preferential dividends in ViiV Healthcare. The remeasurement charges of £2,185 million (2016 £3,914 million) reflected updated trading forecasts and changes in exchange rate assumptions as well as the unwinding of the discount applied to these future liabilities of £1,001 million. They also included charges of £666 million arising from the positive impact of US tax reform on the valuation of the Consumer Healthcare and HIV businesses. These charges were partly offset by the gain of £250 million on the disposal of the anaesthesia business to Aspen and royalty income of £356 million (2016 £398 million).
Operating profit
Total operating profit was £4,087 million in 2017 compared with £2,598 million in 2016. The increase primarily reflected a reduced impact from accounting charges related to the remeasurement of the liabilities for contingent consideration, put options and preferential dividends. In addition operating profit benefited from an improved operating margin driven by sales growth across all three businesses, but particularly Vaccines, and a more favourable mix in all three businesses. In Vaccines, there was also a favourable year-on-year comparison with inventory adjustments in 2016 and the benefit of a one-off settlement in cost of sales. Continued tight control of ongoing costs and benefits from restructuring and integration also contributed to improved margins in Vaccines and Consumer Healthcare, but in Pharmaceuticals, the benefits were offset by an overall increase in Pharmaceuticals R&D investment (including the impact of the Priority Review Voucher) together with continuing price pressure, particularly in Respiratory, and supply chain investments to support new products.
Net finance costs
Finance income |
2017 £m |
2016 £m |
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Interest and other income |
63 | 70 | ||||||
Fair value movements |
2 | 2 | ||||||
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65 | 72 | |||||||
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Finance expense |
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Interest expense |
(720 | ) | (701 | ) | ||||
Unwinding of discounts on liabilities |
(16 | ) | (16 | ) | ||||
Remeasurements and fair value movements |
(4 | ) | (4 | ) | ||||
Other finance expense |
6 | (15 | ) | |||||
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(734 | ) | (736 | ) | |||||
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Profit on disposal of associates
The profit on disposal of associates was £94 million (2016 £nil). This arose from the disposal of our entire shareholdings in two associates, River Vision Development Co. Ltd and JCR Pharmaceuticals Co Ltd.
Share of after tax profits of associates and joint ventures
The share of profits of associates and joint ventures was £13 million (2016 £5 million).
Profit before taxation
Taking account of net finance costs, the profit on disposal of associates and the share of profit of associates, profit before taxation was £3,525 million compared with £1,939 million in 2016.
Taxation
2017 £m |
2016 £m |
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UK current year charge |
199 | 241 | ||||||
Rest of world current year charge |
1,928 | 1,326 | ||||||
Charge in respect of prior periods |
(508 | ) | (149 | ) | ||||
Total current taxation |
1,619 | 1,418 | ||||||
Total deferred taxation |
(263 | ) | (541 | ) | ||||
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Taxation on total profits |
1,356 | 877 | ||||||
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A tax charge of £1,356 million on Total profit represented an effective tax rate of 38.5% (2016 45.2%) and included a charge of £1,078 million arising from US tax reform as described in more detail on page 68. This was partly offset by a £483 million benefit from Swiss tax reform, arising from the revaluation of deferred tax liabilities on acquired Consumer Healthcare brands to reflect a reduction in the headline tax rate.
Non-controlling interests
The allocation of earnings to non-controlling interests amounted to £637 million (2016 £150 million), including the non-controlling interest allocations of Consumer Healthcare profits of £415 million (2016 £203 million) and the allocation of ViiV Healthcare profits, which increased to £187 million (2016 £83 million loss) including the impact of changes in the proportions of preferential dividends due to each shareholder. The increase in allocation of ViiV Healthcare profits primarily reflected the impact of lower remeasurement charges and the increase in allocation of Consumer Healthcare profits reflected improved operating profits together with the benefit of Swiss tax reform in 2017.
Earnings per share
Total earnings per share were 31.4p, compared with 18.8p in 2016. The increase reflected the reduced impact of charges arising from the revaluations of the liabilities for contingent consideration and the put options associated with increases in the Sterling value of the Groups HIV and Consumer Healthcare businesses, the benefit from Swiss tax reform and improved performances by the relevant businesses, partly offset by the charges arising from US tax reform.
Dividends
The Board declared four interim dividends resulting in a total dividend for the year of 80 pence, in line with the dividend declared for 2016.
20
Items adjusted from Total results to present Adjusted results
Total results are adjusted for a number of items in order to present Adjusted results, as explained defined on pages 40 and 41 of the GSK Annual Report 2018. The items are discussed below.
Intangible asset amortisation and impairment
Intangible asset amortisation was £591 million, compared with £588 million in 2016. Intangible asset impairments of £688 million (2016 £20 million) included impairments related to the progressive withdrawal of Tanzeum and a number of other commercial and R&D assets following the refocusing of the R&D pipeline during 2017. Both of the amortisation and impairment charges were non-cash items.
Major restructuring and integration
Major restructuring and integration charges of £1,056 million have been incurred (2016 £970 million). Non-cash charges were £525 million, primarily reflecting the write down of assets as a result of the decision to withdraw Tanzeum and terminate rights to sirukumab arising from the establishment of the Groups new business priorities, as well as the write down of assets related to reductions in the site network. Cash charges were £531 million (2016 £704 million), including charges as a result of the decisions to withdraw Tanzeum and terminate rights to sirukumab. Cash payments made were £555 million (2016 £1,077 million), including the settlement of certain charges previously accrued, but also reflecting the deferral of some payments into 2018. Cash payments of approximately £0.5 billion are expected in 2018. The programme delivered incremental cost savings in 2017 of £0.7 billion, including £0.2 billion of currency benefits.
Charges for the combined restructuring and integration programme to date are £4.8 billion, of which cash charges are £3.5 billion. Cash payments of £3.1 billion have been made to date. Non-cash charges are £1.3 billion.
An extension to the existing combined programme was agreed by the Board in July 2017, with total cash charges of the combined programme now expected to be approximately £4.1 billion and non-cash charges up to £1.6 billion. The programme has now delivered approximately £3.7 billion of annual savings, including a currency benefit of £0.4 billion. The extended programme is now expected to deliver by 2020 total annual savings of £4.0 billion on a constant currency basis, together with an estimated £0.4 billion of currency benefits on the basis of 2017 average exchange rates.
Transaction-related adjustments
Transaction-related adjustments resulted in a net charge of £1,599 million (2016 £3,919 million). This primarily reflected accounting charges for the re-measurement of the liability and the unwinding of the discounting effects on the contingent consideration related to the acquisition of the former Shionogi-ViiV Healthcare joint venture, the contingent consideration related to the acquisition of the former Novartis Vaccines business, and the value attributable to the Consumer Healthcare Joint Venture put option held by Novartis. These transaction-related adjustments exclude the impact on these liabilities arising from the implementation of the US Tax Cuts and Jobs Act in 2017 which is set out separately on this page.
Charge/(credit) |
2017 £m |
2016 £m |
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Consumer Healthcare Joint Venture put option |
986 | 1,133 | ||||||
Contingent consideration on former Shionogi-ViiV Healthcare Joint Venture (including Shionogi preferential dividends) |
556 | 2,162 | ||||||
ViiV Healthcare put options and Pfizer preferential dividends |
(126 | ) | 577 | |||||
Contingent consideration on former Novartis Vaccines business |
101 | 69 | ||||||
Other adjustments |
82 | (22 | ) | |||||
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Total transaction-related charges |
1,599 | 3,919 | ||||||
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The aggregate impact of unwinding the discount on these future and potential liabilities was £1,001 million (2016 £905 million), including £543 million on the Consumer Healthcare Joint Venture put option and £408 million on the contingent consideration related to the former Shionogi-ViiV Healthcare Joint Venture. The remaining charge of £598 million was driven by adjustments to trading forecasts and the impact of updated exchange rate assumptions on those forecasts for the relevant businesses as well as updated multiples used in the valuation of the Consumer Healthcare Joint Venture put option.
Contingent consideration cash payments which are made to Shionogi and other companies reduce the balance sheet liability and hence are not recorded in the income statement. Total contingent consideration cash payments in 2017 amounted to £685 million (2016 £431 million). This included cash payments made by ViiV Healthcare to Shionogi in relation to its contingent consideration liability (including preferential dividends) which amounted to £671 million (2016 £417 million).
An explanation of the accounting for the non-controlling interests in ViiV Healthcare is set out on page 41 of the GSK Annual Report 2018.
The impact on profit after tax from transaction-related adjustments includes an accounting credit in respect of Swiss tax reform of £483 million, arising from the revaluation of deferred tax liabilities on acquired Consumer Healthcare brands to reflect a reduction in the headline Swiss tax rate.
Divestments and other items
Divestments and other items included the profit on disposal of the anaesthesia business to Aspen of £250 million, a number of other asset disposals, equity investment impairments and certain other adjusting items. Significant legal charges of £68 million (2016 £62 million) included the benefit of the settlement of existing matters as well as provisions for ongoing litigation. Significant legal cash payments were £192 million (2016 £102 million).
US tax reform
The enactment of the US Tax Cuts and Jobs Act has resulted in a number of additional charges in 2017, which reduced Total earnings by £1,630 million.
Firstly, increased valuations of the HIV and Consumer Healthcare businesses due to lower US tax rates resulted in an increase in the related liabilities for contingent consideration and the put options of £666 million.
Secondly, an additional tax charge of £1,078 million comprised a reduction in the value of US deferred tax assets held against future liabilities, such as pensions, and a current tax credit, together amounting to £730 million, as well as a charge of £348 million arising on the reserves of subsidiaries of US entities in the Group. The cash impact of this latter charge will be spread over eight years from 2018, with approximately 60% expected to be payable in years six to eight.
These charges were partly offset by an allocation to non-controlling interests amounting to £114 million, as many of the adjustments related to ViiV Healthcare and the Consumer Healthcare Joint Venture.
These charges represent managements estimates of the impact of US tax reform on the Group based on the information currently available. As further guidance from the US Treasury on implementation of the Act becomes available, particularly with regard to the repatriation tax provisions, the assumptions underlying these estimates could change. This could result in adjustments to the charges taken that could have a material impact on the results of the Group.
Adjusted results
We use Adjusted results, which is a non-IFRS measure, among other metrics including total results and cash flow generation, to manage the performance of the Group. Non-IFRS measures may be considered in addition to, but not as a substitute for or superior to, information presented in accordance with IFRS. The definition of Adjusted results is set out on page 40 of the GSK Annual Report 2018.
21
Cost of sales
2017 | 2016 | Growth | ||||||||||||||||||||||
£m | % of turnover |
£m | % of turnover |
£% | CER% | |||||||||||||||||||
Cost of sales |
(8,771 | ) | (29.1 | ) | (8,351 | ) | (29.9 | ) | 5 | 1 |
Cost of sales as a percentage of turnover was 29.1%, down 0.9 percentage points in Sterling terms and down 0.5 percentage points in CER terms compared with 2016. This reflected a more favourable product mix across all three businesses, particularly in Pharmaceuticals, including the impact of higher HIV sales, as well as favourable product mix, the benefit of a settlement for lost third party supply volume and a favourable year-on-year comparison to inventory adjustments in 2016 in Vaccines. There was also a further contribution from integration and restructuring savings in all three businesses, offset by continued adverse pricing pressure in Pharmaceuticals, primarily Respiratory, and additional supply chain investments.
Selling, general and administration
2017 | 2016 | Growth | ||||||||||||||||||||||
£m | % of turnover |
£m | % of turnover |
£% | CER% | |||||||||||||||||||
Selling, general and administration |
(9,341 | ) | (30.9 | ) | (8,797 | ) | (31.5 | ) | 6 | 1 |
SG&A costs were 30.9% of turnover, 0.6 percentage points lower in Sterling terms than in 2016 and 0.5 percentage points lower on a CER basis. This primarily reflected tight control of ongoing costs, particularly in Consumer Healthcare, continued cost reductions in Pharmaceuticals, including the benefits of the Pharmaceuticals restructuring programme, and integration benefits in Vaccines and Consumer Healthcare. This was partly offset by increased investment in promotional product support, particularly for new launches in Respiratory, HIV and Vaccines.
Research and development
2017 | 2016 | Growth | ||||||||||||||||||||||
£m | % of turnover |
£m | % of turnover |
£% | CER% | |||||||||||||||||||
Research and development |
(3,862 | ) | (12.8 | ) | (3,468 | ) | (12.4 | ) | 11 | 8 |
R&D expenditure was £3,862 million (12.8% of turnover), 11% higher than 2016 at AER and 8% higher at CER. This included a charge of £106 million on the utilisation of the Priority Review Voucher in Q2 2017 as well as increased investment in the progression of a number of mid and late-stage programmes.
2017 | 2016 | Growth | ||||||||||||||
£m | £m | £% | CER% | |||||||||||||
Discovery |
1,020 | 821 | 24 | 21 | ||||||||||||
Development |
1,450 | 1,249 | 16 | 13 | ||||||||||||
Facilities and central support functions |
536 | 558 | (4 | ) | (7 | ) | ||||||||||
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Total Pharmaceuticals |
3,006 | 2,628 | 14 | 11 | ||||||||||||
Vaccines R&D |
621 | 597 | 4 | (2 | ) | |||||||||||
Consumer Healthcare R&D |
235 | 243 | (3 | ) | (7 | ) | ||||||||||
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Research and development |
3,862 | 3,468 | 11 | 8 | ||||||||||||
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The growth in Development expenditure was driven by the progression of a number of mid and late-stage programmes in HIV, Respiratory and Anaemia, together with the utilisation of the Priority Review Voucher in Q2 2017. The continuing high growth in Discovery expenditure reflected further investment in the early stage Oncology portfolio.
Royalty income
Royalty income was £356 million (2016 £398 million). The reduction was primarily due to the patent expiry of Cialis in Q4 2016 and a catch-up adjustment recorded in Q1 2016.
Adjusted operating profit
Adjusted operating profit was £8,568 million, 12% AER higher than in 2016 and 5% CER higher on a turnover increase of 3% CER. The Adjusted operating margin of 28.4% was 0.9 percentage points higher than in 2016 on an AER basis and 0.4 percentage points higher on a CER basis. This reflected improved operating leverage driven by sales growth and a more favourable mix in all three businesses, together with, in Vaccines, the benefit of a settlement for lost third party supply volume and a favourable year-on-year comparison to inventory adjustments in 2016. There was also continued tight control of ongoing costs across all three businesses as well as benefits from restructuring and integration. This was partly offset by the charge of £106 million on the utilisation of the Priority Review Voucher in Q2 2017 as well as other increases in R&D investment, continuing price pressure, particularly in Respiratory, and supply chain investments.
22
Adjusted operating profit by business
2017 | 2016 | Growth | ||||||||||||||||||||||
£m | Margin % |
£m | Margin % |
£% | CER% | |||||||||||||||||||
Pharmaceuticals |
8,667 | 50.2 | 7,976 | 49.5 | 9 | 3 | ||||||||||||||||||
Pharmaceuticals R&D |
(2,740 | ) | (2,488 | ) | 10 | 7 | ||||||||||||||||||
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Pharmaceuticals |
5,927 | 34.3 | 5,488 | 34.1 | 8 | 1 | ||||||||||||||||||
Vaccines |
1,644 | 31.9 | 1,429 | 31.1 | 15 | 11 | ||||||||||||||||||
Consumer |
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Healthcare |
1,373 | 17.7 | 1,116 | 15.5 | 23 | 11 | ||||||||||||||||||
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8,944 | 29.6 | 8,033 | 28.8 | 11 | 4 | |||||||||||||||||||
Corporate & other unallocated costs |
(376 | ) | (362 | ) | 4 | (3 | ) | |||||||||||||||||
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Adjusted operating profit |
8,568 | 28.4 | 7,671 | 27.5 | 12 | 5 | ||||||||||||||||||
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Pharmaceuticals
Pharmaceuticals operating profit was £5,927 million, 8% AER higher than in 2016 and 1% CER higher on a turnover increase of 3% CER. The operating margin of 34.3% was 0.2 percentage points higher than in 2016 on a Sterling basis but 0.6 percentage points down on a CER basis. This primarily reflected increased R&D investment, including the impact of the utilisation of the Priority Review Voucher in Q2 2017. The operating margin also reflected increased investment in new product support, as well as the continued impact of lower prices, particularly in Respiratory, and the broader transition of the Respiratory portfolio, partly offset by a more favourable product mix, primarily driven by the growth in HIV sales, and the continued cost reduction benefit of the Groups Pharmaceuticals restructuring programme.
Vaccines
Vaccines operating profit was £1,644 million, 15% AER higher than in 2016 and 11% CER higher on a turnover increase of 6% CER. The operating margin of 31.9% was 0.8 percentage points higher than in 2016 on a Sterling basis and 1.3 percentage points higher on a CER basis. This was primarily driven by improved product mix, the benefit of a settlement for lost third party supply volume and a favourable year-on-year comparison with inventory adjustments in 2016, together with continued restructuring and integration benefits. This was partly offset by increased SG&A resources to support business growth and new launches, increased supply chain costs and lower royalty income.
Consumer Healthcare
Consumer Healthcare operating profit was £1,373 million, 23% AER higher than in 2016 and 11% CER higher on a turnover increase of 2% CER. The operating margin of 17.7% was 2.2 percentage points higher than in 2016 and 1.3 percentage points higher on a CER basis, reflecting tight control of costs, integration synergies, principally in SG&A, partly offset by increased investment in power brands.
Net finance costs
Finance income |
2017 £m |
2016 £m |
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Interest and other income |
63 | 70 | ||||||
Fair value movements |
2 | 2 | ||||||
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65 | 72 | |||||||
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Finance expense |
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Interest expense |
(720 | ) | (701 | ) | ||||
Unwinding of discounts on liabilities |
(4 | ) | (4 | ) | ||||
Remeasurements and fair value movements |
(4 | ) | (4 | ) | ||||
Other finance expense |
6 | (15 | ) | |||||
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(722 | ) | (724 | ) | |||||
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Share of after tax profits of associates and joint ventures
The share of profits of associates and joint ventures was £13 million (2016 £5 million).
Adjusted profit before taxation
2017 | 2016 | Growth | ||||||||||||||||||||||
£m | % of turnover |
£m | % of turnover |
£% | CER% | |||||||||||||||||||
Adjusted profit before tax |
7,924 | 26.3 | 7,024 | 25.2 | 13 | 5 |
Taxation
Tax on Adjusted profit amounted to £1,667 million and represented an effective Adjusted tax rate of 21.0% (2016 21.3%).
Non-controlling interests
The allocation of Adjusted earnings to non-controlling interests amounted to £793 million (2016 £637 million), including the non-controlling interest allocations of Consumer Healthcare profits of £344 million (2016 £288 million) and the allocation of ViiV Healthcare profits, which increased to £414 million (2016 £324 million) including the impact of changes in the proportions of preferential dividends due to each shareholder. The increase in allocation also reflected comparison with the reduction in the allocation to non-controlling interests due to higher net losses in some of the Groups other entities with non-controlling interests in 2016.
Adjusted earnings per share
Adjusted EPS of 111.8p was up 11% AER, 4% CER compared with a 5% CER increase in Adjusted operating profit.
23
Financial position and resources
Property, plant and equipment
Our business is science-based, technology-intensive and highly regulated by governmental authorities. We allocate significant financial resources to the renewal and maintenance of our property, plant and equipment to minimise risks of interruption to production and to ensure compliance with regulatory standards. A number of our processes use hazardous materials.
The total cost of our property, plant and equipment at 31 December 2017 was £21,719 million, with a net book value of £10,860 million. Of this, land and buildings represented £4,270 million, plant and equipment £4,132 million and assets in construction £2,458 million. In 2017, we invested £1,584 million in new property, plant and equipment. This was mainly related to a large number of projects for the renewal, improvement and expansion of facilities at various worldwide sites. Property is mainly held freehold. New investment is financed from our liquid resources. At 31 December 2017, we had contractual commitments for future capital expenditure of £584 million and operating lease commitments of £1,045 million. We believe that our property and plant facilities are adequate for our current needs.
We observe stringent procedures and use specialist skills to manage environmental risks from our activities.
Goodwill
Goodwill decreased during the year to £5,734 million at 31 December 2017, from £5,965 million. The decrease primarily reflected the impact of exchange movements.
Other intangible assets
Other intangible assets include the cost of intangibles acquired from third parties and computer software. The net book value of other intangible assets as at 31 December 2017 was £17,562 million (2016 £18,776 million). The decrease in 2017 reflected the impact of exchange movements and the amortisation and impairment of existing intangibles of £934 million and £680 million respectively, partly offset by the development costs capitalised during the year of £251 million and other additions of £454 million.
Investments in associates and joint ventures
We held investments in associates and joint ventures with a carrying value at 31 December 2017 of £183 million (2016 £263 million). The market value at 31 December 2017 was £372 million (2016 £502 million). The largest of these investments was in Innoviva Inc. which had a book value at 31 December 2017 of £147 million (2016 £138 million). The market value at 31 December 2017 was £336 million. See Note 20 to the financial statements Investments in associates and joint ventures.
Other investments
We held other investments with a carrying value at 31 December 2017 of £918 million (2016 £985 million). The decrease in the carrying value during the year was primarily due to the impact of exchange movements. The most significant of the investments held at 31 December 2017 was in Theravance Biopharma, Inc. which had a book value at 31 December 2017 of £199 million (2017 £248 million). The other investments included equity stakes in companies with which we have research collaborations, which provide access to biotechnology developments of potential interest and interests in companies that arise from business divestments.
Derivative financial instruments: assets
We had current derivative financial instruments held at fair value of £68 million (2016 £156 million) and non-current derivative financial instruments held at fair value of £8 million (2016 £nil). The majority of these financial instruments related to foreign exchange contracts both designated and not designated as accounting hedges.
Inventories
Inventory of £5,557 million increased from £5,102 million in 2016. The increase primarily reflected inventory build in advance of new product launches.
Trade and other receivables
Trade and other receivables of £6,000 million decreased from £6,026 million in 2016, primarily reflecting exchange movements partly offset by the impact of higher sales.
Deferred tax assets
Deferred tax assets of £3,796 million decreased from £4,374 million in 2016 primarily as a result of the revaluation of existing deferred tax assets to reflect the lower headline US tax rate following enactment of US tax reform, partly offset by an increase in deferred tax assets related to intra-Group profit on inventory.
Derivative financial instruments: liabilities
We held current derivative financial instruments at fair value of £74 million (2016 £194 million). This primarily related to foreign exchange contracts both designated and not designated as accounting hedges.
Trade and other payables
Trade and other payables amounting to £20,970 million increased from £11,964 million in 2016, reflecting the reclassification of the Consumer Healthcare put option of £8,606 million from non-current liabilities. This relates to the present value of the estimated amount payable by us in the event of full exercise of Novartis right to require us to acquire its 36.5% shareholding in the Consumer Healthcare Joint Venture. As this option became exercisable from 2 March 2018, with payment likely to be due several months after exercise, it has been classified within current liabilities on the Group balance sheet. Further details are provided in Note 3, Key accounting judgements and estimates.
Provisions
We carried deferred tax provisions and other short-term and non-current provisions of £2,661 million at 31 December 2017 (2016 £3,434 million). The decrease in the year primarily reflected a reduction in the deferred tax provision as a result of Swiss tax reform. Other provisions at the year-end include £186 million (2016 £344 million) related to legal and other disputes and £504 million (2016 £554 million) related to the major restructuring programme. Provision has been made for legal and other disputes, indemnified disposal liabilities, employee related liabilities and the costs of the restructuring programme to the extent that at the balance sheet date a legal or constructive obligation existed and could be reliably estimated.
Pensions and other post-employment benefits
We account for pension and other post-employment arrangements in accordance with IAS 19. The deficits, net of surpluses before allowing for deferred taxation were £1,505 million (2016 £2,084 million) on pension arrangements and £1,496 million (2016 £1,693 million) on unfunded post-employment liabilities. The decreases in the deficits were predominantly driven by special funding contributions to the UK and US schemes and significant UK asset gains partly offset by lower discount rates that we used to discount the value of the liabilities.
Other non-current liabilities
Other non-current liabilities amounted to £981 million at 31 December 2017 (2016 £8,445 million). This decrease from 2016 reflects the reclassification of the Consumer Healthcare put option to current liabilities during the year.
24
Contingent consideration liabilities
Contingent consideration liabilities amounted to £6,172 million at 31 December 2017 (2016 £5,896 million), of which £5,542 million (2016 £5,304 million) represented the estimated present value of amounts payable to Shionogi relating to ViiV Healthcare and £584 million (2016 £545 million) represented the estimated present value of contingent consideration payable to Novartis related to the Vaccines acquisition. The liability due to Shionogi included £216 million in respect of preferential dividends. The liability for preferential dividends due to Pfizer at 31 December 2017 was £17 million. An explanation of the accounting treatment of our interests in ViiV Healthcare is set out on page 59.
Net debt
2017 £m |
2016 £m |
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Cash, cash equivalents and liquid investments |
3,911 | 4,986 | ||||||
Borrowings repayable within one year |
(2,825 | ) | (4,129 | ) | ||||
Borrowings repayable after one year |
(14,264 | ) | (14,661 | ) | ||||
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Net debt |
(13,178 | ) | (13,804 | ) | ||||
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At 31 December 2017, net debt was £13.2 billion, compared with £13.8 billion at 31 December 2016, comprising gross debt of £17.1 billion and cash and liquid investments of £3.9 billion. The decrease in net debt primarily reflected the improved free cash flow of £3.4 billion, disposal proceeds of £0.6 billion, together with a £0.6 billion favourable exchange impact from the translation of non-Sterling denominated debt, which more than offset the cost of dividends paid to shareholders of £3.9 billion.
At 31 December 2017, our cash and liquid investments were held as follows:
2017 £m |
2016 £m |
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Bank balances and deposits |
1,715 | 2,583 | ||||||
US Treasury and Treasury repo only money market funds |
1,715 | 2,248 | ||||||
Liquidity funds |
403 | 66 | ||||||
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3,833 | 4,897 | ||||||
Liquid investments Government securities |
78 | 89 | ||||||
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3,911 | 4,986 | |||||||
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Cash and liquid investments of £2.5 billion (2016 £3.2 billion) were held centrally at 31 December 2017.
5.B | Liquidity and capital resources |
The information set forth under the headings:
| Cash generation and conversion on pages 56 to 57; |
| Financial position and resources on pages 58 to 62; |
| Treasury policies on pages 62 to 63; |
| Note 41 Commitments on page 197; and |
| Note 42 Financial instruments and related disclosures on pages 198 to 211 |
of the GSK Annual Report 2018 is incorporated herein by reference.
5.C | Research and development, patents and licenses, etc. |
The information set forth under the headings:
| Innovation within Pharmaceuticals on pages 13 to 15,Vaccines on pages 18 to 19 and Consumer Healthcare on pages 21 to 22; |
| Performance within Pharmaceuticals on page 17; Vaccines on page 20 and Consumer Healthcare on pages 22 to 23; |
| Pharmaceuticals and Vaccines product development pipeline on pages 235 to 237; |
| Pharmaceutical products, competition and intellectual property on pages 238 to 239; |
| Vaccines products, competition and intellectual property on page 239; and |
| Consumer Healthcare products and competition on page 240 |
of the GSK Annual Report 2018 is incorporated herein by reference.
5.D | Trend information |
The information set forth under the heading Financial Review 2018 in Item 5.A of this annual report on Form 20-F is incorporated herein by reference.
5.E | Off-balance sheet arrangements |
Not applicable.
5.F | Tabular disclosure of contractual obligations |
The information set forth under the heading Contractual obligations and commitments on page 61 of the GSK Annual Report 2018 is incorporated herein by reference.
Item 6. | Directors, Senior Management and Employees |
6.A | Directors and senior management |
The information set forth under the headings:
| Our Board on pages 68 to 70; and |
| Our Corporate Executive Team on page 71 |
of the GSK Annual Report 2018 is incorporated herein by reference.
25
6.B | Compensation |
| Remuneration report on pages 95 to 124; and |
| 2017 Remuneration policy summary on pages 120 to 124 |
of the GSK Annual Report 2018 is incorporated herein by reference.
6.C | Board practices |
The information set forth under the heading:
| Corporate governance on pages 65 to 94; and |
| Additional remuneration disclosures on page 107; and |
| Donations to political organisations and political expenditure on page 259 |
of the GSK Annual Report 2018 is incorporated herein by reference.
6.D | Employees |
The information set forth under the headings:
| Engaged people on page 28; |
| Development on page 29; |
| Note 9 Employee costs on page 158; |
| Note 28 Pensions and other post-employment benefits on pages 174 to 182; and |
| Number of employees under Five year record on page 231 |
of the GSK Annual Report 2018 is incorporated herein by reference.
6.E | Share ownership |
The information set forth under the headings:
| Note 43 Employee share schemes on pages 212 to 213; |
| Total remuneration for 2017 on pages 98 to 99; |
| Value earned from Long Term Incentives (LTIs) on page 103; |
| Update on performance of ongoing LTI awards on page 104; and |
| Directors interests in shares on pages 113 to 118 |
of the GSK Annual Report 2018 is incorporated herein by reference.
Item 7. | Major Shareholders and Related Party Transactions |
7.A | Major shareholders |
The information set forth under the headings:
| Change of control and essential contracts on page 94; |
| Share capital and control on pages 251 to 252; and |
| Analysis of shareholdings at 31 December 2018 on page 252 |
of the GSK Annual Report 2018 is incorporated herein by reference.
7.B | Related party transactions |
The information set forth under the heading:
| Note 35 Related party transactions on page 189 |
of the GSK Annual Report 2018 is incorporated herein by reference.
7.C | Interests of experts and counsel |
Not applicable.
Item 8. | Financial Information |
8.A | Consolidated Statements and Other Financial Information: |
See Item 18 below.
In addition, the information set forth under the headings:
| Note 45 Legal proceedings on pages 215 to 218; and |
| Dividends on page 253 |
of the GSK Annual Report 2018 is incorporated herein by reference.
8.B | Significant Changes |
The information set forth under the headings:
| Note 45 Legal proceedings on pages 215 to 218; and |
| Note 46 Post balance sheet events on page 218 |
of the GSK Annual Report 2018 is incorporated herein by reference.
26
Item 9. | The Offer and Listing |
9.A | Offer and listing details |
The information set forth under the headings:
| Market capitalisation on page 251; and |
| Nature of trading market on page 252 |
of the GSK Annual Report 2018 is incorporated herein by reference.
The trading symbol for GSKs Ordinary Shares of 25p each on the London Stock Exchange is GSK.L and the trading symbol for GSKs ADSs on the New York Stock Exchange is GSK.
9.B | Plan of distribution |
Not applicable.
9.C | Markets |
The information set forth under the headings:
| The second paragraph under Share capital and control on page 251; and |
| Nature of trading market on page 252 |
of the GSK Annual Report 2018 is incorporated herein by reference.
9.D | Selling shareholders |
Not applicable.
9.E | Dilution |
Not applicable.
9.F | Expenses of the issue |
Not applicable.
Item 10. | Additional Information |
10.A | Share Capital Not applicable. |
10.B | Articles of Association of GlaxoSmithKline plc |
The following is a summary of the principal provisions of the companys Articles of Association (the Articles). Shareholders should not rely on this summary, but should instead refer to the current Articles which are filed with the Registrar of Companies in the UK and can be viewed on the companys website. The Articles contain the fundamental provisions of the companys constitution, and the rules for the internal management and control of the company. The company has no statement of objects in its Articles and accordingly its objects are unrestricted in accordance with the provisions of the Companies Act 2006.
(a) Voting
All resolutions put to the vote at general meetings, including electronic general meetings (see paragraph (h)), will be decided by poll. On a poll, every shareholder who is present in person or by proxy or, in the case of an electronic general meeting, who participates or is represented by proxy via an electronic platform shall have one vote for every Ordinary Share of which he or she is the holder. In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and seniority shall be determined by the order in which the names stand on the register. Unless the Directors otherwise decide, the right to attend a general meeting and voting rights may not be exercised by a shareholder who has not paid to the company all calls and other sums then payable by him or her in respect of his or her Ordinary Shares. The right to attend a general meeting and voting rights may not be exercised by a shareholder who is subject to an order under Section 794 of the Companies Act 2006 because he or she has failed to provide the company with information concerning his or her interests in Ordinary Shares within the prescribed period, as required by Section 793 of the Companies Act 2006.
(b) Transfer of Ordinary Shares
Any shareholder may transfer his or her Ordinary Shares which are in certificated form by an instrument of transfer in any usual form or in any other form which the Directors may approve. Such instrument must be properly signed and stamped or certified (or otherwise shown to the satisfaction of the Directors as being exempt from stamp duty) and lodged with the company together with the relevant share certificate(s) and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer.
Any member may transfer title to his or her uncertificated Ordinary Shares by means of a relevant system, such as CREST.
The transferor of a share is deemed to remain the holder until the transferees name is entered on the register. The Directors may decline to register any transfer of any Ordinary Share which is not fully paid.
Registration of a transfer of uncertificated Ordinary Shares may be refused in the circumstances set out in the uncertificated securities rules, and where, in the case of a transfer to joint holders, the number of joint holders to whom the uncertificated Ordinary Share is to be transferred exceeds four.
The Articles contain no other restrictions on the transfer of fully paid certificated Ordinary Shares provided: (i) the instrument of transfer is duly stamped or certified or otherwise shown to the satisfaction of the Directors to be exempt from stamp duty and is accompanied by the relevant share certificate and such other evidence of the right to transfer as the Directors may reasonably require; (ii) the transfer, if to joint transferees, is in favour of not more than four transferees; (iii)
27
the instrument of transfer is in respect of only one class of shares; and (iv) the holder of the Ordinary Shares is not subject to an order under Section 794 of the Companies Act 2006. Notice of refusal to register a transfer must be sent to the transferee within two months of the instrument of transfer being lodged. The Directors may decline to register a transfer of Ordinary Shares by a person holding 0.25 per cent. or more of the existing Ordinary Shares if such person is subject to an order under Section 794 Companies Act 2006, after failure to provide the company with information concerning interests in those Ordinary Shares required to be provided under Section 793 of the Companies Act 2006, unless the transfer is carried out pursuant to an arms length sale.
Provisions in the Articles will not apply to uncertificated Ordinary Shares to the extent that they are inconsistent with:
(i) | the holding of Ordinary Shares in uncertificated form; |
(ii) | the transfer of title to Ordinary Shares by means of a system such as CREST; and |
(iii) | any provisions of the relevant regulations. |
(c) Dividends and distribution of assets on liquidation
The profits of the company which are available for distribution and permitted by law to be distributed and which the company may by ordinary resolution from time to time declare, upon the recommendation of the Directors to distribute by way of dividend, in respect of any accounting reference period shall be distributed by way of dividend among holders of Ordinary Shares.
If in their opinion the companys financial position justifies such payments, the Directors may, as far as any applicable legislation allows, pay interim dividends on shares of any class of such amounts and in respect of such periods as they think fit. Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provide, all dividends will be declared, apportioned and paid pro rata according to the amounts paid up on the shares during any portion of the period in respect of which the dividend is paid. As the company has only one class of Ordinary Shares, the holders of such Ordinary Shares will be entitled to participate in any surplus assets in a winding- up in proportion to their shareholdings.
(d) Variation of rights and changes in capital
Subject to the provisions of any statute (including any orders, regulations or other subordinate legislation made under it) from time to time in force concerning companies in so far as it applies to the company (the Companies Acts), the rights attached to any class of shares may be varied with the written consent of the holders of three-quarters in nominal value of the issued shares of that class (excluding any shares of that class held as treasury shares) or with the sanction of a special resolution passed at a separate meeting of the holders of shares of that class. At every such separate meeting, the provisions of the Articles relating to general meetings shall apply, except the necessary quorum shall be at least two persons entitled to vote and holding or representing as proxy at least one-third in nominal value of the issued shares of the relevant class(excluding any shares of that class held as treasury shares) (but provided that at any adjourned meeting one holder of shares of the relevant class present in person or by proxy shall be a quorum).
The rights conferred upon the holders of any Ordinary Shares shall not, unless otherwise expressly provided in the rights attaching to those Ordinary Shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them.
(e) Unclaimed dividends
All dividends or other sums payable on or in respect of any Ordinary Shares which remain unclaimed may be invested or otherwise made use of by the Directors for the benefit of the company until claimed. Unless the Directors decide otherwise, any dividend or other sums payable on or in respect of any Ordinary Shares unclaimed after a period of 12 years from the date when declared or became due for payment will be forfeited and revert to the company. The company may stop sending dividend cheques or warrants by post, or employ such other means of payment in respect of any Ordinary Shares, if at least two consecutive payments have remained uncashed or are returned undelivered or if one payment has remained uncashed or is returned undelivered and the company cannot establish a new address for the holder after making reasonable enquiries; however, in either case, the company must resume sending cheques or warrants or employ such other means of payment if the holder or any person entitled to the Ordinary Shares by transmission requests the resumption in writing.
(f) Untraced shareholders
The company may sell any certificated Ordinary Shares in the company after using reasonable efforts to trace the holder of, or person entitled by transmission to, the Ordinary Shares and sending a notice to the registered address or last known address of the holder or other person entitled in accordance with the requirements of the Articles and waiting for three months if the Ordinary Shares have been in issue for at least ten years and during that period at least three dividends have become payable on them and have not been claimed or satisfied and, so far as any Director is aware, the company has not received any communication from the holder of the Ordinary Shares or any person entitled to them by transmission. Upon any such sale, the company will become indebted to the former holder of the Ordinary Shares or the person entitled to them by transmission for an amount equal to the net proceeds of sale unless and until forfeited. If no valid claim for the money has been received by the company during a period of six years from the date on which the relevant shares were sold by the company, the money will be forfeited and will belong to the company.
(g) Limitations on rights of non-resident or foreign shareholders
There are no limitations imposed by the Articles on the rights of non-resident or foreign shareholders except that there is no requirement for the company to serve notices on shareholders outside the United Kingdom and the United States, if no postal address in the United States or United Kingdom has been provided to the company. The company may choose not to serve, send or supply any notice to a particular shareholder where it considers this necessary or appropriate to deal with legal, regulatory or practical problems in, or under the laws of, any territory.
(h) General meetings of shareholders
The Articles rely on the Companies Act 2006 provisions dealing with the calling of general meeting. The company is required by the Companies Act 2006 to hold an annual general meeting each year. General meetings of shareholders may be called as necessary by the Directors and must be called promptly upon receipt of a requisition from shareholders. Under the Companies Act 2006, an annual general meeting must be called by notice of at least 21 clear days. A general meeting other than an annual general meeting may be called on not less than 14 clear days notice provided a special resolution reducing the notice period to 14 clear days has been passed at the immediately preceding annual general meeting or a general meeting held since that annual general meeting. The Directors may determine that a general meeting shall be held as a physical meeting or in combination with an electronic platform or platforms that enables members to participate in the meeting without physically attending (an electronic general meeting).
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(i) Conflicts of interest
The Directors may, subject to the provisions of the Articles, authorise any matter which would otherwise involve a Director breaching his or her duty under the Companies Acts to avoid conflicts of interest (each a Conflict). A Director seeking authorisation in respect of a Conflict shall declare to the other Directors the nature and extent of his or her Conflict as soon as is reasonably practicable and shall provide the other Directors with such details of the matter as are necessary to decide how to address the Conflict. The board may resolve to authorise the relevant Director in relation to any matter the subject of a Conflict, save that the relevant Director and any other Director with a similar interest shall not count towards the quorum nor vote on any resolution giving such authority, and, if the other Directors so decide, shall be excluded from any meeting of the Directors while the Conflict is under consideration.
(j) Other Conflicts of Interest
Subject to the provisions of the Companies Acts, and provided the nature and extent of a Directors interest has been declared to the Directors, a Director may:
(i) | be party to, or otherwise interested in, any contract with the company, or in which the company has a direct or indirect interest; |
(ii) | hold any other office or place of profit with the company (except that of auditor) in conjunction with his office of director for such period and upon such terms, including remuneration, as the Directors may decide; |
(iii) | act by himself or through a firm with which he is associated in a professional capacity for the company or any other company in which the company may be interested (otherwise than as auditor); |
(iv) | be or become a director of, or employed by, or otherwise be interested in any holding company or subsidiary company of the company or any other company in which the company may be interested; and |
(v) | be or become a director of any other company in which the company does not have an interest and which cannot reasonably be regarded as giving rise to a conflict of interest at the time of his appointment as director of that other company. |
No contract in which a Director is interested shall be liable to be avoided, and any Director who is so interested is not liable to account to the company or its shareholders for any benefit realised by the contract by reason of the Director holding that office or of the fiduciary relationship thereby established. However, no Director may vote on, or be counted in the quorum, in relation to any resolution of the board relating specifically to his or her own appointment (including remuneration) or the terms of his or her termination of appointment or relating to any contract in which he or she has an interest (subject to certain exceptions).
Subject to the Companies Acts, the company may by ordinary resolution suspend or relax to any extent the provisions relating to directors interests or restrictions on voting or ratify any transaction not duly authorised by reason of a contravention of such provisions.
(k) Directors remuneration
Each of the Directors will be paid a fee at such rate as may from time to time be determined by the Directors, but the total fees paid to all of the directors for acting as directors (including amounts paid to any director who acts as chairman or is chairman of, or serves on any committee of the board of directors but excluding any amounts paid under any other provision of the Articles) shall not exceed the higher of:
(i) | £3 million a year; and |
(ii) | any higher amount as the company may by ordinary resolution decide. Such fees may be satisfied in cash or in shares or any other non-cash form. Any Director who is appointed to any executive office, acts as Chairman, acts as senior independent director, acts as a scientific/medical expert on the board, is Chairman of, or serves on any committee of the Directors or performs any other services which the Directors consider to extend beyond the ordinary services of a Director shall be entitled to receive such remuneration (whether by way of salary, commission or otherwise) as the Directors may decide. Each Director may be paid reasonable travelling, hotel and other incidental expenses he or she incurs in attending and returning from meetings of the Directors or committees of the Directors, or general meetings of the company, or otherwise incurred in connection with the performance of his or her duties for the company. |
(l) Pensions and gratuities for Directors
The Directors or any committee authorised by the Directors may provide benefits by the payment of gratuities, pensions or insurance or in any other manner for any Director or former Director or their relations, connected persons or dependants, but no benefits (except those provided for by the Articles) may be granted to or in respect of a Director or former Director who has not been employed by or held an executive office or place of profit under the company or any of its subsidiary undertakings or their respective predecessors in business without the approval of an ordinary resolution of the company.
(m) Borrowing powers
Subject to the provisions of the Companies Act 2006, the Directors may exercise all the companys powers to borrow money; to mortgage or charge all or any of the companys undertaking, property (present and future), and uncalled capital; to issue debentures and other securities; and to give security either outright or as collateral security for any debt, liability or obligation of the company or of any third party.
(n) Retirement and removal of Directors
A Director is subject to re-election at every annual general meeting of the company
In addition to any power of removal conferred by the Companies Acts the company may by special resolution remove any Director before the expiration of his or her period of office. No Director is required to retire by reason of his or her age, nor do any special formalities apply to the appointment or re-election of any Director who is over any age limit. No shareholding qualification for Directors shall be required.
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(o) | Vacation of office |
The office of a director shall be vacated if:
(i) | he resigns or offers to resign, and the board resolves to accept such offer; |
(ii) | his resignation is requested by all of the other directors and all of the other directors are not less than three in number; |
(iii) | he is or has been suffering from mental or physical ill health and the board resolves that his office be vacated; |
(iv) | he is absent without permission of the board from meetings of the board (whether or not an alternate director appointed by him attends) for six consecutive months and the board resolves that his office is vacated; |
(v) | he becomes bankrupt or compounds with his creditors generally; |
(vi) | he is prohibited by law from being a director; or |
(vii) | he is removed from office pursuant to the Articles or the Companies Acts. |
(p) Share rights
Subject to any rights attached to existing shares, shares may be issued with such rights and restrictions as the company may by ordinary resolution decide, or (if there is no such resolution or so far as it does not make specific provision) as the board may decide. Such rights and restrictions shall apply as if they were set out in the Articles. Redeemable shares may be issued, subject to any rights attached to existing shares. The board may determine the terms, conditions and manner of redemption of any redeemable share so issued. Such terms and conditions shall apply to the relevant shares as if they were set out in the Articles. Subject to the articles, any resolution passed by the shareholders and other shareholders rights, the Board may decide how to offer, allot, grant options over or otherwise deal with any shares in the company.
10.C | Material contracts |
Agreements with Novartis
On April 22, 2014, GSK and Novartis AG (Novartis) entered into a three-part, inter-conditional transaction, pursuant to which they executed an implementation agreement, a contribution agreement relating to a consumer healthcare joint venture, a share and business sale agreement relating to the vaccines business of Novartis, a sale and purchase agreement relating to the oncology business of GSK, a put option deed relating to the influenza vaccines business of Novartis and a shareholders agreement. GSKs shareholders approved the Transaction on December 18, 2014. The transaction closed on March 2, 2015.
Under the terms of the shareholders agreement, Novartis had the right to require GSK to purchase its shares in the consumer healthcare joint venture. On March 27, 2018, GSK entered into a Put Option Implementation Agreement with, among others, Novartis and GlaxoSmithKline Consumer Healthcare Holdings Limited (GSK Consumer Healthcare) (such agreement, as amended and supplemented on June 1, 2018 and July 30, 2018, the Put Option Implementation Agreement). Under the Put Option Implementation Agreement, Novartis agreed to the cancellation of its shares in GSK Consumer Healthcare in consideration for a payment of US$13 billion. On May 3, 2018, GSKs shareholders approved the transaction and the transaction was completed on June 1, 2018. Following cancellation of Novartiss shares, GSK acquired control of 100% of the shares in GSK Consumer Healthcare.
GSK continues to have obligations to pay further sales and milestone-based consideration to Novartis under the share and business sale agreement relating to the vaccines business of Novartis.
Agreement with Pfizer
On December 19, 2018, GSK, GSK Consumer Healthcare and Pfizer Inc. (Pfizer) entered into a Stock and Asset Purchase Agreement (the SAPA) pursuant to which the parties agreed to form a consumer healthcare joint venture through the acquisition by GSK Consumer Healthcare from Pfizer of Pfizers consumer healthcare business and the transfer by GSK to GSK Consumer Healthcare of those parts of the GSK consumer healthcare business not already part of GSK Consumer Healthcare as of the date of the SAPA (with certain limited exceptions). As consideration for the acquisition of its consumer healthcare business, Pfizer will receive shares in GSK Consumer Healthcare representing a 32% ownership interest in the joint venture. GSK will retain a controlling interest in GSK Consumer Healthcare of 68%. The transaction is subject to customary closing conditions, including (i) receipt of approval by GSKs shareholders, (ii) receipt of all required antitrust approvals and clearances, (iii) no governmental orders restraining or otherwise prohibiting the transaction, (iv) the accuracy of certain representations and warranties by GSK and Pfizer, except where the failure to be true and correct would not have a material adverse effect and (v) compliance by the parties in all material respects with certain pre-completion covenants.
GSK, GSK Consumer Healthcare and Pfizer may also be required to make certain cash payments to the others at completion of the transaction (subject to a potential post-completion true-up) based on the level of working capital and net cash relative to specified targets. GSK has agreed to pay a termination fee of US$900 million to Pfizer if the SAPA is terminated due to: (i) GSKs board of directors having changed, withdrawn or qualified its recommendation to GSKs shareholders in relation to the transaction; (ii) GSKs shareholders having voted on the transaction and failed to approve it; or (iii) GSKs shareholders having failed to approve the transaction by September 30, 2019 (or, at either GSKs or Pfizers option, December 31, 2019 or March 31, 2020 in the case of delayed required antitrust approvals).
Each of GSK and Pfizer has given customary and broadly reciprocal representations and warranties to each other under the SAPA. GSK and Pfizer have agreed to indemnify each other and GSK Consumer Healthcare (as applicable) in respect of losses (other than certain losses arising from tax matters, which are subject to a specific indemnity under the SAPA) relating to: (i) certain liabilities which the parties have agreed will be retained by GSK or Pfizer; (ii) any breach of their respective covenants or agreements under the SAPA or the related ancillary agreements implementing the SAPA; or (iii) any breach of their respective representations and warranties given under the SAPA or the related ancillary agreements implementing the SAPA as of the date of completion of the transaction. GSK Consumer Healthcare has agreed to indemnify GSK and Pfizer in respect of losses (other than certain losses arising from tax matters, which are subject to a specific indemnity under the SAPA) relating to: (i) liabilities which GSK Consumer Healthcare has agreed to assume in connection with the transaction; (ii) liabilities resulting from the conduct of GSK Consumer Healthcares business other than those liabilities that GSK has agreed to retain in connection with the transaction; and (iii) any breach of GSK Consumer Healthcares post-completion covenants or agreements under the SAPA or the related ancillary agreements implementing the SAPA.
Under the SAPA, GSK, Pfizer and GSK Consumer Healthcare have agreed the form of Shareholders Agreement in relation to the consumer healthcare joint venture (the Shareholders Agreement), which will be entered into by the parties upon completion of the transaction. Under the terms of the Shareholders Agreement, GSK will have the right to appoint six directors to the board of the joint venture and the right to appoint the chair of the board of the joint venture, and Pfizer will have the right to appoint three directors to the board of the joint venture. The shareholders agreement contains a list of customary reserved matters that may not be undertaken by the joint venture without the prior approval of Pfizer.
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The joint venture will be permitted to make external borrowings up to an aggregate amount of £300 million, with external borrowings in excess of this level requiring Pfizers consent. In the event that the joint venture requires additional funding, the funding will be requested from GSK and Pfizer pro rata to their respective shareholdings. GSK and Pfizer will each be entitled to provide all (but not some only) of its proportion of the requested funds, but neither party will be obliged to provide such funding. Dividends will be paid to the shareholders in proportion to their respective interests in ordinary shares, and all readily available cash in excess of an agreed base cash figure of £300 million will be distributed subject to the availability of distributable reserves, there being no outstanding shareholder loans and after the payment of any dividends required to be paid on certain low-coupon preference shares held by GSK.
Under the Shareholders Agreement, each of GSK and Pfizer have agreed, subject to customary carve-outs, not to compete with the business of the consumer healthcare joint venture for a period of three years after completion of the transaction and not to acquire a business or interest in an entity in a competing business of the joint venture for six years after completion of the transaction.
At any time from completion of the transaction, GSK will have the right to require the listing and admission to trading of the shares of GSK Consumer Healthcare on the London Stock Exchange, the Nasdaq Stock Market or the New York Stock Exchange (a Separation). From five years from completion of the transaction, Pfizer will have the right to require a Separation. From 15 years after completion of the transaction, GSK will be entitled to require Pfizer to sell to GSK its entire shareholding in the consumer healthcare joint venture at a price reflecting the fully distributed public trading equity value of the joint venture at the relevant time. Neither GSK nor Pfizer may transfer its shares in the joint venture without the others consent.
The Shareholders Agreement will terminate immediately in the event that (i) only GSK or Pfizer remain holding shares in the joint venture or (ii) the shares of the joint venture have been listed and admitted to trading on a recognized stock exchange.
10.D | Exchange controls |
The information set forth under the heading Exchange controls and other limitations affecting security holders on page 251 of the GSK Annual Report 2018 is incorporated herein by reference.
10.E | Taxation |
The information set forth under the heading Tax information for shareholders on pages 254 to 255 of the GSK Annual Report 2018 is incorporated herein by reference.
10.F | Dividends and paying agents |
Not applicable.
10.G | Statement by experts |
Not applicable.
10.H | Documents on display |
The information set forth under the heading Documents on display on page 254 of the GSK Annual Report 2018 is incorporated herein by reference.
10.I | Subsidiary information |
Not applicable.
Item 11. | Quantitative and Qualitative Disclosures About Market Risk |
The information set forth under the headings:
| Treasury policies on pages 62 to 63; and |
| Note 42 Financial instruments and related disclosures on pages 198 to 211 |
of the GSK Annual Report 2018 is incorporated herein by reference.
Item 12. | Description of Securities Other than Equity Securities |
12.A | Debt Securities |
Not applicable.
12.B | Warrants and Rights |
Not applicable.
12.C | Other Securities |
Not applicable.
12.D | American Depositary Shares |
Fees and charges payable by ADR holders
The Bank of New York serves as the depositary (the Depositary) for GSKs American Depositary Receipt (ADR) programme. On April 6, 2015, GSK and the Depositary amended and restated the deposit agreement (the Deposit Agreement) between GSK, the Depositary and owners and holders of ADRs. Pursuant to the Deposit Agreement, ADR holders may be required to pay various fees to the Depositary, and the Depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid. In particular, the Depositary, under the terms of the Deposit
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Agreement, shall charge (i) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery and surrender of American Depositary Shares, (ii) a fee of $0.05 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to this Deposit Agreement, (iii) a fee for the distribution of securities other than cash or shares and (iv) a fee of $0.05 or less per American Depositary Share (or portion thereof) per annum for depositary services. In addition, the following charges shall be incurred by any party depositing or withdrawing Shares or surrendering ADRs or to whom American Depositary Shares are issued: (i) taxes and other governmental charges, (ii) such registration fees as may from time to time be in effect, (iii) certain cable, telex and facsimile transmission expenses, (iv) such expenses as are incurred by the Depositary in the conversion of foreign currency and (v) any other charges payable by the Depositary.
The Depositary may (i) withhold dividends or other distributions or sell any or all of the shares underlying the ADRs in order to satisfy any tax or governmental charge, (ii) deduct from any cash distribution any tax payable thereon or the cost of any currency conversion and (iii) collect any of its fees or charges by deduction from any cash distribution payable to ADR holders that are obligated to pay those fees or charges.
Direct and indirect payments by the Depositary
GSK receives payments from the Depositary in the form of (i) the reimbursement of expenses in connection with the administration, servicing and maintenance of the ADR programme, (ii) a portion of the fees collected by the Depositary for the issuance and cancellation of American Depositary Shares and (iii) a portion of any cash dividend fees and/or special dividend fees. In 2018, the Depositary made payments to GSK of approximately $9.1 million, of which approximately $2.1 million were related to expenses reimbursed and fees collected in connection with services provided in 2017.
Under certain circumstances, including removal of the Depositary or termination of the ADR programme by GSK, GSK is required to repay certain amounts paid to GSK and to compensate the Depositary for payments made or services provided on behalf of GSK.
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 |
The information set forth under the heading Internal framework for control and risk management developments on pages 80 to 81 of the GSK Annual Report 2018 is incorporated herein by reference.
US law and regulation
A number of provisions of US law and regulation apply to the company because our shares are quoted on the New York Stock Exchange (the NYSE) in the form of American Depositary Shares.
NYSE rules
In general, the NYSE rules permit the company to follow UK corporate governance practices instead of those applied in the USA, provided that we explain any significant variations. This explanation is contained in Item 16.G of this Form 20-F. NYSE rules that came into effect in 2005 require us to file annual and interim written affirmations concerning the Audit & Risk Committee and our statement on significant differences in corporate governance.
Sarbanes-Oxley Act of 2002
Following a number of corporate and accounting scandals in the USA, Congress passed the Sarbanes-Oxley Act of 2002. Sarbanes-Oxley is a wide ranging piece of legislation concerned largely with financial reporting and corporate governance.
As recommended by the Securities and Exchange Commission (the SEC), the company has established a Disclosure Committee. The Committee reports to the CEO, the CFO and to the Audit & Risk Committee. It is chaired by the Company Secretary and the members consist of senior managers from finance, legal, corporate communications and investor relations.
External legal counsel, the external auditors and internal experts are invited to attend its meetings periodically. It has responsibility for considering the materiality of information and, on a timely basis, determining the disclosure of that information. It has responsibility for the timely filing of reports with the SEC and the formal review of the GSK Annual Report 2018 and Form 20-F. In 2018 the Committee met 26 times.
Sarbanes-Oxley requires that this annual report on Form 20-F contain a statement as to whether a member of our Audit & Risk Committee (ARC) is an audit committee financial expert as defined by Sarbanes-Oxley. For a summary regarding the Boards judgment on this matter, please refer to Item 16.A below and to page 70 under Judy Lewent, Skills and experience and page 79 under Judy Lewent, Audit & Risk Committee Chair of the GSK Annual Report 2018.
Additional disclosure requirements arise under section 302 and section 404 of Sarbanes-Oxley in respect of disclosure controls and procedures and internal control over financial reporting.
Section 302: Corporate responsibility for financial reports
Sarbanes-Oxley also introduced a requirement for the CEO and the CFO to complete formal certifications, confirming that:
| they have each reviewed the GSK Annual Report 2018 and Form 20-F; |
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| based on their knowledge, the GSK Annual Report 2018 and Form 20-F contain no material misstatements or omissions; |
| based on their knowledge, the financial statements and other financial information fairly present, in all material respects, the financial condition, results of operations and cash flows as of the dates, and for the periods, presented in the GSK Annual Report 2018 and Form 20-F; |
| they are responsible for establishing and maintaining disclosure controls and procedures that ensure that material information is made known to them, and have evaluated the effectiveness of these controls and procedures as at the year-end, the results of such evaluation being contained in the GSK Annual Report 2018 and Form 20-F; |
| they are responsible for establishing and maintaining internal control over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| they have disclosed in the GSK Annual Report 2018 and Form 20-F any changes in internal controls over financial reporting during the period covered by the GSK Annual Report 2018 and Form 20-F that have materially affected, or are reasonably likely to affect materially, the companys internal control over financial reporting; and |
| they have disclosed, based on their most recent evaluation of internal control over financial reporting, to the external auditors and the ARC, all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to affect adversely the companys ability to record, process, summarise and report financial information, and any fraud (regardless of materiality) involving persons that have a significant role in the companys internal control over financial reporting. |
The Group has carried out an evaluation under the supervision and with the participation of its management, including the CEO and CFO, of the effectiveness of the design and operation of the Groups disclosure controls and procedures as at 31 December 2018.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Based on the Groups evaluation, the CEO and CFO have concluded that, as at December 31, 2018, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that the Group files and submits under the US Securities Exchange Act of 1934, as amended, is recorded, processed, summarised and reported as and when required and that it is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding disclosure.
The CEO and CFO completed these certifications on March 15, 2019.
Section 404: Managements annual report on internal control over financial reporting.
In accordance with the requirements of section 404 of Sarbanes-Oxley, the following report is provided by management in respect of the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the US Securities Exchange Act of 1934):
| management is responsible for establishing and maintaining adequate internal control over financial reporting for the Group. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS; |
| management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission; |
| management has assessed the effectiveness of internal control over financial reporting, as at 31 December 2018 and has concluded that such internal control over financial reporting was effective. In addition, there have been no changes in the Groups internal control over financial reporting during 2018 that have materially affected, or are reasonably likely to affect materially, the Groups internal control over financial reporting; and |
| Deloitte LLP, which has audited the consolidated financial statements of the Group for the year ended December 31, 2018, has also assessed the effectiveness of the Groups internal control over financial reporting under Auditing Standard No. 2201 of the Public Company Accounting Oversight Board (United States). Their audit report can be found below. |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of GlaxoSmithKline plc
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of GlaxoSmithKline plc and subsidiaries (the Company) as at 31 December 2018, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at 31 December 2018, based on criteria established in Internal Control Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as at and for the year ended 31 December 2018, of the Company and our report dated 15 March 2019, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements annual report on internal control over financial reporting included in item 15 of the Form 20-F. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte LLP
London, United Kingdom
15 March 2019
Item 16.A | Audit committee financial expert |
The information set forth under the heading:
| Membership within the Audit & Risk Committee Report on page 79; and |
| Sarbanes-Oxley Act of 2002 on page 258 |
of the GSK Annual Report 2018 is incorporated herein by reference.
Item 16.B | Code of Ethics |
The information set forth under the heading Code of Conduct and reporting lines on page 86 of the GSK Annual Report 2018 is incorporated herein by reference. You will find the Code of Conduct at this link: https://www.gsk.com/en-gb/about-us/policies-codes-and-standards/.
No waivers were granted from a provision of our code of ethics to an officer or person described in Item 16B(a) that relates to one or more of the items set forth in Item 16B(b) in 2017.
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Item 16.C | Principal Accountant Fees and Services |
Audit Fees for 2016 and 2017 were paid to PricewaterhouseCoopers LLP and for 2018 were paid to Deloitte LLP.
16C(a) | Audit Fees |
The information set forth in the table under the heading Fees payable to the companys auditor and its associates in the rows named Audit of parent company and consolidated financial statements, Audit of the companys subsidiaries and Attestation under s.404 of Sarbanes-Oxley Act 2002 in Note 8 Operating profit on page 157 of the GSK Annual Report 2018 is incorporated herein by reference.
16C(b) | Audit-Related Fees |
The information set forth in the table under the heading Fees payable to the companys auditor and its associates in the row named Other assurance services in Note 8 Operating profit on page 157 of the GSK Annual Report 2018 is incorporated herein by reference. The other assurance services provided by the auditor relate to agreed upon procedures and other assurance services outside of statutory audit requirements.
16C(c) | Tax Fees |
The information set forth in the table under the heading Fees payable to the companys auditor and its associates in the rows named Taxation compliance and Taxation advice in Note 8 Operating profit on page 157 of the GSK Annual Report 2018 is incorporated herein by reference.
16C(d) | All Other Fees |
The information set forth in the table under the heading Fees payable to the companys auditor and its associates in the row named All other services in Note 8 Operating profit on page 157 of the GSK Annual Report 2018 is incorporated herein by reference. All other services provided by the auditor primarily related to advisory services for the year-ended 31 December 2018.
16C(e) | The information set forth under the heading Non-audit services on page 86 of the GSK Annual Report 2018 is incorporated herein by reference. |
16C(f) | Not applicable. |
Item 16.D | Exemptions from the Listing Standards for Audit Committees |
Not applicable.
Item 16.E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
Not applicable.
Item 16.F | Change in Registrants Certifying Accountant |
Not applicable.
Item 16.G | Corporate Governance |
Comparison of New York Stock Exchange Corporate Governance Standards and GlaxoSmithKline plcs corporate governance practice.
On November 4, 2003, the New York Stock Exchange (the NYSE) adopted new corporate governance standards. The application of the NYSEs standards is restricted for foreign companies, recognizing that they have to comply with domestic requirements. As a foreign private issuer, GlaxoSmithKline plc (GlaxoSmithKline or the Company) must comply with the following NYSE standards:
1. | the Company must satisfy the audit committee requirements of the SEC; |
2. | the Chief Executive Officer (the CEO) must promptly notify the NYSE in writing after any executive officer of the Company becomes aware of any non-compliance with any applicable provisions of the NYSEs corporate governance standards; |
3. | the Company must submit an annual affirmation to the NYSE affirming GlaxoSmithKlines compliance with applicable NYSE corporate governance standards, and submit interim affirmations to the NYSE notifying it of specified changes to the audit committee or a change to the status of the Company as a foreign private issuer; and |
4. | the Company must provide a brief description of any significant differences between its corporate governance practices and those followed by US companies under the NYSE listing standards. |
As a Company listed on the London Stock Exchange, GlaxoSmithKline is required to comply with the UK Listing Authoritys Listing Rules (the Listing Rules) and to report non-compliance with the UK Corporate Governance Code (the UK Code).
The table below discloses differences between GlaxoSmithKlines current domestic corporate governance practices, which are based on the UK Code, and the NYSE corporate governance standards, applicable to US companies.
NYSE Corporate Governance Standards |
Description of differences between GlaxoSmithKlines governance practice and the NYSE Corporate Governance Standards | |||
Director Independence (303A.01 of NYSE Manual) | ||||
1. | Listed companies must have a majority of independent directors (as defined in Exchange Act Rule 10A-3 under the U.S Securities Exchange Act of 1934, as amended (the Exchange Act)). | GlaxoSmithKline complies with the equivalent domestic requirements contained in the UK Corporate Governance Code (the UK Code), the latest version of which was issued in July 2018. |
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The UK Code provides that the board of directors of GlaxoSmithKline (the Board) and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of the service of the Board and membership should be regularly refreshed (Principle K). The Board should include an appropriate combination of Executive and Non-Executive Directors and, in particular, independent Non-Executive Directors (for the purpose of the UK Code) such that no individual or small group of individuals can dominate the Boards decision taking. There should be a clear division of responsibilities between the leadership of the Board and the executive leadership of GlaxoSmithKlines business (Principle G). At least half the Board, excluding the Chairman, should comprise Non-Executive Directors determined by the Board to be independent (Provision 11). The roles of Chairman and Chief Executive should not be exercised by the same individual. If, exceptionally, this is proposed by the Board, major shareholders should be consulted ahead of appointment (Provision 9).
The Board considers that Vindi Banga, Dr Vivienne Cox, Lynn Elsenhans, Dr Laurie Glimcher, Dr Jesse Goodman, Judy Lewent, and Urs Rohner are independent for the purpose of the UK Code.
A majority of the Board members are independent Non-Executive Directors and, in accordance with the requirements of the UK Code, the Board has appointed one of the independent Non-Executive Directors as Senior Independent Director to provide a sounding board for the Chairman and act as an intermediary for other Directors and shareholders where necessary (Provision 12). In January 2012 the Board adopted a formal written role specification for the Senior Independent Director. | ||||
NYSE Independence Tests (303A.02 of the NYSE Manual) | ||||
2. | In order to tighten the definition of independent director for purposes of these standards:
(a) (i) No director qualifies as independent unless the board of directors affirmatively determines that the director has no material relationship with the listed company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the company).
(ii) In addition, in affirmatively determining the independence of any director who will serve on the compensation committee of the listed companys board of directors, the board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the listed company which is material to that directors ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to:
(A) the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the listed company to such director; and
(B) whether such director is affiliated with the listed company, a subsidiary of the listed company or an affiliate of a subsidiary of the listed company.
(b) In addition, a director is not independent if:
(i) The director is, or has been within the last three years, an employee of the listed company, or an immediate family member is, or has been within the last three years, an executive officer, of the listed company. |
GlaxoSmithKline complies with the corresponding domestic requirements contained in the UK Code, which sets out the principles for GlaxoSmithKline to determine whether a director is independent.
The Board is required to determine and state its reasons for the determination of whether each Non-Executive Director is independent in character and judgment and whether there are relationships or circumstances which are likely to impair, or could appear to impair, the directors judgment. In undertaking this process, the Board is required, amongst other factors, to consider if the director:
(a) is or has been an employee of GlaxoSmithKline within the last five years;
(b) has, or has had within the last three years, a material business relationship with GlaxoSmithKline either directly or as a partner, shareholder, director or senior employee of a body that has such a relationship with GlaxoSmithKline;
(c) has received or receives additional remuneration from GlaxoSmithKline apart from a directors fee, participates in GlaxoSmithKlines share option or a performance-related pay scheme, or is a member of GlaxoSmithKlines pension scheme;
(d) has close family ties with any of GlaxoSmithKlines advisers, directors or senior employees;
(e) holds cross-directorships or has significant links with other directors through involvement in other companies or bodies;
(f) represents a significant shareholder; or | ||
(ii) The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in direct compensation from the listed company, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service). |
(g) has served on the Board for more than nine years from the date of his or her first appointment,
and is independent notwithstanding the existence of these relationships or circumstances (Provision 10).
The Board considers all its Non-Executive Directors to be independent in character and judgment and has concluded that all its Non-Executive Directors are independent within the meaning of the UK Code. |
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(iii) (A) The director is a current partner or employee of a firm that is the listed companys internal or external auditor; (B) the director has an immediate family member who is a current partner of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and personally works on the listed companys audit; or (D) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on the listed companys audit within that time.
(iv) The director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the listed companys present executive officers at the same time serves or served on that companys compensation committee.
(v) The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, the listed company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million, or 2% of such other companys consolidated gross revenues.
(For the purposes of these standards executive officer is defined to have the meaning specified for the term officer in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended, the Exchange Act). |
The Chairman satisfied the independence criteria on appointment in accordance with the UK Code (Provision 9). The Chairman should not remain in post beyond nine years from the date of their first appointment to the Board. To facilitate effective succession planning and the development of a diverse board, this period can be extended for a limited time (Provision 19).
GlaxoSmithKline complied with the UK Code requirement, and its articles of association, that all Directors should be subject to annual election or re-election by shareholders (Provision 18) at its Annual General Meeting in 2018, and intends to comply with this requirement at its 2019 Annual General Meeting.
The UK Code also provides that the Board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees, the Chairman and individual Directors (Principle L and Provision 21). Annual evaluation of the Board should consider the Boards composition, diversity and how effectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute effectively (Principle L). GlaxoSmithKline has complied with this requirement. In addition, the annual evaluation of the Board should be externally facilitated at least every three years and a statement should be made as to whether an external facilitator has any other connection with GlaxoSmithKline and the external facilitator should be identified in the Annual Report (Provision 21). Internally facilitated evaluations were conducted in 2015, 2016 and 2018. GlaxoSmithKline conducted an externally facilitated evaluation in 2014 and 2017.
The FRCs Guidance on Board Effectiveness (Guidance) provides that all Directors should receive an induction on joining the Board and should regularly update and refresh their skills and knowledge. The Chairman should ensure that new Directors receive a full, formal and tailored induction on joining the Board (Guidance, para 61, 75-76 & 81). The Chairman should act on the results of the annual evaluation by recognising the strengths and addressing any weaknesses of the Board. Each Director should engage with this process and take appropriate action when development needs have been identified (Provision 22). | |||
Executive Sessions (303A.03 of the NYSE Manual) | Meetings | |||
3. | To empower non-management directors to serve as a more effective check on management, the non-management directors of each listed company must meet at regularly scheduled executive sessions without management. | GlaxoSmithKline complies with the equivalent domestic requirements set out in the UK Code, which requires the Chairman of GlaxoSmithKline to hold meetings with the Non-Executive Directors without executives present (Provision 13). The Non-Executive Directors, led by the Senior Independent Director, also meet at least annually without the Chairman present to appraise the Chairmans performance (Provision 12).
The UK Code provides that the Chairman should promote a culture of openness and debate by facilitating the effective contribution of all Non-Executive Directors in particular, and constructive board relations between Executive and Non-Executive Directors (Principle F). In addition, the Chairman should seek regular engagement with major shareholders in order to understand their views on governance and performance against the strategy. The Chairman is responsible for ensuring that the Board as a whole has a clear understanding of the view of shareholders and stakeholders (Principle D and Provision 3). The board should also understand the views of GlaxoSmithKlines other key stakeholders and keep engagement mechanisms under review so that they remain effective (Provision 5). | ||
Nominating / Corporate Governance Committee (303A.04 of the NYSE Manual) | Nominations Committee | |||
4. | (a) Listed companies must have a nominating/corporate governance committee composed entirely of independent directors.
(b) The nominating/corporate governance committee must have a written charter that addresses: |
GlaxoSmithKline complies with the corresponding domestic requirements set out in the UK Code, which requires GlaxoSmithKline to have a Nominations Committee that is comprised of a majority of independent Non-Executive Directors (Provision 17).
GlaxoSmithKlines Nominations Committee has written terms of reference in accordance with the UK Code. The terms of reference are available on GlaxoSmithKlines website and |
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(i) the committees purpose and responsibilities which, at minimum, must be to: identify individuals qualified to become board members, consistent with criteria approved by the board, and to select, or to recommend that the board select, the director nominees for the next annual meeting of shareholders; develop and recommend to the board a set of corporate governance guidelines applicable to the corporation; and oversee the evaluation of the board and management; and
(ii) an annual performance evaluation of the committee. |
explain the Nominations Committees role and the authority delegated to it by the Board (Guidance, para 63). The Nominations Committee reviews the structure, size, diversity (including gender diversity), and composition of the Board (evaluating the balance of skills, experience, independence and knowledge on the Board), leads the process for the appointment of members to the Board and the Corporate Executive Team (the CET), and makes recommendations to the Board as appropriate. The Nominations Committee also monitors the planning of succession for the Board and Senior Management (Provision 17).
The terms and conditions of appointment of the Chairman and Non-Executive Directors are available for inspection (Guidance, para 96).
The UK Code requires that a separate section in GlaxoSmithKlines Annual Report describes the work of the Nominations Committee in discharging its duties, including the process it has used in relation to Board appointments (Provision 20). An explanation should be given if neither an external search consultancy nor open advertising has been used in the appointment of a chairman or a non-executive director. Where an external search consultancy has been used, it should be identified in the Annual Report and a statement should be made as to whether it has any other connection with GlaxoSmithKline (Provision 20). This section should include a description of the process used in relation to appointments, how board evaluation has been conducted, the Boards policy on diversity, including gender, any measurable objectives that it has set for implementing the policy, and progress on achieving the objectives, and the gender balance of those in the senior management and their direct reports (Provision 23). GlaxoSmithKline has complied with this requirement under the 2016 UK Code and will comply with this requirement as amended in the 2018 UK Code.
As described above, there is an annual Board evaluation exercise, which also includes evaluation of the Boards committees and individual Directors (Principle L).
The Board is responsible for regularly reviewing its corporate governance standards and practices. The Company Secretary oversees corporate governance matters for the Group. The Company Secretary is responsible for advising the Board through the Chairman on all corporate governance matters (Provision 16). Domestic requirements do not mandate GlaxoSmithKline to establish a distinct corporate governance committee. | |||
Compensation Committee (303A.05 of the NYSE Manual) | Remuneration Committee | |||
5. | (a) Listed companies must have a compensation committee composed entirely of independent directors. Compensation committee members must satisfy the additional independence requirements specific to compensation committee membership set forth in Section 2(a)(ii) in the Section titled Independence Tests above. | GlaxoSmithKline complies with the equivalent domestic requirements set out in the UK Code, which requires GlaxoSmithKline to have a Remuneration Committee comprising at least three independent Non-Executive Directors (Provision 32). | ||
(b) The compensation committee must have a written charter that addresses:
(i) the committees purpose and responsibilities which, at a minimum, must be to have direct responsibility to:
(A) review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEOs performance in light of those goals and objectives, and, either as a committee or together with the other independent directors (as directed by the board), determine and approve the CEOs compensation level based on this evaluation;
(B) make recommendations to the board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to board approval; and
(C) prepare the disclosure required by item 407(e)(5) or Regulation S-K under the Exchange Act; |
GlaxoSmithKlines Remuneration Committee has written terms of reference in accordance with the UK Code, which explain the Remuneration Committees role and the authority delegated to it by the Board and are available on GlaxoSmithKlines website (Guidance, para 63). The Remuneration Committee determines the terms of service and remuneration of the Executive Directors and members of the CET and, with the assistance of external independent advisers, it evaluates and makes recommendations to the Board on overall executive remuneration policy (the Chairman and the CEO are responsible for evaluating and making recommendations to the Board on the remuneration of Non-Executive Directors). It should review workforce remuneration and related policies and the alignment of incentives and rewards with culture, taking these into account when setting the policy for executive director remuneration (Provision 33). Where remuneration consultants are appointed, they should be identified in the Annual Report and a statement should be made as to whether they have any other connection with GlaxoSmithKline (Provision 35). |
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(ii) an annual performance evaluation of the compensation committee.
(iii) The rights and responsibilities of the compensation committee set forth in Section 303A.05(c).
(c)(i) The compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, independent legal counsel or other adviser.
(ii) The compensation committee shall be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, independent legal counsel or other adviser retained by the compensation committee.
(iii) The listed company must provide for appropriate funding, as determined by the compensation committee, for payment of reasonable compensation to a compensation consultant, independent legal counsel or any other adviser retained by the compensation committee.
(iv) The compensation committee may select a compensation consultant, legal counsel or other adviser to the compensation committee only after taking into consideration, all factors relevant to that persons independence from management, including the following:
(A) The provision of other services to the listed company by the person that employs the compensation consultant, legal counsel or other adviser;
(B) The amount of fees received from the listed company by the person that employs the compensation consultant, legal counsel or other adviser, as a percentage of the total revenue of the person that employs the compensation consultant, legal counsel or other adviser;
(C) The policies and procedures of the person that employs the compensation consultant, legal counsel or other adviser that are designed to prevent conflicts of interest;
(D) Any business or personal relationship of the compensation consultant, legal counsel or other adviser with a member of the compensation committee;
(E) Any stock of the listed company owned by the compensation consultant, legal counsel or other adviser; and
(F) Any business or personal relationship of the compensation consultant, legal counsel, other adviser or the person employing the adviser with an executive officer of the listed company. |
The UK Code provides that the Remuneration Committee:
(a) should take care to recognise and manage conflicts of interest when receiving views from Executive Directors or senior management, or consulting the Chief Executive about its proposals (Provision 35 & Guidance, para 129) and should have delegated responsibility for setting remuneration for all Executive Directors and the Chairman, including pension rights and any compensation payments (Provision 33);
(b) should recommend and monitor the level and structure of remuneration for senior management (Provision 33);
(c) should consider the pension consequences and associated costs of basic salary increases and any other changes in pensionable remuneration, or contribution rates, particular for Directors close to retirement (Provision 38);
(d) should ensure that compensation commitments in Directors terms of appointment do not reward poor performance (Provision 39). Remuneration schemes should promote long-term shareholdings by Executive Directors that support alignment with long-term shareholder interests. A formal policy should be developed for post-employment shareholding requirements encompassing both unvested and vested shares (Provision 36). Remuneration schemes and policies should enable the use of discretion to override formulaic outcomes and include provisions that would enable GlaxoSmithKline to recover and/or withhold sums or share awards specifying the circumstances in which it would be appropriate to do so (Provision 37); and
(e) when determining Executive Director remuneration policy and practices, ensure that: (i) remuneration arrangements are transparent and promote effective engagement with shareholders and the workforce; (ii) the operation and rationale of remuneration structures are easy to understand; (iii) remuneration arrangements identify and mitigate reputational and other risks from excessive rewards and behavioural risks that can arise from target-based incentive plans; (iv) the range of possible values of rewards to individual Directors and any other limits or discretions are identified and explained at the time of approving the policy; (v) the link between individual awards, the delivery of strategy and the long-term performance of GlaxoSmithKline should be clear; and (vi) incentive schemes should drive behaviours consistent with company purpose, values and strategy (Provision 40).
The UK Code requires that remuneration of Non-Executive Directors should not include share options or other performance-related elements, but should reflect the time commitment and responsibilities of the role (Provision 34).
The UK Code requires that notice or contract periods should be one year or less (Provision 39).
As described above, there is an annual Board evaluation exercise, which also includes evaluation of the Boards committees (Principle L). | |||
Audit Committee (303A.06 and 303A.07 of the NYSE Manual) | Audit & Risk Committee | |||
6. | Listed companies must have an audit committee that satisfies the requirements of Rule 10A-3 under the Exchange Act. | GlaxoSmithKline complies with equivalent domestic requirements set out in the UK Code, which requires that GlaxoSmithKline has an Audit & Risk Committee that is comprised of at least three independent Non-Executive Directors (Provision 24). GlaxoSmithKline considers all members of the Audit & Risk Committee to be independent. The Board has also satisfied itself, in line with the UK Code, that at least one member of the Audit & Risk Committee has recent and relevant financial experience and that the Audit & Risk Committee as a whole has competence relevant to the sector in which GlaxoSmithKline operates (Provision 24). |
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|
The UK Code requires the Audit & Risk Committee to:
(a) monitor the integrity of the financial statements of GlaxoSmithKline and any formal announcements relating to GlaxoSmithKlines financial performance, reviewing significant financial reporting judgments contained in them (Provision 25);
(b) provide advice (where requested by the Board) on whether the Annual Report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess GlaxoSmithKlines position and performance, business model and strategy (Provision 25);
(c) review GlaxoSmithKlines internal financial controls and internal control and risk management systems (Provision 25);
(d) monitor and review the effectiveness of GlaxoSmithKlines internal audit function (Provision 25);
(e) conduct the tender process and make recommendations to the Board, regarding the appointment, re-appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor (Provision 25);
(f) review and monitor the external auditors independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional and regulatory requirements (Provision 25);
(g) develop and implement policy on the engagement of external auditors to supply non-audit services, ensuring there is prior approval of non-audit services, considering the impact this may have on independence, taking into account the relevant regulations and ethical guidance regarding the provision of non-audit services by the external audit firm, and to report to the Board on any improvement or action required (Provision 25);
(h) report to the Board on how it has discharged its responsibilities (Provision 25); and
(i) review arrangements by which the staff of GlaxoSmithKline may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters (Provision 6).
GlaxoSmithKlines Audit & Risk Committee meets the requirements of Rule 10A-3 in that:
each member of the Audit & Risk Committee is deemed to be independent in accordance with the Securities Exchange Act of 1934, as amended, and applicable NYSE and UK requirements; | |||
the Audit & Risk Committee, amongst other things, is responsible for recommending the appointment, compensation, maintenance of independence and oversight of the work of any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for GlaxoSmithKline, and each such accounting firm must report directly to the Audit & Risk Committee;
the Audit & Risk Committee has established a procedure for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
the Audit & Risk Committee has the authority to engage independent counsel and other advisors as it determines necessary to carry out its duties; and
GlaxoSmithKline must provide appropriate funding for the Audit & Risk Committee.
The Board has determined that Judy Lewent has the appropriate qualifications and background to be an Audit Committee Financial Expert as defined in rules promulgated by the SEC under the Exchange Act. |
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7. | (a) The audit committee must have a minimum of three members. All audit committee members must satisfy the requirements for independence set out in Section 303A.02 and, in the absence of an applicable exemption, Rule 10A-3(b)(1) under the Exchange Act.
(b) The audit committee must have a written charter that addresses:
(i) the committees purpose which, at minimum, must be to:
(A) assist board oversight of (1) the integrity of the listed companys financial statements, (2) the listed companys compliance with legal and regulatory requirements, (3) the independent auditors qualifications and independence, and (4) the performance of the listed companys internal audit function and independent auditors (if the listed company does not yet have an internal audit function because it is availing itself of a transition period pursuant to Section 303A.00, the charter must provide that the committee will assist board oversight of the design and implementation of the internal audit function); and
(B) prepare disclosure regarding the audit committees review and discussion of financial statements and certain other audit matters with management and auditors
(ii) the committees responsibility to conduct an annual performance evaluation of the audit committee; and
(iii) the duties and responsibilities of the audit committee which, at a minimum, must include those set out in Rule 10A-3(b)(2), (3), (4) and (5) of the Exchange Act as well as to:
(A) at least annually, obtain and review a report by the independent auditor describing: the firms internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditors independence) all relationships between the independent auditor and the listed company;
(B) meet to review and discuss the listed companys annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing the listed companys specific disclosures under Managements Discussion and Analysis of Financial Condition and Results of Operations;
(C) discuss the listed companys earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;
(D) discuss policies with respect to risk assessment and risk management;
(E) meet separately, periodically, with management, with internal auditors (or other personnel responsible for the internal audit function) and with independent auditors;
(F) review with the independent auditor any audit problems or difficulties and managements response;
(G) set clear hiring policies for employees or former employees of the independent auditors; and
(H) report regularly to the board of directors.
(c) Each listed company must have an internal audit function. |
GlaxoSmithKline complies with the equivalent domestic requirements set out in the UK Code, which requires that the Audit & Risk Committee should be comprised of a minimum of three independent Non-Executive Directors (Provision 24).
GlaxoSmithKlines Audit & Risk Committee has written terms of reference in accordance with the UK Code. The terms of reference are available on GlaxoSmithKlines website and explain the Audit & Risk Committees role and the authority delegated to it by the Board (Guidance, para 63).
The Audit & Risk Committees main responsibilities include monitoring and reviewing the financial reporting process, the system of internal control and risk management, overseeing the identification and management of risks, the external and internal process and for monitoring compliance with laws, regulations and ethical codes of practice, including review throughout the year of integrated assurance reports comprising business unit and associated consolidated internal audit reports (Provision 25). Where requested by the Board, the Audit & Risk Committee should provide advice on:
whether the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess GlaxoSmithKlines performance, business model and strategy (Principle M & Provision 27); and
when taking into account GlaxoSmithKlines position and principal risks, how the prospects of GlaxoSmithKline have been assessed, over what period and why the period is regarded as appropriate. The Audit & Risk Committee should also advise whether there is a reasonable expectation that GlaxoSmithKline will be able to continue in operation and meet its liabilities when falling due over the said period, drawing attention to any qualifications or assumptions as necessary prior to the directors making their statement in the annual report (Provision 31).
The UK Code requires that a separate section of the Annual Report should describe the work of the Audit & Risk Committee in discharging its responsibilities (Provision 26).
The Annual Report should include:
the significant issues that the committee considered in relation to the financial statements, and how these issues were addressed (Provision 26);
an explanation of how it has assessed the effectiveness of the external audit process and the approach taken to the appointment or reappointment of the external auditor, information on the length of tenure of the current audit firm and when a tender was last conducted and advance notice of any retendering plans (Provision 26); and
if the external auditor provides non-audit services, an explanation of how auditor objectivity and independence are safeguarded (Provision 26).
Please see section 6 above for a description of the main role and responsibilities of the Audit & Risk Committee.
In accordance with the UK Code (Provision 25), the Audit & Risk Committee monitors and reviews the effectiveness of GlaxoSmithKlines internal audit function. | ||
Shareholder Approval of Equity Compensation Plans (303A.08 of the NYSE Manual) | ||||
8. | Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, except for employment inducement awards, certain grants, plans and amendments in the context of mergers and acquisitions, and certain specific types of plans. | GlaxoSmithKline complies with corresponding domestic requirements in the Listing Rules, which mandate that GlaxoSmithKline must seek shareholder approval for employee share schemes and significant changes to existing schemes, save in circumstances permitted by the Listing Rules (Listing Rule 9.4). Please see section 5(d) above. |
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Corporate Governance Guidelines (303A.09 of the NYSE Manual) | ||||
9. | Listed companies must adopt and disclose corporate governance guidelines. | GlaxoSmithKline complies with corresponding domestic requirements in the Listing Rules and the UK Code, which require that GlaxoSmithKline includes an explanation in its Annual Report of how it complies with the principles of the UK Code and a confirmation that it complies with the UK Codes provisions or, where it does not, provide an explanation of how and why it does not comply (Listing Rule 9.8.6). In addition, GlaxoSmithKline is required to make certain mandatory corporate governance statements in the Directors Report in accordance with the UK Listing Authoritys Disclosure Guidance and Transparency Rules, DTR 7. GlaxoSmithKline will comply with these requirements in its 2018 Annual Report. | ||
Code of Business Conduct and Ethics (303A.10 of the NYSE Manual) | Code of Conduct | |||
10. | Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. | GlaxoSmithKlines Code of Conduct for all employees, including the CEO, CFO and other senior financial officers, is available on GlaxoSmithKlines website. | ||
Foreign Private Issuer Disclosure (303A.11 of the NYSE Manual) | ||||
11. | Listed foreign private issuers must disclose any significant ways in which their corporate governance practices differ from those followed by domestic companies under NYSE listing standards.
Listed foreign private issuers are required to provide this disclosure in the English language and in their annual reports filed on Form 20-F. |
GlaxoSmithKline fulfils this requirement by publishing this document.
GlaxoSmithKline fulfils this requirement by including this disclosure in its Annual Report on Form 20-F. | ||
12. | Certification Requirements (303A.12 of the NYSE Manual) | |||
Each listed company and its CEO must file certain annual and interim certifications regarding compliance with the corporate governance requirements and certain other matters (although foreign private issuers are only required to comply with a subset of these requirements). | GlaxoSmithKline fulfils this requirement by filing the required certifications each year. |
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Item 16.H | Mine Safety Disclosure |
Not applicable.
Item 17 | Financial Statements |
Not applicable.
Item 18 | Financial Statements |
The information set forth under the headings:
| Consolidated income statement on page 140; |
| Consolidated statement of comprehensive income on page 140 |
| Consolidated balance sheet on page 141; |
| Consolidated statement of changes in equity on page 142; |
| Consolidated cash flow statement on page 143; and |
| Notes to the financial statements on pages 144 to 218 |
of the GSK Annual Report 2018 is incorporated herein by reference.
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of GlaxoSmithKline plc
Opinion on the Financial Statements
We have audited the consolidated balance sheet of GlaxoSmithKline plc and subsidiaries (the Company) as at 31 December 2018, the related consolidated income statement, statement of comprehensive income, statement of changes in equity, and cash flows statement, for the year ended 31 December 2018, and the related notes, included in Exhibit 15.3 on pages 140 to 218 (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 at 31 December 2018, and the results of its operations and its cash flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Companys internal control over financial reporting as at 31 December 2018, based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 15 March 2019, expressed an unqualified opinion on the Companys internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys 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
15 March 2019
The first accounting period we audited was 31 December 2018. In 2017, we began preparing for audit firm transition.
44
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of GlaxoSmithKline plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of GlaxoSmithKline plc and its subsidiaries (the Company) as of 31 December 2017 and the related consolidated income statements, consolidated cash flow statements, consolidated statements of comprehensive income and consolidated statements of changes in equity for each of the two years in the period ended 31 December 2017, including the related notes, included in Exhibit 15.3 on pages 140 to 218 (collectively referred to as 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 31 December 2017 and the results of its operations and its cash flows for each of the two years in the period ended 31 December 2017 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board and in conformity with International Financial Reporting Standards as adopted by the European Union.
Basis for Opinion
These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys 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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits of the consolidated financial statements 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/ PricewaterhouseCoopers LLP
London, United Kingdom
16 March 2018
We served as the Company or its merged predecessors auditor from 1977 to 2017. Since at least 1974, we also served as auditor of a company acquired by a merged predecessor of the Company.
45
Item 19 | Exhibits |
* | Certain of the information included within Exhibit 15.3, which is provided pursuant to Rule 12b-23(a)(3) of the Securities Exchange Act of 1934, as amended, is incorporated by reference in this Form 20-F, as specified elsewhere in this Form 20-F. With the exception of the items and pages so specified, the GSK Annual Report 2018 is not deemed to be filed as part of this Form 20-F. |
** | In accordance with Rule 402 of Regulation S-T, the information in these exhibits shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. |
46
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 Annual Report on its behalf.
GlaxoSmithKline plc | ||||||
March 15, 2019 | By: | /s/ Simon Dingemans | ||||
Simon Dingemans | ||||||
Chief Financial Officer |
47
Exhibit 1.1
Company No. 3888792
ARTICLES OF ASSOCIATION
(As adopted by Special Resolution passed on 3 May 2018)
OF
GlaxoSmithKline plc
Company No. 3888792
ARTICLES OF ASSOCIATION
(As adopted by Special Resolution passed on 3 May 2018)
OF
GLAXOSMITHKLINE PLC
CONTENTS
Page |
||||||
1. | Exclusion of Model Articles |
1 | ||||
2. | Definitions |
1 | ||||
3. | Limited Liability |
3 | ||||
4. | Change of Name |
3 | ||||
5. | Rights Attached to Shares |
3 | ||||
6. | Redeemable Shares |
3 | ||||
7. | Variation of Rights |
4 | ||||
8. | Pari Passu Issues |
4 | ||||
9. | Shares |
4 | ||||
10. | Payment of Commission |
4 | ||||
11. | Trusts Not Recognised |
4 | ||||
12. | Suspension of Rights Where Non-Disclosure of Interest |
5 | ||||
13. | Uncertificated Shares |
7 | ||||
14. | Right to Share Certificates |
9 | ||||
15. | Replacement of Share Certificates |
9 | ||||
16. | Share Certificates Sent at Holders Risk |
9 | ||||
17. | Execution of Share Certificates |
9 | ||||
18. | Companys Lien on Shares Not Fully Paid |
9 | ||||
19. | Enforcing Lien by Sale |
10 | ||||
20. | Application of Proceeds of Sale |
10 | ||||
21. | Calls |
10 | ||||
22. | Timing of Calls |
10 |
23. | Liability of Joint Holders |
10 | ||||
24. | Interest Due on Non-Payment |
11 | ||||
25. | Sums Due on Allotment Treated as Calls |
11 | ||||
26. | Power to Differentiate |
11 | ||||
27. | Payment of Calls in Advance |
11 | ||||
28. | Notice if Call or Instalment Not Paid |
11 | ||||
29. | Form of Notice |
11 | ||||
30. | Forfeiture for Non-Compliance with Notice |
12 | ||||
31. | Notice after Forfeiture |
12 | ||||
32. | Sale of Forfeited Shares |
12 | ||||
33. | Arrears to be Paid Notwithstanding Forfeiture |
12 | ||||
34. | Statutory Declaration as to Forfeiture |
12 | ||||
35. | Transfer |
13 | ||||
36. | Signing of Transfer |
13 | ||||
37. | Rights to Decline Registration of Partly Paid Shares |
13 | ||||
38. | Other Rights to Decline Registration |
13 | ||||
39. | No Fee for Registration |
14 | ||||
40. | Untraced Shareholders |
14 | ||||
41. | Transmission on Death |
15 | ||||
42. | Entry of Transmission in Register |
15 | ||||
43. | Election of Person Entitled by Transmission |
15 | ||||
44. | Rights of Person Entitled by Transmission |
16 | ||||
45. | Sub-division |
16 | ||||
46. | Fractions |
16 | ||||
47. | Omission or Non-Receipt of Notice |
17 |
48. | Postponement of General Meetings |
17 | ||||
49. | Resolutions of members at Annual General Meetings |
17 | ||||
50. | Electronic General Meetings |
18 | ||||
51. | Quorum |
18 | ||||
52. | Procedure if Quorum Not Present |
19 | ||||
53. | Security Arrangements |
19 | ||||
54. | Confidential Information |
20 | ||||
55. | Chairman of General Meeting |
20 | ||||
56. | Orderly Conduct |
20 | ||||
57. | Entitlement to Attend and Speak |
20 | ||||
58. | Adjournments |
21 | ||||
59. | Notice of Adjournment |
21 | ||||
60. | Amendments to Resolutions |
21 | ||||
61. | Amendments Ruled Out of Order |
21 | ||||
62. | Votes of Members |
22 | ||||
63. | Method of Voting |
22 | ||||
64. | Votes of Joint Holders |
22 | ||||
65. | Voting on Behalf of Incapable Member |
22 | ||||
66. | No Right to Vote where Sums Overdue on Shares |
22 | ||||
67. | Objections or Errors in Voting |
23 | ||||
68. | Meaning of Approved Depositary |
23 | ||||
69. | Appointment of Approved Depositaries |
23 | ||||
70. | Register of Approved Depositaries |
24 | ||||
71. | Approved Depositaries Attendance at General Meetings |
24 |
72. | Proxies of Appointed Depositaries |
24 | ||||
73. | Identifying Appointed Proxies |
24 | ||||
74. | Appointment of Proxies |
25 | ||||
75. | Receipt of Proxies |
25 | ||||
76. | Maximum Validity of Proxy |
26 | ||||
77. | Form of Proxy |
27 | ||||
78. | Cancellation of Proxys Authority |
27 | ||||
79. | Separate General Meetings |
27 | ||||
80. | Number of Directors |
27 | ||||
81. | Directors Shareholding Qualification |
27 | ||||
82. | Power of Company to Appoint Directors |
27 | ||||
83. | Power of Board to Appoint Directors |
28 | ||||
84. | Annual Retirement of Directors |
28 | ||||
85. | Filling Vacancies |
28 | ||||
86. | Power of Removal by Special Resolution |
28 | ||||
87. | Persons Eligible as Directors |
28 | ||||
88. | Position of Retiring Directors |
28 | ||||
89. | Vacation of Office by Directors |
29 | ||||
90. | Alternate Directors |
29 | ||||
91. | Executive Directors |
30 | ||||
92. | Directors Fees |
31 | ||||
93. | Additional Remuneration |
31 | ||||
94. | Expenses |
32 | ||||
95. | Pensions and Gratuities for Directors |
32 | ||||
96. | Conflicts of interest requiring board authorisation |
33 |
97. | Other conflicts of interest |
34 | ||||
98. | Benefits |
34 | ||||
99. | Quorum and voting requirements |
34 | ||||
100. | General |
37 | ||||
101. | General Powers of Company Vested in Board |
37 | ||||
102. | Borrowing Powers |
37 | ||||
103. | Agents |
37 | ||||
104. | Delegation to Individual Directors |
38 | ||||
105. | Registers |
38 | ||||
106. | Provision for Employees |
39 | ||||
107. | Board Meetings |
39 | ||||
108. | Notice of Board Meetings |
39 | ||||
109. | Quorum |
39 | ||||
110. | Directors below Minimum through Vacancies |
39 | ||||
111. | Appointment of Chairman |
39 | ||||
112. | Competence of Meetings |
40 | ||||
113. | Voting |
40 | ||||
114. | Delegation to Committees |
40 | ||||
115. | Participation in Meetings |
40 | ||||
116. | Resolution in Writing |
41 | ||||
117. | Validity of Acts of Board or Committee |
41 | ||||
118. | Use of Seals |
41 | ||||
119. | Declaration of Dividends by Company |
41 | ||||
120. | Payment of Interim and Fixed Dividends by Board |
41 |
121. | Calculation and Currency of Dividends |
42 | ||||
122. | Amounts Due on Shares may be Deducted from Dividends |
42 | ||||
123. | No Interest on Dividends |
42 | ||||
124. | Payment Procedure |
42 | ||||
125. | Uncashed Dividends |
44 | ||||
126. | Forfeiture of Unclaimed Dividends |
44 | ||||
127. | Dividends Not in Cash |
44 | ||||
128. | Scrip Dividends and Dividend Plans Generally |
45 | ||||
129. | Power to Capitalise Reserves and Funds |
47 | ||||
130. | Settlement of Difficulties in Distribution |
47 | ||||
131. | Power to Choose Any Record Date |
48 | ||||
132. | Inspection of Records |
48 | ||||
133. | Summary Financial Statements |
48 | ||||
134. | Method of Service |
48 | ||||
135. | Record Date for Service |
49 | ||||
136. | Members Resident Abroad or on Branch Registers |
50 | ||||
137. | Service of Notice on Person Entitled by Transmission |
50 | ||||
138. | Deemed Delivery |
51 | ||||
139. | Notice When Post Not Available |
52 | ||||
140. | Presumptions Where Documents Destroyed |
52 | ||||
141. | Indemnity of Directors |
53 |
ARTICLES OF ASSOCIATION
of
GLAXOSMITHKLINE PLC
(adopted by Special Resolution passed on 3 May 2018)
Interpretation
1. | Exclusion of Model Articles |
No articles set out in any statute, or in any statutory instrument or other subordinate legislation made under any statute, concerning companies shall apply as the articles of the company.
2. | Definitions |
In these articles unless the context otherwise requires:
address includes a number or address used for the purposes of sending or receiving documents or information by electronic means;
these articles means these articles of association as altered from time to time and the expression this article shall be construed accordingly;
associated company means any company (i) which is the companys holding company or (ii) in which the company or its holding company or any of the predecessors of the company or of such holding company has any interest whether direct or indirect or (iii) which is in any way allied to or associated with the company or its holding company or any of the predecessors of the company or of such holding company, of (iv) which is a subsidiary undertaking or any other associated company;
the auditors means the auditors from time to time of the company or, in the case of joint auditors, any one of them;
the Bank of England base rate means the base lending rate most recently set by the Monetary Policy Committee of the Bank of England in connection with its responsibilities under Part 2 of the Bank of England Act 1998;
the board means the board of directors from time to time of the company or the directors present at a meeting of the directors at which a quorum is present;
1
certificated share means a share which is not an uncertificated share and references in these articles to a share being held in certificated form shall be construed accordingly;
clear days in relation to the period of a notice means that period excluding the day when the notice is served or deemed to be served and the day for which it is given or on which it is to take effect;
the Companies Acts means every statute (including any orders, regulations or other subordinate legislation made under it) from time to time in force concerning companies in so far as it applies to the company;
the holder in relation to any shares means the person whose name is entered in the register as the holder of those shares;
the office means the registered office from time to time of the company;
paid up means paid up or credited as paid up;
participating class means a class of shares title to which is permitted by an Operator to be transferred by means of a relevant system;
person entitled by transmission means a person whose entitlement to a share in consequence of the death or bankruptcy of a member or of any other event giving rise to its transmission by operation of law has been noted in the register;
place means, in relation to a general meeting or annual general meeting, the place of a physical meeting or the electronic platform specified by the board in relation to an electronic general meeting and, where relevant, references to the place of a general meeting or annual general meeting include any combination of two or more such places;
the register means the register of members of the company;
seal means any common or official seal that the company may be permitted to have under the Companies Acts;
the secretary means the secretary, or (if there are joint secretaries) any one of the joint secretaries, of the company and includes an assistant or deputy secretary and any person appointed by the board to perform any of the duties of the secretary;
the uncertificated securities rules means any provision of the Companies Acts relating to the holding, evidencing of title to, or transfer of uncertificated shares and any legislation, rules or other arrangements made under or by virtue of such provision;
uncertificated share means a share of a class which is at the relevant time a participating class, title to which is recorded on the register as being held in uncertificated form and references in these articles to a share being held in uncertificated form shall be construed accordingly;
United Kingdom means Great Britain and Northern Ireland;
2
references to a person being present at or attending a general meeting or annual general meeting means present at a physical meeting or participating via the electronic platform specified by the board in relation to that meeting, and references to absence, refuse entry and eject shall be read accordingly;
references to a document being signed or to signature include references to its being executed under hand or under seal or by any other method and, in the case of a communication in electronic form, such references are to its being authenticated as specified by the Companies Acts;
references to writing include references to any method of representing or reproducing words in a legible and non-transitory form whether sent or supplied in electronic form or otherwise and written shall be construed accordingly;
words or expressions to which a particular meaning is given by the Companies Acts in force when these articles or any part of these articles are adopted bear (if not inconsistent with the subject matter or context) the same meaning in these articles or that part (as the case may be) save that the word company shall include any body corporate; and
references to a meeting shall not be taken as requiring more than one person to be present if any quorum requirement can be satisfied by one person.
Headings are included only for convenience and shall not affect meaning.
3. | Limited Liability |
The liability of members of the company is limited to the amount, if any, unpaid on the shares in the company held by them.
4. | Change of Name |
The company may change its name by resolution of the board.
Share Capital
5. | Rights Attached to Shares |
Subject to any rights attached to existing shares, any share may be issued with or have attached to it such rights and restrictions as the company may by ordinary resolution decide or, if no such resolution has been passed or so far as the resolution does not make specific provision, as the board may decide. Such rights and restrictions shall apply to the relevant shares as if the same were set out in these articles.
6. | Redeemable Shares |
Subject to any rights attached to existing shares, any share may be issued which is to be redeemed, or is liable to be redeemed at the option of the company or the holder. The board may determine the terms, conditions and manner of redemption of any redeemable share so issued. Such terms and conditions shall apply to the relevant shares as if the same were set out in these articles.
3
7. | Variation of Rights |
Subject to the provisions of the Companies Acts, all or any of the rights attached to any existing class of shares may from time to time (whether or not the company is being wound up) be varied either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class (excluding any shares of that class held as treasury shares) or with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. All the provisions of these articles as to general meetings of the company shall, with any necessary modifications, apply to any such separate general meeting, but so that the necessary quorum shall be two persons entitled to vote and holding or representing by proxy not less than one-third in nominal value of the issued shares of the class (excluding any shares of that class held as treasury shares), (but so that at any adjourned meeting one holder entitled to vote and present in person or by proxy (whatever the number of shares held by him) shall be a quorum). The foregoing provisions of this article shall apply to the variation of the special rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class and their special rights were to be varied.
8. | Pari Passu Issues |
The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them.
9. | Shares |
Subject to the provisions of these articles and to any resolution passed by the company and without prejudice to any rights attached to existing shares, the board may offer, allot, grant options over or otherwise deal with or dispose of shares in the company to such persons, at such times and for such consideration and upon such terms as the board may decide.
10. | Payment of Commission |
The company may in connection with the issue of any shares or the sale for cash of treasury shares exercise all powers of paying commission and brokerage conferred or permitted by the Companies Acts. Any such commission or brokerage may be satisfied by the payment of cash or by the allotment of fully or partly-paid shares or other securities or partly in one way and partly in the other.
11. | Trusts Not Recognised |
Except as ordered by a court of competent jurisdiction or as required by law, no person shall be recognised by the company as holding any share upon any trust and the company shall not be bound by or required in any way to recognise (even when having notice of it) any interest in any share or (except only as by these articles or by law otherwise provided) any other right in respect of any share other than an absolute right to the whole of the share in the holder.
4
12. | Suspension of Rights Where Non-Disclosure of Interest |
(A) | Where the holder of any shares in the company, or any other person appearing to be interested in those shares, fails to comply within the relevant period with any statutory notice in respect of those shares or, in purported compliance with such a notice, has made a statement which is false or inadequate in a material particular, the company may give the holder of those shares a further notice (a restriction notice) to the effect that from the service of the restriction notice those shares will be subject to some or all of the relevant restrictions, and from service of the restriction notice those shares shall, notwithstanding any other provision of these articles, be subject to those relevant restrictions accordingly. For the purpose of enforcing the relevant restriction referred to in sub-paragraph (iii) of the definition of relevant restrictions, the board may give notice to the relevant member requiring the member to change the relevant shares held in uncertificated form to certificated form by the time stated in the notice and to keep them in certificated form for as long as the board requires. The notice may also state that the member may not change any of the relevant shares held in certificated form to uncertificated form. If the member does not comply with the notice, the board may authorise any person to instruct the Operator to change the relevant shares held in uncertificated form to certificated form. |
(B) | If after the service of a restriction notice in respect of any shares the board is satisfied that all information required by any statutory notice relating to those shares or any of them from their holder or any other person appearing to be interested in the shares the subject of the restriction notice has been supplied, the company shall, within seven days, cancel the restriction notice. The company may at any time at its discretion cancel any restriction notice or exclude any shares from it. The company shall cancel a restriction notice within seven days after receipt of a notice in writing that the relevant shares have been transferred pursuant to an arms length sale. |
(C) | Where any restriction notice is cancelled or ceases to have effect in relation to any shares, any moneys relating to those shares which were withheld by reason of that notice shall be paid without interest to the person who would but for the notice have been entitled to them or as he may direct. |
(D) | Any new shares in the company issued in right of any shares subject to a restriction notice shall also be subject to the restriction notice, and the board may make any right to an allotment of the new shares subject to restrictions corresponding to those which will apply to those shares by reason of the restriction notice when such shares are issued. |
(E) | Any holder of shares on whom a restriction notice has been served may at any time request the company to give in writing the reason why the restriction notice has been served, or why it remains uncancelled, and within 14 days of receipt of such a notice the company shall give that information accordingly. |
(F) | Where a person appearing to be interested in shares has been served with a statutory notice and the shares in which he appears to be interested are held by an Approved Depositary, this article applies only to those shares which are held by the Approved Depositary in which that person appears to be interested and not (so far as that persons apparent interest is concerned) to any other shares held by the Approved Depositary. |
5
(G) | Where a member who is an Approved Depositary has been served with a statutory notice, the obligations of that member will be limited to disclosing to the company information relating to any person who appears to be interested in the shares held by it which has been recorded by it in accordance with the arrangement under which it was appointed as an Approved Depositary. |
(H) | If a statutory notice is given by the company to a person appearing to be interested in any share, a copy shall at the same time be given to the holder, but the failure or omission to do so or the non-receipt of the copy by the holder shall not invalidate such notice. |
(I) | This article is in addition to, and shall not in any way prejudice or affect, the statutory rights of the company arising from any failure by any person to give any information required by a statutory notice within the time specified in it. For the purpose of this article a statutory notice need not specify the relevant period, and may require any information to be given before the expiry of the relevant period. |
(J) | In this article: |
a sale is an arms length sale if the board is satisfied that it is a bona fide sale of the whole of the beneficial ownership of the shares to a party unconnected with the holder or with any person appearing to be interested in such shares and shall include a sale made by way of or in pursuance of acceptance of a takeover offer and a sale made through a recognised investment exchange or any other stock exchange outside the United Kingdom. For this purpose an associate (within the definition of that expression in any statute relating to insolvency in force at the date of adoption of this article) shall be included amongst the persons who are connected with the holder or any person appearing to be interested in such shares;
person appearing to be interested in any shares shall mean any person named in a response to a statutory notice or otherwise notified to the company by a member as being so interested or shown in any register or record kept by the company under the Companies Acts as so interested or, taking into account a response or failure to respond in the light of the response to any other statutory notice and any other relevant information in the possession of the company, any person whom the company knows or has reasonable cause to believe is or may be so interested;
person with a 0.25 per cent. interest means a person who holds, or is shown in any register or record kept by the company under the Companies Acts as having an interest in, shares in the company which comprise in total at least 0.25 per cent. in number or nominal value of the shares of the company (calculated exclusive of any shares held as treasury shares), or of any class of such shares (calculated exclusive of any shares of that class held as treasury shares), in issue at the date of service of the restriction notice;
relevant period means a period of 14 days following service of a statutory notice;
6
relevant restrictions mean in the case of a restriction notice served on a person with a 0.25 per cent. interest that:
(i) | the shares shall not confer on the holder any right to attend or vote either personally or by proxy at any general meeting of the company or at any separate general meeting of the holders of any class of shares in the company or to exercise any other right conferred by membership in relation to general meetings; |
(ii) | the board may withhold payment of all or any part of any dividends or other moneys payable in respect of the shares and the holder shall not be entitled to receive shares in lieu of dividend; |
(iii) | the board may decline to register a transfer of any of the shares which are certificated shares, unless such a transfer is pursuant to an arms length sale, |
and in any other case mean only the restriction specified in sub-paragraph (i) of this definition; and
statutory notice means a notice served by the company under the Companies Acts requiring particulars of interests in shares or of the identity of persons interested in shares.
13. | Uncertificated Shares |
(A) | Pursuant and subject to the uncertificated securities rules, the board may permit title to shares of any class to be evidenced otherwise than by a certificate and title to shares of such a class to be transferred by means of a relevant system and may make arrangements for a class of shares (if all shares of that class are in all respects identical) to become a participating class. Title to shares of a particular class may only be evidenced otherwise than by a certificate where that class of shares is at the relevant time a participating class. The board may also, subject to compliance with the uncertificated securities rules, determine at any time that title to any class of shares may from a date specified by the board no longer be evidenced otherwise than by a certificate or that title to such a class shall cease to be transferred by means of any particular relevant system. |
(B) | In relation to a class of shares which is a participating class and for so long as it remains a participating class, no provision of these articles shall apply or have effect to the extent that it is inconsistent in any respect with: |
(i) | the holding of shares of that class in uncertificated form; |
(ii) | the transfer of title to shares of that class by means of a relevant system; and |
(iii) | any provision of the uncertificated securities rules, |
and, without prejudice to the generality of this article, no provision of these articles shall apply or have effect to the extent that it is in any respect inconsistent with the maintenance, keeping or entering up by the Operator, so long as that is permitted or required by the uncertificated securities rules, of an Operator register of securities in respect of that class of shares in uncertificated form.
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(C) | Shares of a class which is at the relevant time a participating class may be changed from uncertificated to certificated form, and from certificated to uncertificated form, in accordance with and subject as provided in the uncertificated securities rules. |
(D) | If, under these articles or the Companies Acts, the company is entitled to sell, transfer or otherwise dispose of, forfeit, re-allot, accept the surrender of or otherwise enforce a lien over an uncertificated share, then, subject to these articles and the Companies Acts, such entitlement shall include the right of the board to: |
(i) | require the holder of that uncertificated share by notice in writing to change that share from uncertificated to certificated form within such period as may be specified in the notice and keep it as a certificated share for as long as the board requires; |
(ii) | appoint any person to take such other steps, by instruction given by means of a relevant system or otherwise, in the name of the holder of such share as may be required to effect the transfer of such share and such steps shall be as effective as they had been taken by the registered holder of that share; and |
(iii) | take such other action that the board considers appropriate to achieve the sale, transfer, disposal, forfeiture, re-allotment or surrender of that share or otherwise to enforce a lien in respect of that share. |
(E) | Unless the board otherwise determines, shares which a member holds in uncertificated form shall be treated as separate holdings from any shares which that member holds in certificated form. However shares held in uncertificated form shall not be treated as forming a class which is separate from certificated shares with the same rights. |
(F) | Unless the board otherwise determines or the uncertificated securities rules otherwise require, any shares issued or created out of or in respect of any uncertificated shares shall be uncertificated shares and any shares issued or created out of or in respect of any certificated shares shall be certificated shares. |
(G) | The company shall be entitled to assume that the entries on any record of securities maintained by it in accordance with the uncertificated securities rules and regularly reconciled with the relevant Operator register of securities are a complete and accurate reproduction of the particulars entered in the Operator register of securities and shall accordingly not be liable in respect of any act or thing done or omitted to be done by or on behalf of the company in reliance on such assumption; in particular, any provision of these articles which requires or envisages that action will be taken in reliance on information contained in the register shall be construed to permit that action to be taken in reliance on information contained in any relevant record of securities (as so maintained and reconciled). |
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14. | Right to Share Certificates |
Every person (except a person to whom the company is not by law required to issue a certificate) whose name is entered in the register as a holder of any certificated shares shall be entitled, without payment, to receive within the time limits prescribed by the Companies Acts (or, if earlier, within any prescribed time limit or within a time specified when the shares were issued) one certificate for all those shares of any one class. In the case of a certificated share held jointly by several persons, the company shall not be bound to issue more than one certificate and delivery of a certificate to one of several joint holders shall be sufficient delivery to all. A member who transfers some but not all of the shares comprised in a certificate shall be entitled to a certificate for the balance without charge to the extent the balance is to be held in certificated form.
15. | Replacement of Share Certificates |
If a share certificate is defaced, worn out, lost or destroyed, it may be replaced on such terms (if any) as to evidence and indemnity as the board may decide and, where it is defaced or worn out, after delivery of the old certificate to the company. Any two or more certificates representing shares of any one class held by any member shall at his request be cancelled and a single new certificate for such shares issued in lieu. Any certificate representing shares of any one class held by any member may at his request be cancelled and two or more certificates for such shares may be issued instead. The board may require the payment of any exceptional out-of-pocket expenses of the company incurred in connection with the issue of any certificates under this article. Any one of two or more joint holders may request replacement certificates under this article.
16. | Share Certificates Sent at Holders Risk |
Every share certificate sent in accordance with these articles will be sent at the risk of the member or other person entitled to the certificate. The company will not be responsible for any share certificate lost or delayed in the course of delivery.
17. | Execution of Share Certificates |
Every share certificate shall be executed under a seal or in such other manner as the board, having regard to the terms of issue and any listing requirements, may authorise and shall specify the number and class of the shares to which it relates and the amount or respective amounts paid up on the shares. The board may by resolution decide, either generally or in any particular case or cases, that any signatures on any share certificates need not be autographic but may be applied to the certificates by some mechanical or other means or may be printed on them or that the certificates need not be signed by any person.
Lien
18. | Companys Lien on Shares Not Fully Paid |
The company shall have a first and paramount lien on every share (not being a fully paid share) for all amounts payable to the company (whether presently or not) in respect of that share. The companys lien on a share shall extend to every amount payable in respect of it. The board may at any time either generally or in any particular case waive any lien that has arisen or declare any share to be wholly or in part exempt from the provisions of this article.
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19. | Enforcing Lien by Sale |
The company may sell, in such manner as the board may decide, any share on which the company has a lien if a sum in respect of which the lien exists is presently payable and is not paid within 14 clear days after a notice has been served on the holder of the share or the person who is entitled by transmission to the share, demanding payment and stating that if the notice is not complied with the share may be sold. For giving effect to the sale the board may authorise some person to sign an instrument of transfer of the share sold to or in accordance with the directions of the purchaser. The transferee shall not be bound to see to the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in relation to the sale.
20. | Application of Proceeds of Sale |
The net proceeds, after payment of the costs, of the sale by the company of any share on which it has a lien shall be applied in or towards payment or discharge of the debt or liability in respect of which the lien exists so far as it is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale and upon surrender, if required by the company, for cancellation of the certificate for the share sold) be paid to the person who was entitled to the share at the time of the sale.
Calls on Shares
21. | Calls |
Subject to the terms of issue, the board may from time to time make calls upon the members in respect of any moneys unpaid on their shares (whether on account of the nominal amount of the shares or by way of premium) and not payable on a date fixed by or in accordance with the terms of issue, and each member shall (subject to the company serving upon him at least 14 clear days notice specifying when and where payment is to be made) pay to the company as required by the notice the amount called on his shares. A call may be made payable by instalments. A call may be revoked or postponed, in whole or in part, as the board may decide. A person upon whom a call is made shall remain liable jointly and severally with the successors in title to his shares for all calls made upon him notwithstanding the subsequent transfer of the shares in respect of which the call was made.
22. | Timing of Calls |
A call shall be deemed to have been made at the time when the resolution of the board authorising the call was passed.
23. | Liability of Joint Holders |
The joint holders of a share shall be jointly and severally liable to pay all calls in respect of the share.
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24. | Interest Due on Non-Payment |
If a call remains unpaid after it has become due and payable, the person from whom it is due and payable shall pay interest on the amount unpaid from the day it is due and payable to the time of actual payment at such rate (not exceeding the Bank of England base rate by more than five percentage points) as the board may decide, and all expenses that have been incurred by the company by reason of such non-payment, but the board shall be at liberty in any case or cases to waive payment of the interest or expenses wholly or in part.
25. | Sums Due on Allotment Treated as Calls |
Any amount which becomes payable in respect of a share on allotment or on any other date fixed by or in accordance with the terms of issue, whether in respect of the nominal amount of the share or by way of premium or as an instalment of a call, shall be deemed to be a call and, if it is not paid, all the provisions of these articles shall apply as if the sum had become due and payable by virtue of a call.
26. | Power to Differentiate |
The board may on or before the issue of shares differentiate between the allottees or holders as to the amount of calls to be paid and the times of payment.
27. | Payment of Calls in Advance |
The board may, if it thinks fit, receive from any member who is willing to advance them all or any part of the moneys uncalled and unpaid upon any shares held by him and on all or any of the moneys so advanced may (until they would, but for the advance, become presently payable) pay interest at such rate (not exceeding the Bank of England base rate by more than five percentage points, unless the company by ordinary resolution shall otherwise direct) as the board may decide.
Forfeiture of Shares
28. | Notice if Call or Instalment Not Paid |
If any call or instalment of a call remains unpaid on any share after the day appointed for payment, the board may at any time serve a notice on the holder requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued and any expenses incurred by the company by reason of such non-payment.
29. | Form of Notice |
The notice shall name a further day (not being less than 14 clear days from the date of the notice) on or before which, and the place where, the payment required by the notice is to be made and shall state that in the event of non-payment on or before the day and at the place appointed, the shares in respect of which the call has been made or instalment is payable will be liable to be forfeited.
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30. | Forfeiture for Non-Compliance with Notice |
If the notice is not complied with, any share in respect of which it was given may, at any time before payment of all calls or instalments and interest and expenses due in respect of it have been made, be forfeited by a resolution of the board to that effect and the forfeiture shall include all dividends declared and other moneys payable in respect of the forfeited shares and not paid before the forfeiture. The board may accept the surrender of any share liable to be forfeited and, in that event, references in these articles to forfeiture shall include surrender.
31. | Notice after Forfeiture |
When any share has been forfeited, notice of the forfeiture shall be served upon the person who was before forfeiture the holder of the share but no forfeiture shall be invalidated by any omission or neglect to give notice.
32. | Sale of Forfeited Shares |
Until cancelled in accordance with the requirements of the Companies Acts, a forfeited share shall be deemed to be the property of the company and may be sold or otherwise disposed of either to the person who was, before forfeiture, the holder or to any other person upon such terms and in such manner as the board shall decide. The board may for the purposes of the disposal authorise some person to sign an instrument of transfer to the designated transferee. The company may receive the consideration (if any) given for the share on its disposal. At any time before a sale or disposition the forfeiture may be cancelled by the board on such terms as the board may decide.
33. | Arrears to be Paid Notwithstanding Forfeiture |
A person whose shares have been forfeited shall cease to be a member in respect of them and shall surrender to the company for cancellation the certificate for the forfeited shares but shall remain liable to pay to the company all moneys which at the date of the forfeiture were payable by him to the company in respect of those shares with interest thereon at such rate (not exceeding the Bank of England base rate by more than five percentage points) as the board may decide from the date of forfeiture until payment, and the company may enforce payment without being under any obligation to make any allowance for the value of the shares forfeited or for any consideration received on their disposal.
34. | Statutory Declaration as to Forfeiture |
A statutory declaration that the declarant is a director of the company or the secretary and that a share has been forfeited on a specified date shall be conclusive evidence of the facts stated in it as against all persons claiming to be entitled to the share. The declaration shall (subject to the signing of an instrument of transfer if necessary) constitute a good title to the share and the person to whom the share is sold or otherwise disposed of shall not be bound to see to the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the forfeiture, sale or disposal.
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Transfer of Shares
35. | Transfer |
(A) | Subject to such of the restrictions of these articles as may be applicable: |
(i) | any member may transfer all or any of his uncertificated shares by means of a relevant system in such manner provided for, and subject as provided in, the uncertificated securities rules, and accordingly no provision of these articles shall apply in respect of an uncertificated share to the extent that it requires or contemplates the effecting of a transfer by an instrument in writing or the production of a certificate for the share to be transferred; and |
(ii) | any member may transfer all or any of his certificated shares by an instrument of transfer in any usual form or in any other form which the board may approve. |
(B) | The transferor of a share shall be deemed to remain the holder of the share concerned until the name of the transferee is entered in the register in respect of it. |
36. | Signing of Transfer |
The instrument of transfer of a certificated share shall be signed by or on behalf of the transferor and (in the case of a partly paid share) the transferee. All instruments of transfer, when registered, may be retained by the company.
37. | Rights to Decline Registration of Partly Paid Shares |
The board can decline to register any transfer of any share which is not a fully paid share.
38. | Other Rights to Decline Registration |
(A) | Registration of a transfer of an uncertificated share may be refused in the circumstances set out in the uncertificated securities rules, and where, in the case of a transfer to joint holders, the number of joint holders to whom the uncertificated share is to be transferred exceeds four. |
(B) | The board may decline to register any transfer of a certificated share unless: |
(i) | the instrument of transfer is duly stamped or duly certified or otherwise shown to the satisfaction of the board to be exempt from stamp duty and is left at the office or such other place as the board may from time to time determine accompanied (save in the case of a transfer by a person to whom the company is not required by law to issue a certificate and to whom a certificate has not been issued) by the certificate for the share to which it relates and such other evidence as the board may reasonably require to show the right of the person signing the instrument of transfer to make the transfer and, if the instrument of transfer is signed by some other person on his behalf, the authority of that person so to do; |
(ii) | the instrument of transfer is in respect of only one class of share; and |
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(iii) | in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four. |
(C) | For all purposes of these articles relating to the registration of transfers of shares, the renunciation of the allotment of any shares by the allottee in favour of some other person shall be deemed to be a transfer and the board shall have the same powers of refusing to give effect to such a renunciation as if it were a transfer. |
39. | No Fee for Registration |
No fee shall be charged by the company for registering any transfer, document or instruction relating to or affecting the title to any share or for making any other entry in the register.
40. | Untraced Shareholders |
(A) | The company may sell any certificated shares in the company on behalf of the holder of, or person entitled by transmission to, the shares at the best price reasonably obtainable at the time of sale if: |
(i) | the shares have been in issue either in certificated or uncertificated form throughout the qualifying period and at least three cash dividends have become payable on the shares during the qualifying period; |
(ii) | no cash dividend payable on the shares has either been claimed by presentation to the paying bank of the relevant cheque or warrant or been satisfied by the transfer of funds to a bank account designated by the holder of, or person entitled by transmission to, the shares or by the transfer of funds by means of a relevant system at any time during the relevant period; |
(iii) | so far as any director of the company at the end of the relevant period is then aware, the company has not at any time during the relevant period received any communication from the holder of, or person entitled by transmission to, the shares; and |
(iv) | on or after the expiry of the qualifying period, the company has sent a notice to the registered address or last known address of the member or person concerned, of its intention to sell such share and before sending such a notice to the member or other person concerned, the company must have used reasonable efforts to trace the member or other person entitled, engaging, if considered appropriate by the company, a professional asset reunification company or other tracing agent, and at least a period of three months has elapsed from the date of sending such notices. |
(B) | The company shall also be entitled to sell at the best price reasonably obtainable at the time of sale any additional certificated shares in the company issued either in certificated or uncertificated form during the qualifying period in right of any share to which paragraph (A) of this article applies (or in right of any share so issued), if the criteria in paragraph (A)(ii) to (iv) are satisfied in relation to the additional shares. |
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(C) | To give effect to any sale of shares pursuant to this article the board may authorise some person to transfer the shares in question and an instrument of transfer signed by that person shall be as effective as if it had been signed by the holder of, or person entitled by transmission to, the shares. The purchaser shall not be bound to see to the application of the purchase moneys nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale. |
(D) | The net proceeds of sale shall belong to the company and, upon their receipt, the company shall record the name of the member, or (if known) the person who would have been entitled to the shares by law, as a creditor for the money in its accounts, unless and until forfeited under this article. No trust shall be created in respect of the debt and no interest shall be payable in respect of it and the company shall not be required to account for any moneys earned from the net proceeds which may be employed in the business of the company or as it thinks fit. If no valid claim for the money has been received by the company during a period of six years from the date on which the relevant shares were sold by the company under this article, the money will be forfeited and will belong to the company. |
(D) | For the purpose of this article: |
the qualifying period means the period of 10 years immediately preceding the date of sending the notice referred to in paragraph (A)(iv) above; and
the relevant period means the period beginning at the commencement of the qualifying period and ending on the date when all the requirements of paragraphs (A)(i) to (iv) above have been satisfied.
Transmission of Shares
41. | Transmission on Death |
If a member dies, the survivor or survivors, where he was a joint holder, and his personal representatives, where he was a sole holder or the only survivor of joint holders, shall be the only persons recognised by the company as having any title to his shares; but nothing contained in these articles shall release the estate of a deceased holder from any liability in respect of any share held by him solely or jointly with other persons.
42. | Entry of Transmission in Register |
Where the entitlement of a person to a certificated share in consequence of the death or bankruptcy of a member or of any other event giving rise to its transmission by operation of law is proved to the satisfaction of the board, the board shall within two months after proof cause the entitlement of that person to be noted in the register.
43. | Election of Person Entitled by Transmission |
Any person entitled by transmission to a share may, subject as provided elsewhere in these articles, elect either to become the holder of the share or to have some person nominated by him registered as the holder. If he elects to be registered himself he shall give notice to the company to that effect. If he elects to have another person registered and the share is
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a certificated share, he shall sign an instrument of transfer of the share to that person. If he elects to have himself or another person registered and the share is an uncertificated share, he shall take any action the board may require (including, without limitation, the signing of any document and the giving of any instruction by means of a relevant system) to enable himself or that person to be registered as the holder of the share. The board may at any time require the person to elect either to be registered himself or to transfer the share and if the requirements are not complied with within 60 days of being issued the board may withhold payment of all dividends and other moneys payable in respect of the share until the requirements have been complied with. All the provisions of these articles relating to the transfer of, and registration of transfers of, shares shall apply to the notice or transfer as if the death or bankruptcy of the member or other event giving rise to the transmission had not occurred and the notice or transfer was given or signed by the member.
44. | Rights of Person Entitled by Transmission |
Where a person becomes entitled by transmission to a share, the rights of the holder in relation to that share shall cease, but the person entitled by transmission to the share may give a good discharge for any dividends or other moneys payable in respect of it and shall have the same rights in relation to the share as he would have had if he were the holder of it save that, until he becomes the holder, he shall not be entitled in respect of the share (except with the authority of the board) to receive notice of, or to attend or vote at, any general meeting of the company or at any separate general meeting of the holders of any class of shares in the company or to exercise any other right conferred by membership in relation to general meetings.
Alteration of Share Capital
45. | Sub-division |
Any resolution authorising the company to sub-divide its shares or any of them may determine that, as between the shares resulting from the sub-division, any of them may have any preference or advantage or be subject to any restriction as compared with the others.
46. | Fractions |
Whenever as a result of a consolidation, consolidation and sub-division or sub-division of shares any holders would become entitled to fractions of a share, the board may deal with the fractions as it thinks fit including by ignoring fractions altogether or by aggregating and selling them or by dealing with them in some other way. For the purposes of effecting any such sale, the board may arrange for the shares representing the fractions to be entered in the register as certificated shares. The board may sell shares representing fractions to any person, including the company and may authorise some person to transfer or deliver the shares to, or in accordance with the directions of, the purchaser. The person to whom any shares are transferred or delivered shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity in, or invalidity of, the proceedings relating to the sale.
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Notice of General Meetings
47. | Omission or Non-Receipt of Notice |
(A) | The accidental omission to give any notice of a meeting or the accidental omission to send or supply any document or other information relating to any meeting to, or the non-receipt (even if the company becomes aware of such non-receipt) of any such notice, document or other information by, any person entitled to receive the notice, document or other information shall not invalidate the proceedings at that meeting. |
(B) | A member present in person or by proxy at a meeting shall be deemed to have received proper notice of that meeting and, where applicable, of the purpose of that meeting. |
48. | Postponement of General Meetings |
If the board, in its absolute discretion, considers that it is impractical or undesirable for any reason to hold a general meeting on the date or at the time or place specified in the notice calling the general meeting, it may postpone or move the general meeting to another date, time and/or place. The board shall take reasonable steps to ensure that notice of the date, time and place of the rearranged meeting is given to any member trying to attend the meeting at the original time and place. Notice of the date, time and place of the rearranged meeting shall, if practicable, also be placed in: (i) at least two national newspapers in the United Kingdom, and (ii) The Wall Street Journal and/or such other newspaper published in the United States as the directors consider to be appropriate. Notice of the business to be transacted at such rearranged meeting shall not be required. If a meeting is rearranged in this way, the appointment of a proxy will be valid if it is received as required by these articles not less than 48 hours before the time appointed for holding the rearranged meeting. The board may also postpone or move the rearranged meeting under this article.
49. | Resolutions of members at Annual General Meetings |
(A) | If, on or before, 31st January in any year any members shall, in accordance with the Companies Acts, require the company, in relation to the Annual General Meeting to be held in that year, to give notice of a resolution which may properly be moved or require the company to circulate a statement in acceptable form, the company shall circulate that resolution or statement with the notice of the Annual General Meeting without cost to the requisitionists. |
(B) | If any such requisition is made in accordance with the Companies Acts after 31st January in any year and prior to the Annual General Meeting to be held in that year, the company shall require that the requisitionists deposit or tender a sum sufficient to meet the Companys reasonable expenses in complying with such requisition in accordance with the Companies Acts. |
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Proceedings at General Meetings (including Annual General Meetings)
50. | Electronic General Meetings |
(A) | The board may determine that a general meeting shall be held as a physical meeting or in combination with an electronic platform or platforms that enables members to participate in the meeting without physically attending. A general meeting held partially on an electronic platform in combination with a physical meeting is referred in these articles as an electronic general meeting. |
(B) | The board may make arrangements for an electronic platform to permit members or their proxies who are not present together at the same physical place to attend, speak and vote at an electronic general meeting by electronic means, and to permit directors or others to attend and speak, and the chairman of the meeting to preside, at an electronic general meeting by electronic means. That meeting shall be duly constituted and its proceedings valid if the chairman of the general meeting is satisfied that adequate facilities are available throughout the electronic general meeting to ensure that members attending the electronic general meeting may participate in the business of the general meeting. |
(C) | The notice of an electronic general meeting shall specify the physical place of that meeting and shall specify the electronic platform and arrangements by which members or their proxies may participate in the meeting. |
(D) | A member who is entitled to vote and who participates or is represented by a proxy by means of a specified electronic platform at an electronic general meeting shall be counted in the quorum for that general meeting. |
(E) | The board may make arrangements for any documents which are required to be made available to the meeting to be accessible electronically to members or their proxies. |
(F) | Nothing in these articles prevents a general meeting being held only at a physical location, however a general meeting cannot be held solely on an electronic platform. |
51. | Quorum |
(A) | No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the choice or appointment of a chairman of the meeting which shall not be treated as part of the business of the meeting. Save as otherwise provided by these articles, two members present in person or by proxy and entitled to vote shall be a quorum for all purposes. A shareholder which is a company is to be considered present if it is represented by a duly authorised representative. |
(B) | If the directors so determine, any or all members (or their proxies) may participate in a general meeting by means of a conference telephone, video teleconference equipment or any communication equipment which allows all persons participating in the meeting to speak to and hear each other. A person so participating shall be |
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deemed to be present in person at the meeting and shall be entitled to vote or be counted in a quorum accordingly. A meeting which takes place by conference telephone, video teleconference or other such communication equipment will be treated as taking place at the place where the chairman is. |
52. | Procedure if Quorum Not Present |
If within five minutes (or such longer time not exceeding one hour as the chairman of the meeting may decide to wait) after the time appointed for the commencement of the meeting a quorum is not present, or if during the meeting a quorum ceases to be present, the meeting:
(i) | if convened by or upon the requisition of members, shall be dissolved; and |
(ii) | in any other case, it shall stand adjourned to such other day (being not less than ten days later, excluding the day on which the meeting is adjourned and the day for which it is reconvened) and at such other time or place as the chairman of the meeting may decide. At any adjourned meeting one member present in person or by proxy and entitled to vote (whatever the number of shares held by him) shall be a quorum and any notice of an adjourned meeting shall state that one member present in person or by proxy and entitled to vote (whatever the number of shares held by him) shall be a quorum. |
53. | Security Arrangements |
(A) | The directors or the secretary may take any action and may put in place any arrangements both before and during any meeting that they/he consider appropriate for: |
(i) | the safety of people attending a meeting; |
(ii) | proper and orderly conduct of a meeting; or |
(iii) | the meeting to reflect the wishes of the majority. |
(B) | This includes the power to refuse entry to, or eject from meetings, any person who fails to comply with any arrangements made or any person who in the opinion of the directors or the secretary is acting in a manner that threatens the safety of people attending the meeting and/or the proper and orderly conduct at a meeting. |
(C) | The board may direct that persons wishing to attend any general meeting should submit to such searches or other security arrangements or restrictions (including, without limitation, a requirement that such persons refrain from taking electronic equipment into a general meeting) as the board shall consider appropriate in the circumstances and the board shall be entitled in its absolute discretion to, or to authorise some one or more persons who shall include a director or the secretary or the chairman of the meeting to, refuse entry to, or to eject from, such general meeting any person who fails to submit to such searches or otherwise to comply with such security arrangements or restrictions. |
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54. | Confidential Information |
No shareholder at any general meeting is entitled to require disclosure of or any information about any detail of the companys trading, or any matter that is or may be in the nature of a trade secret, commercial secret or secret process, or that may relate to the conduct of the business of the company, if the directors decide it would be inexpedient in the interests of the company to make that information public.
55. | Chairman of General Meeting |
The chairman (if any) of the board or, in his absence, the deputy chairman (if any) shall preside as chairman at every general meeting. If more than one deputy chairman is present they shall agree amongst themselves who is to take the chair or, if they cannot agree, the deputy chairman who has been in office as a director longest shall take the chair. If there is no chairman or deputy chairman, or if at any meeting neither the chairman nor any deputy chairman is present within five minutes after the time appointed for the commencement of the meeting, or if neither the chairman nor any deputy chairman is willing to act as chairman, the directors present shall choose one of their number to act, or if one director only is present he shall preside as chairman of the meeting if willing to act. If no director is present, or if each of the directors present declines to take the chair, the persons present and entitled to vote shall appoint one of their number to be chairman of the meeting. Nothing in these articles shall restrict or exclude any of the powers or rights of a chairman of a meeting which are given by law.
56. | Orderly Conduct |
(A) | The chairman of the meeting shall take such action or give directions for such action to be taken as he thinks fit to promote the orderly conduct of the business of the meeting. The chairmans decision on points of order, matters of procedure or arising incidentally from the business of the meeting shall be final as shall be his determination as to whether any point or matter is of such a nature. |
(B) | The directors may arrange for any people who they consider cannot be seated in the main meeting room, where the chairman will be, to attend and take part in a general meeting in an overflow room or rooms. Any overflow room will have a live video link from the main room, and a two-way sound link. The notice of the meeting does not have to give details of any arrangements under this Article. The directors may decide how to divide people between the main room and any overflow room. If any overflow room is used, the meeting will be treated as being held, and taking place, in the main room. |
57. | Entitlement to Attend and Speak |
Each director shall be entitled to attend and speak at any general meeting of the company. The chairman of the meeting may invite any person to attend and speak at any general meeting of the company where he considers that this will assist in the deliberations of the meeting.
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58. | Adjournments |
The chairman of the meeting may at any time without the consent of the meeting adjourn any meeting (whether or not it has commenced or a quorum is present) either to a later time on the same day or to another time or place where it appears to him that (a) the members entitled to vote and wishing to attend cannot be conveniently accommodated in the place appointed for the meeting (b) the conduct of persons present prevents or is likely to prevent the orderly continuation of business (c) in relation to an electronic general meeting, the electronic platforms or arrangements for that meeting become inadequate for the purpose of ensuring that members can participate properly and in an orderly and secure way or (d) an adjournment is otherwise necessary so that the business of the meeting may be properly conducted. In addition, the chairman of the meeting may at any time with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting) adjourn the meeting either sine die or to another time or place. When a meeting is adjourned sine die the time and place for the adjourned meeting shall be fixed by the board. No business shall be transacted at any adjourned meeting except business which might properly have been transacted at the meeting had the adjournment not taken place. Any meeting may be adjourned more than once.
59. | Notice of Adjournment |
If the continuation of an adjourned meeting is to take place three months or more after it was adjourned or if business is to be transacted at an adjourned meeting the general nature of which was not stated in the notice of the original meeting, notice of the adjourned meeting shall be given as in the case of an original meeting. Except as provided in this article, it shall not be necessary to give any notice of an adjourned meeting or of the business to be transacted at an adjourned meeting.
Amendments
60. | Amendments to Resolutions |
In the case of a resolution duly proposed as a special resolution no amendment thereto (other than an amendment to correct a patent error) may be considered or voted upon and in the case of a resolution duly proposed as an ordinary resolution no amendment thereto (other than an amendment to correct a patent error) may be considered or voted upon unless either at least two working days prior to the date appointed for holding the meeting or adjourned meeting at which such ordinary resolution is to be proposed notice in writing of the terms of the amendment and intention to move the same has been received by the company at its office or the chairman of the meeting in his absolute discretion decides that it may be considered or voted upon. With the consent of the chairman of the meeting, an amendment may be withdrawn by its proposer before it is put to the vote.
61. | Amendments Ruled Out of Order |
If an amendment shall be proposed to any resolution under consideration but shall be ruled out of order by the chairman of the meeting the proceedings on the substantive resolution shall not be invalidated by any error in such ruling.
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Voting
62. | Votes of Members |
Subject to any special terms as to voting upon which any shares may be issued or may at the relevant time be held and to any other provisions of these articles, members shall be entitled to vote at a general meeting as provided in the Companies Acts.
63. | Method of Voting |
At any general meeting, including any electronic general meeting, a resolution put to the vote of the meeting shall be decided on a poll, which shall be taken in such manner as the chairman of the meeting shall direct, including by means of electronic vote casters. The result of the vote shall be deemed to be the resolution of the meeting at which the vote was demanded. A vote to elect the chairman of the meeting or to adjourn the meeting must be taken immediately at the meeting. Any other vote may be taken at any other time (within 30 days of the meeting) and place determined by the chairman. The chairman can appoint scrutineers (who need not be shareholders) and set a day, time and place for the result of the poll to be declared.
64. | Votes of Joint Holders |
In the case of joint holders of a share the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register in respect of the joint holding.
65. | Voting on Behalf of Incapable Member |
A member in respect of whom an order has been made by any competent court or official on the ground that he is or may be suffering from a mental disorder or is otherwise incapable of managing his affairs may vote at any general meeting of the company and may exercise any other right conferred by membership in relation to general meetings by or through any person authorised in such circumstances to do so on his behalf (and that person may vote by proxy), provided that evidence to the satisfaction of the board of the authority of the person claiming to exercise the right to vote or such other right has been received by the company not later than the last time at which appointments of proxy should have been received in order to be valid for use at that meeting or on the holding of that poll.
66. | No Right to Vote where Sums Overdue on Shares |
No member shall, unless the board otherwise decides, be entitled in respect of any share held by him to attend or vote (either personally or by proxy) at any general meeting of the company or to exercise any other right conferred by membership in relation to general meetings unless all calls or other sums presently payable by him in respect of that share have been paid.
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67. | Objections or Errors in Voting |
If:
(i) | any objection shall be raised to the qualification of any voter, or |
(ii) | any votes have been counted which ought not to have been counted or which might have been rejected, or |
(iii) | any votes are not counted which ought to have been counted, |
the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless it is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the chairman decides that the same may have affected the decision of the meeting. The decision of the chairman on such matters shall be conclusive.
Approved Depositaries
68. | Meaning of Approved Depositary |
(A) | In these articles, unless the context otherwise requires, Approved Depositary means a person approved by the board and appointed: |
(i) | to hold the companys shares or any rights or interests in any of the companys shares; and |
(ii) | to issue securities, documents of title or other documents which evidence that the holder of them owns or is entitled to receive the shares, rights or interests held by the Approved Depository, |
and shall include a nominee acting for a person appointed to do these things.
(B) | The trustees of any scheme or arrangements for or principally for the benefit of employees of the company and its associated companies will be deemed to be an Approved Depositary for the purposes of these articles unless the board resolves otherwise. |
(C) | References in these articles to an Approved Depositary or to shares held by it refer only to an Approved Depositary and to its shares held in its capacity as an Approved Depositary. |
69. | Appointment of Approved Depositaries |
Subject to these articles and to applicable law, an Approved Depositary may appoint as its proxy or proxies in relation to any ordinary shares which it holds, anyone it thinks fit and may determine the manner and terms of any such appointment. Each appointment must state the number and class of shares to which it relates and the total number of shares of
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each class in respect of which appointments exist at any one time, which must not exceed the total number of shares of each such class registered in the name of the Approved Depositary or its nominee (the Depositary Shares) at that time.
70. | Register of Approved Depositaries |
The Approved Depositary must keep a register (the Proxy Register) of each person it has appointed as a proxy under Article 72 (an Appointed Proxy) and the number of Depositary Shares (his Appointed Number) to which the appointment relates. The directors will determine the requisite information to be recorded in the Proxy Register relating to each Appointed Proxy.
Any person authorised by the company may inspect the Proxy Register during usual business hours and the Approved Depositary will give such person any information which he requests as to the contents of the Proxy Register.
71. | Approved Depositaries Attendance at General Meetings |
(A) | An Appointed Proxy may only attend a general meeting if he provides the company with written evidence of his appointment as such. This must be in a form agreed between the directors and the Approved Depositary. |
(B) | Subject to applicable law and to these articles, and so long as the Approved Depositary or a nominee of the Approved Depositary holds at least his Appointed Number of shares, an Appointed Proxy is entitled to attend a general meeting which holders of that class of shares are entitled to attend, and he is entitled to the same rights, and subject to the same obligations, in relation to his Appointed Number of Depositary Shares as if he had been validly appointed in accordance with Articles 74 to 78 by the registered holder of these shares as its proxy in relation to those shares. |
72. | Proxies of Appointed Depositaries |
An Appointed Proxy may appoint another person as his proxy for his Appointed Number of Depositary Shares, provided the appointment is made and deposited in accordance with Articles 74 to 78. These articles apply to that appointment and to the person so appointed as though those Depositary Shares were registered in the name of the Appointed Proxy and the appointment was made by him in that capacity. The directors may require such evidence as they think appropriate to decide that such appointment is effective.
73. | Identifying Appointed Proxies |
(A) | For the purposes of determining who is entitled as an Appointed Proxy to exercise the rights conferred by Articles 71 and 72 and the number of Depositary Shares in respect of which a person is to be treated as having been appointed as an Appointed Proxy for these purposes, the Approved Depositary may decide that the Appointed Proxies who are so entitled are the persons entered in the Proxy Register at a time and on a date (a Record Time) agreed between the Approved Depositary and the company. |
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(B) | When a Record Date is decided for a particular purpose: |
(i) | an Appointed Proxy is to be treated as having been appointed for that purpose for the number and class of shares appearing against his name in the Proxy Register as at the Record Time; and |
(ii) | changes to entries in the Proxy Register after the Record Time will be ignored for this purpose. |
(C) | Except for recognising the rights given in relation to General Meetings by appointments made by Appointed Proxies pursuant to Article 72, the company is entitled to treat any person entered in the Proxy Register as an Appointed Proxy as the only person (other than the Approved Depositary) who has any interest in the Depositary Shares in respect of which the Appointed Proxy has been appointed. |
(D) | At a general meeting the chairman has the final decision as to whether any person has the right to vote or exercise any other right relating to any Depositary Shares. In any other situation, the directors have the final decision as to whether any person has the right to exercise any right relating to any Depositary Shares. |
Proxies
74. | Appointment of Proxies |
The appointment of a proxy shall be in writing signed by the appointor or his duly authorised attorney or, if the appointor is a corporation, shall either be executed under its seal or signed by an officer, attorney or other person authorised to sign it. If a member appoints more than one proxy and the proxy forms appointing those proxies would give those proxies the apparent right to exercise votes on behalf of the member in a general meeting over more shares than are held by the member, then each of those proxy forms will be invalid and none of the proxies so appointed will be entitled to attend, speak or vote at the relevant general meeting.
75. | Receipt of Proxies |
(A) | The appointment of a proxy must: |
(i) | in the case of an appointment made in hard copy form, be received at the office (or such other place in the United Kingdom or in the United States as may be specified by the company for the receipt of appointments of proxy in hard copy form) not less than 48 hours (or such shorter time as the board may determine) before the time appointed for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote together with (if required by the board) any authority under which it is made or a copy of the authority, certified notarially or in accordance with the Powers of Attorney Act 1971 or in some other manner approved by the board; |
(ii) | in the case of an appointment made by electronic means, be received at the address specified by the company for the receipt of appointments of proxy by electronic means not less than 48 hours (or such shorter time as the board may determine) before the time appointed for holding the meeting or adjourned meeting at which the person named in the appointment proposes |
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to vote. Any authority pursuant to which such an appointment is made or a copy of the authority, certified notarially or in accordance with the Powers of Attorney Act 1971 or in some other manner approved by the board, must, if required by the board, be received at such address or at the office (or such other place in the United Kingdom as may be specified by the company for the receipt of such documents) not less than 48 hours (or such shorter time as the board may determine) before the time appointed for holding the meeting or adjourned meeting at which the person named in the appointment proposes to vote; |
(iii) | in the case of an appointment delivered by an Approved Depositary (except in respect of a proxy appointed in accordance with Article 69) be delivered to the appropriate place referred to in (i) or (ii) above, as appropriate, depending on whether the appointment is made in hard copy or electronic form; |
(iv) | in the case of a vote taken more than 48 hours subsequently to the date of the meeting or adjourned meeting, be received as aforesaid not less than 24 hours (or such shorter time as the board may determine) before the time appointed for the taking of the vote; and |
(v) | in the case of a vote taken not more than 48 hours subsequently to the date of the meeting or adjourned meeting, be received as aforesaid by the time at which the vote was demanded (or at such later time as the board may determine), |
and an appointment of a proxy which is not, or in respect of which the authority or copy thereof is not, received in a manner so permitted shall be invalid. When two or more valid but differing appointments of a proxy are received in respect of the same share for use at the same meeting or poll, the one which is last received (regardless of its date or of the date of its signature) shall be treated as replacing and revoking the others as regards that share; if the company is unable to determine which was last received, none of them shall be treated as valid in respect of that share. The appointment of a proxy shall not preclude a member from attending and voting in person at the meeting or poll concerned. The proceedings at a general meeting shall not be invalidated where an appointment of a proxy in respect of that meeting is sent in electronic form as provided in these articles, but because of a technical problem it cannot be read by the recipient.
(B) | The board may at its discretion determine that in calculating the periods mentioned in this article no account shall be taken of any part of a day that is not a working day. |
76. | Maximum Validity of Proxy |
No appointment of a proxy shall be valid after 12 months have elapsed from the date of its receipt save that, unless the contrary is stated in it, an appointment of a proxy shall be valid for use at an adjourned meeting or vote after a meeting or an adjourned meeting even after 12 months, if it was valid for the original meeting.
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77. | Form of Proxy |
The appointment of a proxy shall be in any usual form or in such other form as the board may approve. The appointment of a proxy shall be deemed to confer authority to vote on any amendment of a resolution put to, or any other business which may properly come before, the meeting for which it is given as the proxy thinks fit. The appointment of a proxy shall, unless the contrary is stated in it, be valid as well for any adjournment of the meeting as for the meeting to which it relates.
78. | Cancellation of Proxys Authority |
A vote given by a proxy or by the duly authorised representative of a corporation shall be valid notwithstanding the previous determination of the authority of the person voting, unless notice in writing of the determination was received by the company at the office (or such other place or address as was specified by the company for the receipt of appointments of proxy) not later than the last time at which an appointment of a proxy should have been received in order to be valid for use at the meeting at which the vote was given.
Class Meetings
79. | Separate General Meetings |
The provisions of these articles relating to general meetings shall apply, with any necessary modifications to any separate general meeting of the holders of shares of a class convened otherwise than in connection with the variation or abrogation of the rights attached to the shares of that class. For this purpose, a general meeting at which no holder of a share other than an ordinary share may, in his capacity as a member, attend or vote shall also constitute a separate general meeting of the holders of the ordinary shares.
Appointment, Retirement and Removal of Directors
80. | Number of Directors |
Unless otherwise determined by ordinary resolution of the company, the directors (disregarding alternate directors) shall be not less than two nor more than 24 in number.
81. | Directors Shareholding Qualification |
No shareholding qualification for directors shall be required.
82. | Power of Company to Appoint Directors |
Subject to the provisions of these articles, the company may by ordinary resolution elect any person who is willing to act to be a director, either to fill a vacancy or as an addition to the existing board, but so that the total number of directors shall not at any time exceed any maximum number fixed by or in accordance with these articles.
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83. | Power of Board to Appoint Directors |
Subject to the provisions of these articles, the board may appoint any person who is willing to act to be a director, either to fill a vacancy or as an addition to the existing board, but so that the total number of directors shall not at any time exceed any maximum number fixed by or in accordance with these articles. Any director so appointed shall retire at the next annual general meeting and shall then be eligible for re-appointment.
84. | Annual Retirement of Directors |
At every annual general meeting each of the directors shall retire from office and may offer himself for re-appointment by the members.
85. | Filling Vacancies |
Subject to the provisions of these articles, at the meeting at which a director retires the company can pass an ordinary resolution to re-appoint the director or to elect some other eligible person in his place.
86. | Power of Removal by Special Resolution |
In addition to any power of removal conferred by the Companies Acts, the company may by special resolution remove any director before the expiration of his period of office and may (subject to these articles) by ordinary resolution appoint another person who is willing to act to be a director in his place.
87. | Persons Eligible as Directors |
No person other than a director retiring at the meeting shall be appointed or re-appointed a director at any general meeting unless:
(i) | he is recommended by the board; or |
(ii) | not less than seven nor more than 42 days before the day appointed for the meeting, notice in writing by a member qualified to vote at the meeting (not being the person to be proposed) has been given to the secretary of the intention to propose that person for appointment or re-appointment together with confirmation in writing by that person of his willingness to be appointed or re-appointed. |
88. | Position of Retiring Directors |
A director who retires at an annual general meeting may, if willing to continue to act, be reappointed. If he is re-appointed he is treated as continuing in office throughout. If he is not re-appointed, he shall retain office until the end of the meeting or (if earlier) when a resolution is passed to appoint someone in his place or when a resolution to re-appoint the director is put to the meeting and lost.
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89. | Vacation of Office by Directors |
Without prejudice to the provisions for retirement contained in these articles, the office of a director shall be vacated if:
(i) | he resigns his office by notice in writing sent to or received at the office or at an address specified by the company for the purposes of communication by electronic means or tendered at a meeting of the board; or |
(ii) | by notice in writing sent to or received at the office or at an address specified by the company for the purposes of communication by electronic means or tendered at a meeting of the board, he offers to resign and the board resolves to accept such offer; or |
(iii) | by notice in writing sent to or received at the office or at an address specified by the company for the purposes of communication by electronic means or tendered at a meeting of the board, his resignation is requested by all of the other directors and all of the other directors are not less than three in number; or |
(iv) | he is or has been suffering from mental or physical ill health and the board resolves that his office is vacated; or |
(v) | he is absent without the permission of the board from meetings of the board (whether or not an alternate director appointed by him attends) for six consecutive months and the board resolves that his office is vacated; or |
(vi) | he becomes bankrupt or compounds with his creditors generally; or |
(vii) | he is prohibited by law from being a director; or |
(viii) | he ceases to be a director by virtue of the Companies Acts or is removed from office pursuant to these articles. |
If the office of a director is vacated for any reason, he shall cease to be a member of any committee or sub-committee of the board.
90. | Alternate Directors |
(A) | Each director may appoint any person to be his alternate and may at his discretion remove an alternate director so appointed. If the alternate director is not already a director, the appointment, unless previously approved by the board, shall have effect only upon and subject to its being so approved. Any appointment or removal of an alternate director shall be effected by notice in writing signed by the appointor and sent to or received at the office or at an address specified by the company for the purpose of communication by electronic means or tendered at a meeting of the board, or in any other manner approved by the board. An alternate director shall be entitled to receive notice of all meetings of the board or of committees of the board of which his appointor is a member. He shall also be entitled to attend and vote as a director at any such meeting at which the director appointing him is not personally present and at such meeting to exercise and discharge all the functions, powers, |
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rights and duties of his appointor as a director and for the purposes of the proceedings at such meeting the provisions of these articles shall apply as if he were a director. |
(B) | Every person acting as an alternate director shall (except as regards power to appoint an alternate and remuneration) be subject in all respects to the provisions of these articles relating to directors and shall during his appointment be an officer of the company. An alternate director shall alone be responsible to the company for his acts and defaults and shall not be deemed to be the agent of or for the director appointing him. An alternate director may be paid expenses and shall be entitled to be indemnified by the company to the same extent as if he were a director. An alternate director shall not be entitled to receive from the company any fee in his capacity as an alternate director but the company shall, if so requested in writing by the appointor, pay to the alternate director any part of the fees or remuneration otherwise due to the appointor. |
(C) | A director or any other person may act as an alternate director to represent more than one director. Every person acting as an alternate director shall have one vote for each director for whom he acts as alternate, in addition to his own vote if he is also a director but he shall count as only one for the purposes of determining whether a quorum is present. Signature by an alternate director of any resolution in writing of the board or a committee of the board shall, unless the notice of his appointment provides to the contrary, be as effective as signature by his appointor. |
(D) | An alternate director shall cease to be an alternate director: |
(i) | if his appointor ceases for any reason to be a director except that, if at any meeting any director retires but is re-appointed at the same meeting, any appointment made by him pursuant to this article which was in force immediately before his retirement shall remain in force as though he had not retired; or |
(ii) | on the happening of any event which if he were a director would cause him to vacate his office as director; or |
(iii) | if he resigns his office by notice in writing to the company. |
91. | Executive Directors |
The board or any committee authorised by the board may from time to time appoint one or more directors to hold any employment or executive office with the company for such period and upon such other terms as the board or any committee authorised by the board may in its discretion decide and may revoke or terminate any appointment so made. Any revocation or termination of the appointment shall be without prejudice to any claim for damages that the director may have against the company or the company may have against the director for any breach of any contract of service between him and the company which may be involved in the revocation or termination. A director so appointed shall receive such remuneration (whether by way of salary, commission, participation in profits or otherwise) as the board or any committee authorised by the board may decide, and either in addition to or in lieu of his remuneration as a director.
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Fees, Remuneration, Expenses and Pensions
92. | Directors Fees |
(A) | The directors can decide on the amount, timing and manner of payment of fees to be paid by the company to the directors for acting as directors, but the total fees paid to all of the directors for acting as directors (including amounts paid under Article 93(ii) to 93(v) but excluding any amounts paid under any other provision of these articles) shall not exceed the higher of: |
(i) | £3 million a year; and |
(ii) | any higher amount as the company may by ordinary resolution decide. |
These fees can be satisfied in cash or in any other form.
(B) | If the directors decide to satisfy any of these fees in shares or in any other non-cash form, the value of the shares or other assets to be counted towards this limit will be their value at the time the entitlement to them is first allocated, or provisionally allocated, to the director. This value will be taken into account for the purpose of the limit in the year in which the entitlement is first allocated, or provisionally allocated, and not in any later year when the fees, shares or other assets are actually paid or delivered to the director. This paragraph applies even if: |
(i) | the directors entitlement to the fees, or to receive the assets, is subject to conditions which will, or may, be fulfilled at a later time; |
(ii) | the fees, shares or other assets are to be, or may be, paid or delivered to the director at a later time or the director elects, agrees or is required to receive the cash equivalent of the shares or other assets as determined by reference to their value at such later time; |
(iii) | the company has not paid for the relevant shares or other assets at the time the director first becomes, or becomes provisionally, entitled to them, and their value subsequently changes. |
(C) | Unless an ordinary resolution is passed saying otherwise, the fees will be divided between some or all of the directors in the way that they decide. If they fail to decide, the fees will be shared equally by the directors, except that any director holding office as a director for only part of the period covered by the fee is only entitled to a pro rata share covering that part period. |
93. | Additional Remuneration |
The directors can award special pay to any director who:
(i) | holds any executive post; |
(ii) | acts as chairman; |
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(iii) | acts as senior independent director; |
(iv) | acts as a scientific/medical expert on the board; |
(v) | is chairman of, or serves on, any committee of the directors; or |
(vi) | performs any other services which the directors consider to extend beyond the ordinary duties of a director. |
Special pay can take the form of salary, commission or other benefits or can be paid in some other way. This is decided on by the directors.
94. | Expenses |
(A) | Each director may be paid his reasonable travelling, hotel and incidental expenses of attending and returning from meetings of the board or committees of the board or general meetings of the company or any other meeting which as a director he is entitled to attend and shall be paid all other costs and expenses properly and reasonably incurred by him in the conduct of the companys business or in the discharge of his duties as a director. The company may also fund a directors or former directors expenditure for the purposes permitted under the Companies Acts and may do anything to enable a director or former director of the company to avoid incurring such expenditure as provided in the Companies Acts. |
(B) | The directors can award extra pay to any director who, at the request of the directors, performs special services or goes or lives abroad for any purposes of the company. |
95. | Pensions and Gratuities for Directors |
The board or any committee authorised by the board may exercise all the powers of the company to provide benefits, either by the payment of gratuities or pensions or by insurance or in any other manner whether similar to the foregoing or not, for any director or former director or the relations, or dependants of, or persons connected to, any director or former director, provided that no benefits (except such as may be provided for by any other article) may be granted to or in respect of a director or former director who has not been employed by, or held an executive office or place of profit under, the company or any body corporate which is or has been its subsidiary undertaking or any predecessor in business of the company or any such body corporate without the approval of an ordinary resolution of the company. No director or former director shall be accountable to the company or the members for any benefit provided pursuant to this article and the receipt of any such benefit shall not disqualify any person from being or becoming a director of the company.
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Directors Interests
96. | Conflicts of interest requiring board authorisation |
(A) | The board may, subject to the quorum and voting requirements set out in this article, authorise any matter which would otherwise involve a director breaching his duty under the Companies Acts to avoid conflicts of interest (Conflict). |
(B) | A director seeking authorisation in respect of a Conflict shall declare to the board the nature and extent of his interest in a Conflict as soon as is reasonably practicable. The director shall provide the board with such details of the relevant matter as are necessary for the board to decide how to address the Conflict together with such additional information as may be requested by the board. |
(C) | Any director (including the relevant director) may propose that the relevant director be authorised in relation to any matter the subject of a Conflict. Such proposal and any authority given by the board shall be effected in the same way that any other matter may be proposed to and resolved upon by the board under the provisions of these articles save that: |
(i) | the relevant director and any other director with a similar interest shall not count towards the quorum nor vote on any resolution giving such authority; and |
(ii) | the relevant director and any other director with a similar interest may, if the other members of the board so decide, be excluded from any board meeting while the Conflict is under consideration. |
(D) | Where the board gives authority in relation to a Conflict, or where any of the situations described in Article 97(B) apply in relation to a director (Relevant Situation): |
(i) | the board may (whether at the relevant time or subsequently) (a) require that the relevant director is excluded from the receipt of information, the participation in discussion and/or the making of decisions (whether at meetings of the board or otherwise) related to the Conflict or Relevant Situation; and (b) impose upon the relevant director such other terms for the purpose of dealing with the Conflict or Relevant Situation as it may determine; |
(ii) | the relevant director will be obliged to conduct himself in accordance with any terms imposed by the board in relation to the Conflict or Relevant Situation; |
(iii) | the board may provide that where the relevant director obtains (otherwise than through his position as a director of the company) information that is confidential to a third party, the director will not be obliged to disclose that information to the company, or to use or apply the information in relation to the companys affairs, where to do so would amount to a breach of that confidence; |
(iv) | the terms of the authority shall be recorded in writing (but the authority shall be effective whether or not the terms are so recorded); and |
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(v) | the board may revoke or vary such authority at any time but this will not affect anything done by the relevant director prior to such revocation in accordance with the terms of such authority. |
97. | Other conflicts of interest |
(A) | If a director is in any way directly or indirectly interested in a proposed contract with the company or a contract that has been entered into by the company, he must declare the nature and extent of that interest to the directors in accordance with the Companies Acts. |
(B) | Provided he has declared his interest in accordance with paragraph (A), a director may: |
(i) | be party to, or otherwise interested in, any contract with the company or in which the company has a direct or indirect interest; |
(ii) | hold any other office or place of profit with the company (except that of auditor) in conjunction with his office of director for such period and upon such terms, including as to remuneration, as the board may decide; |
(iii) | act by himself or through a firm with which he is associated in a professional capacity for the company or any other company in which the company may be interested (otherwise than as auditor); |
(iv) | be or become a director or other officer of, or employed by or otherwise be interested in any holding company or subsidiary company of the company or any other company in which the company may be interested; and |
(v) | be or become a director of any other company in which the company does not have an interest and which cannot reasonably be regarded as giving rise to a conflict of interest at the time of his appointment as a director of that other company. |
98. | Benefits |
A director shall not, by reason of his office or of the fiduciary relationship thereby established, be liable to account to the company or the members for any remuneration, profit or other benefit realised by reason of his having any type of interest authorised under Article 96(A) or permitted under Article 97(B) and no contract shall be liable to be avoided on the grounds of a director having any type of interest authorised under Article 96(A) or permitted under Article 97(B).
99. | Quorum and voting requirements |
(A) | A director shall not vote on or be counted in the quorum in relation to any resolution of the board concerning his own appointment, or the settlement or variation of the terms or the termination of his own appointment, as the holder of any office or place of profit with the company or any other company in which the company is interested. |
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(B) | Where proposals are under consideration concerning the appointment, or the settlement or variation of the terms or the termination of the appointment, of two or more directors to offices or places of profit with the company or any other company in which the company is interested, a separate resolution may be put in relation to each director and in that case each of the directors concerned shall be entitled to vote and be counted in the quorum in respect of each resolution unless it concerns his own appointment or the settlement or variation of the terms or the termination of his own appointment or the appointment of another director to an office or place of profit with a company in which the company is interested and the director seeking to vote or be counted in the quorum has a Relevant Interest in it. |
(C) | A director shall not vote on, or be counted in the quorum in relation to, any resolution of the board in respect of any contract in which he has an interest and, if he shall do so, his vote shall not be counted, but this prohibition shall not apply to any resolution where that interest cannot reasonably be regarded as likely to give rise to a conflict of interest or where that interest arises only from one or more of the following matters: |
(i) | the giving to him of any guarantee, indemnity or security in respect of money lent or obligations undertaken by him or by any other person at the request of or for the benefit of the company or any of its subsidiary undertakings; |
(ii) | the giving to a third party of any guarantee, indemnity or security in respect of a debt or obligation of the company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the giving of security; |
(iii) | the giving to him of any other indemnity where all other directors are also being offered indemnities on substantially the same terms; |
(iv) | the funding by the company of his expenditure on defending proceedings or the doing by the company of anything to enable him to avoid incurring such expenditure where all other directors are being offered substantially the same arrangements; |
(v) | where the company or any of its subsidiary undertakings is offering securities in which offer the director is or may be entitled to participate as a holder of securities or in the underwriting or sub-underwriting of which the director is to participate; |
(vi) | any contract in which he is interested by virtue of his interest in shares or debentures or other securities of the company or by reason of any other interest in or through the company; |
(vii) | any contract concerning any other company (not being a company in which the director has a Relevant Interest) in which he is interested directly or indirectly whether as an officer, shareholder, creditor or otherwise howsoever; |
(viii) | any contract concerning the adoption, modification or operation of a pension fund, superannuation or similar scheme or retirement, death or disability benefits scheme or employees share scheme which relates both to directors |
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and employees of the company or of any of its subsidiary undertakings and does not provide in respect of any director as such any privilege or advantage not accorded to the employees to which the fund or scheme relates; |
(ix) | any contract for the benefit of employees of the company or of any of its subsidiary undertakings under which he benefits in a similar manner to the employees and which does not accord to any director as such any privilege or advantage not accorded to the employees to whom the contract relates; and |
(x) | any contract for the purchase or maintenance of insurance against any liability for, or for the benefit of, any director or directors or for, or for the benefit of, persons who include directors. |
(D) | A company shall be deemed to be one in which a director has a Relevant Interest if and so long as (but only if and so long as) he is to his knowledge (either directly or indirectly) the holder of or beneficially interested in one per cent. or more of any class of the equity share capital of that company (calculated exclusive of any shares of that class in that company held as treasury shares) or of the voting rights available to members of that company. In relation to an alternate director, an interest of his appointor shall be treated as an interest of the alternate director without prejudice to any interest which the alternate director has otherwise. |
(E) | Where a company in which a director has a Relevant Interest is interested in a contract, he also shall be deemed interested in that contract. |
(F) | If any question shall arise at any meeting of the board as to the interest of a director (other than the chairman of the meeting) in a contract and whether it is likely to give rise to a conflict of interest or as to the entitlement of any director (other than the chairman of the meeting) to vote or be counted in the quorum and the question is not resolved by his voluntarily agreeing to abstain from voting or not to be counted in the quorum, the question shall be referred to the chairman of the meeting and his ruling in relation to the director concerned shall be conclusive except in a case where the nature or extent of the directors interest (so far as it is known to him) has not been fairly disclosed to the board. If any question shall arise in respect of the chairman of the meeting, the question shall be decided by a resolution of the board (for which purpose the chairman of the meeting shall be counted in the quorum but shall not vote on the matter) and the resolution shall be conclusive except in a case where the nature or extent of the interest of the chairman of the meeting (so far as it is known to him) has not been fairly disclosed to the board. |
(G) | Subject to these articles, the board may also cause any voting power conferred by the shares in any other company held or owned by the company or any power of appointment to be exercised in such manner in all respects as it thinks fit, including the exercise of the voting power or power of appointment in favour of the appointment of the directors or any of them as directors or officers of the other company, or in favour of the payment of remuneration to the directors or officers of the other company. Subject to these articles, a director may also vote on and be counted in the quorum in relation to any of such matters. |
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100. | General |
(A) | References in Articles 96 to 99 to: |
(i) | a contract include references to any proposed contract and to any transaction or arrangement or proposed transaction or arrangement whether or not constituting a contract; and |
(ii) | a conflict of interest include a conflict of interest and duty and a conflict of duties. |
(B) | The company may by ordinary resolution suspend or relax the provisions of Articles 95 to 98 to any extent or ratify any contract not properly authorised by reason of a contravention of any of the provisions of Articles 96 to 99. |
Powers and Duties of the Board
101. | General Powers of Company Vested in Board |
Subject to the these articles and to any directions given by the company in general meeting by special resolution, the business of the company shall be managed by the board which may exercise all the powers of the company whether relating to the management of the business of the company or not. No alteration of these articles and no special resolution shall invalidate any prior act of the board which would have been valid if that alteration had not been made or that resolution had not been passed. The powers given by this article shall not be limited by any special power given to the board by any other article.
102. | Borrowing Powers |
Subject to the provisions of the Companies Acts, the directors may exercise all the powers of the company:
(i) | to borrow money; |
(ii) | to mortgage or charge all or any of the companys undertaking, property (present and future) and uncalled capital; |
(iii) | to issue debentures and other securities; and |
(iv) | to give security either outright or as collateral security for any debt, liability or obligation of the company or of any third party. |
103. | Agents |
(A) | The board can appoint anyone as the companys attorney by granting a power of attorney or by authorising them in some other way. Attorneys can either be appointed directly by the board or the board can give someone else the power to select attorneys. The board or the persons who are authorised by it to select attorneys can decide on the purposes, powers, authorities and discretions of attorneys. But they cannot give an attorney any power, authority or discretion which the board does not have under these articles. |
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(B) | The board can decide how long a power of attorney will last for and attach any conditions to it. The power of attorney can include any provisions which the board decides on for the protection and convenience of anybody dealing with the attorney. The power of attorney can allow the attorney to grant any or all of his power, authority or discretion to any other person. |
(C) | The board can: |
(i) | delegate any of its authority, powers or discretions to any manager or agent of the company; |
(ii) | allow managers or agents to delegate to another person; |
(iii) | remove any people it has appointed in any of these ways; and |
(iv) | cancel or change anything that it has delegated, although this will not affect anybody who acts in good faith who has not had any notice of any cancellation or change. |
(D) | Any appointment or delegation by the board which is referred to in this article can be on any conditions decided on by the board. |
(E) | The ability of the board to delegate under this article applies to all its powers and is not limited because certain articles refer to powers being exercised by the board or by a committee authorised by the board while other articles do not. |
104. | Delegation to Individual Directors |
The board may entrust to and confer upon any director any of its powers, authorities and discretions (with power to sub-delegate) upon such terms and conditions and with such restrictions as it thinks fit, and either collaterally with, or to the exclusion of, its own powers, authorities and discretions and may from time to time revoke or vary all or any of them but no person dealing in good faith and without notice of the revocation or variation shall be affected by it. The power to delegate contained in this article shall be effective in relation to the powers, authorities and discretions of the board generally and shall not be limited by the fact that in certain articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the board or by a committee authorised by the board.
105. | Registers |
The company may keep an overseas or local or other register in any place and the board may make and vary such regulations as it may think fit respecting the keeping of the register.
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106. | Provision for Employees |
The board may exercise any power conferred by the Companies Acts to make provision for the benefit of persons employed or formerly employed by the company or any of its subsidiaries in connection with the cessation or the transfer to any person of the whole or part of the undertaking of the company or that subsidiary.
Proceedings of the Board
107. | Board Meetings |
The board may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. A director at any time may, and the secretary on the requisition of a director at any time shall, summon a board meeting.
108. | Notice of Board Meetings |
Notice of a board meeting shall be deemed to be properly given to a director if it is given to him personally or by word of mouth or sent in writing to him at his last known address or any other address given by him to the company for this purpose. A director may waive his entitlement to notice of any meeting either prospectively or retrospectively and any retrospective waiver shall not affect the validity of the meeting or of any business conducted at the meeting.
109. | Quorum |
The quorum necessary for the transaction of the business of the board may be fixed by the board and, unless so fixed at any other number, shall be two. Subject to the provisions of these articles, any director who ceases to be a director at a board meeting may continue to be present and to act as a director and be counted in the quorum until the termination of the board meeting if no other director objects and if otherwise a quorum of directors would not be present.
110. | Directors below Minimum through Vacancies |
The continuing directors or a sole continuing director may act notwithstanding any vacancy in their number but, if and so long as the number of directors is reduced below the minimum number fixed by or in accordance with these articles or is below the number fixed by or in accordance with these articles as the quorum or there is only one continuing director, the continuing directors or director may act for the purpose of filling vacancies or of summoning general meetings of the company but not for any other purpose. If there are no directors or director able or willing to act, then any two members (excluding any member holding shares as treasury shares) may summon a general meeting for the purpose of appointing directors.
111. | Appointment of Chairman |
The board may appoint a director to be the chairman or a deputy chairman of the board, and may at any time remove him from that office. The chairman of the board or failing him a deputy chairman shall act as chairman at every meeting of the board. If more than one deputy chairman is present they shall agree amongst themselves who is to take the chair
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or, if they cannot agree, the deputy chairman who has been in office as a director longest shall take the chair. But if no chairman of the board or deputy chairman is appointed, or if at any meeting neither the chairman nor any deputy chairman is present within five minutes after the time appointed for holding the meeting, the directors present may choose one of their number to be chairman of the meeting. References in these articles to a deputy chairman include, if no one has been appointed to that title, a person appointed to a position with another title which the board designates as equivalent to the position of deputy chairman.
112. | Competence of Meetings |
A meeting of the board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions vested in or exercisable by the board.
113. | Voting |
Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes the chairman of the meeting shall have a second or casting vote.
114. | Delegation to Committees |
(A) | The board may delegate any of its powers, authorities and discretions (with power to sub-delegate) to any committee, consisting of such person or persons (whether a member or members of its body or not) as it thinks fit, provided that the majority of persons on any committee or sub-committee must be directors. References in these articles to committees include sub-committees permitted under this article. |
(B) | Any committee so formed shall, in the exercise of the powers, authorities and discretions so delegated, conform to any regulations which may be imposed on it by the board. The meetings and proceedings of any committee consisting of two or more members shall be governed by the provisions contained in these articles for regulating the meetings and proceedings of the board so far as the same are applicable and are not superseded by any regulations imposed by the board. |
(C) | The power to delegate contained in this article shall be effective in relation to the powers, authorities and discretions of the board generally and shall not be limited by the fact that in certain articles, but not in others, express reference is made to particular powers, authorities or discretions being exercised by the board or by a committee authorised by the board. |
115. | Participation in Meetings |
All or any of the members of the board may participate in a meeting of the board by means of a conference telephone or any communication equipment which allows all persons participating in the meeting to speak to and hear each other or by a series of telephone calls from the chairman of the meeting. A person so participating shall be deemed to be present in person at the meeting and shall be entitled to vote and be counted in a quorum accordingly. Any such meeting will be treated as taking place where the chairman is located.
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116. | Resolution in Writing |
A resolution in writing signed by all the directors who are at the relevant time entitled to receive notice of a meeting of the board and who would be entitled to vote on the resolution at a meeting of the board (if that number is sufficient to constitute a quorum) shall be as valid and effectual as a resolution passed at a meeting of the board properly called and constituted. The resolution may be contained in one document or in several documents in like form each signed by one or more of the directors concerned.
117. | Validity of Acts of Board or Committee |
All acts done by the board or by any committee or by any person acting as a director or member of a committee shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member of the board or committee or person so acting or that they or any of them were disqualified from holding office or had vacated office or were not entitled to vote, be as valid as if each such member or person had been properly appointed and was qualified and had continued to be a director or member of the committee and had been entitled to vote.
Seals
118. | Use of Seals |
The board shall provide for the custody of every seal of the company. A seal shall only be used by the authority of the board or of a committee of the board authorised by the board in that behalf. Subject as otherwise provided in these articles, and to any resolution of the board or committee of the board dispensing with the requirement for any counter-signature on any occasion, any instrument to which the common seal is applied shall be signed by at least one director and the secretary, or by at least two directors or by one director in the presence of a witness who attests the signature or by such other person or persons as the board may approve. Any instrument to which an official seal is applied need not, unless the board otherwise decides or the law otherwise requires, be signed by any person.
Dividends and Other Payments
119. | Declaration of Dividends by Company |
The company may by ordinary resolution from time to time declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the board.
120. | Payment of Interim and Fixed Dividends by Board |
The board may pay such interim dividends as appear to the board to be justified by the financial position of the company and may also pay any dividend payable at a fixed rate at intervals settled by the board whenever the financial position of the company, in the opinion of the board, justifies its payment. If the board acts in good faith, it shall not incur any liability to the holders of any shares for any loss they may suffer in consequence of the payment of an interim or fixed dividend on any other class of shares ranking pari passu with or after those shares.
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121. | Calculation and Currency of Dividends |
(A) | Except in so far as the rights attaching to, or the terms of issue of, any share otherwise provide: |
(i) | all dividends shall be declared and paid according to the amounts paid up on the share in respect of which the dividend is paid, but no amount paid up on a share in advance of calls shall be treated for the purposes of this article as paid up on the share; |
(ii) | all dividends shall be apportioned and paid pro rata according to the amounts paid up on the share during any portion or portions of the period in respect of which the dividend is paid; and |
(iii) | dividends may be declared or paid in any currency. |
(B) | The board may decide the basis of conversion for any currency conversions that may be required and how any costs involved are to be met. |
(C) | The board may also decide that a particular Approved Depositary should be able to receive dividends in a currency other than the currency in which it is declared and may make arrangements accordingly. In particular, if an Approved Depositary has chosen or agreed to receive dividends in another currency, the directors may make arrangements with that Approved Depositary for payment to be made to them for value on the date on which the relevant dividend is paid, or a later date decided on by the directors. |
122. | Amounts Due on Shares may be Deducted from Dividends |
The board may deduct from any dividend or other moneys payable to a member by the company on or in respect of any shares all sums of money (if any) presently payable by him to the company on account of calls or otherwise in respect of shares of the company. Sums so deducted can be used to pay amounts owing to the company in respect of the shares.
123. | No Interest on Dividends |
Subject to the rights attaching to, or the terms of issue of, any shares, no dividend or other moneys payable by the company on or in respect of any share shall bear interest against the company.
124. | Payment Procedure |
(A) | Any dividend or other sum payable in cash by the company in respect of a share may be paid: |
(i) | by inter-bank transfer or by other electronic means (including payment through CREST) directly to an account with a bank or other financial institution (or other organisations operating deposit accounts if allowed by the company) named in a written instruction from the persons entitled to receive the payment under this article; |
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(ii) | by sending a cheque, warrant or similar financial instrument by post addressed to the holder at his registered address; |
(iii) | by sending a cheque, warrant or similar financial instrument payable to someone else named in a written instruction from the shareholder (or all joint shareholders) and sent by post to the address specified in that instruction; or |
(iv) | in some other way requested in writing by the shareholder (or all joint shareholders) and agreed with the company. |
(B) | In respect of payment of any dividend or other money, the directors can decide and notify shareholders that: |
(i) | one or more of the payment means described in paragraph (A) above will be used for payment and, where more than one means will be used, a shareholder (or all joint shareholders) may elect to receive payment by one of the means so notified in the manner prescribed by the directors; |
(ii) | one or more of such means will be used for the payment unless a shareholder (or all joint shareholders) elects for another means of payment in the manner prescribed by the directors; or |
(iii) | one or more of such means will be used for the payment and that shareholders will not be able to elect to receive the payment by any other means. |
(C) | If: |
(i) | a shareholder (or all joint shareholders) does not specify an address, or does not specify an account of a type prescribed by the directors, or does not specify other details, and in each case that information is necessary in order to make payment of the dividend or other money in the way in which under this article the directors have decided that the payment is to be made or by which the shareholder (or all joint shareholders) has validly elected to receive the payment; or |
(ii) | payment cannot be made by the company using the information provided by the shareholder (or all joint shareholders), |
then the dividend or other money will be treated as unclaimed for the purposes of these articles.
(D) | For joint shareholders or persons jointly entitled to shares by law, payment can be made to the shareholder whose name stands first in the register. The company can then rely on a receipt for a dividend or other money paid on shares from any one of them on behalf of them all. |
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(E) | Cheques, warrants and similar financial instruments are sent, and payment in any other way is made, at the risk of the person who is entitled to the money. The company is treated as having paid a dividend if the cheque, warrant or similar financial instrument is cleared or if a payment is made through CREST, bank transfer or other electronic means. The company will not be responsible for any payment which is lost or delayed. |
(F) | Where a person is entitled by transmission to a share, any dividend or other sum payable by the company in respect of the share may be paid as if he were a holder of the share and his address noted in the register were his registered address and where two or more persons are so entitled, any one of them may give effectual receipts for any dividends or other moneys payable or property distributable on or in respect of the shares. |
125. | Uncashed Dividends |
The company may cease to send any cheque, warrant or similar financial instrument through the post or to employ any other means of payment, including payment by means of a relevant system, for any dividend payable on any shares in the company which is normally paid in that manner on those shares if in respect of at least two consecutive dividends payable on those shares the cheques, warrants or similar financial instruments have been returned undelivered or remain uncashed during or at the end of the period for which the same are valid or that means of payment has failed. In addition, the company may cease to send any cheque, warrant or similar financial instrument through the post or may cease to employ any other means of payment if, in respect of one dividend payable on those shares, the cheque, warrant or similar financial instrument has been returned undelivered or remains uncashed during or at the end of the period for which the same is valid or that means of payment has failed and reasonable enquiries have failed to establish any new postal address or account of the holder. Subject to the provisions of these articles, the company must recommence sending cheques, warrants or similar financial instruments or employing such other means in respect of dividends payable on those shares if the holder or person entitled by transmission requests such recommencement in writing.
126. | Forfeiture of Unclaimed Dividends |
All dividends or other sums payable on or in respect of any shares which remain unclaimed may be invested or otherwise made use of by the board for the benefit of the company until claimed. Any dividend or other sum unclaimed after a period of 12 years from the date when it was declared or became due for payment shall be forfeited and shall revert to the company unless the board decides otherwise and the payment by the board of any unclaimed dividend or other sum payable on or in respect of a share into a separate account shall not constitute the company a trustee in respect of it.
127. | Dividends Not in Cash |
Any general meeting declaring a dividend may, upon the recommendation of the board, by ordinary resolution direct, and the board may in relation to any interim dividend direct, that it shall be satisfied wholly or partly by the distribution of assets, and in particular of paid up shares or debentures of any other company, and where any difficulty arises in regard to the distribution the board may settle it as it thinks expedient, and in particular may authorise
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any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution purposes of any assets or any part thereof to be distributed and may determine that cash shall be paid to any members upon the footing of the value so fixed in order to secure equality of distribution and may vest any assets to be distributed in trustees as may seem expedient to the board.
128. | Scrip Dividends and Dividend Plans Generally |
The board may, if authorised by an ordinary resolution of the company, offer any holders of ordinary shares (excluding any member holding shares as treasury shares) the right to elect to receive ordinary shares, credited as fully paid, instead of cash in respect of the whole (or some part, to be determined by the board) of any dividend specified by the ordinary resolution. The following provisions shall apply:
(i) | an ordinary resolution may specify some or all of a particular dividend (whether or not already declared) or may specify some or all of any dividends declared or paid within a specified period, but such period may not end later than the third anniversary of the date of the meeting at which the ordinary resolution is passed; |
(ii) | the entitlement of each holder of ordinary shares to new ordinary shares shall be such that the relevant value of the entitlement shall be as nearly as possible equal to (but not greater than) the cash amount (disregarding any tax credit) of the dividend that such holder elects to forgo. For this purpose relevant value shall be calculated by reference to the average of the middle market quotations for the companys ordinary shares on the London Stock Exchange as derived from the Daily Official List (or any other publication of a recognised investment exchange showing quotations for the companys ordinary shares) on such five consecutive dealing days as the board shall determine provided that the first of such days shall be on or after the day on which the ordinary shares are first quoted ex the relevant dividend or in such other manner as may be determined by or in accordance with the ordinary resolution. A certificate or report by the auditors as to the amount of the relevant value in respect of any dividend shall be conclusive evidence of that amount and in giving such a certificate or report the auditors may rely on advice or information from brokers or other sources of information as they think fit; |
(iii) | no fraction of any ordinary share shall be allotted. The board may make such provisions as it thinks fit for any fractional entitlements including provisions whereby, in whole or in part, the benefit thereof accrues to the company and/or under which fractional entitlements are accrued and/or retained without interest and in each case accumulated on behalf of any holder of ordinary shares and such accruals or retentions are applied to the allotment by way of bonus to or cash subscription on behalf of such holder of fully paid ordinary shares and/or provisions whereby cash payments may be made to such holders in respect of their fractional entitlements; |
(iv) | the board, if it intends to offer an election in respect of any dividend, shall give notice to the holders of ordinary shares of the right of election offered to them, and specify the procedure to be followed which, for the avoidance of doubt, may include an election by means of a relevant system and the place at which, and the latest time by which, elections must be lodged in order for elections to be effective; no such notice need be given to holders of ordinary shares who have previously given election |
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mandates in accordance with this article and whose mandates have not been revoked; the accidental omission to give notice of any right of election to, or the non receipt (even if the company becomes aware of such non-receipt) of any such notice by, any holder of ordinary shares entitled to the same shall neither invalidate any offer of an election nor give rise to any claim, suit or action; |
(v) | the board shall not proceed with any election unless the company has sufficient reserves or funds that may be capitalised, and the board has authority to allot sufficient shares, to give effect to it after the basis of allotment is determined; |
(vi) | the board may exclude or restrict from any offer any shareholder who is an Approved Depositary or a nominee for an Approved Depositary if the offer or exercise of the right to or by the persons on whose behalf the Approved Depositary holds the shares would suffer legal or practical problems of the kind mentioned in Article 128(vii). If other shareholders (other than those excluded under Article 128(vii)) have the right to opt for new shares, the directors must be satisfied that an appropriate dividend reinvestment plan or similar arrangement is available to a substantial majority of the people on whose behalf the Approved Depositary holds shares or that such arrangement will be available promptly and the first sentence of this Article 128(vi) does not apply until the directors are satisfied of this; |
(vii) | the board may exclude from any offer or make other arrangement in relation to any holders of ordinary shares where the board believes that such exclusion or arrangement is necessary or expedient in relation to legal or practical problems under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory, or the board believes that for any other reason the offer should not be made to them; |
(viii) | the dividend (or that part of the dividend in respect of which a right of election has been offered) shall not be payable on ordinary shares in respect of which an election has been made (for the purposes of this article the elected ordinary shares) and instead additional ordinary shares shall be allotted to the holders of the elected ordinary shares on the basis of allotment calculated as stated. For such purpose the board shall capitalise, out of any amount standing to the credit of any reserve or fund (including the retained earnings) at the relevant time whether or not the same is available for distribution as the board may determine, a sum equal to the aggregate nominal amount of the additional ordinary shares to be allotted on that basis and apply it in paying up in full the appropriate number of ordinary shares for allotment and distribution to the holders of the elected ordinary shares on that basis. The board may do all acts and things considered necessary or expedient to give effect to any such capitalisation; |
(ix) | the additional ordinary shares when allotted shall rank pari passu in all respects with the fully-paid ordinary shares then in issue except that they will not be entitled to participation in the relevant dividend; |
(x) | unless the board otherwise determines, or unless the uncertificated securities rules otherwise require, the new ordinary share or shares which a member has elected to receive instead of cash in respect of the whole (or some part) of the specified dividend declared or paid in respect of his elected ordinary shares shall be in |
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uncertificated form (in respect of the members elected ordinary shares which were in uncertificated form on the date of the members election) and in certificated form (in respect of the members elected ordinary shares which were in certificated form on the date of the members election); |
(xi) | the board may also from time to time establish or vary a procedure for election mandates, which, for the avoidance of doubt, may include an election by means of a relevant system, under which a holder of ordinary shares may elect in respect of future rights of election offered to that holder under this article until the election mandate is revoked or deemed to be revoked in accordance with the procedure; |
(xii) | the board may decide how any costs relating to making new shares available in place of a cash dividend will be met, including deciding to deduct an amount from the entitlement of a shareholder under this article; and |
(xiii) | at any time before new ordinary shares are allotted instead of cash in respect of any part of a dividend, the board may determine that such new ordinary shares will not be allotted. Any such determination may be made before or after any election has been made by holders of ordinary shares in respect of the relevant dividend. |
Capitalisation of Reserves
129. | Power to Capitalise Reserves and Funds |
The company may, upon the recommendation of the board, at any time and from time to time pass an ordinary resolution to the effect that it is desirable to capitalise all or any part of any amount standing to the credit of any reserve or fund (including retained earnings) at the relevant time whether or not the same is available for distribution and accordingly that the amount to be capitalised be set free for distribution among the members or any class of members who would be entitled to it if it were distributed by way of dividend and in the same proportions, on the footing that it is applied either in or towards paying up the amounts unpaid at the relevant time on any shares in the company held by those members respectively or in paying up in full shares, debentures or other obligations of the company to be allotted and distributed credited as fully paid up among those members, or partly in one way and partly in the other, but so that, for the purposes of this article: (i) a share premium account and a capital redemption reserve, and any reserve or fund representing unrealised profits, may be applied only in paying up in full shares of the company that are to be allotted and distributed as fully paid up; and (ii) where the amount capitalised is applied in paying up in full shares that are to be allotted and distributed as fully paid up, the company will also be entitled to participate in the relevant distribution in relation to any shares of the relevant class held by it as treasury shares and the proportionate entitlement of the relevant class of members to the distribution will be calculated accordingly. The board may authorise any person to enter into an agreement with the company on behalf of the persons entitled to participate in the distribution and the agreement shall be binding on those persons.
130. | Settlement of Difficulties in Distribution |
Where any difficulty arises in regard to any distribution of any capitalised reserve or fund the board may settle the matter as it thinks expedient and in particular may authorise any person to sell and transfer any fractions or may resolve that the distribution should be as
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nearly as may be practicable in the correct proportion but not exactly so or may ignore fractions altogether, and may determine that cash payments shall be made to any members in order to adjust the rights of all parties, as may seem expedient to the board.
Record Dates
131. | Power to Choose Any Record Date |
Notwithstanding any other provision of these articles, the company or the board may fix any date as the record date for any dividend, distribution, allotment or issue and such record date may be on or at any time before or after any date on which the dividend, distribution, allotment or issue is declared, paid or made. The power to fix any such record date shall include the power to fix a time on the chosen date.
Records and Summary Financial Statements
132. | Inspection of Records |
No member in his capacity as such shall have any right of inspecting any accounting record or book or document of the company except as conferred by law, ordered by a court of competent jurisdiction or authorised by the board or by ordinary resolution of the company.
133. | Summary Financial Statements |
The company may send or supply copies of its strategic reports with supplementary materials to its members instead of copies of its full accounts and reports.
Service of Notices, Documents and Other Information
134. | Method of Service |
(A) | Any notice, document (including a share certificate) or other information may be served on or sent or supplied to any member by the company: |
(i) | personally; |
(ii) | by sending it through the post addressed to the member at his registered address or by leaving it at that address addressed to the member; |
(iii) | by means of a relevant system; |
(iv) | where appropriate, by sending or supplying it in electronic form to an address notified by the member to the company for that purpose; |
(v) | where appropriate, by making it available on a website and notifying the member of its availability in accordance with this article; or |
(vi) | by any other means authorised in writing by the member. |
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In the case of joint holders of a share, service, sending or supply of any notice, document or other information on or to one of the joint holders shall for all purposes be deemed a sufficient service on or sending or supplying to all the joint holders.
(B) | In the case of joint holders of a share, anything to be agreed or specified in relation to any notice, document or other information to be served on or sent or supplied to them may be agreed or specified by any one of the joint holders and the agreement or specification of the senior shall be accepted to the exclusion of that of the other joint holders and, for this purpose, seniority shall be determined by the order in which the names stand in the register in respect of the joint holding. |
(C) | If any member, including any joint holder, who is without a United Kingdom or United States postal address provides the company with such postal address is entitled to have notice or documents served or supplied to him at that address. If such a member fails to provide the company with a United Kingdom or United States postal address he may be ignored for the purposes of sufficient service or supply of any notice or documents. |
(D) | If on three consecutive occasions any notice, document or other information served on or sent or supplied to a member has been returned undelivered, such member shall not thereafter be entitled to receive notices, documents or other information from the company until he shall have communicated with the company and supplied to the company (or its agent) a new registered address, or a postal address within the United Kingdom or the United States for the service of notices and the despatch or supply of documents and other information, or shall have informed the company of an address for the service of notices and the despatch or supply of documents and other information in electronic form. For these purposes, any notice, document or other information sent by post shall be treated as returned undelivered if the notice, document or other information is served, sent or supplied back to the company (or its agents) and a notice, document or other information served, sent or supplied in electronic form shall be treated as returned undelivered if the company (or its agents) receives notification that the notice, document or other information was not delivered to the address to which it was sent. For the avoidance of doubt, a notice, document or other information served, sent or supplied in electronic form shall not be treated as a failure to deliver if the company (or its agents) receives an out of office notification from such member. |
(E) | The company may at any time and in its sole discretion choose (a) to serve, send or supply notices, documents or other information in hard copy form alone to some or all members; and (b) not to serve, send or supply any notice, document or other information to a particular member where it considers this necessary or appropriate to deal with legal, regulatory or practical problems in, or under the laws of, any territory. |
135. | Record Date for Service |
Any notice, document or other information may be served, sent or supplied by the company by reference to the register as it stands at any time not more than 15 days before the date of service, sending or supply. No change in the register after that time shall invalidate that service, sending or supply. Where any notice, document or other information is served on
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or sent or supplied to any person in respect of a share in accordance with these articles, no person deriving any title or interest in that share shall be entitled to any further service, sending or supply of that notice, document or other information.
136. | Members Resident Abroad or on Branch Registers |
(A) | Any member whose registered address is not within the United Kingdom or the United States and who gives to the company a postal address within the United Kingdom or the United States at which notices, documents or other information may be served upon, or sent or supplied to, him shall be entitled to have notices, documents or other information served on or sent or supplied to him at that address or, where applicable, by making them available on a website and notifying the holder at that address. Any member whose registered address is not within the United Kingdom or the United States and who gives to the company an address for the purposes of communications by electronic means may, subject to these articles, have notices, documents or other information served on or sent or supplied to him at that address or, where applicable, by making them available on a website and notifying the holder at that address. Otherwise, a member whose registered address is not within the United Kingdom or the United States shall not be entitled to receive any notice, document or other information from the company. |
(B) | For a member registered on a branch register, notices, documents or other information can be posted or despatched in the United Kingdom, the United States or in the country where the branch register is kept. |
137. | Service of Notice on Person Entitled by Transmission |
(A) | This article applies where a member has died or become bankrupt or is in liquidation, or where someone else has otherwise become entitled by law to that members shares, but is still registered as a member, it applies whether he is registered as a sole or joint member. |
(B) | A person who is entitled by transmission to a share, and who proves this to the reasonable satisfaction of the directors, upon supplying the company with a postal address within the United Kingdom or the United States for the service of notices and the despatch or supply of documents and other information, shall be entitled to have served upon or sent or supplied to him at such address any notice, document or other information to which he would have been entitled if he were the holder of that share or, where applicable, to be notified at that address of the availability of the notice, document or other information on a website. |
(C) | A person who is entitled by transmission to a share, and who proves this to the reasonable satisfaction of the directors, upon supplying the company with an address for the purposes of communications by electronic means for the service of notices and the despatch or supply of documents and other information, may have served on, sent or supplied to him at such address any notice, document or other information to which he would have been entitled if he were the holder of that share or, where applicable, may be notified at that address of the availability of the notice, document or other information on a website. |
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(D) | In either case under paragraphs (B) and (C) above, such service, sending or supply shall for all purposes be deemed a sufficient service, sending or supply of such notice, document or other information on all persons interested (whether jointly with or as claimants through or under him) in the share. |
(E) | Otherwise, any notice, document or other information served on or sent or supplied to any member pursuant to these articles shall, notwithstanding that the member is then dead or bankrupt or that any other event giving rise to the transmission of the share by operation of law has occurred and whether or not the company has notice of the death, bankruptcy or other event, be deemed to have been properly served, sent or supplied in respect of any share registered in the name of that member as sole or joint holder. |
138. | Deemed Delivery |
(A) | Any notice, document or other information, if served, sent or supplied by the company by post, shall be deemed to have been received on the day following that on which it was posted if first class post was used or 48 hours after it was posted if first class post was not used and, in proving that a notice, document or other information was served, sent or supplied, it shall be sufficient to prove that the notice, document or other information was properly addressed, prepaid and put in the post. |
(B) | Any notice, document or other information not served, sent or supplied by post but left by the company at a registered address or at an address (other than an address for the purposes of communications by electronic means) notified to the company in accordance with these articles by a person who is entitled by transmission to a share shall be deemed to have been received on the day it was so left. |
(C) | Any notice, document or other information served, sent or supplied by the company by means of a relevant system shall be deemed to have been received when the company or any sponsoring system-participant acting on its behalf sends the issuer- instruction relating to the notice, document or other information. |
(D) | Any notice, document or other information served, sent or supplied by the company using electronic means shall be deemed to have been received on the day on which it was sent notwithstanding that the company subsequently sends a hard copy of such notice, document or information by post. Any notice, document or other information made available on a website shall be deemed to have been received on the day on which the notice, document or other information was first made available on the website or, if later, when a notice of availability is received or deemed to have been received pursuant to this article. In proving that a notice, document or other information served, sent or supplied by electronic means was served, sent or supplied, it shall be sufficient to prove that it was properly addressed. |
(E) | Any notice, document or other information served, sent or supplied by the company by any other means authorised in writing by the member concerned shall be deemed to have been received when the company has carried out the action it has been authorised to take for that purpose. |
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139. | Notice When Post Not Available |
If there is a suspension or curtailment of postal services within the United Kingdom, the United States or some part of either the United Kingdom or the United States, the company need only give notice of a general meeting to those members with whom the company can communicate by electronic means and who have provided the company with an address for this purpose. The company shall also advertise the notice in at least one newspaper with a national circulation and make it available on its website from the date of such advertisement until the conclusion of the meeting or any adjournment thereof. If at least six clear days prior to the meeting the sending or supply of notices by post in hard copy form has again become generally possible, the company shall send or supply confirmatory copies of the notice by post to those members who would otherwise receive the notice in hard copy form.
Destruction of Documents
140. | Presumptions Where Documents Destroyed |
If the company destroys or deletes:
(i) | any share certificate which has been cancelled at any time after a period of one year has elapsed from the date of cancellation, or |
(ii) | any instruction concerning the payment of dividends or other moneys in respect of any share or any notification of change of name or address at any time after a period of two years has elapsed from the date the instruction or notification was recorded by the company, or |
(iii) | any instrument of transfer of shares or Operator-instruction for the transfer of shares which has been registered by the company at any time after a period of six years has elapsed from the date of registration, or |
(iv) | any instrument of proxy which has been used for the purpose of a poll at any time after a period of one year has elapsed from the date of use, or |
(v) | any instrument of proxy which has not been used for the purpose of a poll at any time after a period of one month has elapsed from the end of the meeting to which the instrument of proxy relates, or |
(vi) | any other document on the basis of which any entry is made in the register at any time after a period of six years has elapsed from the date the entry was first made in the register in respect of it, |
and the company destroys or deletes the document or instruction in good faith and without express notice that its preservation was relevant to a claim, it shall be presumed irrebuttably in favour of the company that every share certificate so destroyed was a valid certificate and was properly cancelled, that every instrument of transfer or Operator-instruction so destroyed or deleted was a valid and effective instrument of transfer or instruction and was properly registered and that every other document so destroyed was a valid and effective document and that any particulars of it which are recorded in the books or records of the company were correctly recorded. If the documents relate to uncertificated shares, the
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company must comply with any requirements of the uncertificated securities rules which limit its ability to destroy these documents. Nothing contained in this article shall be construed as imposing upon the company any liability which, but for this article, would not exist or by reason only of the destruction of any document of the kind mentioned above before the relevant period mentioned in this article has elapsed or of the fact that any other condition precedent to its destruction mentioned above has not been fulfilled. References in this article to the destruction of any document include references to its disposal in any manner.
Indemnity and Insurance
141. | Indemnity of Directors |
(A) | To the extent permitted by the Companies Acts, every director or former director or other officer of the company or of any associated company shall be indemnified by the company out of its own funds against all costs, charges, losses, expenses and liabilities incurred by him in performing his duties and/or in exercising his powers and/or in supposedly doing these things and/or otherwise in relation to or in connection with his duties, powers or office. |
(B) | To the extent permitted by the Companies Acts, every director or former director or other officer of the company or of any associated company is exempted from any liability to the company where that liability would be covered by the indemnity in Article 141(A). |
(C) | Without prejudice to Article 141(A), the company may purchase and maintain insurance against any liability for any persons who are or were at any time directors, officers or employees of the company or of any associated company or trustees of any pension fund or employee share scheme in which employees of any such company are interested. |
(D) | No director or former director of the company or of any associated company shall be accountable to the company or the members for any benefit provided pursuant to this article and the receipt of any such benefit shall not disqualify the person from being or becoming a director of the company. |
(E) | For the purposes of this article, no person appointed or employed by the company or an associated company as an auditor is an officer. |
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Exhibit 4.3
Dated 29 March, 2017
GLAXOSMITHKLINE SERVICES UNLIMITED
and
EMMA N. WALMSLEY
SERVICE AGREEMENT
This Agreement is made on 29 March, 2017 between:
(1) | GLAXOSMITHKLINE SERVICES UNLIMITED whose registered office is at GSK House, Brentford, Middlesex, TW8 9GS (the Company); and |
(2) | EMMA N. WALMSLEY (the Executive). |
1 | Interpretation |
1.1 | In this Agreement (and any schedules to it) |
Accrued Obligations means:
1.1.1 | the Executives base salary under this Agreement through to the end of the month in which the Termination Date occurs at the rate in effect on the Termination Date and the reimbursement (in accordance with Group policy) of any expenses incurred by the Executive prior to the Termination Date; |
1.1.2 | any unpaid bonus pertaining to the previous financial year and the product of any target bonus for the financial year in which the Termination Date occurs and a fraction, the numerator of which is the number of days in the Companys current financial year up to the Termination Date and the denominator of which is 365; |
1.1.3 | any remuneration previously deferred by the Executive (together with any accrued interest) and not yet paid by the Company including payment for any accrued holiday not taken by the Executive; and |
1.1.4 | any other benefits to which the Executive is entitled, as determined in accordance with the applicable plans and policies of the Company; |
Board means the board of directors of the Company from time to time or any person or committee nominated by that board as its representative for the purposes of this Agreement;
Employment means the employment governed by this Agreement;
Group means the Company and any other company controlling, controlled by or under the direct or indirect common control of the Company, including, without limitation, GSK plc and any of its subsidiaries from time to time;
Group Company means a member of the Group and Group Companies will be interpreted accordingly;
GSK Board means the board of directors of GSK plc from time to time or any person or committee nominated by the GSK Board as its representative for the purposes of this Agreement;
GSK plc means GlaxoSmithKline plc;
Termination Date means the date on which the Employment terminates, whether on the expiration of notice to terminate the Employment pursuant to Section 3 or otherwise pursuant to this Agreement.
1.2 | References to any statutory provisions include any modifications or re-enactments of those provisions. |
1.3 | In this Agreement, terms used in the context of the GlaxoSmithKline 2009 Performance Share Plan shall have the meaning ascribed to them in such plan. |
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2 | Employment |
The Company confirms the employment of the Executive, and the Executive confirms her employment with the Company, on the terms and conditions set out in this Agreement.
3 | Termination by Notice |
3.1 | The Executives continuous employment began on 1st May, 2010. |
3.2 | The Employment under the terms of this Agreement shall commence on 1st April, 2017 and the Employment shall continue until: |
(i) | the Employment is otherwise terminated in accordance with this Agreement; or |
(ii) | not less than 12 calendar months notice in writing is given by the Company to the Executive; or |
(iii) | not less than 12 calendar months notice in writing is given by the Executive to the Company. |
3.3 | The Company may, in its absolute discretion, lawfully terminate the employment of the Executive at any time by paying to the Executive a sum equal to her basic salary (excluding any other benefits) for the period this Agreement would otherwise continue. For this purpose, basic salary shall be the basic salary in effect at the date of termination of the employment. |
4 | Duties and Responsibilities |
4.1 | The Executive shall be appointed as Chief Executive Officer of GSK plc (in which capacity she will report directly to the GSK Board). The Executive shall have such powers and duties as are from time to time given to her by the GSK Board consistent with the Employment and this Agreement. In addition, and for no additional consideration, the Executive shall sit on the GSK Board and, if requested by the GSK Board, serve as a director on any other board of directors of any Group Company. The Executive agrees that for the purposes of the Working Time Regulations 1998 she is a managing executive. |
4.2 | During the Employment, the Executive shall devote her full business time and energies to the business and affairs of the Company and GSK plc, consistent with any other duties and responsibilities she may have to any Group Companies. The Executives time shall be allocated among the Group Companies in accordance with the Executives reasonable judgment and dependent upon the level of her responsibilities to any other Group Company, subject to the overall supervision and direction of the GSK Board. |
4.3 | The Executive shall not, without the prior written consent of the GSK Board, accept directorships, trusteeships and other appointments (other than of Group Companies) or carry on or be engaged, concerned or interested either directly or indirectly in any other business or activity. |
4.4 | The location of the Executives activities shall be at GSK House, but subject to the overall supervision and direction of the Board and the GSK Board, and to perform properly her duties, she may be required to undertake reasonable travel elsewhere in the world. The Executive is required to reside at a location convenient to the Companys offices at GSK House (or such other location as the GSK Board may determine) during the Employment. |
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5 | Salary, etc. |
5.1 | In consideration of the services to be rendered by the Executive under this Agreement the Executive shall be paid a salary at the rate of £1,003,000 per annum, payable in accordance with the frequency of payments adopted by the Company for its executives from time to time (but not less frequently than calendar monthly). The salary will be credited to the Executives bank account notified to the Company for the purpose. Salary shall be reviewed annually in accordance with the Companys normal administrative practices for its executives and may be increased (but not reduced) by the Company by such amount (if any) as it shall think fit. |
5.2 | The Executive shall be entitled subject to Section 6.5 to participate |
(i) | in all such cash bonus plans and programmes as are made available from time to time to board level executives of the Company in accordance with the Companys policy (or GSK plcs policy, as applicable); and |
(ii) | in respect of the salary provided by Section 5.1, in such incentive programmes as are made available from time to time to board level executives of the Company and/or GSK plc generally, |
in each case subject to the terms and conditions of such bonus plans and programmes from time to time in force. Any grants of share options or awards of performance shares under such plans and programmes shall be granted subject to performance conditions as determined by the GSK Board. The Executives future participation in certain of these plans and programmes may be affected if she does not satisfy the Share Ownership Requirements (as amended from time to time). It is agreed that in the event of the Executive retiring from the Company, the Executive will retain the relevant number of shares (as set out in the Share Ownership Requirements) until at least one year after the earlier of (i) the Executives Retirement Date contemplated by Section 14 of this Agreement, or (ii) the date on which the Executive retires from the Company in accordance with the terms of any Company policy (as may be in force from time to time).
5.3 | The Executives salary under Section 5.1 of this Agreement shall be inclusive of any fees or other remuneration to which the Executive may be entitled or receives as a Director, alternate Director, specialist adviser, consultant or by virtue of any other office or appointment in any Group Company. The Executive shall account to the Company for all such fees or other remuneration by paying over or procuring to be paid over the same to the Company. |
5.4 | GSK shall not be liable for any costs or expenses, including any costs or expenses pertaining to travel undertaken by the Executive, incurred as a result of any activity or participation in any role or capacity external to and unrelated to GSK or any Group Company. It is agreed that the Executive will promptly reimburse GSK against any such costs that may be incurred by GSK. Further, the Executive authorises the Company at any time to deduct from her salary, or any other monies payable to her by the Company, all sums which she owes the Company. If this is insufficient, the Company will require repayment of the balance. |
6 | Expenses and other Benefits |
6.1 | The Company shall promptly reimburse to the Executive all reasonable travel and other out of pocket expenses properly incurred by her in the performance of her duties under the Employment. The Executive will submit claims for expenses reimbursement to the Company regularly with appropriate supporting documentation. |
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6.2 | The Executive is eligible to participate in the GlaxoSmithKline Cash Allowance and Car Ownership Scheme subject to the rules of the scheme as amended and/or agreed with the Company from time to time. Full details of the Scheme are available on the TotalReward section on myGSK. |
6.3 | The medical benefit arrangements for the Executive and her family are as set out in the GlaxoSmithKline Executive Medical Plan (as amended from time to time). Details, including eligibility criteria, are set out in the TotalReward section on myGSK. |
6.4 | The Company at its expense shall provide the Executive with other benefits provided to board level executives of the Company, and the Executive shall be entitled to participate in all benefit plans, practices and policies as are made available by the Company from time to time to its board level executives subject to their terms and conditions from time to time in force. Details of the relevant plans and programmes are set out in the TotalReward section on my GSK. |
6.5 | The Company (and GSK plc, as applicable) reserves the absolute right and discretion to amend, modify or terminate all such benefits, plans and programmes as are referred to in Sections 5.2, 6.2, 6.3, 6.4 and 8 at any time and for any reason. |
7 | Holidays |
In addition to all statutory and Bank Holidays, the Executive shall be entitled to 27 days holiday in each year at full pay, increasing to 28 days after 10 years service, in accordance with Company policy from time to time in force, which shall accrue rateably during the calendar year. Up to four days of such holiday shall be taken at times to be designated by the Company and the remainder shall be taken at such times as the business of the Company may permit. On termination of the Employment the Executive will be entitled to be paid for any accrued holiday not taken and will reimburse the Company for any holiday taken but not accrued.
Holiday which is not taken in the year in which it is accrued may be carried forward, in accordance with the Companys rules on the banking of holidays outlined in its Holiday Policy, as amended from time to time. Any holiday which is not banked in accordance with these rules will be lost.
8 | Pension and Life Insurance |
The Executive is entitled to be a member of the GSK Pension Plan Senior Executive section (the Pension Plan), subject to the conditions of the trust deed and rules governing the Pension Plan from time to time. The rate of employer core contribution to the Pension Plan is set at 20% of salary. If the Executive has reached or reaches any limit set by the Government relating to pension allowances, the Executive can opt out of the Pension Plan and the Company may pay her a cash supplement in lieu of any employer pension contributions. The Pension Plan is subject to amendment or withdrawal at the Companys discretion. Any contributions payable by the Executive to the pension plan will be deducted from salary via salary sacrifice. The Company shall provide the Executive with the benefit of life cover which would provide a lump sum equivalent to four times the level of her base salary in the event of death in service.
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9 | Sickness |
9.1 | The Executive shall comply with the Companys sick pay rules from time to time in force. |
9.2 | Without prejudice to the Companys right to terminate the Employment in accordance with Sections 3, 13, 15 and 16 and to automatic termination in accordance with Section 14, if the Executive is absent from the Employment as a result of sickness or injury she shall be paid her full salary for the first 26 weeks absence (whether or not consecutive) and half of her salary for the second 26 weeks (whether or not consecutive) in aggregate in any period of 24 calendar months. The amount of any benefit which the Executive is entitled to claim during that period of absence under any Social Security or National Insurance Scheme and/or any Scheme of which the Executive is a non-contributory member by virtue of the Employment, will be deducted from any salary paid to her. The Company will pay the Executive statutory sick pay under the Social Security Contributions and Benefits Act 1992 (as amended) and any salary paid to her will be deemed to include statutory sick pay. The Company reserves the right to offset the amount of these benefits against salary paid to the Executive even if the Executive has not recovered them. |
9.3 | The Company may request the Executive to have a medical examination every year (or at such shorter intervals as they may agree between them), by a doctor approved by the Company. The costs of such examinations shall be borne by the Company. |
10 | Inventions and Copyright |
The Companys standard policy on inventions and copyright from time to time in force shall apply to the Executive.
11 | Confidentiality; Company Securities |
11.1 | Without prejudice to any other duty owed to the Company or to any Group Company, the Executive shall not, except in the proper performance of her duties or as authorised by the Board, during or after the Employment, use or disclose to any person any Confidential Information obtained by her during the Employment. |
11.2 | In the course of the Employment, the Executive is likely to obtain trade secrets and confidential information belonging to or relating to Group Companies and other persons. She will treat such information as if it falls within the terms of Section 11.1 and Section 11.1 will apply with any necessary amendments to such information. If requested to do so by the Company, the Executive will enter into an agreement with other Group Companies and any other persons in the same terms as Section 11.1 with any amendments necessary to give effect to this provision. |
11.3 | For the purposes of this Agreement, the term Confidential Information shall include, but not be limited to confidential commercial, financial and strategic data pertaining to the Group and any other confidential information relating to the business or affairs of the Group including, without limitation, any invention, trade secret, manufacturing process or patent information. The term Confidential Information shall not include any information: |
11.3.1 | which is or becomes generally available to the public; or |
11.3.2 | which is acquired by the Executive apart from her association with the Group |
other than, in each case, as a result of disclosure by the Executive or by any person to whom she has supplied information or by any person in breach of a duty of confidentiality.
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In addition, the term Confidential Information shall not include any information which the Executive is required to disclose by applicable law or regulation or by order of a court or governmental body of competent jurisdiction, so long as the Executive gives the Board or the GSK Board reasonable prior notice of such required disclosure. This does not affect any rights the Executive has under Part IVA of the Employment Rights Act 1996.
11.4 | During the Employment, the Executive shall be bound, in respect of transactions in securities issued by any Group Company, by the Companys and GSK plcs policies from time to time in effect on employee securities dealing. In particular, the Executive shall advise the Company Secretary, Chief Financial Officer or Chairman of GSK plc before she or any member of her immediate family seeks to trade in such securities and shall be bound by any directions given by the Company Secretary, Chief Financial Officer or Chairman. |
12 | General Termination Provisions |
12.1 | On the termination of the Employment for whatever reason, or at any other time when requested to do so by the Company, the Executive, upon receipt of written request from the Company, shall promptly |
(i) | deliver up to the Company any property belonging to the Company or any other Group Company which may be in her possession or under her control including Confidential Information, lists of customers, correspondence, documents and other property. The Executive will not retain any copies of any materials or other information. The Company shall promptly return to the Executive and permit her to remove from the premises of the Company and any other Group Company, any property, personal records, files, etc. belonging to the Executive; and |
(ii) | resign on request by the Company or the GSK Board (if she has not already done so) from all offices held by her in the Company and any other Group Company (except for any she is entitled to retain under any separate agreement with any Group Company), failing which the Executive irrevocably authorises the Company or GSK plc to appoint an officer of the Company or GSK plc to execute all documents on her behalf and do all things necessary to effect such resignations; PROVIDED, however, that any such resignations pursuant to this Section 12.1(ii) shall be without prejudice to the Executives rights under this Agreement. |
12.2 | Any termination of the Employment shall be without prejudice to the Executives and the Companys continuing obligations under this Agreement. |
12.3 | Upon the termination of the Executives employment for whatever reason, the Executive shall immediately repay all outstanding debts or loans due to the Company or any Group Company and the Company is hereby authorised to deduct from any payment of wages any sum in repayment of all or any part of such debts or loans. |
12.4 | The terms of the GSK Redundancy Policy as in force from time to time, shall not apply to the Executive who shall only be entitled to statutory redundancy pay in addition to any other entitlement under this Agreement if her Employment is terminated by reason of redundancy. |
13 | Termination due to Death or Disability |
13.1 | In the event of the Executives death, the Employment will terminate automatically on the date of her death, which shall be the Termination Date for the purposes of this Agreement. Her duly qualified executor shall be entitled to receive the Accrued Obligations. |
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13.2 | The Company may elect to terminate the Employment immediately without notice or payment in lieu of notice by serving written notice (Termination Notice for Disability), if an independent physician selected by the Company has certified in writing that, by reason of a physical or mental illness or other condition of the Executive, the Executive is unlikely to be able to resume performance of duties under the Employment for the foreseeable future. The Employment will terminate on the Termination Date specified in the Termination Notice for Disability. Provided that the Company shall not be entitled to terminate the employment by reason of physical or mental illness or other condition if this would lead to the Executive becoming dis-entitled to benefits under the Companys or GSK plcs permanent health insurance plan. |
13.3 | In the event the Company delivers a Termination Notice for Disability, the Executive shall immediately be relieved from all offices, appointments and responsibilities that she may then hold under the Employment and be relieved of any duty to work for or serve the Company or any Group Company. The Executive shall be entitled only to the Accrued Obligations, together with such rights as are provided for in the applicable benefits plan(s) in which the Executive participates. |
14 | Termination on Retirement |
The Employment shall automatically terminate on the last day of the month in which the Executive reaches her sixty-fifth (65th) birthday (the Retirement Date) and the Executive shall thereafter be entitled only to payment of the Accrued Obligations.
15 | Termination for Cause |
15.1 | The Company shall be entitled to terminate the Employment immediately without notice or payment in lieu of notice for Cause (as defined in this Section 15) by serving written notice (Notice of Termination for Cause). |
15.2 | Cause shall mean: |
15.2.1 | the Executive is convicted of any criminal offence which in the reasonable opinion of the Chairman of GSK plc or the GSK Board affects the Executives position as Chief Executive Officer of GSK plc (other than a motoring offence for which no custodial sentence is given to her); or |
15.2.2 | the Executive, in carrying out her duties under the Employment, is found guilty of gross neglect or gross misconduct; or |
15.2.3 | the Executive shall become bankrupt or have an order under Section 252 of the Insolvency Act 1986 made in respect of her or if an interim receiver of her property is appointed under Section 286 of the Act; or |
15.2.4 | the Executive shall be or become prohibited by law from being a director; or |
15.2.5 | the Executive commits a serious breach of any material term of this Agreement. |
15.3 | Any delay or forbearance by the Company in exercising any right of termination shall not constitute a waiver of it. |
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15.4 | In the event that the Employment is terminated for Cause, the Employment shall terminate upon the date on which the Board serves Notice of Termination for Cause and the Executive shall be entitled only to payment of all previously accrued and unpaid salary then due and owing under this Agreement and any accrued annual leave up to the date of termination and reimbursement for expenses previously incurred and, save for the provisions of this Section 15.4, the Executive will have no claim for damages or any other remedy against the Company or any Group Company. |
16 | Termination by Notice |
16.1 | If either notice to terminate the Employment is given by the Executive according to Section 3.2(iii) above, or if the Executive resigns without giving due notice and the Company does not accept her resignation or the Company has given notice in accordance with Section 3.2(ii) above then the Company may require the Executive to comply with any and all of the provisions in this Section 16.1 for a maximum period of 12 months (the Garden Leave Period). |
16.1.1 | The Company may require that the Executive does not: |
(i) | enter or attend the premises of the Company, or any Group Company; or |
(ii) | contact or have any communication with any customer or client of the Company, or any Group Company in relation to the business of the Company, or any Group Company; or |
(iii) | contact or have any communication with any employee, officer, director, agent or consultant of the Company, or any Group Company in relation to the business of the Company, or any Group Company; or |
(iv) | become employed or engaged by any company, partnership or other entity whether as an employee, director, partner or consultant or carry on any business either on her own account or for any other person whether directly or indirectly (except as the holder, directly or indirectly, of less than 5 per cent of the shares or save for those activities permitted in accordance with Section 4.3); |
(v) | remain or become involved in any aspect of the business of the Company, or any Group Company except as required by such companies. |
16.1.2 | The Company may require the Executive: |
(i) | to comply with the provisions of Section 12; and |
(ii) | to immediately resign from any directorship which she holds in the Company, and any Group Company or any other company where such directorship is held as a consequence or requirement of the Employment, unless she is required to perform duties to which any such directorship relates in which case she may retain such directorships while those duties are ongoing. The Executive hereby irrevocably appoints the Company to appoint an officer of GSK plc as her attorney to execute any instrument and do anything in her name and on her behalf to effect her resignation if she fails to do so in accordance with this Section 16.1.2(ii). |
16.1.3 | During any Garden Leave Period the Company may appoint another individual to carry out the duties of the Executive and the Executive shall: |
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(i) | continue to be bound by the provisions of this Agreement and conduct herself with good faith towards the Company and not do anything that is harmful to the Company or any Group Company; |
(ii) | remain available to perform any reasonable duty requested by the Company or any Group Company and to co-operate generally with the Company or any Group Company to ensure a smooth handover of her duties (provided that if the Executive should fail to make herself available for such work having been requested by the Company or any Group Company to attend she shall, notwithstanding any other provision of this Agreement forfeit her right to salary and contractual benefits in respect of such period of non-availability). |
16.1.4 | During the Garden Leave Period, the Executive will be entitled to receive her salary and benefits in accordance with the terms of this Agreement including any bonus payable in accordance with Section 5.2 but excluding any share entitlements under Section 5.2 above. |
16.1.5 | Where the Company gives notice to terminate the Employment in accordance with Section 3.2 (except where termination is effected pursuant to the terms of Section 15) above then notwithstanding the continuation of the Employment during any period after notice has been given, including, any Garden Leave Period, within 30 days of the date such notice was given to the Executive, the Company shall pay to the Executive as a lump sum her full salary in respect of the entire period of notice (except for any part of it attributable to the period falling after the Executives Retirement Date and subject to deduction of tax and any other deductions required to be made) (the Lump Sum). For this purpose, full salary shall be the basic salary in effect at the date such notice is given to the Executive. For the avoidance of doubt, the payment by the Company to the Executive of the Lump Sum will extinguish any and all liability imposed on the Company under this Agreement to make any further payment to the Executive in respect of salary under this Agreement during any period after notice has been given, including, any Garden Leave Period. |
16.1.6 | After the payment of a Lump Sum pursuant to Section 16.1.5, at the end of or at any time during the Garden Leave Period the Company may at its sole and absolute discretion terminate the Employment by further written notice to the Executive without any further payment. In any event at the end of the 12 month Garden Leave Period the Employment will also terminate automatically and the Company shall be under no obligation to make any further payment to the Executive, save for in respect of any Accrued Obligations that may exist. |
16.1.7 | However, in the event that the Executive obtains an offer of future alternative employment with another employer, or otherwise wishes to take up alternative business activities, and she can satisfy the GSK Board that such employment/activities are not in breach of Section 17, the Company shall waive the balance of any unexpired notice period or the Garden Leave Period so as to enable the Executive to take up such alternative employment/activities; whereupon, subject to Section 12.3 above, the Companys obligations to the Executive under this Section 16.1 shall cease with effect from the agreed revised Termination Date. |
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16.1.8 | The Company and the Executive agree that if the Company shall fully perform, when due, all its obligations under this Section 16, such performance shall be in full and final settlement of all and any claims or rights of action which the Executive might have against the Company, or any Group Company arising out of this Agreement or its termination or otherwise howsoever relating to the Employment. |
17 | Restrictions during and after Termination of Employment |
17.1 | In this Section: |
Restricted Business means the businesses of the Company or any Group Company at the Termination Date (or if earlier the start of any Garden Leave Period ending on the Termination Date) with which the Executive was involved to a material extent during the last 12 months of the Employment.
Restricted Period means any period during which the Executive is employed by the Company (including for the avoidance of doubt, any Garden Leave Period) and the period of 12 months, less any Garden Leave Period imposed by the Company under Section 16 and less any period of notice worked by the Executive during the notice period set out in Section 3, commencing on the Termination Date.
17.2 | The Executive is likely to obtain trade secrets and confidential information and personal knowledge of and influence over customers, clients and employees of the Company, GSK plc and its Group Companies during the course of the Employment. To protect these interests, the Executive agrees with the Company and GSK plc that the Executive will be bound by the following covenants: |
17.2.1 | During the Restricted Period she will not be employed or engaged in (except as the holder, directly or indirectly, of less than 5 per cent of the shares) any Competing Business. For the purposes of this Section 17.2.1, a Competing Business shall mean the following companies (or, as appropriate, the successors to their operations): Abbott Laboratories; AbbVie Inc.; Amgen Inc.; AstraZeneca PLC; Bayer HealthCare; Bristol-Myers Squibb Company; Colgate-Palmolive Company; Eli Lilly and Company; Johnson & Johnson; Kimberly-Clark; Merck & Co., Inc.; Novartis; Pfizer Inc.; Procter & Gamble; Reckitt Benckiser plc; Roche Holding Ltd; Sanofi S.A.; and, Unilever PLC. |
17.2.2 | During the Restricted Period the Executive will not canvass or solicit in competition with the Company, or any Group Company, the custom of any person who was during the last 12 months of the Employment a customer, or client of, or in the habit of dealing with, the Company, or (as the case may be) any Group Company and in respect of which the Executive had access to confidential information or with whose custom or business the Executive is or was personally concerned, during that 12 month period with a view to providing goods or services to that person in competition with any Restricted Business. |
17.2.3 | During the Restricted Period she will not, in the course of any business concern which is in competition with the Restricted Business provide goods or services to or otherwise have any dealings with any person who was during the last 12 months of the Employment a customer, or client of, or in the habit of dealing with the Company, or any Group Company, and in respect of which the Executive had access to confidential information or with whose custom or business the Executive is or was personally concerned during that 12 month period. |
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17.2.4 | During the Restricted Period she will not, interfere or endeavour to interfere with the continuance of the provision of goods or services to the Company, or any Group Company, by any supplier which was a supplier of goods or services to the Company, or any Group Company during the last 12 months of the Employment and with whom the Executive dealt to a material extent during that period. |
17.2.5 | During the Restricted Period she will not entice or try to entice away from the Company or any Group Company any person who is still employed by the Company or a Group Company during the Restricted Period and is a senior employee, director or full time senior consultant of such a company and with whom she worked closely in the last six months of the Employment. |
17.3 | Each of the obligations imposed on the Executive by this Section 17 extend to her acting not only on her own account but also on behalf of any other firm, company or other person and shall apply whether she acts directly or indirectly. |
17.4 | Following the Termination Date, the Executive will not represent herself as being in any way connected with the businesses of the Company, GSK plc or of any other Group Company (except to the extent agreed in writing by such a company). |
17.5 | Any benefit given or deemed to be given by the Executive to any Group Company under the terms of Section 17 is received and held on trust by the Company for the relevant Group Company. The Executive will enter into appropriate restrictive covenants directly with other Group Companies if asked to do so by the Company or GSK plc. |
18 | Reasonableness of Restrictions |
18.1 | Each of the obligations on the Executive contained in Section 17 constitutes a separate and independent restriction on the Executive notwithstanding that they may be contained in the same Section, paragraph or sentence. |
18.2 | Should the restrictions contained in Section 17 be found to be void but would be valid if some part thereof were deleted or the period or radius of application reduced, then such restriction shall apply with such modification as may be necessary to make it valid and effective. In particular, the Executive agrees that the restrictions are reasonable and necessary for the protection of the Company and the Group Companies. |
18.3 | If the Executive shall, during the Restricted Period, receive from any person, firm or company, an offer to provide services in any capacity whatsoever, or to enter into employment where acceptance of such offer, or the taking of such employment, might render her in breach of the provisions of this Agreement, she shall promptly advise the offeror of the existence of the restrictions set forth in Section 17 of this Agreement. |
18.4 | The Executive acknowledges that the Company may have no adequate remedy at law and would be irreparably harmed if the Executive breaches or threatens to breach the provisions of Section 17 above and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of Section 17 above, and to specific performance of the terms of each such Section in addition to any other legal or equitable remedy it may have. The Executive further agrees that she shall not, in any equity proceedings involving her relating to the enforcement of Section 17 above raise the defence that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have. |
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19 | Severability |
In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
20 | Successors and Assigns |
20.1 | This Agreement shall be binding upon and inure to the benefit of the Company or any corporation or other entity to which the Company may transfer all or substantially all of its assets and business and to which the Company may assign this Agreement, in which case Company, as used in this Agreement, shall mean such corporation or other entity. The foregoing shall not relieve the Company of any of its obligations under Section 16 of this Agreement. The rights of the Executive shall inure to the benefit of her heirs, executors, administrators and other personal representatives. |
20.2 | The Executive may not assign this Agreement or any part of it, or any rights thereunder or delegate any duties to be performed by her under it to anyone else. |
21 | Survivorship |
To the extent contemplated by this Agreement, respective rights and obligations of the parties set out in this Agreement shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
22 | Notices |
Any notice (including any Termination Notice) required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or sent by courier, duly addressed to the party concerned at such address as the party may notify to the other. Any notice delivered personally under this Section 22 shall be deemed given on the date delivered and any notice sent by courier shall be deemed given on the date delivery is recorded by such courier.
23 | Entire Agreement |
23.1 | This Agreement supersedes any previous written or oral agreement between the parties in relation to the matters dealt with within it. It contains the whole agreement between the parties relating to the Employment at the date the Agreement was entered into (except for those terms implied by law which cannot be excluded by the agreement of the parties). The Executive acknowledges that she has not been induced to enter into this Agreement by any representation, warranty or undertaking not expressly incorporated into it. |
23.2 | Neither partys rights or powers under this Agreement will be affected if: |
23.2.1 | one party delays in enforcing any provision of this Agreement; or |
23.2.2 | one party grants time to the other party. |
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24 | Amendment or Modification; Waiver |
No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing, signed by the Executive and by a duly authorised officer of the Company who shall supply the Executive with evidence of such authority.
25 | Withholding |
Anything to the contrary notwithstanding, all payments required to be made by the Company under this Agreement to the Executive, or to her estate or beneficiaries, shall be subject to withholding of such amounts relating to taxes as the Company may be required to withhold pursuant to any applicable statute, law or regulation.
26 | Indemnification and Insurance |
26.1 | The Company agrees that if the Executive is made a party or is threatened to be made a party to any action, suit, proceeding, prosecution or governmental, regulatory or other investigation by reason of the fact of the Employment or that she is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another Group Company or entity except for any action instigated by the Company or the Executive (a Proceeding), she shall be indemnified by the Company to the fullest extent permitted by applicable law against all expenses, liabilities, fees, costs, damages and losses reasonably incurred or suffered by the Executive in connection with such a Proceeding (including any tax payable by the Executive as a result of payments made by the Company pursuant to this indemnity), including, without limitation, payment of expenses incurred in defending a Proceeding prior to the final disposition of such Proceeding; PROVIDED, however, that written notice of such Proceeding is given promptly to the Company by the Executive and the Company is permitted (where appropriate) to participate in and assume the defence of such Proceeding. The provisions of this Section 26 shall survive the termination of the Employment and shall be in addition to any other rights to indemnification to which the Executive may from time to time be entitled, whether under any applicable insurance policies or otherwise. |
26.2 | The Company will provide the Executive with Legal Expenses Insurance and Directors and Officers Liability Insurance under the Companys policy current from time to time in force to cover the period during which she acts as a director, officer or employee or agent of any Group Company or entity under this Agreement whether or not she remains a director, officer, employee or agent of any Group Company or entity at the time any claim under the policy is made. |
27 | Collective Agreements Disciplinary Rules and Procedures |
There are no collective agreements which directly affect the terms and conditions set out in this Agreement.
The Companys harassment and bullying policies, disciplinary rules and procedures and grievance procedures, as in force from time to time, shall apply to the Executive. The Company reserves the right to leave out any or all of the stages of those rules and procedures where it considers it appropriate to do so.
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28 | Data Protection |
The Executive consents to the Company or any Group Company holding and processing both electronically and manually the data it collects which relates to the Executive for the purpose of the administration and management of its employees and its business and for compliance with applicable procedures, laws and regulations. The Executive also consents to the transfer of such personal information to other offices the Company may have or to a Group Company or to other third parties whether or not outside the European Economic Area for administration purposes and other purposes in connection with the Executives employment where it is necessary or desirable for the Company to do so.
29 | Governing Law |
This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of England. Each of the parties submits to the exclusive jurisdiction of the English courts as regards any claim or matter under this Agreement.
30 | Titles |
Titles to the Sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any Section.
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In witness whereof the parties hereto have executed this Agreement as a deed on the day and year first above written
THE COMMON SEAL of GLAXOSMITHKLINE SERVICES UNLIMITED was hereunto affixed in the presence of: |
} | /s/ Paul Williamson | ||
Director | P Williamson For and on behalf of Glaxo Group Limited Corporate Director | |||
Secretary | /s/ V A Whyte V A Whyte | |||
Signed Sealed and Delivered by the said EMMA N. WALMSLEY in the presence of: |
} | /s/ Emma Walmsley | ||
Name: | /s/ Allen James Powley | |||
Address
Occupation |
Allen James Powley |
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Exhibit 4.4
Dated 16 December 2017
GLAXOSMITHKLINE LLC
and
HAL V. BARRON
SERVICE AGREEMENT
This Agreement is made on 16 December 2017 between:
(1) | GLAXOSMITHKLINE LLC whose trading office is at Five Crescent Drive, Philadelphia, Pennsylvania 19112, USA (the Company); and |
(2) | HAL V. BARRON of 315 Clipper Street, San Francisco, CA 94114, USA (the Executive). |
1 | Interpretation |
1.1 | In this Agreement (and any schedules to it) |
Accrued Obligations means:
1.1.1 | the Executives base salary under this Agreement through to the end of the month in which the Termination Date occurs at the rate in effect on the Termination Date and the reimbursement (in accordance with Group policy) of any expenses incurred by the Executive prior to the Termination Date; |
1.1.2 | any unpaid bonus pertaining to the previous financial year and the product of any target bonus for the financial year in which the Termination Date occurs and a fraction, the numerator of which is the number of days in the Companys current financial year up to the Termination Date and the denominator of which is 365, paid as soon as practicable on or following the termination date; |
1.1.3 | any remuneration previously deferred by the Executive (together with any accrued interest) and not yet paid by the Company including payment for any accrued vacation not taken by the Executive, in each case paid in accordance with the applicable plan, policy or program of the Company; and |
1.1.4 | any other benefits to which the Executive is entitled, as determined in accordance with the applicable plans and policies of the Company; |
Agreement means this employment agreement, which as of the date hereof supersedes and replaces any previous employment agreement between the Company and the Executive;
Board means the board of directors of the Company from time to time or any person or committee nominated by that board as its representative for the purposes of this Agreement;
Chief Executive Officer means the Chief Executive Officer of GSK plc from time to time;
Employment means the employment governed by this Agreement;
Group means the Company and any other Company controlling, controlled by or under the direct or indirect common control of the Company, including, without limitation, GSK plc and any of its subsidiaries from time to time;
Group Company means a member of the Group and Group Companies will be interpreted accordingly;
GSK Board means the board of directors of GSK plc from time to time or any person or committee nominated by the GSK Board as its representative for the purposes of this Agreement;
GSK plc means GlaxoSmithKline plc;
Termination Date means the date on which the Employment terminates pursuant to this Agreement.
1.2 | References to any statutory provisions include any modifications or re-enactments of those provisions. |
1.3 | In this Agreement terms used in the context of the GlaxoSmithKline Performance Share Plan shall have the meaning ascribed to them in such plan. |
2 | Employment |
The Company confirms the Employment of the Executive, and the Executive confirms his Employment with the Company, on the terms and conditions set out in this Agreement.
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3 | Termination by Notice |
3.1 | The Employment under the terms of this Agreement shall be deemed to have commenced on 1 January 2018, and the Employment shall continue until: |
(i) | the Employment is otherwise terminated in accordance with this Agreement; or |
(ii) | not less than 12 calendar months notice in writing is given by the Company to the Executive; or |
(iii) | not less than 12 calendar months notice in writing is given by the Executive to the Company; and, in any event, |
(iv) | at no point beyond 31 December 2024. In the event that this Agreement shall terminate pursuant to this Clause 3.1(iv), then the Executive shall thereafter be deemed an employee at will and shall be entitled only to payment of Accrued Obligations. |
3.2 | The Company may, in its absolute discretion, lawfully terminate the Employment of the Executive at any time, with immediate effect and without cause, by paying in aggregate to the Executive within 30 days of the date notice of termination is given to him a sum equal to his base salary (excluding any other benefits) for the period this Agreement would otherwise continue following such notice (not to exceed the maximum period of 12 months). For this purpose, salary shall be the base salary in effect at the date of termination of the Employment. |
4 | Duties and Responsibilities |
4.1 | The Executive shall be appointed as Chief Scientific Officer and President R&D. The Executive will be compensated at GSK grade 0. The Executive shall have such powers and duties as are from time to time given to him by the Chief Executive Officer or, if different, the person to whom the Executive reports, consistent with the Employment and this Agreement. |
4.2 | During the Employment, the Executive shall devote his full business time and energies to the business and affairs of the Company and GSK plc, consistent with any other duties and responsibilities he may have to any Group Companies. The Executives time shall be allocated among the Group Companies in accordance with the Executives reasonable judgment and dependent upon the level of his responsibilities to any other Group Company, subject to the overall supervision and direction of the Chief Executive Officer or, if different, the person to whom the Executive reports. |
4.3 | The Executive shall not, without the prior written consent of the GSK Board, accept directorships, trusteeships and other appointments (other than of Group Companies) or carry on or be engaged, concerned or interested either directly or indirectly in any other business or for profit activity. A list of the directorships and outside interests of the Executive approved by the GSK Board as at the date of this Agreement is attached as Appendix 1 to this Agreement. Any fees earned by the Executive in respect of such authorised activities may be retained by the Executive. |
4.4 | While the location of the Executives activities shall be in or around San Francisco, CA subject to the overall supervision and direction of the Chief Executive Officer, in order to perform properly his duties, he will be required to undertake travel elsewhere in the world and in particular to the UK and Pennsylvania where the Company maintains its primary R&D centers. The Executive is required to reside at a location convenient to the Companys offices in or around San Francisco, CA (or such other location as the Company may determine) during the Employment. |
5 | Salary, etc. |
5.1 | In consideration of the services to be rendered by the Executive and the promises and covenants made by the Executive under this Agreement, specifically including Section 16, the Executive shall be paid a base salary at the rate of $1,700,000 per annum payable in accordance with the Companys pay practices for its executives from time to time in force (but not less frequently than calendar monthly). The salary will be credited to the Executives bank account notified to the Company for the purpose or paid to Executive in check or cash or another manner compliant with applicable law. Salary shall be reviewed annually in accordance with the Companys normal administrative practices for its executives and may be increased (but not reduced) by the Company by such amount (if any) as it shall think fit. |
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5.2 | The Executive shall be eligible, subject to Section 6.4, to participate: |
(i) | in all such cash bonus plans and programmes as are made available from time to time for executives of the Company generally of the same grade in the relevant jurisdiction in accordance with the Companys policy (or GSK plcs policy, as applicable); and |
(ii) | in respect of the salary provided by Section 5.1, in such incentive programmes as are made available from time to time for executives of the Company and/or GSK plc generally who are of the same grade in the relevant jurisdiction, |
in each case, subject to the terms and conditions of such bonus plans and programmes from time to time in force. Any grant of share options or awards of performance shares under such plans and programmes shall be granted subject to performance conditions as determined by the GSK Board. The Executives future participation in certain of these plans and programmes may be affected if the Executive does not satisfy the Share Ownership Requirements (as amended from time to time). It is agreed that in the event the Executive leaves the Company, the Executive will retain the relevant number of shares (as set out in the Share Ownership Requirements) until at least one year after the Termination Date. The Executives salary under Section 5.1 of this Agreement shall be inclusive of any fees or other remuneration to which the Executive may be entitled or receives as a Director, alternate Director, specialist adviser, consultant or by virtue of any other office or appointment in any Group Company. The Executive shall account to the Company for all such fees or other remuneration by paying over or procuring to be paid over the same to the Company.
5.3 | No Group Company shall be liable for any costs or expenses, including any costs or expenses pertaining to travel undertaken by the Executive, incurred as a result of any activity or participation in any role or capacity external to and unrelated to the Group. It is agreed that the Executive will promptly reimburse the Company against any such costs that may be incurred by the Group. Further, the Executive authorises the Company at any time to deduct from his salary, or any other monies payable to him by the Company, all sums which he owes the Company. If this is insufficient, the Company will require repayment of the balance. |
6 | Expenses and other Benefits |
6.1 | The Company shall promptly reimburse to the Executive all reasonable travel and other out of pocket expenses properly incurred by him in the performance of his duties under the Employment. The Executive will submit claims for expense reimbursement to the Company regularly with appropriate supporting documentation, and in accordance with the Companys policies in effect from time to time. |
6.2 | The medical benefit arrangements for the Executive and his family are as set out in the GlaxoSmithKline Executive Medical Plan (as amended from time to time). Details, including eligibility criteria, are set out in the TotalReward section on Connect GSK. |
6.3 | The Company at its expense shall provide the Executive with other benefits provided to executives of the Company of the same grade, and the Executive shall be eligible to participate in all benefit plans, practices and policies as are made available by the Company from time to time to its executives generally of the same grade subject to their terms and conditions from time to time in force. A list of all plans and programmes currently in operation is set out in Appendix 2. Details of the relevant plans and programmes are set out in the TotalReward section on Connect GSK. |
6.4 | The Company (and GSK plc, as applicable) reserves the absolute right and discretion to amend, modify or terminate all such benefits, plans and programmes as are referred to in Sections 5.2, 6.2, 6.3 and 8 at any time and for any reason. |
7 | Vacation |
In addition to all Company Holidays, the Executive shall be entitled to 20 days vacation in each year at full pay, which shall accrue rateably during the calendar year in accordance with Company policy as in effect from time to time, to be taken at such times as the business of the Company may permit. On termination of the Employment the Executive will be entitled to be paid for any accrued vacation not taken and will reimburse the Company for any vacation taken but not accrued in accordance with the terms of Company policy as in effect from time to time.
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8 | Pension and Life Insurance |
The Executive shall be eligible to participate in the GlaxoSmithKline Cash Balance Pension Plan and any other retirement plans or deferred compensation programmes made available by the Company to its senior executives in the United States, including, without limitation, the GlaxoSmithKline Retirement Savings Plan and the GlaxoSmithKline Executive Supplemental Savings Plan, subject to the terms and conditions of such programmes from time to time in force. Details of such current plans and programmes are accessible from the intranet site Connect GSK and they are subject to amendment or withdrawal at the Companys discretion.
9 | Illness and Leave of Absence |
9.1 | The Executive shall comply with the Companys leave of absence policies from time to time in force. |
9.2 | The Executive shall be eligible to participate in the Companys short-term and long-term disability plans or programmes in force from time to time. |
9.3 | If the Company has concerns about the Executives ability to perform the essential functions of his role, the Company may require the Executive to have a medical examination every year (or at such shorter intervals as they may agree between them), by a doctor approved by the Company. The costs of such examinations shall be borne by the Company. The Executive agrees and understands that this provision is job related and consistent with business necessity of the Company. |
10 | Inventions and Copyright |
The Companys Standard US Policy Requirements on Inventions, Copyright, and Confidentiality shall apply to the Executive. The Companys current policy language is attached as Appendix 3, which is incorporated by reference into this Agreement. The Executive expressly acknowledges and agrees to the terms, conditions, and promises contained in Appendix 3.
11 | Confidentiality; Company Securities |
Without prejudice to any other duty owed to the Company or to any Group Company, the Executive shall not, except in the proper performance of his duties or as authorised by the Board, during or after the Employment, use, retain, or disclose to any person any Confidential Information (defined below) obtained or created by him during the Employment.
11.1 | In the course of the Employment, the Executive will obtain trade secrets and confidential information belonging to or relating to Group Companies and other persons. He will treat such information as if it falls within the terms of Section 11 and Section 11 will apply with any necessary amendments, to such information. If requested to do so by the Company, the Executive will enter into an agreement with other Group Companies and any other persons in the same terms as Section 11 with any amendments necessary to give effect to this provision. |
11.2 | For the purposes of this Agreement, the term Confidential Information shall include, but not be limited to confidential commercial, financial and strategic data pertaining to the Group and any other confidential information relating to the business or affairs of the Group including, without limitation, any invention, trade secret, manufacturing process or patent information. The term Confidential Information shall not include any information: |
11.2.1 | which is or becomes generally available to the public, or |
11.2.2 | which is acquired by the Executive apart from his association with the Group |
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other than, in each case, as a result of disclosure by the Executive or by any person to whom he has supplied information or by any person in breach of a duty of confidentiality. In addition, the term Confidential Information shall not include any information which the Executive is required to disclose by applicable law or regulation or by order of a court or governmental body of competent jurisdiction.
11.3 | During the Employment, the Executive shall be bound, in respect of transactions in securities issued by any Group Company, by the Companys and GSK plcs policies from time to time in effect on employee securities dealing. In particular, the Executive shall advise the Company Secretary, Chief Financial Officer, Chief Executive Officer or Chairman of GSK plc before he or any member of his immediate family seeks to trade in such securities and shall be bound by any directions given by the Company Secretary, Chief Financial Officer, Chief Executive Officer or Chairman. |
12 | General Termination Provisions |
12.1 | On the termination of the Employment for whatever reason, or at any other time when requested to do so by the Company, the Executive, upon receipt of written request from the Company, shall promptly: |
(i) | deliver up to the Company any property belonging to the Company or any other Group Company which may be in his possession or under his control including Confidential Information, lists of customers, correspondence, documents and other property. The Executive will not retain any copies of any materials or other information. The Company shall promptly return to the Executive and permit him to remove from the premises of the Company and any other Group Company, any property, personal records, files, etc. belonging to the Executive; and |
(ii) | resign on request by the Company or the GSK Board (if he has not already done so) from all offices held by him in the Company and any other Group Company (except for any he is entitled to retain under any separate agreement with any Group Company), failing which the Executive irrevocably authorises the Company or GSK plc to appoint an officer of the Company or GSK plc to execute all documents on his behalf and do all things necessary to effect such resignations; PROVIDED, however, that any such resignations pursuant to this Section 12.1(ii) shall be without prejudice to the Executives rights under this Agreement. |
12.2 | Any termination of the Employment shall be without prejudice to the Executives and the Companys continuing obligations under this Agreement. |
12.3 | Upon the termination of the Executives Employment for whatever reason, the Executive shall immediately repay all outstanding debts or loans due to the Company or any Group Company. |
12.4 | The terms of the US GSK Severance Pay Plan or any other severance policy as in force from time to time, shall not apply to the Executive. |
13 | Termination due to Death or Inability to Perform Essential Functions |
13.1 | In the event of the Executives death the Employment will terminate automatically on the date of his death, which shall be the Termination Date for the purposes of this Agreement. His duly qualified executor shall be entitled to receive the Accrued Obligations. |
13.2 | The Company may elect to terminate the Employment immediately without advance notice or payment in lieu of notice by serving written notice, if an independent physician mutually agreeable to the Company and Executive has certified in writing that the Executive is unable to perform the essential functions of his role with or without reasonable accommodation and will not, to a reasonable degree of medical certainty, be able to resume performance of the essential functions of his duties with or without reasonable accommodations for the foreseeable future. The Executive hereby acknowledges and agrees that this provision is job related and consistent with business necessity, and that it would be an undue hardship for the Company to maintain the Employment under such circumstances. The Employment will terminate on the Termination Date specified in the Termination Notice. |
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13.3 | In the event the Company delivers a Termination Notice under 13.2, the Executive shall immediately be relieved from all offices, appointments and responsibilities that he may then hold under the Employment and be relieved of any duty to work for or serve the Company or any Group Company. The Executive hereby acknowledges and agrees that this provision is job related and consistent with business necessity, and that it would be an undue hardship for the Company to maintain any of the Executives offices, appointments, or responsibilities under such circumstances. The Executive shall be entitled only to the Accrued Obligations, together with such rights as are provided for in the applicable benefits plan(s) in which the Executive participates. |
14 | Termination for Cause |
14.1 | The Company shall be entitled to terminate the Employment effective immediately without notice or payment in lieu of notice for Cause (as defined in this Section 14) by serving written notice (Notice of Termination for Cause). |
14.2 | Cause shall mean: |
14.2.1 | the Executive is convicted of any criminal offense which in the reasonable opinion of the Chairman of GSK plc or the GSK Board affects the Executives position as Chief Scientific Officer and President R&D (other than a motoring offence for which no custodial sentence is given to him); or |
14.2.2 | the Executive, in carrying out his duties under the Employment, is found to have engaged in significant misconduct (e.g., violation of regulation, law, or a significant GSK policy, such as the Code of Conduct) in the sole determination of the Company; or |
14.2.3 | the Executive shall become personally bankrupt or insolvent; or |
14.2.4 | the Executive shall be or become prohibited by law from being an employee, officer, or director; or |
14.2.5 | the Executive commits a material breach of any term of this Agreement. |
14.3 | Any delay or forbearance by the Company in exercising any right of termination shall not constitute a waiver of it. |
14.4 | In the event that the Employment is terminated for Cause, the Employment shall terminate upon the date on which the Board serves Notice of Termination for Cause and, except as otherwise required by applicable law, the Executive shall be paid only previously earned compensation , up to the date of termination including reimbursement for expenses previously incurred and, save for the provisions of this Section 14.4, the Executive will have no claim for further compensation including incentive compensation or damages or any other remedy against the Company or any Group Company. |
15 | Termination by Notice Requirements, Additional Detail |
15.1 | Subject to Sections 13 and 14 of this Agreement, the Employment under the terms of this Agreement shall terminate on the occurrence of either: |
15.1.1 | The election of the Company, upon not less than 12 months notice in writing by the Company to the Executive in accordance with Section 3.1(ii); or |
15.1.2 | The election of the Executive, upon not less than 12 months notice in writing by the Executive to the Company in accordance with Section 3.1(iii). |
Notwithstanding any other provision of this Agreement to the contrary, if, following delivery of the notice as required under Section 3.1(ii) or 3.1(iii), the Executive abandons his employment with the Company prior to expiration of the 12 month notice period, the Executive shall be entitled to receive only those payments set forth in Section 15.3 of this Agreement.
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15.2 | In the event the Employment terminates pursuant to Section 15.1.1, the Executive shall be entitled to receive the Accrued Obligations on or as soon as practicable following the Termination Date coinciding with the expiration of the 12 month notice period. Alternatively, the Company may, in its absolute discretion, lawfully terminate the Employment immediately upon delivery of the written notice set forth in Section 3.1(ii) and pay the Executive a cash payment equal to 100% of his annual base salary (as in effect immediately prior to the Termination Date), payable in a lump sum as soon as practicable on or following the Termination Date and any remuneration previously earned or deferred by the Executive (together with any accrued interest) and not yet paid by the Company. |
15.3 | In the event the Employment terminates pursuant to Section 15.1.2, or if the Executive abandons the Employment following delivery of the notice set forth in Section 3.1(ii) or 3.1(iii) but prior to expiration of the 12 month notice period, except as otherwise required by applicable law, the Executive shall be entitled only to payment of all previously earned or deferred compensation then due and owing under this Agreement, up to the Termination Date, any unpaid bonus pertaining to the previous financial year, and reimbursement for expenses previously incurred and, save for the provisions of this Section 15.3, the Executive will have no claim for damages or any other remedy against the Company or any Group Company. In the event the Executive abandons the Employment following delivery of the notice set forth in Section 3.1(ii) or 3.1(iii) but prior to the expiration of the 12 month notice period, the Company may terminate the Employment effectively immediately and bring forward the Termination Date and, in this event, the Company agrees not to pursue any claim for damages arising out of the Executives abandonment of the remaining notice period, save for its rights to enforce any other Section or Appendix of this Agreement including, but not limited to, Sections 10, 11, 12, 16, and 27 and Appendix 3 and 4, which are unaffected. The amounts described in this Section 15.3 shall be paid as soon as practicable on or following the Termination Date. |
16 | Restrictions during and after Termination of Employment |
16.1 | In this Section: |
Restricted Business means any existing or prospective lines of business, any division, any business unit, or any product or service of the Group with which the Executive worked, or which the Executive supported, during the last 12 months of the Employment.
Restricted Period means any period during which the Executive is employed by the Company and the period of 12 months commencing on the Termination Date. In the event the Employment is terminated by Notice under paragraphs 15.1 and 3.1(ii) or 3.1(iii), the 12 month period is reduced by any time period between the delivery of Notice and the Termination Date itself.
16.2 | The Executive will acquire Confidential Information and personal knowledge of and influence over customers, clients and employees of the Company, GSK plc and its Group Companies during the course of the Employment. The improper disclosure or use of such information or knowledge by the Executive would cause the Group irreparable harm. To protect these interests, and prevent such harm, the Executive agrees with the Company and GSK plc that the Executive will be bound by the following covenants: |
16.2.1 | During the Employment, the Executive will not be employed by, affiliated with (except as the holder, directly or indirectly, of less than 5 per cent of the shares) work for, or render services similar to those which the Executive is involved during the Employment on behalf of, any firm or business organization that competes or is planning to compete with the Restricted Business, or render services to, or assist in any way, any competitor of the Group by working on or having any involvement with products or services that are similar to the Restricted Business. |
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16.2.2 | During the Employment, the Executive will not canvass, solicit or induce any customer, client or vendor of the Company or any Group Company to become a customer, client or vendor of any other person, firm, or corporation other than the Group with respect to the Restricted Business. After the Executives Employment with the Company, the Executive will not use Confidential Information to canvass, solicit or induce any customer, client or vendor of the Company or any Group Company to become a customer, client or vendor of any other person, firm, or corporation other than the Group with respect to the Restricted Business. |
16.2.3 | During the Restricted Period, the Executive will not interfere or endeavor to interfere with the continuance of the provision of goods or services to the Company, or any Group Company, by any supplier which was a supplier of goods or services to the Company, or any Group Company during the last 12 months of the Employment. |
16.2.4 | During the Restricted Period, the Executive will not solicit or attempt to solicit any officer, director, senior employee or senior consultant of the Group to leave the Group to join or perform services on behalf of any other person or entity. |
16.3 | Each of the obligations imposed on the Executive by this Section 16 extend to the Executive acting not only on his own account but also on behalf of any other firm, company or other person and shall apply whether the Executive acts directly or indirectly. |
16.4 | Following the Termination Date, the Executive will not represent himself as being in any way connected with the businesses of the Company, GSK plc or of any other Group Company (except to the extent agreed in writing by such a company). |
16.5 | Any benefit given or deemed to be given by the Executive to any Group Company under the terms of this Section 16 is received and held in trust by the Company for the relevant Group Company. The Executive will enter into appropriate restrictive covenants directly with other Group Companies if asked to do so by the Company or GSK plc. |
17 | Consideration and Reasonableness of Restrictions |
17.1 | The Executive acknowledges that the restrictions contained in Section 16 are supported by consideration in the form of compensation received by the Executive under this Agreement. |
17.2 | Each of the obligations on the Executive contained in Section 16 constitutes a separate and independent restriction on the Executive notwithstanding that they may be contained in the same Section, paragraph or sentence. |
17.3 | Should the restrictions contained in Section 16 be found to be void but would be valid if some part thereof were deleted or the period or radius of application reduced, then such restriction shall apply with such modification as may be necessary to make it valid and effective. In particular, the Executive agrees that the restrictions are reasonable and necessary for the protection of the Company and the Group Companies. |
17.4 | If the Executive shall, during the Restricted Period, receive from any person, firm or company, an offer to provide services in any capacity whatsoever, or to enter into employment where acceptance of such offer, or the taking of such employment, might render the Executive in breach of the provisions of this Agreement, the Executive shall promptly advise the offeror of the existence of the restrictions set forth in Section 16 of this Agreement. |
17.5 | The Executive acknowledges that the Company may have no adequate remedy at law and would be irreparably harmed if the Executive breaches or threatens to breach the provisions of Section 16 above and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of Section 16 above, and to specific performance of the terms of each such Section in addition to any other legal or equitable remedy it may have. The Executive further agrees that he shall not, in any equity proceedings involving the Executive relating to the enforcement of Section 16 above raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have. |
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18 | Severability |
In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
19 | Successors and Assigns |
19.1 | This Agreement shall be binding upon and inure to the benefit of the Company or any corporation or other entity to which the Company may transfer all or substantially all of its assets and business and to which the Company may assign this Agreement, in which case Company, as used in this Agreement, shall mean such corporation or other entity. The foregoing shall not relieve the Company of any of its obligations under Section 15 of this Agreement. The rights of the Executive shall inure to the benefit of his heirs, executors, administrators and other personal representatives. |
19.2 | The Executive may not assign this Agreement or any part of it, or any rights thereunder or delegate any duties to be performed by him under it to anyone else. |
20 | Survivorship |
To the extent contemplated by this Agreement, respective rights and obligations of the parties set out in this Agreement shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
21 | Notices |
Any notice (including any notice of termination of the Employment) required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or sent by courier, duly addressed to the party concerned at such address as the party may notify to the other. Any notice delivered personally under this Section 21 shall be deemed given on the date delivered and any notice sent by courier shall be deemed given on the date delivery is recorded by such courier.
22 | Entire Agreement |
22.1 | This Agreement supersedes any previous written or oral agreement between the parties in relation to the matters dealt with in it. It contains the whole agreement between the parties relating to the Employment at the date the agreement was entered into (except for those terms implied by law which cannot be excluded by the agreement of the parties). The Executive acknowledges that he has not been induced to enter into this Agreement by any representation, warranty or undertaking not expressly incorporated into it. |
22.2 | Neither partys rights or powers under this Agreement will be affected if: |
22.2.1 | one party delays in enforcing any provision of this Agreement; or |
22.2.2 | one party grants time to the other party. |
23 | Amendment or Modification; Waiver |
No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing, signed by the Executive and by a duly authorised officer of the Company who shall supply the Executive with evidence of such authority.
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24 | Withholding |
Anything to the contrary notwithstanding, all payments required to be made by the Company under this Agreement to the Executive, or to his estate or beneficiaries, shall be subject to withholding of such amounts relating to taxes as the Company may be required to withhold pursuant to any applicable statute, law or regulation.
25 | Indemnification and Insurance |
25.1 | The Company agrees that if the Executive is made a party or is threatened to be made a party to any action, suit, proceeding or governmental or other investigation by reason of the fact of the Employment or that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another Group Company or entity except for any action instigated by the Company or the Executive (a Proceeding), he shall be indemnified by the Company to the fullest extent permitted by applicable law against all expenses, liabilities and losses reasonably incurred or suffered by the Executive in connection with such a Proceeding (including any tax payable by the Executive as a result of payments made by the Company pursuant to this indemnity), including, without limitation, payment of expenses incurred in defending a Proceeding prior to the final disposition of such Proceeding; PROVIDED, however, that written notice of such Proceeding is given promptly to the Company by the Executive and the Company is permitted (where appropriate) to participate in and assume the defence of such Proceeding. The provisions of this Section 25 shall survive the termination of the Employment and shall be in addition to any other rights to indemnification to which the Executive may from time to time be entitled, whether under any applicable insurance policies or otherwise. |
25.2 | The Company will provide the Executive with Legal Expenses Insurance and Directors and Officers Liability Insurance under the Companys policy current from time to time in force subject to such cover being available at reasonable commercial rates. |
26 | Collective Agreements Disciplinary Rules and Procedures |
There are no collective agreements which directly affect the terms and conditions set out in this Agreement.
The Companys harassment and bullying policies, disciplinary rules and procedures and grievance procedures, as in force from time to time, shall apply to the Executive. The Company reserves the right to leave out any or all of the stages of those rules and procedures where it considers it appropriate to do so.
27 | Executive Financial Recoupment Policy |
The Companys standard policy on financial recoupment shall apply to the Executive. The current policy titled Executive Financial Recoupment Policy is attached as Appendix 4 and incorporated by reference herein.
28 | Data Protection |
The Executive consents to the Company or any Group Company holding and processing both electronically and manually the data it collects which relates to the Executive for the purpose of the administration and management of its employees and its business and for compliance with applicable procedures, laws and regulations. The Executive also consents to the transfer of such personal information to other offices the Company may have or to a Group Company or to other third parties whether or not outside the United States for administration purposes and other purposes in connection with the Executives Employment where it is necessary or desirable for the Company to do so.
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29 | Section 409A |
29.1 | It is the intention of the parties to this Agreement that no payment or entitlement pursuant to this Agreement will give rise to any adverse tax consequences to the Executive under Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including that issued after the date hereof. The Agreement shall be interpreted to that end and, consistent with that objective and notwithstanding any provision herein to the contrary, the Company may take any action it deems necessary or desirable to amend any provision herein to avoid the application of or excise tax under Section 409A, after giving the Executive reasonable notice and opportunity to comment. Further, no effect shall be given to any provision herein in a manner that reasonably could be expected to give rise to adverse tax consequences under Section 409A of the Code. |
29.2 | Any annual cash bonus that the Executive shall become entitled to receive hereunder for any calendar year shall be paid by the Company at such time and in such manner that annual bonuses are paid to other senior executives of the Company, but not later than the March 15 immediately following the end of the applicable calendar year; provided it shall not be a breach of this Agreement if payment is made later in the year to the extent the bonus is not determinable by March 15 and payment is made by payroll no later than December 31 of such year. |
29.3 | All payments to be made upon a termination of Employment under the Agreement will only be made upon a separation from service under Section 409A of the Code. In no event may the Executive, directly or indirectly, designate the calendar year of payment. To the maximum extent permitted under Section 409A of the Code and its corresponding regulations, the amounts payable under the Agreement to be made upon termination of Employment are intended to meet the requirements of the short-term deferral exemption under Section 409A of the Code and the separation pay exception under Treas. Reg. §1.409A-1(b)(9)(iii). For purposes of the application of Treas. Reg. §1.409A-1(b)(4) (or any successor provision), each payment in a series of payments to the Executive will be deemed a separate payment. |
29.4 | Notwithstanding anything in this Agreement to the contrary, in the event that the Executive is deemed to be a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code, any payment under this Agreement that constitutes deferred compensation subject to 409A of the Code and would otherwise commence to be paid as a result of the Executives separation from service (as defined in Section 409A of the Code and any Treasury Regulations promulgated thereunder), will not be made to the Executive before the lapse of six months after the date such payment would have been made but for this Section 29.4. Any payments that are postponed in accordance with this Section 29.4 shall be paid in a lump sum payment within 10 days after the end of the six month period. If the Executive dies during the postponement period prior to payment of the postponed amount, the amounts withheld on account of Section 409A of the Code shall be paid to the personal representative of the Executives estate within 60 days after the date of Executives death. |
30 | Governing Law |
This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of the Commonwealth of Pennsylvania. Each of the parties submits to the exclusive jurisdiction of the Commonwealth of Pennsylvanias courts as regards any claim or matter under this Agreement.
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31 | Titles |
Titles to the Sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any Section.
In witness whereof the parties hereto have executed this Agreement as a deed on the day and year first above written
GLAXOSMITHKLINE LLC |
||
By: /s/ Dan Troy |
||
Name: Daniel B Troy |
||
Title: General Counsel and SVP | ||
Date: December 8, 2017 | ||
HAL V. BARRON | ||
/s/ Hal V. Barron |
||
Date: 16 December 2017 | ||
Signed Sealed and Delivered by the said HAL V. BARRON in the presence of: |
}/s/ Carol Cunningham | |
Name: Carol Cunningham
Address |
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Exhibit 4.5
Dated 18 September 2018
GLAXOSMITHKLINE SERVICES UNLIMITED
and
IAIN MACKAY
SERVICE AGREEMENT
This Agreement is made on 18 September, 2018 between:
(1) | GLAXOSMITHKLINE SERVICES UNLIMITED whose registered office is at GSK House, Brentford, Middlesex, TW8 9GS (the Company); and |
(2) | IAIN MACKAY (the Executive). |
1 | Interpretation |
1.1 | In this Agreement (and any schedules to it) |
Accrued Obligations means:
1.1.1 | the Executives base salary under this Agreement through to the end of the month in which the Termination Date occurs at the rate in effect on the Termination Date and the reimbursement (in accordance with Group policy) of any expenses incurred by the Executive prior to the Termination Date; |
1.1.2 | any unpaid bonus pertaining to the previous financial year and the product of any target bonus for the financial year in which the Termination Date occurs and a fraction, the numerator of which is the number of days in the Companys current financial year up to the Termination Date and the denominator of which is 365; |
1.1.3 | any remuneration previously deferred by the Executive (together with any accrued interest) and not yet paid by the Company including payment for any accrued holiday not taken by the Executive; and |
1.1.4 | any other benefits to which the Executive is entitled, as determined in accordance with the applicable plans and policies of the Company; |
Board means the board of directors of the Company from time to time or any person or committee nominated by that board as its representative for the purposes of this Agreement;
Employment means the employment governed by this Agreement;
Group means the Company and any other company controlling, controlled by or under the direct or indirect common control of the Company, including, without limitation, GSK plc and any of its subsidiaries from time to time;
Group Company means a member of the Group and Group Companies will be interpreted accordingly;
GSK Board means the board of directors of GSK plc from time to time or any person or committee nominated by the GSK Board as its representative for the purposes of this Agreement;
GSK plc means GlaxoSmithKline plc;
Termination Date means the date on which the Employment terminates, whether on the expiration of notice to terminate the Employment pursuant to Section 3 or otherwise pursuant to this Agreement.
1.2 | References to any statutory provisions include any modifications or re-enactments of those provisions. |
1.3 | In this Agreement, terms used in the context of the GlaxoSmithKline 2009 Performance Share Plan shall have the meaning ascribed to them in such plan. |
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2 | Employment |
The Company confirms the employment of the Executive, and the Executive confirms his employment with the Company, on the terms and conditions set out in this Agreement.
3 | Termination by Notice |
3.1 | The Employment under the terms of this Agreement shall be deemed to have commenced on 14 January, 2019 and the Employment shall continue until: |
(i) | the Employment is otherwise terminated in accordance with this Agreement; or |
(ii) | not less than 12 calendar months notice in writing is given by the Company to the Executive; or |
(iii) | not less than 12 calendar months notice in writing is given by the Executive to the Company. |
3.2 | The Company may, in its absolute discretion, lawfully terminate the employment of the Executive at any time by paying to the Executive a sum equal to his basic salary (excluding any other benefits) for the period this Agreement would otherwise continue. For this purpose, basic salary shall be the basic salary in effect at the date of termination of the employment. |
4 | Duties and Responsibilities |
4.1 | The Executive shall be appointed as Chief Financial Officer and shall have such powers and duties as are from time to time given to him by the Chief Executive Officer consistent with the Employment and this Agreement. In addition, and for no additional consideration, the Executive shall serve as a director on the GSK Board and, if requested by the GSK Board, shall serve as a director on the Board or any other board of directors of any Group Company. The Executive agrees that for the purposes of the Working Time Regulations 1998 he is a managing executive. |
4.2 | During the Employment, the Executive shall devote his full business time and energies to the business and affairs of the Company and GSK plc, consistent with any other duties and responsibilities he may have to any Group Companies. The Executives time shall be allocated among the Group Companies in accordance with the Executives reasonable judgment and dependent upon the level of his responsibilities to any other Group Company, subject to the overall supervision and direction of the Chief Executive Officer. |
4.3 | The Executive shall not, without the prior written consent of the GSK Board, accept directorships, trusteeships and other appointments (other than of Group Companies) or carry on or be engaged, concerned or interested either directly or indirectly in any other business or activity. |
4.4 | The location of the Executives activities shall be at GSK House, but subject to the overall supervision and direction of the Chief Executive Officer, and to perform properly his duties, he may be required to undertake reasonable travel elsewhere in the world. The Executive is required to reside at a location convenient to the Companys offices at GSK House (or such other location as the GSK Board may determine) during the Employment. |
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5 | Salary, etc. |
5.1 | In consideration of the services to be rendered by the Executive under this Agreement the Executive shall be paid a salary at the rate of £850,000 per annum payable in accordance with the Companys pay practices for its executives from time to time in force (but not less frequently than calendar monthly). The salary will be credited to the Executives bank account notified to the Company for the purpose. Salary shall be reviewed annually in accordance with the Companys normal administrative practices for its executives and may be increased (but not reduced) by the Company by such amount (if any) as it shall think fit. |
5.2 | The Executive shall be entitled subject to Section 6.4 to participate |
(i) | in all such cash bonus plans and programmes as are made available from time to time to board level executives of the Company in accordance with the Companys policy (or GSK plcs policy, as applicable); and |
(ii) | in respect of the salary provided by Section 5.1, in such incentive programmes as are made available from time to time to board level executives of the Company and/or GSK plc generally, |
in each case subject to the terms and conditions of such bonus plans and programmes from time to time in force. Any grants of share options or awards of performance shares under such plans and programmes shall be granted subject to performance conditions as determined by the GSK Board. The Executives future participation in certain of these plans and programmes may be affected if he does not satisfy the Share Ownership Requirements (as amended from time to time). It is agreed that in the event of the Executive retiring from the Company, the Executive will retain the relevant number of shares (as set out in the Share Ownership Requirements) until one year after the date on which the Executive retires from the Company in accordance with the terms of any Company policy (as may be in force from time to time).
5.3 | The Executives salary under Section 5.1 of this Agreement shall be inclusive of any fees or other remuneration to which the Executive may be entitled or receives as a Director, alternate Director, specialist adviser, consultant or by virtue of any other office or appointment in any Group Company. The Executive shall account to the Company for all such fees or other remuneration by paying over or procuring to be paid over the same to the Company. |
5.4 | GSK shall not be liable for any costs or expenses, including any costs or expenses pertaining to travel undertaken by the Executive, incurred as a result of any activity or participation in any role or capacity external to and unrelated to GSK or any Group Company. It is agreed that the Executive will promptly reimburse GSK against any such costs that may be incurred by GSK. Further, the Executive authorises the Company at any time to deduct from his salary, or any other monies payable to him by the Company, all sums which he owes the Company. If this is insufficient, the Company will require repayment of the balance. |
6 | Expenses and other Benefits |
6.1 | The Company shall promptly reimburse to the Executive all reasonable travel and other out of pocket expenses properly incurred in the performance of his duties under the Employment. The Executive will submit claims for expenses reimbursement to the Company regularly with appropriate supporting documentation. |
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6.2 | The Executive is eligible to participate in the GlaxoSmithKline Cash Allowance and Car Ownership Scheme subject to the rules of the scheme as amended from time to time. Full details of the Scheme are available on the TotalReward section on myGSK. |
6.3 | The Company at its expense shall provide the Executive with other benefits provided to board level executives of the Company, and the Executive shall be entitled to participate in all benefit plans, practices and policies as are made available by the Company from time to time to its board level executives subject to their terms and conditions from time to time in force. Details of the relevant plans and programmes are set out in the TotalReward section on my GSK. |
6.4 | The Company (and GSK plc, as applicable) reserves the absolute right and discretion to amend, modify or terminate all such benefits, plans and programmes as are referred to in Sections 5.2, 6.2, 6.3 and 8 at any time and for any reason. |
7 | Holidays |
In addition to all statutory and Bank Holidays, the Executive shall be entitled to 28 days holiday in each year at full pay, in accordance with Company policy from time to time in force, which shall accrue rateably during the calendar year. Up to four days of such holiday shall be taken at times to be designated by the Company and the remainder shall be taken at such times as the business of the Company may permit. On termination of the Employment the Executive will be entitled to be paid for any accrued holiday not taken and will reimburse the Company for any holiday taken but not accrued.
Holiday which is not taken in the year in which it is accrued may be carried forward, in accordance with the Companys rules on the banking of holidays outlined in its Holiday Policy, as amended from time to time. Any holiday which is not banked in accordance with these rules will be lost.
8 | Pension and Life Insurance |
The Executive is entitled to be a member of the GSK Pension Plan Senior Executive section (the Pension Plan), subject to the conditions of the trust deed and rules governing the Pension Plan from time to time. If the Executive has reached or reaches any limit set by the Government relating to pension allowances, the Executive can opt out of the Pension Plan and the Company may pay him a cash supplement in lieu of any employer pension contributions. The Pension Plan is subject to amendment or withdrawal at the Companys discretion. Any contributions payable by the Executive to the pension plan will be deducted from salary via salary sacrifice. The Company shall provide the Executive with the benefit of life cover which would provide a lump sum equivalent to four times the level of his base salary in the event of death in service.
9 | Sickness |
9.1 | The Executive shall comply with the Companys sick pay rules from time to time in force. |
9.2 | Without prejudice to the Companys right to terminate the Employment in accordance with Sections 3, 13, 14 and 15, if the Executive is absent from the Employment as a result of sickness or injury he shall be paid his full salary for the first 26 weeks absence (whether or not consecutive) and half of his salary for the second 26 weeks (whether or not consecutive) in aggregate in any period of 24 calendar months. The amount of any benefit which the Executive is entitled to claim during that period of absence under any Social Security or National Insurance Scheme and/or any Scheme of which the Executive |
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is a non-contributory member by virtue of the Employment, will be deducted from any salary paid to him. The Company will pay the Executive statutory sick pay under the Social Security Contributions and Benefits Act 1992 (as amended) and any salary paid to him will be deemed to include statutory sick pay. The Company reserves the right to offset the amount of these benefits against salary paid to the Executive even if the Executive has not recovered them. |
9.3 | The Company may request the Executive to have a medical examination every year (or at such shorter intervals as they may agree between them), by a doctor approved by the Company. The costs of such examinations shall be borne by the Company. |
10 | Inventions and Copyright |
The Companys standard policy on inventions and copyright from time to time in force shall apply to the Executive.
11 | Confidentiality; Company Securities |
11.1 | Without prejudice to any other duty owed to the Company or to any Group Company, the Executive shall not, except in the proper performance of his duties or as authorised by the Board, during or after the Employment, use or disclose to any person any Confidential Information obtained by him during the Employment. |
11.2 | In the course of the Employment, the Executive is likely to obtain trade secrets and confidential information belonging to or relating to Group Companies and other persons. He will treat such information as if it falls within the terms of Section 11.1 and Section 11.1 will apply with any necessary amendments to such information. If requested to do so by the Company, the Executive will enter into an agreement with other Group Companies and any other persons in the same terms as Section 11.1 with any amendments necessary to give effect to this provision. |
11.3 | For the purposes of this Agreement, the term Confidential Information shall include, but not be limited to confidential commercial, financial and strategic data pertaining to the Group and any other confidential information relating to the business or affairs of the Group including, without limitation, any invention, trade secret, manufacturing process or patent information. The term Confidential Information shall not include any information: |
11.3.1 | which is or becomes generally available to the public; or |
11.3.2 | which is acquired by the Executive apart from his association with the Group |
other than, in each case, as a result of disclosure by the Executive or by any person to whom he has supplied information or by any person in breach of a duty of confidentiality.
In addition, the term Confidential Information shall not include any information which the Executive is required to disclose by applicable law or regulation or by order of a court or governmental body of competent jurisdiction. This does not affect any rights the Executive has under Part IVA of the Employment Rights Act 1996.
11.4 | During the Employment, the Executive shall be bound, in respect of transactions in securities issued by any Group Company, by the Companys and GSK plcs policies from time to time in effect on employee securities dealing. In particular, the Executive shall advise the Chief Executive Officer, Chairman or Company Secretary of GSK plc before he or any member of his immediate family seeks to trade in such securities and shall be bound by any directions given by the said Chief Executive Officer, Chairman or Company Secretary. |
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12 | General Termination Provisions |
12.1 | On the termination of the Employment for whatever reason, or at any other time when requested to do so by the Company, the Executive, upon receipt of written request from the Company, shall promptly |
(i) | deliver up to the Company any property belonging to the Company or any other Group Company which may be in his possession or under his control including Confidential Information, lists of customers, correspondence, documents and other property. The Executive will not retain any copies of any materials or other information. The Company shall promptly return to the Executive and permit him to remove from the premises of the Company and any other Group Company, any property, personal records, files, etc. belonging to the Executive; and |
(ii) | resign on request by the Company or the GSK Board (if he has not already done so) from all offices held by him in the Company and any other Group Company (except for any he is entitled to retain under any separate agreement with any Group Company), failing which the Executive irrevocably authorises the Company or GSK plc to appoint an officer of the Company or GSK plc to execute all documents on his behalf and do all things necessary to effect such resignations; PROVIDED, however, that any such resignations pursuant to this Section 12.1(ii) shall be without prejudice to the Executives rights under this Agreement. |
12.2 | Any termination of the Employment shall be without prejudice to the Executives and the Companys continuing obligations under this Agreement. |
12.3 | Upon the termination of the Executives employment for whatever reason, the Executive shall immediately repay all outstanding debts or loans due to the Company or any Group Company and the Company is hereby authorised to deduct from any payment of wages any sum in repayment of all or any part of such debts or loans. |
12.4 | The terms of the GSK Redundancy Policy as in force from time to time, shall not apply to the Executive who shall only be entitled to statutory redundancy pay in addition to any other entitlement under this Agreement if his Employment is terminated by reason of redundancy. |
13 | Termination due to Death or Disability |
13.1 | In the event of the Executives death, the Employment will terminate automatically on the date of his death, which shall be the Termination Date for the purposes of this Agreement. His duly qualified executor shall be entitled to receive the Accrued Obligations. |
13.2 | The Company may elect to terminate the Employment immediately without notice or payment in lieu of notice by serving written notice (Termination Notice for Disability), if an independent physician selected by the Company has certified in writing that, by reason of a physical or mental illness or other condition of the Executive, the Executive is unlikely to be able to resume performance of duties under the Employment for the foreseeable future. The Employment will terminate on the Termination Date specified in the Termination Notice for Disability. Provided that the Company shall not be entitled to terminate the employment by reason of physical or mental illness or other condition if this would lead to the Executive becoming dis-entitled to benefits under the Companys or GSK plcs permanent health insurance plan. |
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13.3 | In the event the Company delivers a Termination Notice for Disability, the Executive shall immediately be relieved from all offices, appointments and responsibilities that he may then hold under the Employment and be relieved of any duty to work for or serve the Company or any Group Company. The Executive shall be entitled only to the Accrued Obligations, together with such rights as are provided for in the applicable benefits plan(s) in which the Executive participates. |
14 | Termination for Cause |
14.1 | The Company shall be entitled to terminate the Employment immediately without notice or payment in lieu of notice for Cause (as defined in this Section 14) by serving written notice (Notice of Termination for Cause). |
14.2 | Cause shall mean: |
14.2.1 | the Executive is convicted of any criminal offence which in the reasonable opinion of the Chairman of GSK plc or the GSK Board affects the Executives position as Chief Financial Officer (other than a motoring offence for which no custodial sentence is given to him); or |
14.2.2 | the Executive, in carrying out his duties under the Employment, is found guilty of gross neglect, gross misconduct, or significant misconduct which would include but not be limited to violation of a relevant and material regulation or law, or of a significant GSK policy or the GSK Code of Conduct; or |
14.2.3 | the Executive shall become bankrupt or have an order under Section 252 of the Insolvency Act 1986 made in respect of him or if an interim receiver of his property is appointed under Section 286 of the Act; or |
14.2.4 | the Executive shall be or become prohibited by law from being a director; or |
14.2.5 | the Executive commits a serious breach of any material term of this Agreement. |
14.3 | Any delay or forbearance by the Company in exercising any right of termination shall not constitute a waiver of it. |
14.4 | In the event that the Employment is terminated for Cause, the Employment shall terminate upon the date on which the Board serves Notice of Termination for Cause and the Executive shall be entitled only to payment of all previously accrued and unpaid salary then due and owing under this Agreement, up to the date of termination including reimbursement for expenses previously incurred and, save for the provisions of this Section 14.4, the Executive will have no claim for damages or any other remedy against the Company or any Group Company. |
15 | Termination by Notice |
15.1 | If either notice to terminate the Employment is given by the Executive according to Section 3.1(iii) above, or if the Executive resigns without giving due notice and the Company does not accept his resignation or the Company has given notice in accordance with Section 3.1(ii) above then the Company may require the Executive to comply with any and all of the provisions in this Section 15.1 for a maximum period of 12 months (the Garden Leave Period). |
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15.1.1 | The Company may require that the Executive does not: |
(i) | enter or attend the premises of the Company, or any Group Company; or |
(ii) | contact or have any communication with any customer or client of the Company, or any Group Company in relation to the business of the Company, or any Group Company; or |
(iii) | contact or have any communication with any employee, officer, director, agent or consultant of the Company, or any Group Company in relation to the business of the Company, or any Group Company; or |
(iv) | become employed or engaged by any company, partnership or other entity whether as an employee, director, partner or consultant or carry on any business either on his own account or for any other person whether directly or indirectly (except as the holder, directly or indirectly, of less than 5 per cent of the shares or save for those activities permitted in accordance with Section 4.3); |
(v) | remain or become involved in any aspect of the business of the Company, or any Group Company except as required by such companies. |
15.1.2 | The Company may require the Executive: |
(i) | to comply with the provisions of Section 12; and |
(ii) | to immediately resign from any directorship which he holds in the Company, and any Group Company or any other company where such directorship is held as a consequence or requirement of the Employment, unless he is required to perform duties to which any such directorship relates in which case he may retain such directorships while those duties are ongoing. The Executive hereby irrevocably appoints the Company to appoint an officer of GSK plc as his attorney to execute any instrument and do anything in his name and on his behalf to effect his resignation if he fails to do so in accordance with this Section 15.1.2(ii). |
15.1.3 | During any Garden Leave Period the Company may appoint another individual to carry out the duties of the Executive and the Executive shall: |
(i) | continue to be bound by the provisions of this Agreement and conduct himself with good faith towards the Company and not do anything that is harmful to the Company or any Group Company; |
(ii) | remain available to perform any reasonable duty requested by the Company or any Group Company and to co-operate generally with the Company or any Group Company to ensure a smooth handover of his duties (provided that if the Executive should fail to make himself available for such work having been requested by the Company or any Group Company to attend he shall, notwithstanding any other provision of this Agreement forfeit his right to salary and contractual benefits in respect of such period of non-availability). |
15.1.4 | During the Garden Leave Period, the Executive will be entitled to receive his salary and benefits in accordance with the terms of this Agreement including any bonus payable in accordance with Section 5.2 but excluding any share entitlements under Section 5.2 above. |
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15.1.5 | Where the Company gives notice to terminate the Employment in accordance with Section 3.2 (except where termination is effected pursuant to the terms of Section 14) above then notwithstanding the continuation of the Employment during any period after notice has been given, including, any Garden Leave Period, within 30 days of the date such notice was given to the Executive, the Company shall pay to the Executive as a lump sum his full salary in respect of the entire period of notice (subject to deduction of tax and any other deductions required to be made) (the Lump Sum). For this purpose, full salary shall be the basic salary in effect at the date such notice is given to the Executive. For the avoidance of doubt, the payment by the Company to the Executive of the Lump Sum will extinguish any and all liability imposed on the Company under this Agreement to make any further payment to the Executive in respect of salary under this Agreement during any period after notice has been given, including, any Garden Leave Period. |
15.1.6 | After the payment of a Lump Sum pursuant to Section 15.1.5, at the end of or at any time during the Garden Leave Period the Company may at its sole and absolute discretion terminate the Employment by further written notice to the Executive without any further payment. In any event at the end of the 12 month Garden Leave Period the Employment will also terminate automatically and the Company shall be under no obligation to make any further payment to the Executive, save for in respect of any Accrued Obligations that may exist. |
15.1.7 | However, in the event that the Executive obtains an offer of future alternative employment with another employer, or otherwise wishes to take up alternative business activities, and he can satisfy the GSK Board that such employment/activities are not in breach of Section 16, the Company shall waive the balance of any unexpired notice period or the Garden Leave Period so as to enable the Executive to take up such alternative employment/activities; whereupon, subject to Section 12.3 above, the Companys obligations to the Executive under this Section 15.1 shall cease with effect from the agreed revised Termination Date. |
15.1.8 | The Company and the Executive agree that if the Company shall fully perform, when due, all its obligations under this Section 15, such performance shall be in full and final settlement of all and any claims or rights of action which the Executive might have against the Company, or any Group Company arising out of this Agreement or its termination or otherwise howsoever relating to the Employment. |
16 | Restrictions during and after Termination of Employment |
16.1 | In this Section: |
Restricted Business means the businesses of the Company or any Group Company at the Termination Date (or if earlier the start of any Garden Leave Period ending on the Termination Date) with which the Executive was involved to a material extent during the last 12 months of the Employment; and,
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Restricted Period means any period during which the Executive is employed by the Company (including for the avoidance of doubt, any Garden Leave Period) and the period of 12 months, less any Garden Leave Period imposed by the Company under Section 15 and less any period of notice worked by the Executive during the notice period set out in Section 3, commencing on the Termination Date.
16.2 | The Executive is likely to obtain trade secrets and Confidential Information and personal knowledge of and influence over customers, clients and employees of the Company, GSK plc and its Group Companies during the course of the Employment. To protect these interests, the Executive agrees with the Company and GSK plc that the Executive will be bound by the following covenants: |
16.2.1 | During the Restricted Period he will not be employed or engaged in (except as the holder, directly or indirectly, of less than 5 per cent of the shares) any business which is or is about to be in competition with the Restricted Business. |
16.2.2 | During the Restricted Period the Executive will not canvass or solicit in competition with the Company, or any Group Company, the custom of any person who was during the last 12 months of the Employment a customer, or client of, or in the habit of dealing with, the Company, or (as the case may be) any Group Company and in respect of which the Executive had access to Confidential Information or with whose custom or business the Executive is or was personally concerned, during that 12 month period with a view to providing goods or services to that person in competition with any Restricted Business. |
16.2.3 | During the Restricted Period the Executive will not, in the course of any business concern which is in competition with the Restricted Business provide goods or services to or otherwise have any dealings with any person who was during the last 12 months of the Employment a customer, or client of, or in the habit of dealing with the Company, or any Group Company, and in respect of which the Executive had access to Confidential Information or with whose custom or business the Executive is or was personally concerned during that 12 month period. |
16.2.4 | During the Restricted Period the Executive will not, interfere or endeavour to interfere with the continuance of the provision of goods or services to the Company, or any Group Company, by any supplier which was a supplier of goods or services to the Company, or any Group Company during the last 12 months of the Employment and with whom the Executive dealt to a material extent during that period |
16.2.5 | During the Restricted Period he will not entice or try to entice away from the Company or any Group Company any person who is still employed by the Company or a Group Company during the Restricted Period and is a senior employee, director or full time senior consultant of such a company and with whom he worked closely in the last six months of the Employment. |
16.3 | Each of the obligations imposed on the Executive by this Section 16 extend to him acting not only on his own account but also on behalf of any other firm, company or other person and shall apply whether he acts directly or indirectly. |
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16.4 | Following the Termination Date, the Executive will not represent himself as being in any way connected with the businesses of the Company, GSK plc or of any other Group Company (except to the extent agreed in writing by such a company). |
16.5 | Any benefit given or deemed to be given by the Executive to any Group Company under the terms of Section 16 is received and held on trust by the Company for the relevant Group Company. The Executive will enter into appropriate restrictive covenants directly with other Group Companies if asked to do so by the Company or GSK plc. |
17 | Reasonableness of Restrictions |
17.1 | Each of the obligations on the Executive contained in Section 16 constitutes a separate and independent restriction on the Executive notwithstanding that they may be contained in the same Section, paragraph or sentence. |
17.2 | Should the restrictions contained in Section 16 be found to be void but would be valid if some part thereof were deleted or the period or radius of application reduced, then such restriction shall apply with such modification as may be necessary to make it valid and effective. In particular, the Executive agrees that the restrictions are reasonable and necessary for the protection of the Company and the Group Companies. |
17.3 | If the Executive shall, during the Restricted Period, receive from any person, firm or company, an offer to provide services in any capacity whatsoever, or to enter into employment where acceptance of such offer, or the taking of such employment, might render him in breach of the provisions of this Agreement, he shall promptly advise the offeror of the existence of the restrictions set forth in Section 16 of this Agreement. |
17.4 | The Executive acknowledges that the Company may have no adequate remedy at law and would be irreparably harmed if the Executive breaches or threatens to breach the provisions of Section 16 above and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any breach or threatened breach of Section 16 above, and to specific performance of the terms of each such Section in addition to any other legal or equitable remedy it may have. The Executive further agrees that he shall not, in any equity proceedings involving him relating to the enforcement of Section 16 above raise the defence that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have. |
18 | Severability |
In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions or portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.
19 | Successors and Assigns |
19.1 | This Agreement shall be binding upon and inure to the benefit of the Company or any corporation or other entity to which the Company may transfer all or substantially all of its assets and business and to which the Company may assign this Agreement, in which case Company, as used in this Agreement, shall mean such corporation or other entity. The foregoing shall not relieve the Company of any of its obligations under Section 15 of this Agreement. The rights of the Executive shall inure to the benefit of his heirs, executors, administrators and other personal representatives. |
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19.2 | The Executive may not assign this Agreement or any part of it, or any rights thereunder or delegate any duties to be performed by him under it to anyone else. |
20 | Survivorship |
To the extent contemplated by this Agreement, respective rights and obligations of the parties set out in this Agreement shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.
21 | Notices |
Any notice (including any Termination Notice) required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or sent by courier, duly addressed to the party concerned at such address as the party may notify to the other. Any notice delivered personally under this Section 21 shall be deemed given on the date delivered and any notice sent by courier shall be deemed given on the date delivery is recorded by such courier.
22 | Entire Agreement |
22.1 | This Agreement supersedes any previous written or oral agreement between the parties in relation to the matters dealt with within it. It contains the whole agreement between the parties relating to the Employment at the date the Agreement was entered into (except for those terms implied by law which cannot be excluded by the agreement of the parties). The Executive acknowledges that he has not been induced to enter into this Agreement by any representation, warranty or undertaking not expressly incorporated into it. |
22.2 | Neither partys rights or powers under this Agreement will be affected if: |
22.2.1 | one party delays in enforcing any provision of this Agreement; or |
22.2.2 | one party grants time to the other party. |
23 | Amendment or Modification; Waiver |
No provision of this Agreement may be amended or waived unless such amendment or waiver is agreed to in writing, signed by the Executive and by a duly authorised officer of the Company who shall supply the Executive with evidence of such authority.
24 | Withholding |
Anything to the contrary notwithstanding, all payments required to be made by the Company under this Agreement to the Executive, or to his estate or beneficiaries, shall be subject to withholding of such amounts relating to taxes as the Company may be required to withhold pursuant to any applicable statute, law or regulation.
25 | Indemnification and Insurance |
25.1 | The Company agrees that if the Executive is made a party or is threatened to be made a party to any action, suit, proceeding, prosecution or governmental, regulatory or other investigation by reason of the fact of the Employment or that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another Group Company or entity except for any action instigated by the Company or the Executive (a Proceeding), he shall be indemnified by the Company to the fullest extent permitted by applicable law against all |
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expenses, liabilities, fees, costs, damages and losses reasonably incurred or suffered by the Executive in connection with such a Proceeding (including any tax payable by the Executive as a result of payments made by the Company pursuant to this indemnity), including, without limitation, payment of expenses incurred in defending a Proceeding prior to the final disposition of such Proceeding; PROVIDED, however, that written notice of such Proceeding is given promptly to the Company by the Executive and the Company is permitted (where appropriate) to participate in and assume the defence of such Proceeding. The provisions of this Section 25 shall survive the termination of the Employment and shall be in addition to any other rights to indemnification to which the Executive may from time to time be entitled, whether under any applicable insurance policies or otherwise. |
25.2 | The Company will provide the Executive with Legal Expenses Insurance and Directors and Officers Liability Insurance under the Companys policy current from time to time in force to cover the period during which he acts as a director, officer or employee or agent of any Group Company or entity under this Agreement whether or not he remains a director, officer, employee or agent of any Group Company or entity at the time any claim under the policy is made. |
26 | Collective Agreements Disciplinary Rules and Procedures |
There are no collective agreements which directly affect the terms and conditions set out in this Agreement.
The Companys harassment and bullying policies, disciplinary rules and procedures and grievance procedures, as in force from time to time, shall apply to the Executive. The Company reserves the right to leave out any or all of the stages of those rules and procedures where it considers it appropriate to do so.
27 | Governing Law |
This Agreement shall be deemed a contract made under, and for all purposes shall be construed in accordance with, the laws of England. Each of the parties submits to the exclusive jurisdiction of the English courts as regards any claim or matter under this Agreement.
28 | Titles |
Titles to the Sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any Section.
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In witness whereof the parties hereto have executed this Agreement as a deed on the day and year first above written
THE COMMON SEAL of GLAXOSMITHKLINE SERVICES UNLIMITED was hereunto affixed in the presence of: | }/s/ Paul Williamson | |
Director P Williamson Authorised Signatory For and on behalf of Edinburgh Pharmaceuticals Industries Limited The Corporate Director |
||
Secretary /s/ Sonja Reynolds Arseniç S Reynolds Arseniç Authorised Signatory For and on behalf of Glaxo Group Limited Corporate Director |
||
Signed Sealed and Delivered by the said IAIN MACKAY in the presence of: |
}/s/ Iain Mackay | |
Name: Robert Nicol
Address |
}/s/ Robert Nicol | |
Occupation |
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Exhibit 4.7
Execution version
DATE 27 MARCH 2018
GLAXOSMITHKLINE PLC
and
SETFIRST LIMITED
and
NOVARTIS AG
and
NOVARTIS HOLDING AG
and
NOVARTIS FINANCE CORPORATION
and
GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED
PUT OPTION IMPLEMENTATION AGREEMENT
relating to GlaxoSmithKline Consumer Healthcare Holdings Limited
Slaughter and May
One Bunhill Row
London EC1Y 8YY
(SRN/DRJ/JODW)
551534464
CONTENTS
1. |
DEFINITIONS AND INTERPRETATION | 5 | ||||
2. |
AGREEMENT | 13 | ||||
3. |
CONDITIONS TO COMPLETION | 14 | ||||
4. |
OBLIGATIONS IN RESPECT OF CONDITIONS TO COMPLETION | 14 | ||||
5. |
CONDUCT BEFORE COMPLETION | 20 | ||||
6. |
APPROVALS AND CONSENTS | 23 | ||||
7. |
TIMING OF COMPLETION | 25 | ||||
8. |
CANCELLATION AND PAYMENT OF CONSIDERATION AMOUNT | 25 | ||||
9. |
TRUE-UP FOLLOWING COMPLETION | 28 | ||||
10. |
WARRANTIES AND INDEMNITIES | 29 | ||||
11. |
GUARANTEE | 31 | ||||
12. |
OBLIGATIONS FOLLOWING COMPLETION | 33 | ||||
13. |
BREAK FEE | 34 | ||||
14. |
TERMINATION | 36 | ||||
15. |
PAYMENTS | 37 | ||||
16. |
TAXATION | 38 | ||||
17. |
ANNOUNCEMENTS | 39 | ||||
18. |
CONFIDENTIALITY | 40 | ||||
19. |
EFFECT OF COMPLETION | 41 | ||||
20. |
EFFECT OF DEED OF ADHERENCE | 42 | ||||
21. |
SHAREHOLDER UNDERTAKINGS | 42 | ||||
22. |
REMEDIES AND WAIVERS | 42 | ||||
23. |
ASSIGNMENT | 43 | ||||
24. |
VARIATION |
43 |
25. FURTHER ASSURANCE |
44 | |||||
26. ENTIRE AGREEMENT |
44 | |||||
27. NOTICES |
44 | |||||
28. COSTS AND EXPENSES |
46 | |||||
29. INVALIDITY |
46 | |||||
30. CONFLICT WITH ARTICLES OF ASSOCIATION |
46 | |||||
31. COUNTERPARTS |
46 | |||||
32. THIRD PARTY RIGHTS |
47 | |||||
33. NO PARTNERSHIP |
47 | |||||
34. GOVERNING LAW |
47 | |||||
35. JURISDICTION |
47 | |||||
36. LANGUAGE |
47 | |||||
37. AGENT FOR SERVICE |
48 | |||||
SCHEDULE 1 FORM OF DEED OF ADHERENCE |
49 | |||||
SCHEDULE 2 FORM OF RESIGNATION AND RELEASE LETTER |
51 |
This AGREEMENT is entered into on 27 March 2018
BETWEEN:
(1) | GLAXOSMITHKLINE PLC, a company registered in England under number 03888792 and whose registered office is at 980 Great West Road, Brentford, Middlesex, TW8 9GS (GSK); |
(2) | SETFIRST LIMITED, a company registered in England under number 2332323 and whose registered office is at 980 Great West Road, Brentford, Middlesex, TW8 9GS (the GSK Shareholder and provided that any person to whom A Shares are transferred by the GSK Shareholder pursuant to Clause 6.4 shall also be a GSK Shareholder); |
(3) | NOVARTIS AG, a share corporation (Aktiengesellschaft) registered in the Commercial Register of the Canton of Basel-Stadt, Switzerland under number CHE-103.867.266 and whose registered office is at Basel Switzerland and whose address is Lichstrasse 35, 4056 Basel (Novartis); |
(4) | NOVARTIS HOLDING AG, a company limited by shares (Aktiengesellschaft) registered in the Commercial Register of Basel-Stadt, Switzerland under number CHE-103.959.690 whose registered office is at Lichstrasse 35, 4056 Basel (the First Novartis Shareholder); |
(5) | NOVARTIS FINANCE CORPORATION, a company incorporated under the laws of New York with an office at 230 Park Avenue, New York, NY 10169 (the Second Novartis Shareholder and, together with the First Novartis Shareholder, the Novartis Shareholders); and |
(6) | GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED, a company registered in England under number 08998608 and whose registered office is at 980 Great West Road, Brentford, Middlesex, TW8 9GS (the Company), |
each, a party and together, the parties.
WHEREAS:
1. | On 2 March 2015, GSK, the GSK Shareholder, Novartis, the Novartis Shareholders and the Company entered into the Shareholders Agreement (as defined below). |
2. | Pursuant to the terms of the Shareholders Agreement, the Novartis Shareholders may, from 2 March 2018 to 2 March 2035 (other than in certain restricted periods), serve notice to require the GSK Shareholder to purchase the B Shares (as defined below) (or specified tranches of them) from the Novartis Shareholders at the fully distributed public trading equity value of such B Shares (as determined in accordance with the provisions of the Shareholders Agreement). |
3. | Novartis and the Novartis Shareholders wish to exit their investment in the Company and, accordingly, have agreed with GSK that this should take place at an agreed value having regard to the pricing methodology contained in the Shareholders Agreement. |
4
4. | GSK, the GSK Shareholder, Novartis and the Novartis Shareholders have given their approval (for the purposes of the Shareholders Agreement and for any other purpose) to the Company entering into this Agreement and have acknowledged that the Companys entry into this Agreement has been duly authorised by the Board (as defined below). |
5. | The parties now therefore wish to enter into this Agreement to set out their agreement in relation to various matters relating to the Company, including the reduction and cancellation of the B Shares and the payments of the amounts specified herein by the Company to the Novartis Shareholders. |
IT IS AGREED as follows:
1. | DEFINITIONS AND INTERPRETATION |
1.1 | In this Agreement: |
A Director |
has the meaning given in the Shareholders Agreement; | |
A Shares |
has the meaning given in the Shareholders Agreement; | |
Accounting Policies |
has the meaning given in the Shareholders Agreement; | |
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, and Affiliates shall be interpreted accordingly; | |
Agreed Form |
in relation to any document means that document in a form agreed by the parties and initialled or otherwise confirmed for the purposes of identification by or on behalf of each party (including by its counsel); | |
Applicable Law |
means any statute, law, rule, regulation, ordinance, code or rule of common law issued, administered or enforced by any governmental or regulatory authority, or any judicial or administrative interpretation thereof, including, for the avoidance of doubt, any rules issued by the FCA and the rules of any stock exchange; | |
B Director |
has the meaning given in the Shareholders Agreement; | |
B Shares |
has the meaning given in the Shareholders Agreement; | |
Base Cash Amount |
has the meaning given in the Shareholders Agreement; | |
Board |
has the meaning given in the Shareholders Agreement; | |
Borrowings |
has the meaning given in the Shareholders Agreement; |
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CA 2006 | means the Companies Act 2006; | |
Cancellation | means the reduction of the capital of the Company by way of cancellation of the B Shares in accordance with the procedure set out under section 641(1)(a) of the CA 2006; | |
Cancellation Solvency Statement | means the solvency statement to be given by each of the directors of the Company at the time of such statement in connection with the Cancellation in accordance with section 643 of the CA 2006; | |
Cancellation Statement of Capital | means the statement of capital to be delivered by the Company to the Registrar in connection with the Cancellation in accordance with section 644(1)(b) of the CA 2006; | |
Cancellation Statement of Compliance | means the statement of compliance to be delivered by the Company to the Registrar in connection with the Cancellation in accordance with section 644(5) of the CA 2006; | |
Cancellation Written Resolution | means the special written shareholder resolution of the Company approving the Cancellation in accordance with section 641(1)(a) of the CA 2006; | |
Cash Shortfall True-up Amount | has the meaning given in Clause 9.3(B); | |
Completion | means closing of the Put Option Transaction in accordance with the terms of this Agreement; | |
Completion Balance Sheet | has the meaning given in Clause 9.1; | |
Completion Business Day | means a day which is not a Saturday, a Sunday or public holiday in the canton of Basel Stadt (Switzerland), in the canton of Zürich (Switzerland), in Luxembourg City (Luxembourg), in New York (US) or in London (United Kingdom); | |
Completion Date | has the meaning given in Clause 7; | |
Conditions | has the meaning given in Clause 3.1; | |
Connected Persons | has the meaning given in the Shareholders Agreement; | |
Consideration Amount | means an amount equal to USD13,000,000,000; |
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Control | means, in relation to a person, the ability of another person to ensure that the activities and business of the first mentioned person are conducted in accordance with the wishes of that other person (whether by exercise of contractual rights, ownership of shares or otherwise), and a person shall be deemed to have Control of a body corporate if that person has the contractual right to procure that the activities and business of that body corporate are conducted in accordance with that persons wishes or if that person possesses the majority of the issued share capital or the voting rights in that body corporate or the right to receive the majority of the income of that body corporate on any distribution by it of all of its income or the majority of its assets on a winding up (and Controller, Controlled and Controlling shall be construed accordingly); | |
Deed of Adherence |
means a deed of adherence to this Agreement in the form set out in Schedule 1; | |
Default Rate |
means one per cent. above USD LIBOR per annum, accruing daily; | |
Directors |
has the meaning given in the Shareholders Agreement; | |
Excess Cash True-up Amount | has the meaning given in Clause 9.3(A); | |
FCA |
means the Financial Conduct Authority; | |
FSMA |
means the Financial Services and Markets Act 2000; | |
GBP |
means pounds sterling; | |
Governmental Authority |
means any supra-national, federal, national, state, county, local, municipal or other governmental, regulatory or administrative authority, agency, commission or other instrumentality, any court, tribunal or arbitral body with competent jurisdiction, or any national securities exchange; | |
Governmental Order |
means any order, writ, judgment, injunction, decree, ruling or determination of or obtained by a Governmental Authority; | |
Group |
means a person and that persons Affiliates from time to time; | |
Group Transferee |
has the meaning given in the Shareholders Agreement; | |
GSK Articles of Association |
means the articles of association of GSK in force and effect from time to time; |
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GSK Break Fee | means an amount equal to USD200,000,000, as may be adjusted pursuant to Clause 13.7; | |
GSK Break Fee Refund | has the meaning given in Clause 8.4(A); | |
GSK D&O Policy | has the meaning given in the Shareholders Agreement; | |
GSK Directors | means the directors of GSK from time to time; | |
GSK Members | means the holders of ordinary shares in the capital of GSK from time to time; | |
GSK Recommendation | has the meaning given in Clause 4.11(A); | |
GSK Shareholder Approval Condition | means the condition set out in Clause 3.1(A); | |
GSK Shareholder Circular | means the circular to be prepared by GSK and approved by the UKLA in connection with the Put Option Transaction (and including the GSK Shareholder Resolution) under and in accordance with the Listing Rules, including a notice convening a GSK Shareholder Meeting; | |
GSK Shareholder Loan | has the meaning given in the Shareholders Agreement; | |
GSK Shareholder Meeting | has the meaning given in Clause 3.1(A); | |
GSK Shareholder Resolution | has the meaning given in Clause 3.1(A); | |
GSK Sponsor | means the person or persons acting as sponsor (as defined in the Listing Rules) in relation to the GSK Shareholder Circular; | |
GSK Transaction Announcement | means the announcement to be made by GSK in relation to the Put Option Transaction and this Agreement substantially in the Agreed Form (provided that only the parts of GSKs announcement relating to the Put Option Transaction and this Agreement are required to be in the Agreed Form); | |
GSK Transferee | has the meaning given in Clause 6.4; | |
GSK Transferor | has the meaning given in Clause 6.4; | |
Guaranteed Party | has the meaning given in Clause 11.1(A) and 11.1(B); | |
Guarantor | has the meaning given in Clause 11.1; |
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Half-Yearly Accounting Period | has the meaning given in the Shareholders Agreement; | |
Interest Rate | means 0.20% per cent. above USD LIBOR per annum, accruing daily; | |
Joint Shareholder Loan | has the meaning given in the Shareholders Agreement; | |
Key Objectives | has the meaning given in Clause 4.3; | |
Listing Rules | means the listing rules made by the FCA under section 73A of FSMA; | |
Negative Condition | has the meaning given to it in Clause 3.1(B); | |
Novartis Percentage | means the aggregate of the Percentage Interests of the Novartis Shareholders immediately prior to Completion; | |
Novartis Transaction Announcement | means the announcement to be made by Novartis in substantially the Agreed Form; | |
Percentage Interests | has the meaning given in the Shareholders Agreement; | |
Preparatory Capital Step | means:
(A) any capitalisation of any account or reserve (whether statutory or non-statutory) of the Company, including any issuance of deferred shares to a member of GSKs Group in connection with any such capitalisation; and
(B) any reduction of any part of the share capital or any reducible reserve or account of the Company,
that is, in either case, proposed by the Company or GSK to be carried out (i) prior to or contemporaneously with the Cancellation, and (ii) in connection with and in order to facilitate and/or support the Cancellation and the payments to be made hereunder in respect thereof by the Company to the Novartis Shareholders; | |
Proceedings | means any proceeding, suit or action arising out of or in connection with this Agreement, whether contractual or non-contractual; | |
Put Option Transaction | means the transaction being implemented under this Agreement; |
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Readily Available Cash | has the meaning given in the Shareholders Agreement (including as amended by paragraph 1.2 of the letter agreement entered into between the parties on 23 June 2016); | |
Registrar | means the registrar of companies in England and Wales; | |
Relevant Tax Deduction | has the meaning given in Clause 16.2; | |
Representatives | means, in relation to any party, any of its and/or any other member of its Groups directors, officers, employees, agents, representatives, bankers, auditors, accountants, financial advisers, legal advisers and any other professional advisers; | |
Reserved Matter | has the meaning given in the Shareholders Agreement; | |
Resignation and Release Letter | means a deed of resignation and release in the form set out in Schedule 2 to be provided by each of the B Directors to the Company in accordance with Clause 5.7(B); | |
Service Document | means a claim form, application notice, order, judgment or other document relating to any Proceedings; | |
Shareholder Loan | has the meaning given in the Shareholders Agreement (and for the avoidance of doubt, any loan or other financing obtained by the Company from any member of GSKs Group in connection with this Agreement shall not be a Shareholder Loan); | |
Shareholders | means the GSK Shareholder(s) and the Novartis Shareholders; | |
Shareholders Agreement | means the shareholders agreement in relation to the Company, between GSK, the GSK Shareholder, Novartis, the Novartis Shareholders and the Company entered into on 2 March 2015, as amended pursuant to letter agreements dated 30 June 2015, 13 August 2015 and 23 June 2016; | |
Shares | has the meaning given in the Shareholders Agreement; | |
Tax, Taxes or Taxation | has the meaning given in the Shareholders Agreement; | |
Tax Authority | has the meaning given in the Shareholders Agreement; | |
Third Party | has the meaning given in the Shareholders Agreement; |
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Third Party Beneficiary | has the meaning given in Clause 32.1; | |
Third Party Rights Provisions | has the meaning given in Clause 32.1; | |
UK Business Day | means a day which is not a Saturday, a Sunday or public holiday in London (United Kingdom); | |
UKLA | means the FCA acting in its capacity as the competent authority under FSMA; | |
Unconditional Date | has the meaning given in Clause 7; | |
USD | means US Dollars; | |
USD LIBOR | means the overnight London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which takes over the administration of that rate) for USD and displayed on pages LIBOR01 or LIBOR02 of the Thomson Reuters screen (or any replacement Thomson Reuters page which displays that rate); | |
VAT | means:
(A) any Tax imposed in compliance with the council directive of 28 November 2006 on the common system of value added tax (EC Directive 2006/112);
(B) to the extent not included in paragraph (A) above, any value added tax imposed by VATA 1994 and legislation and regulations supplemental thereto; and
(C) any other Tax of a similar nature to the Taxes referred to in paragraph (A) or paragraph (B) above, whether imposed in a member state of the European Union in substitution for, or levied in addition to, the Taxes referred to in paragraph (A) or paragraph (B) above or imposed elsewhere; | |
VATA 1994 | means the Value Added Tax Act 1994; | |
Wholly-Owned Group | has the meaning given in the Shareholders Agreement; and | |
Working Hours | means 9.30 a.m. to 5.30 p.m. on a UK Business Day in the relevant place. |
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1.2 | In construing this Agreement, unless otherwise specified: |
(A) | references to clauses and schedules are to clauses of, and schedules to, this Agreement; |
(B) | use of any gender includes the other genders and (unless the context otherwise requires) the singular shall include the plural and vice versa; |
(C) | references to a person shall be construed so as to include any individual, firm, company or other body corporate, government, state or agency of a state, local or municipal authority or government body or any joint venture, association or partnership (whether or not having separate legal personality); |
(D) | body corporate shall have the meaning given in section 1173 of the Companies Act 2006; |
(E) | a reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted; |
(F) | any reference to a day (including within the phrase UK Business Day or Completion Business Day) shall mean a period of 24 hours running from midnight to midnight; |
(G) | references to include and including shall be deemed to be followed by the words without limitation; |
(H) | references to indemnify any person against any circumstance shall include indemnifying and keeping it or him harmless from all actions, claims and proceedings from time to time made against it or him and all loss, damage, payments, costs or expenses suffered, made or incurred by it or him as a consequence of that circumstance and, unless otherwise specified, any indemnity given in this agreement shall be deemed to have been given on an after-Tax basis; |
(I) | a reference to any other document referred to in this Agreement is a reference to that other document as amended, varied, novated or supplemented (other than in breach of the provisions of this Agreement or that other document) at any time; |
(J) | headings and titles are for convenience only and do not affect the interpretation of this Agreement; |
(K) | a reference to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than England be treated as a reference to any analogous term in that jurisdiction; |
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(L) | the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word other shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things; and |
(M) | general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words. |
1.3 | The schedules form part of this Agreement and shall have the same force and effect as if expressly set out in the body of this Agreement, and any reference to this Agreement shall include the schedules. |
1.4 | Any indemnity being given on an after-Tax basis means that the amount payable pursuant to the indemnity (the Payment) shall be calculated in such a manner as will ensure that, after taking into account: |
(A) | any Tax required to be deducted or withheld from the Payment; |
(B) | the amount and timing of any additional Tax which becomes payable by the recipient of the Payment as a result of the Payments being subject to Tax in the hands of that person; and |
(C) | the amount and timing of any Tax benefit which is obtained, by the recipient of the Payment to the extent that such Tax benefit is attributable to the matter giving rise to the indemnity payment or the receipt of the Payment, |
the recipient of the Payment is in the same position as that in which it would have been if the matter giving rise to the indemnity payment had not occurred (or, in the case of a Payment arising by reference to a matter affecting a person other than the recipient of the Payment, the recipient of the Payment and that other person are, taken together, in the same position as that in which they would have been had the matter giving rise to the indemnity payment not occurred), provided that (i) the amount of the Payment shall not exceed that which it would have been if it had been regarded for all Tax purposes as received solely by the recipient and not any other person and (ii) if any party to this Agreement shall have assigned or novated the benefit of this Agreement in whole or in part or, after the date of this Agreement, have changed its Tax residence or the permanent establishment to which the rights under this Agreement are allocated then no Payment to that party shall be increased by reason of the operation of paragraphs (A) to (C) above to any greater extent than would have been the case had no such change taken place.
2. | AGREEMENT |
2.1 | The parties agree that: |
(A) | at Completion, the Company shall carry out the Cancellation; and |
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(B) | following the Cancellation taking effect in accordance with Applicable Law, the Company shall pay to the Novartis Shareholders the Consideration Amount in accordance with Clauses 8.3 and 8.4, |
subject to and in accordance with the terms of this Agreement.
2.2 | The parties agree that, by mutual agreement, the exit by Novartis and the Novartis Shareholders from their investment in the Company may be implemented by a transfer of the B Shares from the Novartis Shareholders to the GSK Shareholder(s) but otherwise on the terms and subject to the conditions of this Agreement. |
3. | CONDITIONS TO COMPLETION |
3.1 | Completion under this Agreement is in all respects conditional upon satisfaction or, where applicable, waiver of the following conditions: |
(A) | the passing at a duly convened and held general meeting of the GSK Members (the GSK Shareholder Meeting) of an ordinary resolution to approve the Put Option Transaction to be implemented pursuant to this Agreement for the purposes of Chapter 11 of the Listing Rules in accordance with the requirements of the Listing Rules, the GSK Articles of Association and all other Applicable Law (the GSK Shareholder Resolution) (this condition being the GSK Shareholder Approval Condition); and |
(B) | there not being any Governmental Order in effect (whether temporary, preliminary or permanent) issued by a Governmental Authority of competent jurisdiction that has the effect of making the Put Option Transaction illegal or otherwise restraining or prohibiting the consummation of it (this condition being the Negative Condition), |
the matters described this Clause 3.1 being the Conditions.
3.2 | Each of the Conditions shall only be waivable with the consent of each of GSK and Novartis. |
3.3 | Each party confirms that, as at the date hereof, it is not aware of: |
(A) | any approval or consent that is required to be obtained or any other action needing to be taken in order to satisfy the Negative Condition; or |
(B) | subject to the satisfaction of the GSK Shareholder Approval Condition, any antitrust, legal, regulatory or Third Party approvals or consents as are mandatorily required by Applicable Law to be obtained in respect of the Put Option Transaction prior to Completion. |
4. | OBLIGATIONS IN RESPECT OF CONDITIONS TO COMPLETION |
4.1 | Subject to Clause 4.12, GSK shall use reasonable endeavours to: |
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(A) | publish (or procure the publishing of) the GSK Shareholder Circular (together with the relevant forms of proxy) in accordance with (as to both issuance and content) Applicable Law; |
(B) | following the publication of the GSK Shareholder Circular and without prejudice to the other provisions of this Clause 4.1 and Clauses 4.2 to 4.4 (inclusive), publish (or procure the publishing of) any supplementary circular to the GSK Shareholder Circular (or any other amended, supplemental or supplemented material, document, announcement or notice to, or following the publishing of, the GSK Shareholder Circular) as is required to be published by GSK in connection with the Put Option Transaction and this Agreement under and in accordance with the Listing Rules or other Applicable Law (and, for the avoidance of doubt, unless so required by the Listing Rules or other Applicable Law, GSK shall not, subject always to Clause 4.12, seek to revise, alter, supplement or modify the GSK Shareholder Circular following its initial publication without Novartiss written consent (such consent not to be unreasonably withheld or delayed)); and |
(C) | fulfil (or procure the fulfilment of) the GSK Shareholder Approval Condition, |
in each case, as soon as reasonably practicable having regard to the Key Objectives and with the further objective of achieving a Completion Date of 1 June 2018.
4.2 | Subject to Clause 4.12, GSK shall: |
(A) | prior to the GSK Shareholder Meeting and subject to Applicable Law, keep Novartis informed, on a regular basis, of the number of proxy votes received in respect of the GSK Shareholder Resolution; |
(B) | in accordance with Applicable Law and regulation and the GSK Articles of Association, (i) hold (subject to any adjournment (any such adjournment being subject to the provisions of Clause 4.2(F)) such GSK Shareholder Meeting at the time and date specified in the GSK Shareholder Circular, and (ii) propose and hold a vote upon the GSK Shareholder Resolution (such resolution to be voted on by way of a poll) on such date; |
(C) | not amend the GSK Shareholder Resolution other than with the prior written consent of Novartis (not to be unreasonably withheld); |
(D) | permit a reasonable number of Novartiss advisers and representatives to attend the GSK Shareholder Meeting; |
(E) | not propose any resolution that would result in the revocation or invalidity of the GSK Shareholder Resolution such that the Put Option Transaction cannot be implemented in accordance with its terms; |
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(F) | not adjourn the GSK Shareholder Meeting (or the vote on the GSK Shareholder Resolution) from the time and date specified in the GSK Shareholder Circular without the prior written consent of Novartis (not to be unreasonably withheld or delayed) unless, in the view of the GSK Directors (acting in good faith): (i) such adjournment is required by Applicable Law, (ii) it is not reasonably practicable to seek such consent because the adjournment is on account of a force majeure event or an emergency adjournment; (iii) such adjournment is reasonably necessary for the proper conduct of, or proper consideration of any matter at, the GSK Shareholder Meeting; or (iv) the motion to adjourn is only moved at the GSK Shareholder Meeting by GSK Shareholders (other than the GSK Directors); |
(G) | if the GSK Shareholder Meeting is adjourned to another day than that for which it was originally convened, procure that it shall be adjourned for as short a period as is reasonably practicable and permissible; and |
(H) | not induce or encourage any shareholder to seek to adjourn the GSK Shareholder Meeting. |
4.3 | For the purposes of Clause 4.1, the Key Objectives are the following: |
(A) | that the GSK Shareholder Circular contains all information necessary for the GSK Members to make a properly informed decision as to whether or not to pass the GSK Shareholder Resolution, taking account of the matters, circumstances or requirements relevant to the Put Option Transaction and this Agreement or to the satisfaction of any of the Conditions; and |
(B) | that the process of fulfilling the GSK Shareholder Approval Condition, including, for the avoidance of doubt, the publication of the GSK Shareholder Circular, shall be conducted so as to minimise, to the greatest extent possible, the risk of a supplementary circular to the GSK Shareholder Circular (or any other amended, supplemental or supplemented material, document, announcement or notice to, or following the publishing of, the GSK Shareholder Circular) being required to be published by GSK under the Listing Rules or otherwise. |
4.4 | The Key Objectives shall be solely for the GSK Directors to assess and deliver, acting in good faith after consultation with outside counsel and the GSK Sponsor(s). As at the date of this Agreement, and subject to Novartiss compliance with Clause 4.7, GSKs good faith expectation is that the Key Objectives are likely to be sufficiently advanced to enable it to submit a substantially complete first draft of the GSK Shareholder Circular to the UKLA for review in the timeframe stated in Clause 4.8 and that it would, in the ordinary course thereafter, therefore expect to be in a position to publish or procure the publishing of the GSK Shareholder Circular as soon as reasonably practicable following completion of the UKLA review process and the formal approval by the UKLA of the GSK Shareholder Circular, provided that: |
(A) | the matters, circumstances or requirements relevant to the Put Option Transaction, and/or to the satisfaction of any of the Conditions have, in each case, been finalised; or |
(B) | to the extent that any such matters, facts and/or circumstances referred to in Clause 4.4(A) have not been finalised, any remaining uncertainty in respect of them is not material, and such remaining uncertainty and the range of possible outcomes in relation to such matters, facts and/or circumstances are capable of full and fair disclosure in the GSK Shareholder Circular in a way that meets the Key Objectives, |
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and, without prejudice to the generality of Clauses 4.5 and 4.9, GSK shall keep Novartis informed and consult with Novartis in relation to its assessment of the matters specified in (A) and (B) above.
4.5 | GSK shall keep Novartis informed on an on-going basis of anticipated timings in relation to the publishing of the GSK Shareholder Circular and of the satisfaction of the GSK Shareholder Approval Condition. |
4.6 | GSK shall take all reasonable steps as are required in connection with the preparation and approval by the UKLA of the GSK Shareholder Circular, with a view to having a near finalised draft of the GSK Shareholder Circular (subject to any such amendments as may be required to satisfy the Key Objectives and/or to reflect any other developments or changes in relation to the Put Option Transaction or any other matter) as soon as reasonably practicable following the date of this Agreement. |
4.7 | Novartis shall use reasonable endeavours to provide, either itself or through its Representatives, to GSK and/or its Representatives all such information, documentation, co-operation and assistance as GSK and/or any other member of its Group and/or any of its and/or their Representatives may reasonably request in connection with: |
(A) | the preparation, approval by the UKLA and/or publishing of the GSK Shareholder Circular; |
(B) | the preparation, approval by the UKLA and/or publishing of any supplementary circular to the GSK Shareholder Circular (or any other amended, supplemental or supplemented material, document, announcement or notice to, or following the publication of, the GSK Shareholder Circular) required to be published by GSK in connection with the transaction contemplated by this Agreement under and in accordance with the Listing Rules or otherwise; |
(C) | any preparation, approval by the UKLA and/or publishing of any ancillary documents to those set out in Clauses 4.7(A) and 4.7(B), including, for the avoidance of doubt, any form of proxy in connection with the GSK Shareholder Resolution; |
(D) | the convening of the GSK Shareholder Meeting for the purposes of passing the GSK Shareholder Resolution; and |
(E) | any other matter in connection with the satisfaction of the GSK Shareholder Approval Condition, |
which information, documentation, co-operation and assistance shall include (without limitation) any information about Novartis and/or any other member of its Group reasonably required or necessary to be included in any public documents, announcements, statements and/or notices to be produced by GSK in connection with the GSK Shareholder Approval Condition under the Listing Rules or otherwise (including, for
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the avoidance of doubt, the GSK Shareholder Circular and/or any supplementary circular thereto (and/or any other amended, supplemental or supplemented material, document, announcement or notice thereto or following the publication thereof)). Novartis further agrees that: (i) any information or documentation provided by it and/or any other member of its Group and/or any of its and/or their Representatives on its behalf pursuant to this Clause 4.7 shall be prepared in good faith and shall not be misleading in any material respect at the time of supply; and (ii) prior to publication of the GSK Shareholder Circular it will (reasonably promptly upon request by GSK) confirm to GSK whether any information or documentation within (i) continues not to be misleading in any material respect.
4.8 | As at the date of this Agreement, it is GSKs expectation that a submission of a substantially complete first draft of the GSK Shareholder Circular will be made to the UKLA within two UK Business Days after (but excluding) the date of this Agreement. GSK will provide a copy of the submission draft to Novartis promptly following the date of this Agreement. |
4.9 | GSK shall and/or shall procure that its relevant professional advisers shall: |
(A) | as soon as reasonably practicable following the date of this Agreement and prior to publishing the GSK Shareholder Circular: |
(i) | give Novartis and its advisers a reasonable opportunity to review such GSK Shareholder Circular (or draft thereof); and |
(ii) | give reasonable consideration (acting in good faith) to all comments proposed by Novartis and its advisers in relation to the same within the timeframe specified by GSK and/or its professional advisers (acting reasonably when specifying such timeframe); and |
(B) | prior to publishing any supplementary circular to the GSK Shareholder Circular (and/or any other draft amended, supplemental and/or supplemented material, document, announcement and/or notice thereto or following the publication thereof), to the extent reasonably practicable: |
(i) | give Novartis and its advisers a reasonable opportunity to review the same; and |
(ii) | give reasonable consideration (acting in good faith) to all comments proposed by Novartis and its advisers in relation to the same within the timeframe specified by GSK and/or its professional advisers (acting reasonably when specifying such timeframe). |
4.10 | GSK shall provide Novartis and its advisers with any material written comments that GSK or its advisers may receive from time to time from the UKLA or its staff with respect to information contained in the GSK Shareholder Circular (or any ancillary or supplemental document thereto and/or any draft thereof) that (i) relates to or impacts upon the Put Option Transaction (or the timing thereof) or (ii) is information on or from Novartis and its Group. GSK shall promptly consult with Novartis and its advisers prior to responding to any such comments and shall provide Novartis with copies of all written responses to such comments (or if oral responses, reasonable summaries thereof). GSK and Novartis shall each use all reasonable endeavours to resolve, and each party agrees to consult and cooperate with the other party in resolving, all such comments as promptly as practicable after receipt thereof. |
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4.11 | GSK confirms that its board of directors has by way of unanimous board resolution determined that this Agreement and the Put Option Transaction are in the best interests of GSK and the GSK Members as a whole. GSK shall procure that: |
(A) | the GSK Transaction Announcement shall include a statement of the GSK Directors intention to unanimously recommend that the GSK Members vote in favour of the GSK Shareholder Resolution at the GSK Shareholder Meeting when convened (the GSK Recommendation); |
(B) | the GSK Directors shall give the GSK Recommendation in the GSK Shareholder Circular; |
(C) | subject to Clause 4.12, the GSK Directors shall not adversely change, withdraw or qualify the GSK Recommendation (or, prior to publication of the GSK Shareholder Circular, their intention to provide such recommendation); and |
(D) | the GSK Shareholder Circular shall contain a statement that the GSK Directors intend, in respect of any personal shareholding in GSK that any such director may have at the time of the vote on the GSK Shareholder Resolution, to vote in accordance with the GSK Recommendation, |
and provided that in the event that the GSK Directors shall at any time be minded to adversely change, withdraw or qualify the GSK Recommendation (or, prior to publication of the GSK Shareholder Circular, their intention to provide such recommendation), GSK shall promptly notify Novartis of the same and, in reasonable detail, of the facts, matters and circumstances underlying the same,
4.12 | The obligations of GSK set out in Clauses 4.1, 4.2 and 4.11(A) to 4.11(D) (inclusive) are subject to the fiduciary duties (and any other duty to provide advice or recommendation to the GSK Shareholders) from time to time of the GSK Directors (as determined in good faith by the GSK Directors after consultation with external counsel). |
4.13 | For the purposes of Clauses 4.11(C) and 13.1(A), the GSK Directors shall be deemed not to have adversely changed, withdrawn or qualified: |
(A) | the GSK Recommendation if, following the publishing of the GSK Shareholder Circular, GSK is required to produce a supplementary circular thereto (and/or any other amended, supplemental and/or supplemented material, document, announcement and/or notice thereto or following the publishing thereof); or |
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(B) | their intention to provide the GSK Recommendation if, prior to publishing of the GSK Shareholder Circular, GSK is required to make or issue any further announcement, statement or notice in relation to the Put Option Transaction, provided that in any such supplementary circular (or such amended, supplemental or supplemented material, document, announcement or notice thereto or following the publishing thereof) or, as the case may be, announcement, statement or notice, the GSK Directors re-affirm the GSK Recommendation or, as the case may be, their intention to provide the GSK Recommendation, in any such case, based on the matters, facts and circumstances as set out in any public announcements, statements or notices that have been and/or are made or given or in any documents that have been and/or are published, in any such case, by GSK in connection with the Put Option Transaction. |
4.14 | In relation to the Negative Condition, each party shall, and shall procure that each other relevant member of their respective Groups shall, co-operate with one another (acting reasonably) and take all such steps (which they are lawfully able to take) as are necessary in order to satisfy such Condition as soon as reasonably practicable following the date of this Agreement (save only where such step would have a material adverse effect on their respective Group). |
5. | CONDUCT BEFORE COMPLETION |
5.1 | Subject to Clause 12.1, the Shareholders Agreement shall continue to have effect in accordance with its terms, save that, at all times prior to the termination of this Agreement (or as otherwise expressly modified or provided herein or as otherwise required to give effect to the terms of this Agreement): |
(A) | the B Directors shall not be entitled to participate in any part of the proceedings of the Board or receive any materials made available to the Board relating to the operation or performance of this Agreement (including the Cancellation or any Preparatory Capital Step), or any claim or liability arising in connection with it, and the quorum and notice provisions of Clause 8 of the Shareholders Agreement shall apply on the basis that no notice is required to be given to the B Directors (and they shall not be necessary for any applicable quorum) in relation to such proceedings; |
(B) | where any Shareholder transfers all (but not some only) of its Shares to any other Group Transferee in accordance with Clause 17 of the Shareholders Agreement, such Shareholder may only do so where the Group Transferee has first entered into a Deed of Adherence in respect of this Agreement in the form set out in Schedule 1 of this Agreement (which, for the avoidance of doubt, shall be in addition to such Group Transferee having entered into a Deed of Adherence in respect of the Shareholders Agreement, as provided in the Shareholders Agreement); |
(C) | the provisions of Clauses 19, 20 and 22 and Schedule 3 of the Shareholders Agreement shall be disapplied until this Agreement is terminated, at which point such provisions shall have full force and effect in accordance with the terms of the Shareholders Agreement; |
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(D) | neither Novartis Shareholder shall be permitted to make a transfer of its B Shares under Clause 17 of the Shareholders Agreement after the earlier of (i) the Unconditional Date, (ii) the date on which the B Directors resign from the Board, or (iii) the date that is 15 UK Business Days before any scheduled Completion Date. Clause 5.1(B) shall apply in respect of any such transfer made prior to such dates. Any transfer purported to be made in breach of this Clause 5.1(D) shall be void and of no effect; and |
(E) | in the event that the Company requests any funding from the Shareholders in accordance with Clause 13.2 of the Shareholders Agreement, the Novartis Shareholders shall not participate in the provision of any Joint Shareholder Loan and any such funding need shall be met by a GSK Shareholder Loan only. |
5.2 | From the date of this Agreement until Completion, the Company shall continue to calculate and pay dividends to the Shareholders in accordance with its practice as at the date of this Agreement (including any interim dividends that the Company is accustomed to pay other than in respect of any Half-Yearly Accounting Period). The Company currently expects the first interim dividend in respect of the 12 month period to 31 December 2018 to be paid on or around 30 April 2018. |
5.3 | From the date of this Agreement until Completion, the Company shall (and GSK shall procure that the Company shall) conduct its business in the ordinary course (including with respect to cash management) in accordance with the Shareholders Agreement, provided that this Clause 5.3 shall not prevent or restrict the Company from taking any step permitted or reasonably required by, or otherwise taken in connection with the transactions contemplated by, this Agreement. |
5.4 | The Company acknowledges and agrees that there are no Shareholder Loans outstanding as at the date of this Agreement. As at the date of this Agreement, the parties do not expect that there will be any Shareholder Loans outstanding at Completion. |
5.5 | The Novartis Shareholders shall exercise their voting rights (and execute any written shareholder resolution) to approve, and take all other steps as are reasonably required and identified in the steps plan provided to Novartis under Clause 5.11(A) (or any later steps plan provided prior to ten UK Business Days before the Completion Date that Novartis and its advisers are given a reasonable opportunity to review and in relation to which GSK and its advisers have given reasonable consideration (acting in good faith) to all comments proposed by Novartis and its advisers) to effect as soon as reasonably practicable, the Cancellation (as provided in Clause 8) and any Preparatory Capital Step, provided that any documentation pursuant to which (or relating to any meeting in which) the Novartis Shareholders are required to exercise their voting rights (or take any step reasonably required) pursuant to this Clause 5.5 is provided to the Novartis Shareholders no later than five UK Business Days prior to the earliest of (i) the date on which such voting rights are required to be exercised (or such step is reasonably required to be taken) and (ii) the Completion Date. |
5.6 | The parties agree that: |
(A) | the B Directors shall not be required to take any steps to approve and implement this Agreement (including the Cancellation or any Preparatory Capital Step), provided their resignations are effected in accordance with Clause 5.7; and |
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(B) | in light of the negotiation of this Agreement, the B Directors have been and will be (on the grounds of conflict of interest on account of Novartiss interest in matters under this Agreement) recused from (and shall therefore not be required to take) any steps to review, approve and implement this Agreement (including the Cancellation or any Preparatory Capital Step) and shall resign in accordance with Clause 5.7, |
provided that, for the avoidance of doubt, the parties acknowledge that the execution of this Agreement by the Company has been duly authorised by a resolution of the Board.
5.7 | Novartis and the Novartis Shareholders shall, by no later than the fifth UK Business Day prior to the scheduled Completion Date (provided that the Unconditional Date has occurred prior to such date and otherwise by no later than the end of the Unconditional Date): |
(A) | procure that each of the B Directors resigns from the Board and relinquishes any rights which they may have had under any contract of employment with any member of the Companys Group or under any statutory provision (including any right to damages or compensation for breach of contract, loss of office, redundancy or unfair dismissal or on any other account whatsoever) other than in respect of accrued remuneration and expenses (if any) and to confirm that no agreement or arrangement (other than the provisions of the indemnity in Clause 10.4(A), any insurance policy in respect of directors and officers liability for the benefit of such director and any deed of indemnity in place for the benefit of such director) is outstanding under which any member of the Companys Group has or could have any obligation to any of them (though such resignation shall be without prejudice to the provisions of the indemnity in Clause 10.4(A), any insurance policy in respect of directors and officers liability for the benefit of such director and any deed of indemnity in place for the benefit of such director); and |
(B) | procure that each of the B Directors shall deliver to the Company a Resignation and Release Letter in the form set out in Schedule 2 to this Agreement. |
5.8 | Promptly following Novartis and the Novartis Shareholders having complied with their obligations pursuant to Clause 5.7, the Company shall take all steps reasonably required to remove the B Directors as directors of the Company and shall update the books and records of the Company accordingly. |
5.9 | Following the resignations referred to in Clause 5.7, Novartis and the Novartis Shareholders shall not exercise any right under the Shareholders Agreement or otherwise to nominate or have appointed any person as a B Director, provided that, if the Cancellation does not become effective by or on the date that is one UK Business Day after (but excluding) the Completion Date under Clause 7, the First Novartis Shareholder shall be entitled to re-nominate four individuals as B Directors in accordance with Clause 6.2 of the Shareholders Agreement and the Company shall give effect to any such nomination (by appointing such nominees as B Directors). |
5.10 | Novartis shall indemnify GSK (on its own behalf and on behalf of any member of its Group) and the Company (on its own behalf and on behalf of any member of its Group) on an after-Tax basis against any claim, whether for compensation for loss of office, wrongful dismissal or otherwise, which arises out of any B Director ceasing to hold office under Clause 5.7. |
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5.11 | GSK shall and/or shall procure that its relevant professional advisers shall: |
(A) | within 20 UK Business Days following the date of this Agreement: |
(i) | provide Novartis with a draft steps plan or other similar document in relation to the Cancellation (or any matter within Clauses 6.1(A) or 6.1(B)) that seeks to achieve the earliest possible confirmation from the Registrar on the Completion Date that the Cancellation has become effective in accordance with Applicable Law; |
(ii) | give Novartis and its advisers a reasonable opportunity to review such draft; and |
(iii) | give reasonable consideration (acting in good faith) to all comments proposed by Novartis and its advisers in relation to the same within the timeframe specified by GSK and/or its professional advisers (acting reasonably when specifying such timeframe); and |
(B) | no later than 5 UK Business Days prior to GSK and/or the Company circulating final versions of any documents required in connection with the Cancellation (or any matter within Clauses 6.1(A) or 6.1(B)) to the relevant parties for their execution of such documents: |
(i) | give Novartis and its advisers a reasonable opportunity to review drafts of such documents; and |
(ii) | give reasonable consideration (acting in good faith) to all comments proposed by Novartis and its advisers in relation to the same within the timeframe specified by GSK and/or its professional advisers (acting reasonably when specifying such timeframe). |
5.12 | Novartis hereby undertakes to GSK and the Company that, as required by Listing Rule 11.1.7R(4), Novartis shall not, and shall take all reasonable steps to ensure that its associates (as such term is defined in the Listing Rules) shall not, vote on the GSK Shareholder Resolution, in each case to the extent that Novartis or any such associate either holds or acquires any shares in GSK or other securities of GSK conveying upon it a right to vote at the GSK Shareholder Meeting. |
6. | APPROVALS AND CONSENTS |
6.1 | To the extent that the Put Option Transaction or the execution or performance of this Agreement (or any step or part thereof or any action reasonably required or reasonably undertaken in connection therewith), including (without limitation): |
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(A) | any financing of the Company by GSK, any member of its Group or any Third Party in connection with the Put Option Transaction (whether such financing takes the form of debt or equity financing and including the issue of shares by the Company in relation to any equity financing); or |
(B) | any Preparatory Capital Step, |
constitutes a Reserved Matter requiring the prior written approval of Novartis under the Shareholders Agreement, Novartis hereby grants its prior written approval to the Put Option Transaction and the execution or performance of this Agreement (and any step or part of it or any action reasonably required or reasonably undertaken in connection therewith) for the purposes of the Shareholders Agreement generally (including, without limitation, Clause 4.1 of the Shareholders Agreement) and agrees that each of the Company and the A Directors (the B Directors having been recused from such matters as described in Clause 5.6(B)) are authorised to take such steps as, in GSKs or the Companys reasonable opinion, are necessary in connection with or to give effect to the Put Option Transaction or this Agreement, provided that it is agreed that:
(i) | no reduction of share capital or any reducible reserve or account shall take place without the consent of Novartis prior to the date on which the B Directors resign from the Board pursuant to Clause 5.7; |
(ii) | any reduction of share capital or any reducible reserve or account shall ensure that sufficient distributable reserves remain to allow payment of the Excess Cash True-up Amount; and |
(iii) | no transaction referred to in this Clause 6.1 shall take place prior to the Unconditional Date. |
6.2 | The parties hereby acknowledge and agree that: |
(A) | any proceedings of the Board undertaken in connection with approving and authorising the Companys entry into this Agreement constituted valid proceedings of the Board notwithstanding that no B Directors participated in, or voted on any resolutions proposed in the course of, such proceedings; |
(B) | the quorum and notice provisions of Clause 8 of the Shareholders Agreement and any contrary provisions of the Companys articles of association are disapplied in relation to such proceedings; and |
(C) | the execution and delivery of, and the performance by the Company of its obligations under, this Agreement does not constitute a breach of any provision of the Shareholders Agreement or the Companys articles of association. |
6.3 | GSK and the GSK Shareholder each hereby irrevocably and unconditionally: |
(A) | acknowledges and confirms that it has and will have no claim or right of action of any kind (whether contractual, statutory or otherwise and whether or not known on the date of this Agreement) outstanding against the B Directors in respect of the holding or termination of each of their offices and in respect of the Cancellation or any Preparatory Capital Step; and |
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(B) | to the extent that any such claim exists or may exist, waives such claim and releases and forever discharges each B Director from any liability in respect thereof. |
6.4 | Without prejudice to the rights of any person under Clause 17 of the Shareholders Agreement, Novartis and the Novartis Shareholders hereby consent to the transfer by the GSK Shareholder or any other holder of A Shares from time to time (a GSK Transferor) of some of the A Shares to any other body or bodies corporate in the same Wholly-Owned Group (a GSK Transferee), provided that such GSK Transferee shall first have entered into (i) a Deed of Adherence in respect of the Shareholders Agreement in the form set out in Schedule 2 of the Shareholders Agreement and (ii) a Deed of Adherence in respect of this Agreement in the form set out in Schedule 1 of this Agreement. |
6.5 | The GSK Transferor and the GSK Transferee of any A Shares transferred pursuant to Clause 6.4 shall each at their own expense provide to the Novartis Shareholders any information and evidence reasonably requested in writing by the Novartis Shareholders for the purpose of determining whether the transfer to the GSK Transferee complies with the terms of Clause 6.4. |
6.6 | Without prejudice to Clause 6.4, any GSK Transferor that transfers some (but not all) of its A Shares pursuant to Clause 6.4 shall procure that the GSK Transferee complies with the provisions of this Agreement. |
7. | TIMING OF COMPLETION |
Completion shall occur on the later of:
(A) | the first Completion Business Day of the calendar month following the calendar month in which satisfaction of the Conditions take place (the date on which such Conditions are satisfied being the Unconditional Date); or |
(B) | the first Completion Business Day that is at least the fourth UK Business Day after (and excluding) the Unconditional Date, |
(the Completion Date), provided that in determining the date on which satisfaction of the Conditions takes place, that date shall be the date on which the GSK Shareholder Approval is satisfied or waived unless the Negative Condition is not satisfied or waived as at that date, in which case it shall then be the first following Completion Business Date on which the Negative Condition is satisfied or waived.
8. | CANCELLATION AND PAYMENT OF CONSIDERATION AMOUNT |
8.1 | At Completion: |
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(A) | subject to Novartis and the Novartis Shareholders having complied with their obligations under Clauses 5.5 and 5.7, the Company shall, and GSK shall procure that the Company shall: |
(i) | procure that each director of the Company (as at the Completion Date) executes (if not previously executed and in any event prior to the circulation for execution of the Cancellation Written Resolution) the Cancellation Solvency Statement and, once duly executed, the Company shall send or submit it to each Shareholder together with the proposed Cancellation Written Resolution; |
(ii) | execute the Cancellation Written Resolution (on behalf of the Board); |
(iii) | execute the Cancellation Statement of Capital; |
(iv) | procure that each director of the Company (as at the Completion Date) executes the Cancellation Statement of Compliance immediately following the passing of the Cancellation Written Resolution; |
(v) | at opening of the Registrars business hours on the Completion Date, use its best endeavours to file the Cancellation Solvency Statement (having been executed by each director of the Company), the Cancellation Written Resolution (having been executed by the Company (on behalf of the Board), the GSK Shareholder(s) and the Novartis Shareholders), the Cancellation Statement of Capital (having been executed by the Company) and the Cancellation Statement of Compliance (having been executed by each director of the Company) with the Registrar in order that the Cancellation be effected as soon as possible on the Completion Date (or as soon as reasonably practicable thereafter); |
(vi) | at opening of the Registrars business hours on the Completion Date, use its best endeavours to pay to the Registrar the fee required in order that the Cancellation be effected as soon as possible on the Completion Date (or as soon as reasonably practicable thereafter); and |
(vii) | use its best endeavours to, on the same day as Completion, take all other steps as are reasonably required in order to effect the Cancellation on the Completion Date (or as soon as reasonably practicable thereafter) and record the same in the books and records of the Company; |
(B) | the GSK Shareholder(s) shall, and GSK shall procure that the GSK Shareholder(s) shall: |
(i) | execute the Cancellation Written Resolution indicating its agreement to the Cancellation Written Resolution; and |
(ii) | take all other steps as are reasonably required to effect the Cancellation as soon as reasonably practicable; and |
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(C) | the Novartis Shareholders shall, and Novartis shall procure that each of the Novartis Shareholders shall: |
(i) | execute the Cancellation Written Resolution indicating its agreement to the Cancellation Written Resolution; and |
(ii) | take all other steps as are reasonably required to effect the Cancellation as soon as reasonably practicable. |
8.2 | In consideration for the Cancellation the Company shall be obliged to pay to the Novartis Shareholders the Consideration Amount in accordance with Clauses 8.3 and 8.4. |
8.3 | Subject to Clause 8.4, promptly following the Cancellation having taken effect in accordance with Applicable Law, the Company shall, and GSK shall procure that the Company shall, pay in accordance with Clause 15: |
(A) | to the First Novartis Shareholder USD12,056,164,384; and |
(B) | to the Second Novartis Shareholder USD943,835,616, |
in each case on the same Completion Business Day as the Cancellation takes effect in accordance with Applicable Law (or, if the Cancellation takes effect on a day that is not a Completion Business Day, on the next following Completion Business Day). |
8.4 | In the event that: |
(A) | an amount equal to the GSK Break Fee has become payable by Novartis to GSK pursuant to Clause 13.4 (the GSK Break Fee Refund); and |
(B) | Novartis has not paid such amount to GSK in accordance with Clause 13.4 by or on the date on which the Consideration Amount becomes payable by the Company pursuant to Clause 8.3, |
then:
(i) | the amount payable by the Company to the Novartis Shareholders on the date specified pursuant to Clause 8.3 shall be reduced by an amount equal to the GSK Break Fee Refund (such reduction to be applied to the amounts payable pursuant to Clauses 8.3(A) and 8.3(B) pro rata according to the ratio of such amounts); and |
(ii) | in the event that Novartis pays the GSK Break Fee Refund to GSK, the Company shall pay an amount equal to the GSK Break Fee Refund to the Novartis Shareholders (pro rata according to the ratio of the amounts set out in Clauses 8.3(A) and 8.3(B)) promptly, and in any event on the first Completion Business Day, after Novartis pays the GSK Break Fee Refund to GSK in accordance with Clause 13.4. |
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8.5 | Upon the Cancellation becoming effective in accordance with Applicable Law, the Shareholders Agreement shall terminate in accordance with Clause 12. |
8.6 | In the event that the Consideration Amount is not paid by or on the first Completion Business Day after the Completion Date, interest shall be payable on the Consideration Amount from (and including) the next day to (but excluding) the date of actual payment (as well after as before judgment) at the Interest Rate. No interest shall be payable under this Clause 8.6 in respect of any day where interest is also levied under Clause 15.3. |
8.7 | Subject to the Novartis Shareholders rights under Clause 5.9, each Novartis Shareholder undertakes not to exercise, without the prior written consent of the GSK Shareholder, any of the rights, powers and privileges attaching to its B Shares or otherwise capable of being exercised by the registered holder of its B Shares from the time at which the Cancellation Written Resolution has been passed until the Cancellation has become effective in accordance with Applicable Law. |
9. | TRUE-UP FOLLOWING COMPLETION |
9.1 | As soon as reasonably practicable and, in any event, within 45 UK Business Days following Completion, the Company shall, and GSK shall procure that the Company shall, (acting in good faith) prepare (in accordance with the Accounting Policies) and provide to the parties to this Agreement an audited interim consolidated balance sheet for the Company as at (and including) the last day of the calendar month immediately prior to the Completion Date with the notes thereto showing the amount of Readily Available Cash (the Completion Balance Sheet). |
9.2 | For the avoidance of doubt, the Completion Balance Sheet shall be prepared on a basis that disregards: |
(A) | matters occurring in any period from and including the Completion Date (including, without limitation, the Cancellation, payment of the Consideration Amount, the Excess Cash True-up Amount or the Cash Shortfall True-up Amount (as applicable)); and |
(B) | any changes affecting the balance sheet of the Company arising as a result of or in connection with the Cancellation (including steps preparatory thereto) or the Put Option Transaction, and including, without limitation: |
(i) | any such changes relating to the receipt of any financing by the Company in connection with the Put Option Transaction, including the issuance of shares by any member of the Companys Group to any member of the GSK Group or any Borrowings by any member of the Companys Group; and |
(ii) | any Preparatory Capital Step that is undertaken. |
9.3 | If, following the provision of the Completion Balance Sheet in accordance with Clause 9.1, the aggregate amount shown in the Completion Balance Sheet in respect of Readily Available Cash is: |
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(A) | greater than the Base Cash Amount, then the Company shall pay to the Novartis Shareholders (pro rata according to their respective Percentage Interests immediately prior to Completion) an amount in GBP equal to the lesser of (i) such difference or (ii) the amount of distributable reserves as stated in the Completion Balance Sheet, in either case multiplied by the Novartis Percentage (the Excess Cash True-up Amount); or |
(B) | less than the Base Cash Amount, then the Novartis Shareholders shall pay to the Company an amount in GBP equal to such difference multiplied by the Novartis Percentage (the Cash Shortfall True-up Amount). |
in either case, on the first Completion Business Day that is at least ten UK Business Days after (but excluding) the date on which the Completion Balance Sheet is provided in accordance with Clause 9.1.
9.4 | For the avoidance of doubt, any payment made or liability incurred pursuant to Clause 9.3 by either the Novartis Shareholders or the Company shall be treated as an adjustment to the consideration for the Cancellation to the extent of the payment or liability. |
10. | WARRANTIES AND INDEMNITIES |
10.1 | Each party warrants to the other parties that each of the following statements is accurate in respect of itself in all respects and not misleading at the date of this Agreement and will be accurate in all respects and not misleading at the date on which Completion occurs as if repeated immediately before Completion by reference to the facts and circumstances subsisting at that date: |
(A) | it has the requisite power and authority to enter into and perform this Agreement; |
(B) | its obligations under this Agreement constitute valid and binding obligations of such party in accordance with the terms of this Agreement; |
(C) | the execution and delivery of, and the performance by it of its obligations under, this Agreement will not: |
(i) | result in a breach of any provision of the memorandum or articles of association (or equivalent constitutional documents in the jurisdiction of incorporation of the relevant party) of such party; |
(ii) | result in a breach of, or constitute a default under, any instrument to which it is a party or by which it is bound, where such breach is material to its ability to perform its obligations hereunder; |
(iii) | subject to the satisfaction of the Conditions, result in a breach of any statute, law, rule, regulation, order, judgment or decree of any court or governmental agency by which it is bound, where such breach is material to its ability to perform its obligations hereunder; or |
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(iv) | subject to the satisfaction of the Conditions, require the consent of its shareholders. |
10.2 | Novartis and the Novartis Shareholders warrant to GSK and the Company that each of the following statements is accurate in all respects and not misleading at the date of this Agreement and will be accurate in all respects and not misleading at the date on which Completion occurs as if repeated immediately before Completion by reference to the facts and circumstances subsisting at that date: |
(A) | the Novartis Shareholders are the sole legal and beneficial owners of the B Shares; and |
(B) | other than pursuant to the Shareholders Agreement and the Companys articles of association, there is no option, right to acquire, mortgage, charge, pledge, lien or other form of security or encumbrance or equity on, over or affecting the B Shares or any of them and there is no agreement or commitment to give or create any and no claim has been made by any person to be entitled to any. |
10.3 | GSK warrants to Novartis and the Novartis Shareholders that: |
(A) | its sponsor (as defined in the Listing Rules) has undertaken the assessment required to be undertaken pursuant to Listing Rule 8.2.3 with respect to the Put Option Transaction and this Agreement; and |
(B) | its sponsor has determined (together with GSK) that any payments required to be made by GSK pursuant to Clause 13 constitute a smaller related party transaction pursuant to Listing Rule 11.1.10 and has provided written confirmation that the terms of such Clause are fair and reasonable as far as the GSK Shareholders are concerned. |
10.4 | GSK shall indemnify on demand on an after-Tax basis: |
(A) | subject to Novartis and the Novartis Shareholders having complied with their obligations under Clauses 5.5, 5.7 and 5.9 (such compliance to be confirmed by GSK in writing to Novartis promptly on completion of such compliance and to be determined by reference to the steps plan provided to Novartis under Clause 5.11(A)), each of the B Directors in respect of any claims, loss or liability suffered or incurred by such B Director arising as a result of the Cancellation or any Preparatory Capital Step; and |
(B) | Novartis and the Novartis Shareholders in respect of any claims, loss or liability suffered or incurred by Novartis or the Novartis Shareholders (as applicable) arising as a result of: |
(i) | any failure to carry out the Cancellation or any Preparatory Capital Step in accordance with Applicable Law; |
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(ii) | subject to Clause 28, any steps taken by Novartis and the Novartis Shareholders pursuant to Clause 5.5 (but excluding any exercise of voting rights by the Novartis Shareholders pursuant to Clause 5.5); or |
(iii) | any failure by the Company to make the payments required pursuant to Clauses 8.3, 8.4 and 9.3. |
11. | GUARANTEE |
11.1 | In consideration of the other parties entering into this Agreement: |
(A) | GSK guarantees to Novartis and the Novartis Shareholders the due and punctual performance of all obligations of the GSK Shareholder and any Group Transferee of the GSK Shareholder and the Company (each a Guaranteed Party of GSK) under this Agreement. This guarantee is unconditional and irrevocable; and |
(B) | Novartis guarantees to GSK, the GSK Shareholder and the Company the due and punctual performance of all obligations of the Novartis Shareholders and any Group Transferee of the Novartis Shareholders (each a Guaranteed Party of Novartis) under this Agreement. This guarantee is unconditional and irrevocable, |
with each of GSK and Novartis being, a Guarantor. |
11.2 | The guarantees set out in Clause 11.1: |
(A) | are continuing guarantees. No payment or other settlement will discharge a Guarantors obligations until the obligations of all of its Guaranteed Parties have been discharged in full; |
(B) | are in addition to, and independent of, any other guarantee or security; |
(C) | may be enforced before any steps are taken against the relevant Guaranteed Party or under any other guarantee or security; |
(D) | will only be discharged by the discharge in full of the obligations of the relevant Guarantors Guaranteed Parties; and |
(E) | will not be discharged by any other action, omission or fact. |
11.3 | A Guarantors obligations shall, therefore, not be affected by: |
(A) | the obligations of any of its Guaranteed Parties being or becoming void, invalid, illegal or unenforceable; |
(B) | any change, waiver or release of the obligations of any of its Guaranteed Parties; |
(C) | any concession or time being given to any of its Guaranteed Parties; |
(D) | the winding-up or re-organisation of any of its Guaranteed Parties; |
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(E) | any change in the condition, nature or status of any of its Guaranteed Parties; |
(F) | any of the above events occurring in relation to another guarantor or provider of security in relation to the obligations of any of its Guaranteed Parties; |
(G) | any failure to take, retain or enforce any other guarantee or security; |
(H) | any circumstances affecting or preventing recovery of amounts expressed to be due by any of its Guaranteed Parties; or |
(I) | any other matter which might discharge that Guarantor. |
11.4 | Any receipt from any person other than that Guarantor shall reduce the outstanding balance only to the extent of the amount received. |
11.5 | Any settlement with, or discharge of, a Guarantor shall be subject to the condition that the settlement or discharge shall be set aside if any prior payment, or any other guarantee or security, in reliance on which that settlement or discharge was made in whole or in part, is set aside, invalidated or reduced. In this event each Guarantor agrees to reimburse each other party for the value of the payment, guarantee or security which is set aside, invalidated or reduced. |
11.6 | In the event that a Guaranteed Party fails to perform or breaches any of its obligations under this Agreement, the Guarantor of that Guaranteed Party agrees to indemnify each of the other parties on an after-Tax basis for the losses and reasonable expenses (including loss of profit) that party suffers or incurs, or will suffer or incur, as a result. The Guarantor of that Guaranteed Party also agrees to indemnify each other party on an after-Tax basis for all losses and expenses (including loss of profit) arising from any obligation of any of its Guaranteed Parties being or becoming void, invalid, illegal or unenforceable. |
11.7 | In addition to each Guarantors obligations as guarantor, each Guarantor agrees that any obligation of any of its Guaranteed Parties under this Agreement which may not be enforceable against that Guarantor as guarantor shall be enforceable against that Guarantor as though that Guarantor were the principal obligor in respect of the obligation. |
11.8 | The parties agree that: |
(A) | no Guarantor shall have the benefit of any security in respect of this guarantee; |
(B) | no Guarantor shall: |
(i) | take the benefit of any right against any of its Guaranteed Parties or any other person in respect of amounts paid under this guarantee; or |
(ii) | claim or exercise against any of its Guaranteed Parties any right to any payment; |
(C) | any other party may request a Guarantor to submit a proof for amounts due to it by any of its Guaranteed Parties or any other guarantor. Each Guarantor agrees to submit a proof promptly in accordance with this request. All amounts received in respect of this proof shall be held by the Guarantor on trust for the other parties; |
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(D) | notwithstanding any of the other provisions of this Agreement, the liability of a Guarantor under this Clause 11 shall in no circumstances exceed the liability of the Guaranteed Party whose obligations are guaranteed by that Guarantor; and |
(E) | the obligations in this Clause 11 shall cease to have effect in respect of a Guarantor when the obligations of all of its Guaranteed Parties under this Agreement have been discharged in full. |
12. | OBLIGATIONS FOLLOWING COMPLETION |
12.1 | The Shareholders Agreement shall terminate in accordance with its terms (including, for the avoidance of doubt, as provided in Clause 30 of the Shareholders Agreement) upon the Cancellation becoming effective in accordance with Applicable Law, provided that: |
(A) | the provisions of Clause 25.3 of the Shareholders Agreement shall continue to apply in the case of Novartis to any claims made under any GSK D&O Policy; |
(B) | as provided in the Shareholders Agreement, Clause 28 of the Shareholders Agreement shall continue without limit in time save that GSK and members of its Group shall cease to be subject to any restrictions in respect of the category of information specified in Clause 28.1(D) of the Shareholders Agreement; |
(C) | the provisions of Clause 29 of the Shareholders Agreement shall terminate and cease to have effect and Clause 29.3 of the Shareholders Agreement shall be disapplied; and |
(D) | following Completion the Company shall provide such information relating to the Company and its Group during Novartiss and its Groups period of investment in the Company as Novartis may reasonably require from time to time in connection with the following: |
(i) | the preparation and filing of Novartiss accounts (and/or the accounts of any other member of Novartiss Group); |
(ii) | the preparation and filing of the Tax returns or other Tax filings or correspondence with a Tax Authority of Novartis (and/or any other member of Novartiss Group including the Novartis Shareholders) in relation to any jurisdiction in which such returns or filings are required to be made; and/or |
(iii) | the compliance by Novartis or any other member of Novartiss Group with any reporting obligation if and to the extent required by Applicable Law and/or any securities exchange or regulatory or governmental body to which Novartis or any other member of Novartiss Group is subject, wherever situated, |
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and for the avoidance of doubt, such information may include any raw data which is used to generate financial information in respect of the Companys Group (or any individual member of the Companys Group) including, for the avoidance of doubt, the information referred to in this Clause 12.1. Novartis shall not be entitled to require the Company or any member of its Group to restate any such financial or other information for any purpose (including the preparation of any such accounts or Tax returns or other Tax filings or correspondence with a Tax Authority). |
12.2 | The Company shall ensure (and GSK shall procure that the Company ensures) that any indemnity and/or immunity provisions contained in the memorandum and articles of association of the Company and/or deed of indemnity in place for the benefit of such of any (current or former) B Director are not amended, repealed or modified in any manner that would affect adversely the rights of any (current or former) B Director. |
12.3 | For six years from Completion, the Company shall maintain (and GSK shall procure that the Company maintains) in force such run-off directors and officers liability insurance policies as will enable each (current or former) B Director to make claims arising out of any matter, cause or event occurring on or before Completion under those policies on terms and conditions that are in all material respects equivalent to the directors and officers liability insurance policies that the Company maintains for the benefit of its directors from time to time. |
13. | BREAK FEE |
13.1 | Subject to Clause 13.8, GSK shall pay to Novartis by way of compensation the GSK Break Fee if, in relation to the GSK Shareholder Approval Condition, any of the following occur: |
(A) | subject to Clause 4.13, the GSK Directors adversely change, withdraw or qualify the GSK Recommendation (or, prior to publication of the GSK Shareholder Circular, their intention to provide such recommendation); or |
(B) | a vote has been held on the GSK Shareholder Resolution by or on 31 August 2018 and the GSK Shareholder Resolution is not passed by the GSK Members at the GSK Shareholder Meeting; or |
(C) | no vote is held on the GSK Shareholder Resolution by or on 31 August 2018. |
13.2 | If the GSK Break Fee becomes payable pursuant to Clause 13.1, GSK shall pay, or procure the payment of, the GSK Break Fee to Novartis in accordance with Clause 15 on the first Completion Business Day that is at least five UK Business Days after (but excluding) the later of (i) the date on which the GSK Break Fee becomes payable pursuant to Clause 13.1 and (ii) the date on which Novartis notifies to GSK the bank account into which the GSK Break Fee is to be paid pursuant to this Clause 13.2. |
13.3 | Notwithstanding any other provision of this Agreement: |
(A) | the GSK Break Fee, if paid, shall be the sole and exclusive remedy of Novartis and its Group against GSK, the Company or any member of the GSK Group for any damages, losses or liabilities of any nature incurred or suffered by Novartis or any member of its Group as a result of or otherwise in connection with the matters described in Clause 13.1; and |
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(B) | provided that the GSK Break Fee has been paid in accordance with Clause 13.2, neither Novartis nor any member of its Group shall have any other rights or remedies of any kind whatsoever in connection with the matters described in Clause 13.1. |
13.4 | If the GSK Break Fee is paid pursuant to Clauses 13.1(A) and 13.2 and the GSK Shareholder Resolution is then approved by GSK Members at a general meeting of the GSK Members (or any adjournment thereof) held within eight weeks after the relevant change, withdrawal or qualification of the GSK Recommendation (or intention to provide such recommendation), Novartis shall repay to GSK an amount equal to the GSK Break Fee in accordance with Clause 15 on the first Completion Business Day that is at least five UK Business Days after (but excluding) the later of (i) the date on which such amount becomes payable pursuant to this Clause 13.4 and (ii) the date on which GSK notifies to Novartis the bank account into which such amount is to be paid pursuant to this Clause 13.4. Clauses 13.5 to 13.7 (inclusive) shall apply to any repayment by Novartis under this Clause 13.4, mutatis mutandis. |
13.5 | Subject to Clause 13.7, if any deduction or withholding is required by Applicable Law to be made from any payment required to be made pursuant to Clause 13.2 then the member of GSKs Group making such payment (the payor) shall pay (and, if such payor is not GSK, GSK shall procure that such payor shall pay) to Novartis (the payee) such sum as will, after the deduction or withholding has been made, leave the payee with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding, provided that if the payee shall have assigned or novated the benefit in whole or in part of this Agreement or shall, after the date of this Agreement, have changed its tax residence or the permanent establishment to which the rights under this Agreement are allocated then the liability of the payer under this Clause 13.5 shall be limited to that (if any) which it would have been had no such assignment, novation or change taken place. |
13.6 | If the payor makes an increased payment pursuant to Clause 13.5 and the payee, in respect of the Tax that gave rise to such increased payment, receives and utilises a loss, relief, allowance or credit in respect of any Tax or any deduction in computing its income, profits or gains for the purposes of any Tax, the payee shall reimburse the payor such amount as shall leave the payee in the same position as the payee would have been in had no such deduction or withholding been required to be made. |
13.7 | The parties consider, and shall use reasonable best efforts to secure, that the GSK Break Fee is not and will not be treated for VAT purposes as consideration for a taxable supply. The amount of the GSK Break Fee is inclusive of any amounts in respect of VAT provided that: |
(A) | if the payor of the GSK Break Fee (or the representative member of the VAT group of which the payor is a member) is liable to account for VAT under a reverse charge mechanism, to the extent that the payor (or such representative member) |
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is not entitled to recover (in whole or in part) such VAT from the relevant Tax Authority. The amount of the GSK Break Fee (inclusive of amounts in respect of VAT) shall be reduced to such amount so that the aggregate amount of the GSK Break Fee and such irrecoverable VAT equals the amount of the GSK Break Fee had such GSK Break Fee not been treated as consideration for a taxable supply; and |
(B) | if the payee of the GSK Break Fee (or the representative member of the VAT group of which the payee is a member) is liable to account for VAT, the payee shall issue a valid VAT invoice to the payor and, if such VAT is recoverable (in whole or in part) by the payor (or the representative member of the VAT group of which the payor is a member) the amount of the GSK Break Fee (inclusive of amounts in respect of VAT) shall be increased to such amount as, when the amount of any recoverable VAT is deducted from the increased amount, produces an amount equal to the amount of the GSK Break Fee had such GSK Break Fee not been treated as consideration for a taxable supply. |
13.8 | For the avoidance of doubt: |
(A) | GSK acknowledges that the provisions of this Clause 13 and any payment of the GSK Break Fee shall not in any respect be conditional on the GSK Members having approved the GSK Shareholder Resolution; |
(B) | in no event or circumstance shall GSK be required to pay the GSK Break Fee to Novartis pursuant to Clause 13.1 more than once; and |
(C) | accordingly, subject only to Clauses 13.5 to 13.7 (inclusive), the amount payable by GSK pursuant to Clause 13.1 shall in no event exceed an amount equal to the GSK Break Fee. |
14. | TERMINATION |
14.1 | This Agreement shall terminate: |
(A) | if agreed in writing between the parties; |
(B) | automatically in the event that: |
(i) | the GSK Break Fee is paid pursuant to Clauses 13.1(B) or 13.1(C); |
(ii) | the GSK Break Fee is paid pursuant to Clause 13.1(A) and the time period set out in Clause 13.4 has expired without the relevant amount becoming payable by Novartis to GSK in accordance with Clause 13.4; or |
(iii) | the Conditions have not been satisfied or, where applicable, waived by 31 December 2018. |
14.2 | The following clauses of this Agreement shall survive termination in accordance with Clause 14.1 without limit in time: |
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(A) | in all cases Clauses 1 and 17 to 37 (inclusive) (and Clause 11 would continue to apply in respect of such Clauses); and |
(B) | Clauses 13.1, 13.5, 13.6, 13.7 and 13.8 if this Agreement terminates pursuant to Clause 14.1(B). |
14.3 | Novartis may terminate this Agreement if either of GSK or the Company has breached or failed to perform in any material respect any of its obligations pursuant to Clause 8 within 15 UK Business Days after (but excluding) the Completion Date, provided that the foregoing shall not serve to prohibit Novartis from claiming damages arising in connection with such breach or non-performance or seeking to exercise any other right, power or remedy under this Agreement or otherwise as provided by Applicable Law. |
14.4 | GSK may terminate this Agreement if Novartis has breached or failed to perform in any material respect: |
(A) | any of its obligations under Clauses 5.5 or 5.7 by the required time; or |
(B) | any of its obligations pursuant to Clause 8 within 15 UK Business Days after (but excluding) the Completion Date, |
provided that the foregoing shall not serve to prohibit GSK or the Company from claiming damages arising in connection with such breach or non-performance or seeking to exercise any other right, power or remedy under this Agreement or otherwise as provided by Applicable Law. |
14.5 | Any termination of this Agreement in accordance with this Clause 14 shall be without prejudice to: |
(A) | any accrued rights, obligations and liabilities of any party under this Agreement prior to such termination; and |
(B) | the continuation in full force and effect of the Shareholders Agreement (including Clause 20 thereof), provided that, for the avoidance of doubt, no actions taken by any party under or in accordance with this Agreement shall constitute a breach of the Shareholders Agreement following termination of this Agreement. |
15. | PAYMENTS |
15.1 | Any payment to be made pursuant to this Agreement shall be made in immediately available funds to the bank account(s) notified by the relevant payee to the relevant payer. All sums payable under this Agreement shall be paid free and clear of all deductions, withholdings, set offs or counterclaims whatsoever save only as may be required by law. |
15.2 | Payments of a sum under this Clause 15 shall constitute a payment in full of the sum payable and shall be a good discharge to the payer (and those on whose behalf such payment is made) of the payers obligation to make such payment and the payer (and those on whose behalf such payment is made) shall not be obliged to see to the application of the payment as between those won whose behalf the payment is received. |
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15.3 | If any party defaults on the payment when due of any sum payable under this Agreement, the liability of that party shall be increased to include interest on such sum from (and including) the date on which such payment is due to (but excluding) the date of actual payment (as well after as before judgment) at the Default Rate. |
16. | TAXATION |
16.1 | Without prejudice to the obligations of Novartis pursuant to Clause 13.4, the obligations of the relevant member of GSKs Group (and of GSK, in relation to such obligations) pursuant to Clauses 13.5 to 13.7 (inclusive) and the remainder of this Clause 16, each party shall be responsible for its own liabilities to Tax incurred or otherwise arising as a result of or in connection with entering into or performing its obligations under this Agreement and the transactions contemplated by it and shall bear its own costs incurred in connection with the satisfaction of such liabilities. |
16.2 | If the party to whom a payment in respect of the Consideration Amount or the Excess Cash True-up Amount or the Cash Shortfall True-up Amount (as applicable) is being made (the payee) is or becomes aware of any facts making it reasonably likely that the relevant payer will be required to deduct or withhold any amount in respect of the Consideration Amount or the Excess Cash True-up Amount or the Cash Shortfall True-up Amount (as applicable) (each, a Relevant Tax Deduction), then that payee shall, as soon as reasonably practicable, give notice to the party making the payment (the payer) (including details of the relevant facts and, so far as possible, details of the rate and basis of such withholding). |
16.3 | Subject to the remainder of this Clause 16, if a Relevant Tax Deduction is required by law, the payer shall (except in the case of any interest payable under this Agreement) be obliged to pay to the payee such sum as will after such deduction or withholding has been made leave the payee with the same amount as it would have been entitled to receive in the absence of any such requirement to make a deduction or withholding, provided that if the payee shall have assigned or novated the benefit in whole or in part of this Agreement or shall, after the date of this Agreement, have changed its tax residence or the permanent establishment to which the rights under this Agreement are allocated then the liability of the payer under this Clause 16.3 shall be limited to that (if any) which it would have been had no such assignment, novation or change taken place. |
16.4 | The relevant payee and payer shall, and shall procure that the members of their respective groups shall (at the payees cost), co-operate with each other in good faith and use all reasonable efforts to reduce or mitigate any Relevant Tax Deduction (or its amount) and/or to enable the payee to obtain any available credit or refund in respect of such Relevant Tax Deduction, including, without limitation, making any available claim under an applicable double taxation treaty. |
16.5 | Without prejudice to the generality of Clause 16.4, the relevant payee and payer shall co-operate in good faith to establish or agree the amount or basis of calculation of any Relevant Tax Deduction prior to the relevant payment date (and in this regard the payer shall consider reasonably any relevant information or evidence provided or obtained by the payee) including, if requested by the payee and at the payees expense, by seeking to obtain a ruling or confirmation from a relevant Tax Authority, or obtaining an opinion from reputable local tax counsel or a firm of accountants of international standing satisfactory to the payer (acting reasonably) and instructed jointly by the payee and the payer. |
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16.6 | The payer shall make any Relevant Tax Deduction in the minimum amount required by Applicable Law, provided that: |
(A) | if a double taxation treaty between the jurisdiction under the laws of which the Relevant Tax Deduction is required and the jurisdiction of residence of the relevant payee is in force, the payer shall (and shall procure that any relevant Affiliate shall) make any Relevant Tax Deduction in an amount not exceeding the rate specified in such double taxation treaty (which may be nil), provided that the payee has provided the payer with such evidence as is required under Applicable Law to establish the entitlement of the payee to the benefit of the applicable treaty; and |
(B) | if an opinion from reputable local counsel or a firm of accountants of international standing has been obtained at the request of the payee as envisaged by Clause 16.5, the payer shall (and shall procure that any relevant Affiliate shall) make such Relevant Tax Deduction in an amount or on a basis which is consistent with that opinion (which may result in no withholding or deduction), provided that the payee has indemnified the payer and any relevant Affiliate, to the payers reasonable satisfaction, against any liabilities arising (including any interest and penalties) should such opinion be wholly or partly incorrect. |
16.7 | The payer shall promptly provide the payee with evidence reasonably satisfactory to the payee that a Relevant Tax Deduction has been made and an appropriate amount paid to the relevant Tax Authority. |
16.8 | If any Relevant Tax Deduction is required an additional sum shall be payable in accordance with Clause 16.3 only if and to the extent that such deduction or withholding would not have been required had the payer been resident for Tax purposes only in: |
(A) | the United Kingdom, where the payer is the Company; |
(B) | Switzerland, where the payer is the First Novartis Shareholder; or |
(C) | the United States of America, where the payer is the Second Novartis Shareholder. |
17. | ANNOUNCEMENTS |
17.1 | Subject to Clauses 17.2 and 17.6: |
(A) | no announcement (or other publication) concerning the Put Option Transaction or this Agreement shall be made by or on behalf of GSK or any member of its Group without the prior written consent of Novartis; and |
(B) | no announcement (or other publication) concerning the Put Option Transaction or this Agreement shall be made by or on behalf of Novartis or any member of its Group without the prior written consent of GSK. |
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17.2 | Notwithstanding Clause 17.1, any party may make an announcement concerning the Put Option Transaction if required by: |
(A) | Applicable Law; or |
(B) | any securities exchange or regulatory or governmental body or any Tax Authority to which that party is subject or submits, wherever situated, including (amongst other bodies) the FCA, the London Stock Exchange pic, the Panel on Takeovers and Mergers, HMRC, the SIX Swiss Exchange, the Swiss Federal Tax Administration, the U.S. Securities and Exchange Commission or the New York Stock Exchange, whether or not the requirement has the force of law. |
17.3 | Any announcement to be made pursuant to Clause 17.2 shall, to the extent reasonably practicable and legally permissible, be made only after notice to, and consultation with: |
(A) | in the case of GSK and its Group, Novartis; and |
(B) | in the case of Novartis and its Group, GSK. |
17.4 | Following execution of this Agreement, GSK shall release the GSK Transaction Announcement and Novartis shall release the Novartis Transaction Announcement. |
17.5 | GSK hereby confirms that any redacted content contained in drafts of the GSK Transaction Announcement provided to Novartis prior to the date of this Agreement does not relate to the Put Option Transaction and this Agreement, and, on that basis, such content does not form part of the GSK Transaction Announcement. |
17.6 | The restrictions contained in this Clause 17 shall continue to apply without limit in time, unless otherwise agreed between the parties. |
18. | CONFIDENTIALITY |
18.1 | Each party shall, and shall procure that any other member of their respective Groups shall, treat as confidential all information obtained as a result of the negotiations and/or discussions regarding the Put Option Transaction and/or the entering into and/or performance of this Agreement or any agreements or documents hereunder, which relates to: |
(A) | the provisions of this Agreement and any agreements or documents hereunder (and information provided under it or any of them); |
(B) | the negotiations relating to this Agreement and any agreements or documents hereunder; |
(C) | the subject matter of this Agreement and any agreements or documents hereunder; |
(D) | any termination of any of this Agreement and any agreements or documents hereunder; or |
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(E) | any other party or any member of its Group and its or their business, rights and/or assets. |
18.2 | Notwithstanding the other provisions of this Clause 18, a party may disclose any such confidential information: |
(A) | if and to the extent required by Applicable Law (including, for the avoidance of doubt, the Listing Rules) or for the purpose of any judicial or arbitral proceedings to which it is a party; |
(B) | if and to the extent required by any securities exchange or regulatory, Taxation or other governmental body to which that party or a member of its Group is subject or submits, wherever situated, including (amongst other bodies) the FCA, the London Stock Exchange pic, the Panel on Takeovers and Mergers, HMRC, the SIX Swiss Exchange, the Swiss Federal Tax Administration, the U.S. Securities and Exchange Commission or the New York Stock Exchange, whether or not the requirement for disclosure of such information has the force of law; |
(C) | to a Tax Authority in connection with the disclosing partys (or a member of its Groups) Tax affairs; |
(D) | to any member of its respective Group and its and any member of its respective Groups Representatives, in each case, on a need-to-know basis and provided they have a duty (contractual or otherwise) to keep such information confidential; |
(E) | to the extent the information is in or has come into the public domain through no fault of that party; |
(F) | if it was in the possession of a party or any of its advisers (in either case as evidenced by written records) without any obligations of secrecy prior to it being received or held; |
(G) | if and to the extent the other party has given prior written consent to the disclosure; or |
(H) | in response to any regulatory inquiry or if and to the extent required or in connection with any regulatory consent or clearance process. |
18.3 | Any confidential information to be disclosed pursuant to Clauses 18.1(A), 18.1(B) or 18.1 (C) shall, to the extent reasonably practicable and legally permissible, be disclosed only after notice to and consultation with the other parties. |
18.4 | The restrictions contained in this Clause 18 shall continue to apply to each party without limit in time, unless otherwise agreed between the parties. |
19. | EFFECT OF COMPLETION |
Any provision of this Agreement and any other documents referred to in it which is capable of being performed after but which has not been performed at or before Completion and all warranties, indemnities, covenants and other undertakings and obligations contained in or entered into pursuant to this Agreement shall remain in full force and effect notwithstanding Completion.
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20. | EFFECT OF DEED OF ADHERENCE |
The parties agree to extend the benefit of this Agreement to any person who enters into a Deed of Adherence in respect of this Agreement in the form set out in Schedule 1 of this Agreement, but without prejudice to the continuation inter se of the rights and obligations of the original parties to this Agreement.
21. | SHAREHOLDER UNDERTAKINGS |
21.1 | Each Shareholder undertakes with the other Shareholders that it will: |
(A) | comply with each of the provisions of this Agreement; |
(B) | exercise its voting rights and other rights as a member of the Company and under the Shareholders Agreement in order (insofar as it is able to do so through the exercise of such rights) to give full effect to the provisions of this Agreement and the rights and obligations of the parties as set out in this Agreement; and |
(C) | procure that any Director nominated by it from time to time shall (subject to their fiduciary duties to the Company and, in the case of the B Directors, to the B Directors having been excluded from certain matters pursuant to Clause 5.6) exercise their voting rights and other powers and authorities in order (insofar as they are able to do so through the exercise of such rights, powers and authorities) to give full effect to the provisions of this Agreement and the rights and obligations of the parties as set out in this Agreement. |
22. | REMEDIES AND WAIVERS |
22.1 | No delay or omission by any party to this Agreement in exercising any right, power or remedy provided by law or under this Agreement or any other documents referred to in it shall: |
(A) | affect that right, power or remedy; or |
(B) | operate as a waiver or variation of it. |
22.2 | The single or partial exercise of any right, power or remedy provided by law or under this Agreement shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy. |
22.3 | The rights, powers and remedies provided in this Agreement are cumulative and not exclusive of any rights, powers and remedies provided by law. |
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22.4 | Notwithstanding any express remedies provided under this Agreement and without prejudice to any other right or remedy which any party may have, the parties acknowledge and agree that damages alone may not be an adequate remedy for any breach of this Agreement. Accordingly, the parties may be entitled to the remedies of injunction, specific performance and other equitable relief for any threatened or actual breach of this Agreement. Furthermore, each party acknowledges and agrees that it will not raise any objection to the application by or on behalf of the other party or any other member of its respective Group for any such remedies. |
23. | ASSIGNMENT |
No party shall without the prior written consent of the other parties:
(A) | assign, or purport to assign, all or any part of the benefit of, or its rights or benefits under, this Agreement (together with any causes of action arising in connection with any of them); |
(B) | unless otherwise expressly set out in this Agreement, make a declaration of trust in respect of or enter into any arrangement whereby it agrees to hold in trust for any other person all or any part of the benefit of, or its rights or benefits under, this Agreement; |
(C) | sub-contract or enter into any arrangement whereby another person is to perform any or all of its obligations under this Agreement; |
(D) | transfer, charge or otherwise deal with any of its rights or obligations under this Agreement; or |
(E) | grant, declare, create or dispose of any right or interest in it, in whole or in part, |
and any purported assignment in contravention of this Clause 23 shall be void.
24. | VARIATION |
24.1 | No variation of this Agreement shall be valid unless it is in writing and duly executed by or on behalf of all the parties to it. |
24.2 | If this Agreement is varied: |
(A) | the variation shall not constitute a general waiver of any provisions of this Agreement; |
(B) | the variation shall not affect any rights, obligations or liabilities under this Agreement that have already accrued up to the date of variation; and |
(C) | the rights and obligations of the parties under this Agreement shall remain in full force and effect, except as, and only to the extent that, they are so varied. |
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25. | FURTHER ASSURANCE |
Each party shall at its own cost, from time to time on request of any of the other parties, now or at any time in the future, do or procure the doing of all acts and/or execute or procure the execution of all documents in a form satisfactory to the requesting party which the requesting party may reasonably consider necessary for giving full effect to this Agreement and securing to the requesting party the full benefit of the rights, powers and remedies conferred upon such other party under this Agreement.
26. | ENTIRE AGREEMENT |
26.1 | The parties agree that: |
(A) | this Agreement constitutes the whole and only agreement between the parties relating to the subject matter of this Agreement; |
(B) | except in the case of fraud or fraudulent misrepresentation, each party acknowledges that in entering into this Agreement and/or any other agreement or document hereunder it is not relying upon any pre contractual statement which is not set out in such agreements or documents; |
(C) | except in the case of fraud or fraudulent misrepresentation, no party shall have a right of action against any other party arising out of, or in connection with, any pre-contractual statement which is not set out in this Agreement; and |
(D) | except in the case of fraud or fraudulent misrepresentation and for any liability in respect of a breach of this Agreement, no party (nor any of its Connected Persons) shall owe any duty of care or have any liability in tort or otherwise to any other party (or its respective Connected Persons) in relation to the subject matter of this Agreement. |
26.2 | For the purposes of this Clause 26, pre-contractual statement means any draft, agreement, undertaking, representation, warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of this Agreement made or given by any person at any time prior to the date of this Agreement. |
26.3 | Each party agrees to the terms of this Clause 26 on its own behalf and as agent for each of its Connected Persons. |
27. | NOTICES |
27.1 | A notice under this Agreement shall only be effective if it is in writing. E-mail is permitted. |
27.2 | Notices under this Agreement shall be sent to a party at its address and for the attention of the individual set out below: |
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Party and title of individual |
Address |
E-mail address | ||
GSK |
As stated above |
As shall be notified | ||
For the attention of: Company Secretary |
||||
Novartis |
As stated above |
As shall be notified |
For the attention of:
Head Legal M&A
provided that a party may change its notice details on giving notice to the other party of the change in accordance with this Clause 27.2. That change notice shall only be effective on the day falling five clear UK Business Days after the notification has been received or such later date as may be specified in the notice.
27.3 | Any notice to be sent in connection with this Agreement: |
(A) | to any Novartis Shareholder, shall be sent to Novartis; and |
(B) | to the GSK Shareholder(s) or the Company, shall be sent to GSK. |
27.4 | Any notice given under this Agreement shall be deemed to have been duly given as follows: |
(A) | if delivered personally, on delivery; |
(B) | if sent by first class inland post, two clear UK Business Days after the date of posting; |
(C) | if sent by airmail, six clear UK Business Days after the date of posting; and |
(D) | if sent by e-mail, when despatched. |
27.5 | Any notice given under this Agreement outside Working Hours in the place to which it is addressed shall be deemed not to have been given until the start of the next period of Working Hours in such place. |
27.6 | No notice given under this Agreement may be withdrawn or revoked except with the agreement of the other parties. |
27.7 | The provisions of this Clause 27 shall not apply in relation to the Service Documents. |
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28. | COSTS AND EXPENSES |
Without prejudice to Clauses 13 and 16, each party shall bear its own costs and expenses in connection with the Put Option Transaction, including, for the avoidance of doubt and without limitation, the negotiation, entering into and completion of this Agreement.
29. | INVALIDITY |
29.1 | If at any time any provision (or part of any provision) of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that shall not affect or impair: |
(A) | the legality, validity or enforceability in that jurisdiction of any other (or the remainder of a) provision of this Agreement; or |
(B) | the legality, validity or enforceability under the law of any other jurisdiction of that or any other provision of this Agreement. |
29.2 | Each of the provisions of this Agreement is severable. |
29.3 | If and to the extent that any provision of this Agreement: |
(A) | is held to be, or becomes, invalid or unenforceable under any Applicable Law; but |
(B) | would be valid, binding or enforceable if some part of the provisions were deleted or amended, |
then the provision shall apply with the minimum modifications necessary to make it valid, binding and enforceable. |
30. | CONFLICT WITH ARTICLES OF ASSOCIATION |
In the event of any ambiguity or discrepancy between the provisions of this Agreement and the articles of association or other constitutional documents of a member of the Companys Group, the provisions of this Agreement shall prevail as between the parties to the extent of the inconsistency for so long as this Agreement remains in force. Each of the parties shall (as applicable) exercise all voting and other rights and powers available to it so as to give effect to the provisions of this Agreement and, if necessary, to procure (so far as it is able to do so) any required amendment to the articles of association or such other constitutional documents.
31. | COUNTERPARTS |
31.1 | This Agreement may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. |
31.2 | Each counterpart shall constitute an original of this Agreement, but all the counterparts shall together constitute but one and the same instrument. |
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32. | THIRD PARTY RIGHTS |
32.1 | Certain provisions of this Agreement (such provisions being the Third Party Rights Provisions) confer a benefit on certain persons named therein who are not a party to this Agreement (each, a Third Party Beneficiary) and, subject to the remaining provisions of this Clause 32, are intended to be enforceable by the Third Party Beneficiary by virtue of the Contracts (Rights of Third Parties) Act 1999. |
32.2 | The parties do not intend that any term of this Agreement, save for the Third Party Rights Provisions, should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement. |
32.3 | Notwithstanding the provisions of Clause 32.1, this Agreement may be terminated or varied in any way and at any time by the agreement of the parties to this Agreement without the consent of any Third Party Beneficiary. |
33. | NO PARTNERSHIP |
Nothing in this Agreement and no action taken by the parties under this Agreement shall constitute a partnership, association or other co-operative entity between any of the parties or constitute any party the agent of any other party for any purpose. |
34. | GOVERNING LAW |
This Agreement is to be governed by, and construed in accordance with, English law. Any matter, claim or dispute arising out of, or in connection with, this Agreement, whether contractual or non-contractual, is to be governed by and determined in accordance with English law. |
35. | JURISDICTION |
35.1 | The courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non-contractual, arising out of, or in connection with, this Agreement. Any Proceedings shall be brought in the English courts. |
35.2 | Each party waives (and agrees not to raise) any objection, on the grounds of forum non conveniens or on any other ground, to the taking of Proceedings in the English courts. Each party also agrees that a judgment against it in Proceedings brought in England shall be conclusive and binding upon it and may be enforced in any other jurisdiction. |
35.3 | Each party irrevocably submits and agrees to submit to the exclusive jurisdiction of the English courts. |
36. | LANGUAGE |
36.1 | Each notice or other communication under, or in connection with, this Agreement shall be: |
(A) | in English; or |
47
(B) | if not in English, accompanied by an English translation made by a translator, and certified by an officer of the party giving the notice to be accurate. |
36.2 | The receiving party/agent shall be entitled to assume the accuracy of, and rely upon any English translation of, any document provided pursuant to Clause 36.1(B). |
37. | AGENT FOR SERVICE |
37.1 | Each of Novartis and the Novartis Shareholders irrevocably appoints Hackwood Secretaries Limited of One Silk Street, London, EC2Y 8HQ to be its agent for the receipt of Service Documents. Each such party agrees that any Service Document may be effectively served on it in connection with Proceedings in England and Wales by service on its agent effected in any manner permitted by the UK Civil Procedure Rules. |
37.2 | If the agent at any time ceases for any reason to act as such, the relevant appointing party shall appoint a replacement agent having an address for service in England or Wales and shall notify GSK of the name and address of the replacement agent. Failing such appointment and notification, GSK shall be entitled by notice to the relevant appointing party to appoint a replacement agent to act on its behalf. The provisions of this Clause 37 applying to service on an agent apply equally to service on a replacement agent. |
37.3 | A copy of any Service Document served on an agent shall also be sent by post to the relevant party. Failure or delay in so doing shall not prejudice the effectiveness of service of the Service Document. |
48
SCHEDULE 1
FORM OF DEED OF ADHERENCE
THIS DEED is made on []
by [], a company incorporated [in] / [under the laws of] [] under registered number [], whose [registered] / [principal] office is at [] (the New Party).
WHEREAS:-
(A) | By a transfer dated [], [] transferred to the New Party [[] [A/B] Shares of £1 each in the capital of] GlaxoSmithKline Consumer Healthcare Holdings Limited (the Company) (the Transferring Shares). |
(B) | This Deed is entered into in compliance with the terms of Clause [5.1(B)] / [6.4] of the put option implementation agreement dated [] between the GSK Shareholder, the Novartis Shareholders, GSK, Novartis and the Company as such agreement shall have been or may be amended, or supplemented or novated from time to time (the Put Option Implementation Agreement). |
THIS AGREEMENT WITNESSES as follows:-
1. | Words and expressions defined in the Put Option Implementation Agreement shall, unless the context otherwise requires, have the same meanings when used in this Deed. |
2. | The New Party undertakes to adhere to and be bound by the provisions of the Put Option Implementation Agreement, and to perform the obligations imposed by the Put Option Implementation Agreement which are to be performed on or after the date of this Deed, in all respects as if the New Party were a party to the Put Option Implementation Agreement and named therein as a [GSK Shareholder] / [Novartis Shareholder]. |
3. | The New Party warrants to the other parties to the Put Option Implementation Agreement (and each other person who may from time to time expressly adhere to the Put Option Implementation Agreement) in the terms set out in [Clause 10.1]1 / [Clauses 10.1 and 10.2]2 of the Put Option Implementation Agreement, but so that such warranties shall be deemed to be given on the date on which the New Party becomes the registered holder of the Transferring Shares. |
4. | This Deed is made for the benefit of (a) the original parties to the Put Option Implementation Agreement and (b) any other person or persons who after the date of the Put Option Implementation Agreement (and whether or not prior to or after the date of this Deed) adheres to the Put Option Implementation Agreement. |
1 | Note: Drafting option to be used in the event of a transfer by the GSK Shareholder of some or all A Shares. |
2 | Note: Drafting option to be used in the event of a transfer by the Novartis Shareholder of B Shares in accordance with Clause 17 of the Shareholders Agreement. |
5. | This Deed shall be governed by and construed in accordance with English law. |
6. | The courts of England are to have jurisdiction to settle any dispute arising out of or in connection with this Deed. Any Proceedings may therefore be brought in the English courts. The New Party agrees that this jurisdiction agreement is irrevocable and that it is for the benefit of each of the parties referred to in Paragraph 4 of this Deed. Nothing contained in this Paragraph 6 shall limit the right of any person having the benefit of this Deed to take Proceedings against the New Party in any other court or in the courts of more than one jurisdiction at the same time. |
IN WITNESS of which this Deed has been executed and delivered by the New Party as a deed on the date which first appears above.
[EXECUTION BLOCKS]
50
SCHEDULE 2
FORM OF RESIGNATION AND RELEASE LETTER
[date]
To: | The Directors |
GlaxoSmithKline Consumer Healthcare Holdings Limited (the Company)
980 Great Western Road Brentford
Middlesex TW8 9GS
Dear Sirs
I hereby resign my office as a director of the Company with immediate effect.
I confirm that I have no claims against the Company, or any of its subsidiaries, for breach of contract, compensation for loss of office or on any other account whatsoever. Save for the obligation of the Company to indemnify me pursuant to Clause 10.4(A) of the put option implementation agreement dated [] between, amongst others, GSK PLC, Novartis AG and the Company (the Directors Indemnity), any insurance policy in respect of directors and officers liability in place for my benefit and any deed of indemnity in place for my benefit, I confirm that there is no agreement or arrangement outstanding under which the Company or any of its subsidiaries has or could have any obligation to me other than in respect of accrued remuneration or expenses. To the extent that any such claim exists or may exist (except for any claim pursuant to the Directors Indemnity) I hereby irrevocably waive such claim and release the Company from any liability it has or might have in respect thereof.
Notwithstanding the foregoing, nothing in this letter shall waive any indemnity to which I might be entitled at law or under the articles of association of the Company, the provisions of the indemnity in Clause 10.4(A) (as described above), any insurance policy in respect of directors and officers liability in place for my benefit and any deed of indemnity in place for my benefit in respect of any act, matter or thing done, permitted or suffered by me in good faith whilst a director of the Company and in my capacity as such.
Yours faithfully
Signed as a deed by [name of individual] in the presence of: |
) |
| ||
) |
(Signature of individual) | |||
Witnesss signature: |
| |||
Name (print): |
| |||
Occupation: |
| |||
Address: |
|
52
LIST OF AGREED FORM DOCUMENTS
The following documents are required to be in the Agreed Form pursuant to this Agreement:
| the GSK Transaction Announcement |
| the Novartis Transaction Announcement |
IN WITNESS whereof, the parties have entered into this Agreement the day and year first before written
SIGNED BY |
David Redfern |
/s/ David Redfern | ||||
duly authorised for and on behalf of GLAXOSMITHKLINE PLC |
Signature |
SIGNED BY |
David Redfern |
/s/ David Redfern | ||||
duly authorised for and on behalf of SETFIRST LIMITED |
Signature |
SIGNED BY |
David Redfern |
/s/ David Redfern | ||||
duly authorised for and on behalf of GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED |
Signature |
SIGNED BY |
Keren Haruvi |
/s/ Keren Haruvi | ||||
duly authorised for and on behalf of NOVARTIS AG |
Signature | |||||
SIGNED BY |
Michael Stewart |
/s/ Michael Stewart | ||||
duly authorised for and on behalf of NOVARTIS AG |
Signature |
SIGNED BY |
Keren Haruvi |
/s/ Keren Haruvi | ||||
duly authorised for and on behalf of NOVARTIS HOLDING AG |
Signature | |||||
SIGNED BY |
Michael Stewart |
/s/ Michael Stewart | ||||
duly authorised for and on behalf of NOVARTIS HOLDING AG |
Signature |
SIGNED BY |
Keren Haruvi |
/s/ Keren Haruvi | ||||
duly authorised for and on behalf of NOVARTIS FINANCE CORPORATION |
Signature | |||||
SIGNED BY |
Michael Stewart |
/s/ Michael Stewart
| ||||
duly authorised for and on behalf of NOVARTIS FINANCE CORPORATION |
Signature |
Exhibit 4.8
Execution version
GlaxoSmithKline Consumer Healthcare Holdings Limited
980 Great West Road
Brentford
Middlesex, TW8 9GS
GlaxoSmithKline plc
980 Great West Road
Brentford
Middlesex, TW8 9GS
Setfirst Limited
980 Great West Road
Brentford
Middlesex, TW8 9GS
Novartis AG
Lichstrasse 35
4056 Basel
Switzerland
FAO: Head of Legal M&A
Novartis Holding AG
c/o Novartis AG
Lichstrasse 35
4056 Basel
Switzerland
FAO: Head of Legal M&A
Novartis Finance Corporation
c/o Novartis AG
Lichstrasse 35
4056 Basel
Switzerland
FAO: Head of Legal M&A
1 June 2018
Dear Sirs,
Proposed buyout of Novartiss 36.5% interest in GlaxoSmithKline Consumer Healthcare Holdings Limited: settlement
1. | Reference is made to the put option implementation agreement entered into on 27 March 2018 between GlaxoSmithKline Consumer Healthcare Holdings Limited, GlaxoSmithKline plc, Setfirst Limited, Novartis AG, Novartis Holding AG and Novartis Finance Corporation (the Put Option Implementation Agreement). Unless otherwise defined in this letter, terms defined in the Put Option Implementation Agreement shall have the same meaning when used in this letter. |
1
2. | The parties to the Put Option Implementation Agreement hereby acknowledge and agree that the Put Option Implementation Agreement shall be amended by: |
(A) | deleting the entire text of Clause 8.3 and replacing it with the following: |
8.3 | Subject to Clause 8.4, promptly following the Cancellation having taken effect in accordance with Applicable Law, the Company shall, and GSK shall procure that the Company shall, pay in accordance with Clause 15: |
(A) | to the First Novartis Shareholder USD12,056,164,384; and |
(B) | to the Second Novartis Shareholder USD943,835,616, |
in each case:
(i) | in the event that: |
(a) | the Cancellation takes effect in accordance with Applicable Law on a Completion Business Day; and |
(b) | the Company does not receive confirmation from the Registrar as to the same at a time reasonably sufficient to enable it promptly to instruct the making of such payments to the First Novartis Shareholder and the Second Novartis Shareholder before 15:00 (London time) on such Completion Business Day, |
on the next following Completion Business Day (and the Company shall (and GSK shall procure that the Company shall) instruct the making of such payments by no later than 10:00 (London time) on such day); or
(ii) | in any other event, on the same Completion Business Day as the Cancellation takes effect in accordance with Applicable Law (or, if the Cancellation takes effect in accordance with Applicable Law on a day that is not a Completion Business Day, on the next following Completion Business Day).; and |
(B) | deleting the entire text of Clause 8.6 and replacing it with the following: |
8.6 | In the event that the Consideration Amount is not paid by or on the first Completion Business Day after the Completion Date, interest shall be payable on the Consideration Amount from (and including) the next day to (but excluding) the date of actual payment (as well after as before judgment) at the Interest Rate, provided that: |
2
(A) | no interest shall be payable under this Clause 8.6 in respect of any day where interest is also levied under Clause 15.3; and |
(B) | for the purposes of this Clause 8.6 only, where the Consideration Amount is paid on the next following Completion Business Day after the Completion Business Day on which the Cancellation takes effect in accordance with Applicable Law pursuant to and in accordance with Clause 8.3(B)(i), such payment shall be deemed to have been made on the Completion Business Day on which the Cancellation so took effect. |
3. | Save as amended pursuant to this letter, the Put Option Implementation Agreement shall continue in full force and effect. The Put Option Implementation Agreement and this letter shall be read and construed as one document. |
4. | The parties to this letter intend this letter to be executed as a deed and confirm that it is executed and delivered as a deed on the date set out on page 1, notwithstanding the fact that they may only execute it under hand. |
5. | This letter may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this letter, but all the counterparts shall together constitute but one and the same instrument. |
6. | This letter is to be governed by, and construed in accordance with, English law. Any matter, claim or dispute arising out of, or in connection with, this letter, whether contractual or non-contractual, is to be governed by and determined in accordance with English law. |
7. | The courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non-contractual, arising out of, or in connection with, this letter. Any Proceedings shall be brought in the English courts. Each party waives (and agrees not to raise) any objection, on the grounds of forum non conveniens or on any other ground, to the taking of Proceedings in the English courts. Each party also agrees that a judgment against it in Proceedings brought in England shall be conclusive and binding upon it and may be enforced in any other jurisdiction. Each party irrevocably submits and agrees to submit to the exclusive jurisdiction of the English courts. |
Yours faithfully,
[signatures follow]
3
Executed as a DEED by GlaxoSmithKline Consumer Healthcare Holdings Limited acting as an authorised signatory in the presence of: |
} |
/s/ Tobias Hestler Authorised signatory | ||
Witness signature: |
/s/ Raman Kaur | |||
Name (print): |
Raman Kaur | |||
Occupation: |
Corporate Secretariat | |||
Address: |
980 Great West Road, Brentford TW8 9GS |
Executed as a DEED by Setfirst Limited acting as an authorised signatory in the presence of: |
} |
/s/ Subesh Williams Authorised signatory | ||
Witness signature: |
/s/ Raman Kaur | |||
Name (print): |
Raman Kaur | |||
Occupation: |
Corporate Secretariat | |||
Address: |
980 Great West Road, Brentford TW8 9GS |
Executed as a DEED by Setfirst Limited acting as an authorised signatory in the presence of: |
} |
/s/ Subesh Williams Authorised signatory | ||
Witness signature: |
/s/ Raman Kaur | |||
Name (print): |
Raman Kaur | |||
Occupation: |
Corporate Secretariat | |||
Address: |
980 Great West Road, Brentford TW8 9GS |
We acknowledge and agree to the contents of this letter.
Executed as a DEED by
Keren Haruvi |
and | } | /s/ Keren Haruvi | |||
Michael Stewart |
/s/ Michael Stewart | |||||
on behalf of Novartis AG |
We acknowledge and agree to the contents of this letter.
Executed as a DEED by
Keren Haruvi |
and | } | /s/ Keren Haruvi | |||
Michael Stewart |
/s/ Michael Stewart | |||||
on behalf of Novartis Holding AG |
We acknowledge and agree to the contents of this letter.
Executed as a DEED by
Keren Haruvi |
and | } | /s/ Keren Haruvi | |||
Michael Stewart |
/s/ Michael Stewart | |||||
on behalf of Novartis Finance Corporation |
Exhibit 4.9
Execution version
GlaxoSmithKline Consumer Healthcare Holdings Limited
980 Great West Road
Brentford
Middlesex, TW8 9GS
GlaxoSmithKline plc
980 Great West Road
Brentford
Middlesex, TW8 9GS
Setfirst Limited
980 Great West Road
Brentford
Middlesex, TW8 9GS
Novartis AG
Lichstrasse 35
4056 Basel
Switzerland
FAO: Head of Legal M&A
Novartis Holding AG
c/o Novartis AG
Lichstrasse 35
4056 Basel
Switzerland
FAO: Head of Legal M&A
Novartis Finance Corporation
c/o Novartis AG
Lichstrasse 35
4056 Basel
Switzerland
FAO: Head of Legal M&A
30 July 2018
Dear Sirs,
Buyout of Novartiss 36.5% interest in GlaxoSmithKline Consumer Healthcare Holdings Limited: true-up following completion
1. | Reference is made to the put option implementation agreement entered into on 27 March 2018 between GlaxoSmithKline Consumer Healthcare Holdings Limited, GlaxoSmithKline plc, Setfirst Limited, Novartis AG, Novartis Holding AG and Novartis Finance Corporation, as amended by a letter agreement dated 1 June 2018 (the Put Option Implementation Agreement). Unless otherwise defined in this letter, terms defined in the Put Option Implementation Agreement shall have the same meaning when used in this letter. |
1
2. | The parties to the Put Option Implementation Agreement hereby acknowledge and agree that the Put Option Implementation Agreement shall, with effect from the date hereof, be amended by: |
(A) | deleting from Clause 1.1 the definitions of Completion Balance Sheet, Excess Cash True-up Amount and Cash Shortfall True-up Amount; |
(B) | inserting into Clause 1.1 the following definitions (in alphabetical order): |
(i) | Audited Completion Balance Sheet has the meaning given in Clause 9.2; |
(ii) | Final Cash Shortfall True-up Amount has the meaning given in Clause 9.5(B); |
(iii) | Final Excess Cash True-up Amount has the meaning given in Clause 9.5(A); |
(iv) | Interim Cash Shortfall True-up Amount has the meaning given in Clause 9.4(B); |
(v) | Interim Excess Cash True-up Amount has the meaning given in Clause 9.4(A); and |
(vi) | Unaudited Completion Balance Sheet has the meaning given in Clause 9.1; |
(C) | deleting the entire text of Clause 6.1(ii) and replacing it with the following: |
(ii) | any reduction of share capital or any reducible reserve or account shall ensure that sufficient distributable reserves remain to allow payment of the Interim Excess Cash True-up Amount and/or the Final Excess Cash True-up Amount (as applicable); and; |
(D) | deleting the entire text of Clause 9 and replacing it with the following: |
9. | TRUE-UP FOLLOWING COMPLETION |
9.1 | As soon as reasonably practicable and, in any event, within 45 UK Business Days following Completion, the Company shall, and GSK shall procure that the Company shall, (acting in good faith) prepare and provide to the parties to this Agreement an unaudited interim consolidated balance sheet for the Company as at (and including) 31 May 2018, as extracted from the monthly management accounts of the Company prepared in the ordinary course of business, with the notes and/or schedules thereto showing the amount of Readily Available Cash (the Unaudited Completion Balance Sheet). |
2
9.2 | As soon as reasonably practicable and, in any event, on or before 30 November 2018, the Company shall, and GSK shall procure that the Company shall, (acting in good faith) prepare (in accordance with the Accounting Policies) and provide to the parties to this Agreement an audited interim consolidated balance sheet for the Company as at (and including) 31 May 2018 with the notes and/or schedules thereto showing the amount of Readily Available Cash (the Audited Completion Balance Sheet). |
9.3 | For the avoidance of doubt, the Unaudited Completion Balance Sheet and the Audited Completion Balance Sheet shall be prepared on a basis that disregards: |
(A) | matters occurring in any period from and including the Completion Date (including, without limitation, the Cancellation, payment of the Consideration Amount, the Interim Excess Cash True-up Amount, the Interim Cash Shortfall True-up Amount, the Final Excess Cash True-up Amount or the Final Cash Shortfall True-up Amount (as applicable)); and |
(B) | any changes affecting the balance sheet of the Company arising as a result of or in connection with the Cancellation (including steps preparatory thereto) or the Put Option Transaction, and including, without limitation: |
(i) | any such changes relating to the receipt of any financing by the Company in connection with the Put Option Transaction, including the issuance of shares by any member of the Companys Group to any member of the GSK Group or any Borrowings by any member of the Companys Group; and |
(ii) | any Preparatory Capital Step that is undertaken. |
9.4 | If, following the provision of the Unaudited Completion Balance Sheet in accordance with Clause 9.1, the aggregate amount shown in the Unaudited Completion Balance Sheet in respect of Readily Available Cash is: |
(A) | greater than the Base Cash Amount, then the Company shall pay to the Novartis Shareholders (pro rata according to their respective Percentage Interests immediately prior to Completion) an amount in GBP equal to the lesser of (i) such difference or (ii) the amount of distributable reserves as stated in the Unaudited Completion Balance Sheet, in either case multiplied by the Novartis Percentage (the Interim Excess Cash True-up Amount); or |
(B) | less than the Base Cash Amount, then the Novartis Shareholders shall pay to the Company an amount in GBP equal to such difference multiplied by the Novartis Percentage (the Interim Cash Shortfall True-up Amount) |
in either case, on the first Completion Business Day that is at least ten UK Business Days after (but excluding) the date on which the Unaudited Completion Balance Sheet is provided in accordance with Clause 9.1.
3
9.5 | If, following the provision of the Audited Completion Balance Sheet in accordance with Clause 9.2, the aggregate amount shown in the Audited Completion Balance Sheet in respect of Readily Available Cash is: |
(A) | greater than the aggregate amount shown in the Unaudited Completion Balance Sheet in respect of Readily Available Cash, then the Company shall pay to the Novartis Shareholders (pro rata according to their respective Percentage Interests immediately prior to Completion) an amount in GBP equal to the lesser of (i) such difference or (ii) the amount of distributable reserves as stated in the Audited Completion Balance Sheet, in either case multiplied by the Novartis Percentage (the Final Excess Cash True-up Amount); or |
(B) | less than the aggregate amount shown in the Unaudited Completion Balance Sheet in respect of Readily Available Cash, then the Novartis Shareholders shall pay to the Company an amount in GBP equal to such difference multiplied by the Novartis Percentage (the Final Cash Shortfall True-up Amount) |
in either case, on the first Completion Business Day that is at least ten UK Business Days after (but excluding) the date on which the Audited Completion Balance Sheet is provided in accordance with Clause 9.2.
9.6 | For the avoidance of doubt, any payment made or liability incurred pursuant to Clauses 9.4 or 9.5 by either the Novartis Shareholders or the Company shall be treated as an adjustment to the consideration for the Cancellation to the extent of the payment or liability.; and |
(E) | deleting the entire text of Clause 16.2 and replacing it with the following: |
16.2 | If the party to whom a payment in respect of the Consideration Amount, the Interim Excess Cash True-up Amount, the Interim Cash Shortfall True-up Amount, the Final Excess Cash True-up Amount or the Final Cash Shortfall True-up Amount (as applicable) is being made (the payee) is or becomes aware of any facts making it reasonably likely that the relevant payer will be required to deduct or withhold any amount in respect of the Consideration Amount, the Interim Excess Cash True-up Amount, the Interim Cash Shortfall True-up Amount, the Final Excess Cash True-up Amount or the Final Cash Shortfall True-up Amount (as applicable) (each, a Relevant Tax Deduction), then that payee shall, as soon as reasonably practicable, give notice to the party making the payment (the payer) (including details of the relevant facts and, so far as possible, details of the rate and basis of such withholding).. |
4
3. | Save as amended pursuant to this letter, the Put Option Implementation Agreement shall continue in full force and effect. The Put Option Implementation Agreement and this letter shall be read and construed as one document. |
4. | The parties to this letter intend this letter to be executed as a deed and confirm that it is executed and delivered as a deed on the date set out on page 1, notwithstanding the fact that they may only execute it under hand. |
5. | This letter may be executed in any number of counterparts, and by the parties on separate counterparts, but shall not be effective until each party has executed at least one counterpart. Each counterpart shall constitute an original of this letter, but all the counterparts shall together constitute but one and the same instrument. |
6. | This letter is to be governed by, and construed in accordance with, English law. Any matter, claim or dispute arising out of, or in connection with, this letter, whether contractual or non-contractual, is to be governed by and determined in accordance with English law. |
7. | The courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non-contractual, arising out of, or in connection with, this letter. Any Proceedings shall be brought in the English courts. Each party waives (and agrees not to raise) any objection, on the grounds of forum non conveniens or on any other ground, to the taking of Proceedings in the English courts. Each party also agrees that a judgment against it in Proceedings brought in England shall be conclusive and binding upon it and may be enforced in any other jurisdiction. Each party irrevocably submits and agrees to submit to the exclusive jurisdiction of the English courts. |
Yours faithfully,
[signatures follow]
5
Executed as a DEED by GlaxoSmithKline Consumer Healthcare acting as an authorised signatory in the presence of: |
) ) ) ) |
/s/ Tobias Hestler Authorised signatory | ||
Witness signature: |
/s/ Raman Kaur | |||
Name (print): |
Raman Kauer | |||
Occupation: |
Company Secretary | |||
Address: |
980 Great West Road, Brentford TW8 9GS UK. |
Executed as a DEED by GlaxoSmithKline plc acting as an authorised signatory in the presence of: |
) ) ) ) |
/s/ Subesh Williams Authorised signatory | ||
Witness signature: |
/s/ Raman Kaur | |||
Name (print): |
Raman Kaur | |||
Occupation: |
Company Secretary | |||
Address: |
980 Great West Road, Brentford TW8 9GS UK. |
Executed as a DEED by Setfirst Limited acting as an authorised signatory in the presence of: |
) ) ) ) |
/s/ Subesh Williams Authorised signatory | ||
Witness signature: |
/s/ Raman Kaur | |||
Name (print): |
Raman Kaur | |||
Occupation: |
Company Secretary | |||
Address: |
980 Great West Road, Brentford TW8 9GS UK. |
We acknowledge and agree to the contents of this letter:
Executed as a DEED by |
) ) ) ) ) ) ) ) |
|||||
Keren Haruvi |
and | /s/ Keren Haruvi | ||||
Michael Stewart |
/s/ Michael Stewart | |||||
on behalf of Novartis Finance Corporation |
) ) |
We acknowledge and agree to the contents of this letter:
Executed as a DEED by |
) ) ) ) ) ) ) ) |
|||||
Keren Haruvi |
and | /s/ Keren Haruvi | ||||
Michael Stewart |
/s/ Michael Stewart | |||||
on behalf of Novartis Holding AG | ) |
We acknowledge and agree to the contents of this letter:
Executed as a DEED by |
) ) ) ) ) ) ) ) |
|||||
Keren Haruvi |
and | /s/ Keren Haruvi | ||||
Michael Stewart |
/s/ Michael Stewart | |||||
on behalf of Novartis AG | ) |
EXHIBIT 4.10
STOCK AND ASSET PURCHASE AGREEMENT
by and among
PFIZER INC.,
GLAXOSMITHKLINE PLC
and
GLAXOSMITHKLINE CONSUMER HEALTHCARE HOLDINGS LIMITED
DATED AS OF DECEMBER 19, 2018
Confidential Treatment Requested by GlaxoSmithkline plc
TABLE OF CONTENTS | ||||||
Page |
||||||
ARTICLE I | ||||||
DEFINITIONS AND TERMS | ||||||
Section 1.1 |
Definitions | 2 | ||||
Section 1.2 |
Interpretation | 39 | ||||
ARTICLE II | ||||||
PURCHASE AND SALE | ||||||
Section 2.1 |
Purchase and Sale of Purchased Assets | 40 | ||||
Section 2.2 |
Consents; Shared Contracts | 43 | ||||
Section 2.3 |
Excluded Assets | 47 | ||||
Section 2.4 |
Assumption of Assumed Liabilities | 50 | ||||
Section 2.5 |
Retained Liabilities | 51 | ||||
Section 2.6 |
Purchase Consideration | 51 | ||||
Section 2.7 |
Delivery of the Purchase Consideration | 52 | ||||
Section 2.8 |
Estimated Closing Statement; Estimated Adjustment Payments | 52 | ||||
Section 2.9 |
Post-Closing Working Capital and Net Cash Adjustments | 53 | ||||
Section 2.10 |
Withholding | 57 | ||||
ARTICLE III | ||||||
CLOSING | ||||||
Section 3.1 |
Closing | 57 | ||||
Section 3.2 |
Restated Purchaser Articles of Association | 58 | ||||
ARTICLE IV | ||||||
REPRESENTATIONS AND WARRANTIES OF SELLER PARENT | ||||||
Section 4.1 |
Organization | 58 | ||||
Section 4.2 |
Authority; Binding Effect | 58 | ||||
Section 4.3 |
Conveyed Subsidiaries; Capital Structure | 59 | ||||
Section 4.4 |
No Conflicts; Consents | 60 | ||||
Section 4.5 |
Governmental Authorization | 61 | ||||
Section 4.6 |
Financial Information | 61 | ||||
Section 4.7 |
Absence of Material Changes | 62 | ||||
Section 4.8 |
No Litigation | 62 | ||||
Section 4.9 |
Compliance with Laws | 63 | ||||
Section 4.10 |
Product Registrations; Manufacturing Registrations; Regulatory Compliance; Product Liability and Recalls | 63 | ||||
Section 4.11 |
Environmental Matters | 64 | ||||
Section 4.12 |
Material Contracts | 65 | ||||
Section 4.13 |
Intellectual Property | 66 | ||||
Section 4.14 |
Real Property | 67 | ||||
Section 4.15 |
Assets | 68 | ||||
Section 4.16 |
Taxes | 69 | ||||
Section 4.17 |
Employee Benefits; Employees | 71 | ||||
Section 4.18 |
Global Trade Controls; Anti-Corruption Matters | 73 | ||||
Section 4.19 |
Brokers | 74 | ||||
Section 4.20 |
No Other Representations or Warranties | 74 |
i
ARTICLE V | ||||||
REPRESENTATIONS AND WARRANTIES OF PURCHASER PARENT | ||||||
Section 5.1 |
Organization | 76 | ||||
Section 5.2 |
Authority; Binding Effect | 77 | ||||
Section 5.3 |
Purchaser; Purchaser Subsidiaries; Capital Structure | 78 | ||||
Section 5.4 |
No Conflicts; Consents | 79 | ||||
Section 5.5 |
Governmental Authorization | 80 | ||||
Section 5.6 |
Financial Information | 80 | ||||
Section 5.7 |
Absence of Material Changes | 81 | ||||
Section 5.8 |
Securities Act | 81 | ||||
Section 5.9 |
No Litigation | 81 | ||||
Section 5.10 |
Compliance with Laws | 81 | ||||
Section 5.11 |
Product Registrations; Manufacturing Registrations; Regulatory Compliance; Product Liability and Recalls | 82 | ||||
Section 5.12 |
Environmental Matters | 83 | ||||
Section 5.13 |
Material Contracts | 84 | ||||
Section 5.14 |
Intellectual Property | 85 | ||||
Section 5.15 |
Real Property | 86 | ||||
Section 5.16 |
Assets | 87 | ||||
Section 5.17 |
Taxes | 88 | ||||
Section 5.18 |
Employee Benefits; Employees | 90 | ||||
Section 5.19 |
Global Trade Controls; Anti-Corruption Matters | 93 | ||||
Section 5.20 |
Brokers | 93 | ||||
Section 5.21 |
No Other Representations or Warranties | 93 | ||||
ARTICLE VI | ||||||
COVENANTS | ||||||
Section 6.1 |
Information and Documents | 96 | ||||
Section 6.2 |
Conduct of Business | 98 | ||||
Section 6.3 |
Regulatory Approvals | 105 | ||||
Section 6.4 |
Reasonable Best Efforts; Further Assurances | 115 | ||||
Section 6.5 |
Tax Matters | 117 | ||||
Section 6.6 |
Employees and Employee Benefits | 136 | ||||
Section 6.7 |
Intercompany Accounts and Arrangements | 153 | ||||
Section 6.8 |
Access to Records and Information | 155 | ||||
Section 6.9 |
Mail and Other Communications | 156 | ||||
Section 6.10 |
Transfer of Business IP and Registrations | 157 | ||||
Section 6.11 |
No Solicitation | 157 | ||||
Section 6.12 |
Confidentiality | 157 | ||||
Section 6.13 |
Guarantees; Letters of Credit | 160 | ||||
Section 6.14 |
Certain Ancillary Agreements | 161 | ||||
Section 6.15 |
Retained and Transferred Names | 162 | ||||
Section 6.16 |
Compliance with WARN | 163 | ||||
Section 6.17 |
Litigation Support; Non-Indemnified Claims | 164 | ||||
Section 6.18 |
Insurance | 165 | ||||
Section 6.19 |
Trade Notification | 167 | ||||
Section 6.20 |
Accounts; Products Received | 167 | ||||
Section 6.21 |
Directors and Officers Indemnification | 167 | ||||
Section 6.22 |
Return of Assets; Transfer of Purchased Assets | 168 | ||||
Section 6.23 |
Bulk Transfer Laws | 169 |
ii
Section 6.24 |
Purchaser Parent Shareholder Meeting; Purchaser Parent Board Recommendation | 170 | ||||
Section 6.25 |
Resignations | 173 | ||||
Section 6.26 |
Remedial Action Access | 173 | ||||
Section 6.27 |
Acknowledgements | 174 | ||||
ARTICLE VII | ||||||
INDEMNIFICATION | ||||||
Section 7.1 |
Indemnification by Seller Parent and Purchaser Parent | 174 | ||||
Section 7.2 |
Indemnification by Purchaser | 175 | ||||
Section 7.3 |
Indemnification Procedures | 175 | ||||
Section 7.4 |
Expiration | 177 | ||||
Section 7.5 |
Certain Limitations | 178 | ||||
Section 7.6 |
Losses Net of Insurance, Etc. | 178 | ||||
Section 7.7 |
No Right of Set-Off | 178 | ||||
Section 7.8 |
Materiality | 179 | ||||
Section 7.9 |
Mitigation; Other Limitations | 179 | ||||
Section 7.10 |
Sole Remedy/Waiver | 180 | ||||
Section 7.11 |
Indemnification Payments | 181 | ||||
ARTICLE VIII | ||||||
CONDITIONS TO CLOSING | ||||||
Section 8.1 |
Conditions to the Obligations of the Parties | 181 | ||||
Section 8.2 |
Conditions to the Obligations of Purchaser and Purchaser Parent | 181 | ||||
Section 8.3 |
Conditions to the Obligations of Seller Parent | 182 | ||||
Section 8.4 |
Frustration of Closing Conditions | 183 | ||||
ARTICLE IX | ||||||
TERMINATION | ||||||
Section 9.1 |
Termination | 183 | ||||
Section 9.2 |
Effect of Termination | 184 | ||||
ARTICLE X | ||||||
MISCELLANEOUS | ||||||
Section 10.1 |
Notices | 186 | ||||
Section 10.2 |
Amendment; Waiver | 187 | ||||
Section 10.3 |
Assignment | 187 | ||||
Section 10.4 |
Entire Agreement | 188 | ||||
Section 10.5 |
Parties in Interest | 188 | ||||
Section 10.6 |
Public Disclosure | 188 | ||||
Section 10.7 |
Expenses | 188 | ||||
Section 10.8 |
Disclosure Letters; Disclosures Modifying Other Sections of Agreement | 189 | ||||
Section 10.9 |
No Admission | 189 | ||||
Section 10.10 |
Governing Law; Jurisdiction | 189 | ||||
Section 10.11 |
Counterparts | 190 | ||||
Section 10.12 |
Headings | 190 | ||||
Section 10.13 |
Severability | 190 | ||||
Section 10.14 |
Rules of Construction | 190 | ||||
Section 10.15 |
Specific Performance | 190 | ||||
Section 10.16 |
Affiliate Status | 191 | ||||
Section 10.17 |
Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege | 191 | ||||
Section 10.18 |
Translation of Currencies | 193 |
iii
ANNEXES |
||||
ANNEX A |
Index of Defined Terms |
|||
ANNEX B-1 |
Accounting Principles |
|||
ANNEX B-2 |
Sample Closing Statement |
|||
ANNEX B-3 |
Purchaser Accounting Principles |
|||
ANNEX B-4 |
Sample Purchaser Closing Statement |
|||
ANNEX C |
List of Antitrust Approvals |
|||
ANNEX D |
PCH Split Products |
|||
ANNEX E-1 |
Business Key Products |
|||
ANNEX E-2 |
Purchaser Key Products |
|||
ANNEX F |
PCH Switch Products |
|||
ANNEX G |
Purchaser Parent Retained Assets |
|||
EXHIBITS |
||||
EXHIBIT A |
List of instruments and documents to be delivered by Seller Parent |
|||
EXHIBIT B |
List of instruments and documents to be delivered by Purchaser and Purchaser Parent |
|||
EXHIBIT C |
Form of Purchaser Shareholders Agreement |
|||
EXHIBIT D |
Form of Structuring Considerations Agreement |
|||
EXHIBIT E |
Form of Restated Purchaser Articles of Association |
|||
EXHIBIT F |
Seller Parent Draft Ancillary Agreements |
|||
EXHIBIT G |
Purchaser Parent Draft Ancillary Agreements |
Seller Disclosure Letter
Purchaser Parent Disclosure Letter
iv
STOCK AND ASSET PURCHASE AGREEMENT
This STOCK AND ASSET PURCHASE AGREEMENT, dated as of December 19, 2018 (this Agreement), is by and among Pfizer Inc., a Delaware corporation (Seller Parent), GlaxoSmithKline Plc, a public limited company incorporated under the laws of England (Purchaser Parent, and together with Seller Parent, the Parents), and GlaxoSmithKline Consumer Healthcare Holdings Limited, a company incorporated under the laws of England (Purchaser, and together with the Parents, the Parties).
W I T N E S S E T H:
WHEREAS, in addition to its other businesses, Seller Parent is engaged through certain of its Subsidiaries in the Business (as defined below);
WHEREAS, in addition to its other businesses, Purchaser Parent is engaged through Purchaser in the Purchaser Business (as defined below);
WHEREAS, the Parties desire that (a) the Sellers (as defined below) sell and transfer to Purchaser or the Purchaser Designated Affiliates (as defined below), and that Purchaser or such Purchaser Designated Affiliates purchase from the Sellers, all of Seller Parents and the other Sellers right, title and interest in the Purchased Assets; (b) Purchaser and such Purchaser Designated Affiliates assume the Assumed Liabilities (as defined below); and (c) Purchaser allot and issue to Seller Parent or its applicable designee B Ordinary Shares in the capital of Purchaser, in the case of each of clauses (a), (b), and (c), in the manner and upon the terms and conditions set forth herein;
WHEREAS, certain Sellers, Purchaser, Purchaser Parent and the Purchaser Designated Affiliates, at or prior to the Closing, will execute each of the Ancillary Agreements; and
WHEREAS, the respective Boards of Directors of Seller Parent, Purchaser Parent and Purchaser have approved this Agreement, the Structuring Considerations Agreement, the Purchaser Shareholders Agreement and the transactions contemplated hereby and thereby.
NOW, THEREFORE, in consideration of the foregoing, the representations, warranties, covenants and agreements contained herein, and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Definitions. As used in this Agreement, the following terms have the meanings set forth or as referenced below:
A Ordinary Shares has the meaning set forth in Section 2.7.
ABO has the meaning set forth in Section 6.6(e)(i).
Accounting Principles has the meaning set forth in Section 2.8.
Action means any action, cause of action, claim, charge, suit, countersuit, hearing, complaint, arbitration, subpoena, audit, investigation, litigation or proceeding by or before any court, Governmental Authority or arbitration tribunal.
ADR means American Depositary Receipts of Purchaser Parent issued under the Deposit Agreement.
Affiliate means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made. For purposes of this Agreement, (a) the Conveyed Subsidiaries (and their Subsidiaries) shall be deemed to be (i) Affiliates of Seller Parent (and not Purchaser Parent or Purchaser) prior to the Closing, and (ii) Affiliates of Purchaser Parent and Purchaser (and not Seller Parent or any other Seller) as of and following the Closing and (b) Purchaser and its Subsidiaries shall be deemed to be Affiliates of Purchaser Parent (and not Seller Parent) prior to, as of and following the Closing.
Agreement has the meaning set forth in the preamble of this Agreement, as the same may be amended or supplemented from time to time in accordance with the terms hereof.
Amended Consignment Selling Agreement means the amended consignment selling agreement, substantially in the form provided to Seller Parent prior to the date hereof, to be entered into between Hindustan Unilever Limited and Leo Asia Private Limited on or around the time of completion of the divestiture of Horlicks and other consumer healthcare nutrition brands to Unilever plc and the merger of Leo Consumer Healthcare Limited India with Hindustan Unilever Limited.
Ancillary Agreements means, collectively, the Transition Services Agreement, Intellectual Property License Agreement, Manufacturing and Supply Agreement (Seller Parent as Supplier), Manufacturing and Supply Agreement (Purchaser as Supplier), IP Assignment Agreements, Transitional Trademark License Agreement, Safety Data Exchange Agreement, Lease Agreement, Local Implementing Agreements, the Structuring Considerations Agreement and the Purchaser Shareholders Agreement.
2
Ancillary Implementing Agreements means, collectively, the IP Assignment Agreements and the Local Implementing Agreements.
Anti-Corruption Laws means the U.S. Foreign Corrupt Practices Act of 1977, as amended; the U.K. Bribery Act of 2010; and any applicable Law related to anti-bribery or anti-corruption in any other jurisdiction in which the Business or the Purchaser Business, as applicable, markets, commercializes, distributes and sells products as of the date of this Agreement or as of the Closing.
Antitrust Laws means statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other Laws of any jurisdiction that are designed or intended to prohibit, restrict or regulate actions that may have the purpose or effect of creating a monopoly, lessening competition or restraining trade.
Approvals means any consent, approval or authorization of, permit or license issued or granted by, Governmental Order, waiver or exemption by, negative clearance from, or the expiration or early termination of any waiting period imposed by, any Person (including any third party or Governmental Authority (including any Governmental Antitrust Authority)).
Assumed Contracts has the meaning set forth in Section 2.1(e).
Assumed Liabilities has the meaning set forth in Section 2.4.
B Ordinary Shares has the meaning set forth in Section 2.7.
Balance Sheet Date has the meaning set forth in Section 4.6(a).
Business means the worldwide business of researching, developing, manufacturing, marketing, commercializing, distributing and selling (a) the products sold under the brand names set forth on Annex E-1 or variations or derivatives of such names (including translations thereof) (the Business Key Products, and such brands, the Business Key Brands), as conducted by Seller Parent (directly and indirectly through its Subsidiaries) as of the date of this Agreement and as of immediately prior to the Closing and (b) any over-the-counter consumer healthcare or medicine products, wellness products and other personal care, oral care, nutrition, skin health, cosmetic and related products (other than the PCH Split Products), as conducted by Seller Parent (directly and indirectly through its Subsidiaries) through its Pfizer Consumer Healthcare business unit (directly or indirectly pursuant to a contractual arrangement with any other Pfizer business unit, to the extent of the Pfizer Consumer Healthcare business units rights pursuant to such contractual arrangement) as of the date of this Agreement and as of immediately prior to the Closing.
Business Copyrights means all Copyrights, Copyright registrations and applications for Copyright registration that both (a) are owned by Seller Parent or its Subsidiaries and (b) are Related to the Business.
Business Day means any day other than a Saturday, a Sunday or a day on which banks in New York City or London are authorized or obligated by Law or executive order to close.
3
Business Employee means each individual who, immediately prior to the Closing (a) is employed by Seller Parent or its Affiliates (other than the Conveyed Subsidiaries or their Subsidiaries) and devotes 70% or more of his or her services to the Business, or (b) is employed by any of the Conveyed Subsidiaries (or their Subsidiaries), including, to the extent required by Law, any individual described in clause (a) or (b) who is not actively at work as a result of an approved leave of absence (including disability leave, military leave, or family medical leave).
Business Employee (non-U.S.) means a Business Employee based outside of the United States.
Business Employee (U.S.) means a Business Employee based in the United States.
Business IP means (a) all Business Copyrights, Business Patent Rights, Business Trademark Rights, Business Know-How and Business Software, (b) all other Intellectual Property that both (i) is owned, or purported to be owned, by Seller Parent or its Subsidiaries and (ii) is Related to the Business, and (c) all Intellectual Property listed in the IP Schedules; provided that the Business IP does not include any Registered IP that is not listed, or required to be listed, on the IP Schedules.
Business IT Systems means all Information Systems that both (a) are owned by Seller Parent or its Subsidiaries and (b)(i) are solely related to, solely held for use with, or solely used in connection with the Business; or (ii) located at a Facility.
Business Key Brands has the meaning set forth in the definition of Business.
Business Key Products has the meaning set forth in the definition of Business.
Business Know-How means all Know-How that both (a) is owned by Seller Parent or its Subsidiaries and (b) is Related to the Business.
Business Licensed IP has the meaning set forth in Section 4.13(c).
Business Net Cash means the amount (which may be a positive or negative number) equal to (a) all Cash Equivalents minus (b) all outstanding Funded Indebtedness, in each case, of the Conveyed Subsidiaries and their Subsidiaries, as of 12:01 a.m. (New York time) on the Closing Date; provided that any Cash Equivalents or Funded Indebtedness of the Conveyed Subsidiaries or their Subsidiaries as of 12:01 a.m. (New York time) on the Closing Date that will not be Purchased Assets or Assumed Liabilities (subject to the last sentence of Section 2.2(b)) shall be excluded from the calculation of Business Net Cash.
Business Patent Rights means all Patent Rights that (a) both (i) are owned by Seller Parent or its Subsidiaries and (ii) are solely related to, solely held for use with, or solely used in connection with the Business; or (b) are listed on the IP Schedules.
Business Software means all Software that both (a) is owned or purported to be owned by Seller Parent or its Subsidiaries and (b) is Related to the Business.
4
Business Trademark Rights means all of the following that are owned by or registered to Seller Parent or its Subsidiaries (a)(i) all Trademarks (including Trademark registrations and applications for Trademark registrations) that are (A) solely related to, solely held for use with, or solely used in connection with the Business; or (B) listed in the IP Schedules; (b) all Trademarks that contain, comprise, or include (but only to the extent they include) a Trademark described in the foregoing clause (a); (c) all Trademarks that are confusingly similar to the Trademarks described in clauses (a) or (b) such that they could not be used in commerce without infringing such Trademarks; (d) all Internet Identifiers and telephone numbers or other alphanumeric addresses or mnemonics containing any of the foregoing; and (e) the goodwill of the Business symbolized by any of the foregoing.
Business Working Capital means the amount (which may be a positive or negative number) equal to (a) the sum of the assets of the Business as of 12:01 a.m. (New York time) on the Closing Date represented in the line items shown on the Sample Closing Statement for the Business as of such time, minus (b) the sum of the liabilities of the Business as of 12:01 a.m. (New York time) on the Closing Date represented in the liability line items shown on the Sample Closing Statement for the Business as of such time, in each case calculated in a manner consistent with the Accounting Principles and the Sample Closing Statement; provided that there shall be excluded from such calculation the Excluded Assets, the Retained Liabilities, all assets or Liabilities in respect of Income Taxes (whether current, deferred, or contingent), any amounts included in the calculation of Business Net Cash, any intercompany accounts or Liabilities to be repaid or extinguished pursuant to this Agreement in connection with the Closing, including pursuant to Section 6.7, and any intercompany receivables and intercompany payables, and other intercompany Liabilities, solely between or among any Conveyed Subsidiaries and any of their Subsidiaries.
Cash Equivalents means, with respect to any Person and as of any time, all cash and cash equivalents, checks, money orders, marketable securities, short-term instruments, bank and other depositary accounts, certificates of deposit, time deposits, negotiable instruments, securities and brokerage accounts, funds in time and demand deposits or similar accounts of such Person as of such time, calculated, in the case of Seller Parent, in a manner consistent with the Accounting Principles and the Sample Closing Statement, and in the case of Purchaser, in a manner consistent with the Purchaser Accounting Principles and the Purchaser Sample Closing Statement, (a) excluding the value of outstanding checks and wire transfers that have been issued or transmitted by such Person but have not yet cleared as of such time, unless a corresponding liability is included in the calculation of Business Working Capital or Purchaser Working Capital, as applicable, (b) including the value of uncollected bank deposits of such Person and outstanding checks and wire transfers that have been issued or transmitted to such Person but have not yet cleared as of such time (provided that such outstanding checks and wire transfers ultimately clear), unless in each case a corresponding asset is included in the calculation of Business Working Capital or Purchaser Working Capital, as applicable, and (c) including (i) with respect to Purchaser, the value of any out-of-pocket costs or expenses incurred by either Purchaser or Purchaser Parent prior to the Closing pursuant to Section 2.2, Section 6.3(d) or Section 6.3(i) (in each case, other than any Purchaser Parent Transaction Expenses) and (ii) with respect to the Conveyed Subsidiaries and their Subsidiaries, the value of any out-of-pocket costs or expenses incurred by either Seller Parent or its Affiliates prior to the Closing pursuant to Section 2.2, Section 6.3(d) or Section 6.3(i) (in each case, other than any Seller Parent Transaction Expenses).
5
China Entities has the meaning set forth in Section 6.5(g)(iii)(A).
Clean Team Agreement means the Clean Team Confidentiality Agreement between Seller Parent and Purchaser Parent, dated as of December 17, 2018, as amended or supplemented from time to time.
Closing means the closing of the transactions contemplated by this Agreement pursuant and subject to the terms of this Agreement.
Closing Date has the meaning set forth in Section 3.1(a).
Closing Statement Finalization Date has the meaning set forth in Section 2.9(f).
Code means the Internal Revenue Code of 1986, as amended.
Collateral Source has the meaning set forth in Section 7.6.
Collective Bargaining Agreement means any collective bargaining agreement, labor agreement, work rules or practices, or any other labor-related agreements or arrangements with any labor union, labor organization, works council or consultation body.
Comparable Position has the meaning set forth in Section 6.6(b)(i).
Compliance Requirements has the meaning set forth in Section 6.15(a).
Confidential Information has the meaning set forth in Section 6.12(b).
Confidentiality Agreement means the Confidentiality Agreement between Seller Parent and Purchaser Parent, dated as of October 11, 2018, as amended or supplemented from time to time.
Continuation Period has the meaning set forth in Section 6.6(c)(i).
Contract means any contract, agreement, lease or license (other than any Governmental Authorization) that is binding on any Person or any part of its property under applicable Law, including any amendment thereto, other than any Seller Group Plan, Purchaser Group Plan, Foreign Seller Group Plan and Foreign Purchaser Group Plan.
Controlling Party has the meaning set forth in Section 6.5(e)(iii).
Conveyed Subsidiaries means those entities set forth in Section 1.1(A) of the Seller Disclosure Letter, as such Section may be amended by Seller Parent prior to the Closing Date solely to reflect any changes pursuant to the Seller Internal Restructurings (including any steps Seller Parent shall undertake to effect the Seller Internal Restructurings) made in accordance with Section 6.5(f)(i).
6
Conveyed Subsidiary Excluded Asset has the meaning set forth in Section 2.1.
Conveyed Subsidiary Plan means each Seller Group Plan and each Foreign Seller Group Plan sponsored and maintained by any Conveyed Subsidiary or Subsidiary thereof.
Copyrights has the meaning set forth in the definition of Intellectual Property.
Counterparty has the meaning set forth in Section 6.3(d)(ii)(A).
D&O Indemnitees has the meaning set forth in Section 6.21(a).
DC Employees (non-U.S.) has the meaning set forth in Section 6.6(g)(i).
DC Employees (U.S.) has the meaning set forth in Section 6.6(f)(i).
DC Transfer Amounts has the meaning set forth in Section 6.6(g)(ii).
Deductible has the meaning set forth in Section 7.5(a).
De Minimis Claim Threshold has the meaning set forth in Section 7.5(a).
Delayed Antitrust Approval has the meaning set forth in Section 6.3(e)(i).
Delayed Business has the meaning set forth in Section 6.3(e)(i).
Delayed Business Cut-Off Date has the meaning set forth in Section 6.3(e)(i).
Delayed Business Notice has the meaning set forth in Section 6.3(e)(i).
Delayed Business Purchaser has the meaning set forth in Section 6.3(e)(i).
Delayed Employment Period has the meaning set forth in Section 6.6(b)(iii).
Delayed Transfer Employee has the meaning set forth in Section 6.6(b)(iii).
Deposit Agreement means the deposit agreement dated December 27, 2000, as amended and restated as of December 21, 2007, between Purchaser Parent, the Bank of New York Mellon (as depositary thereunder) and the owners and holders of ADRs issued thereunder.
Direct Transfer has the meaning set forth in Section 6.5(g)(iii)(A).
Disability Employee has the meaning set forth in Section 6.6(b)(iv).
Disputed Item has the meaning set forth in Section 2.9(b).
7
Environmental Law means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., and any applicable Law of any jurisdiction, as in effect on or prior to the Closing Date, relating to pollution or the protection of the environment, natural resources, wildlife or threatened or endangered species (including indoor and outdoor air, soil, sediment, surface water, groundwater, drinking water, and surface or subsurface land), public or worker health or safety with respect to Hazardous Materials, or the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, Release, disposal, recycling, treatment or other management of Hazardous Materials.
Environmental Liability means any Liability arising under Environmental Laws.
Environmental Permit means any Governmental Authorization held by either a Conveyed Subsidiary (or a Subsidiary thereof) for its then-current operations or a Seller for the then-current operation of any Real Property, each following the consummation of any Seller Internal Restructurings and as of the Closing Date, and required pursuant to an Environmental Law.
Equipment has the meaning set forth in Section 2.1(d).
Equipment Leases has the meaning set forth in Section 2.1(d).
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate means any Person that would be treated at a relevant time as a single employer with any other Person under Section 4001(b) of ERISA or Section 414 of the Code.
Estimated Business Deficit Adjustment has the meaning set forth in Section 2.8(c).
Estimated Business Excess Adjustment has the meaning set forth in Section 2.8(b).
Estimated Business Net Cash means Seller Parents good-faith estimate of the Business Net Cash as set forth on the Estimated Closing Statement.
Estimated Business Working Capital means Seller Parents good-faith estimate of the Business Working Capital as set forth on the Estimated Closing Statement.
Estimated Closing Statement means a written statement setting forth the Estimated Business Working Capital and the Estimated Business Net Cash, prepared in a manner consistent with the Accounting Principles and the Sample Closing Statement.
Estimated Purchaser Closing Statement means a written statement setting forth the Estimated Purchaser Working Capital and the Estimated Purchaser Net Cash, prepared in a manner consistent with the Purchaser Accounting Principles and the Sample Purchaser Closing Statement.
Estimated Purchaser Deficit Adjustment has the meaning set forth in Section 2.8(e).
8
Estimated Purchaser Excess Adjustment has the meaning set forth in Section 2.8(d).
Estimated Purchaser Net Cash means Purchaser Parents good-faith estimate of the Purchaser Net Cash as set forth on the Estimated Purchaser Closing Statement.
Estimated Purchaser Working Capital means Purchaser Parents good-faith estimate of the Purchaser Working Capital as set forth on the Estimated Purchaser Closing Statement.
Excluded Assets has the meaning set forth in Section 2.3(a).
Facilities means the manufacturing and research and development facilities listed in Section 1.1(B) of the Seller Disclosure Letter.
FCA means the United Kingdom Financial Conduct Authority.
FICA has the meaning set forth in Section 6.6(p).
Filings means any registrations, applications, declarations, reports, submissions or other filings with, or any notices to, any Person (including any third party or Governmental Authority (including any Governmental Antitrust Authority)).
Final Business Deficit Adjustment has the meaning set forth in Section 2.9(h).
Final Business Excess Adjustment has the meaning set forth in Section 2.9(g).
Final Business Net Cash has the meaning set forth in Section 2.9(e).
Final Business Working Capital has the meaning set forth in Section 2.9(e).
Final Closing Statement means (a) if no notice of Disputed Items with respect to the Proposed Closing Statement is delivered by either Parent within the period provided in Section 2.9(b), the Proposed Closing Statement as prepared by Purchaser, or (b) if such a notice of Disputed Items with respect to the Proposed Closing Statement is timely delivered by a Parent, the Proposed Closing Statement with modifications as agreed to in writing by the Parties and/or as directed by the Independent Accountant pursuant to Section 2.9(d), as applicable.
Final Determination means (a) with respect to U.S. federal Income Taxes, a determination as defined in Section 1313(a) of the Code, and (b) with respect to Taxes other than U.S. federal Income Taxes, any final determination of Liability in respect of a Tax that, under applicable Law, is not subject to further appeal, review or modification through proceedings or otherwise, including the expiration of a statute of limitations or a period for the filing of claims for refunds, amended Tax Returns or appeals from adverse determinations.
Final Pre-Closing Income Tax Amount has the meaning set forth in Section 6.5(d)(vi)(A).
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Final Purchaser Net Cash has the meaning set forth in Section 2.9(e).
Final Purchaser Parent Deficit Adjustment has the meaning set forth in Section 2.9(j).
Final Purchaser Parent Excess Adjustment has the meaning set forth in Section 2.9(i).
Final Purchaser Working Capital has the meaning set forth in Section 2.9(e).
Financial Statements has the meaning set forth in Section 4.6(a).
Foreign Purchaser Group Plan means each pension, profit sharing, savings, retirement, health, life, disability, deferred compensation, incentive, bonus, employment, retention, change in control, termination, severance and fringe benefit plan, program, or arrangement maintained, or contributed to, by Purchaser Parent or any of its Affiliates in which any Purchaser Business Employee (non-U.S.) or Former Purchaser Business Employee (non-U.S.) participates or is a party, other than plans, programs, or arrangements required to be maintained or contributed to by the Laws of the relevant jurisdiction and other than the Purchaser Group Plans.
Foreign Seller Group Plan means each pension, profit sharing, savings, retirement, health, life, disability, deferred compensation, incentive, bonus, employment, retention, change in control, termination, severance and fringe benefit plan, program, or arrangement maintained, or contributed to, by Seller Parent or any of its Affiliates in which any Business Employee (non-U.S.) or Former Business Employee (non-U.S.) participates or is a party, other than plans, programs, or arrangements required to be maintained or contributed to by the Laws of the relevant jurisdiction and other than the Seller Group Plans.
Form Ancillary Agreement has the meaning set forth in Section 6.14(a).
Former Business Employee means an employee of Seller Parent or its Affiliates who both (A) performed services on behalf of or to the Business as of immediately prior to his or her termination of employment, and (B) would have been considered a Business Employee if his or her employment had not terminated prior to the Closing. The term Former Business Employee when followed by (U.S.) means a Former Business Employee who was employed in the United States and when followed by (non-U.S.) means a Former Business Employee who was employed outside the United States.
Former Purchaser Business Employee means an employee of Purchaser Parent or its Affiliates who both (A) performed services on behalf of or to the Purchaser Business as of immediately prior to his or her termination of employment, and (B) would have been considered a Purchaser Business Employee if his or her employment had not terminated prior to the Closing. The term Former Purchaser Business Employee when followed by (U.S.) means a Former Purchaser Business Employee who was employed in the United States and when followed by (non-U.S.) means a Former Purchaser Business Employee who was employed outside the United States.
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FSMA means the UK Financial Services and Markets Act 2000.
Fundamental Purchaser Parent Representations means the representations and warranties of Purchaser Parent contained in Section 5.1, Section 5.2, Section 5.3(a), Section 5.3(b), Section 5.16 and Section 5.20.
Fundamental Seller Parent Representations means the representations and warranties of Seller Parent contained in Section 4.1, Section 4.2, Section 4.3(a), Section 4.3(b), Section 4.15 and Section 4.19.
Funded Indebtedness means, with respect to any Person and as of any time, without duplication, the following obligations of such Person as of such time (including in respect of principal, accrued and unpaid interest, premiums (including make-whole premiums), prepayment penalties, breakage costs and other fees, expenses and charges that would arise as a result of the discharge of such amount owed and directly attributable to the consummation of the Closing), calculated, in the case of Seller Parent, in a manner consistent with the Accounting Principles and the Sample Closing Statement, and in the case of Purchaser, in a manner consistent with the Purchaser Accounting Principles and the Purchaser Sample Closing Statement: (a) the outstanding principal amount of any indebtedness for borrowed money; (b) all capitalized lease obligations that are classified by such Person as a balance sheet liability in accordance with the Accounting Principles or Purchaser Accounting Principles, as applicable; (c) all direct reimbursement obligations in respect of letters of credit, solely to the extent such letters of credit have actually been drawn; (d) all obligations evidenced by bonds, notes, debentures or debt securities; (e) any net payment obligations under any interest rate or currency hedging Contract to the extent classified by such Person as a balance sheet liability in accordance with the Accounting Principles or Purchaser Accounting Principles, as applicable, calculated as of such time as the net amount of payment that would be required to be paid by such Person to the counterparty bank(s) upon the unwind or early termination of such Contract at such time; (f) any amounts owing as deferred purchase price of, or a contingent payment for, any business, assets, property, goods or services (other than ordinary course trade payables and those listed on Section 1.1(C) of the Seller Disclosure Letter); (g) all guarantees and keepwell arrangements issued by such Person to a creditor against a loss with respect to the obligations described in clauses (a) through (f) of another Person; and (h) in the case of the Conveyed Subsidiaries and their Subsidiaries, Seller Accrued Income Taxes and, in the case of Purchaser and its Subsidiaries (other than the Conveyed Subsidiaries and their Subsidiaries), Purchaser Accrued Income Taxes; provided that Funded Indebtedness shall not include (i) any intercompany payables, or other intercompany Liabilities, solely between or among (A) any Conveyed Subsidiaries (or any of their Subsidiaries) and any of their Subsidiaries or (B) Purchaser (or any of its Subsidiaries) and any of its Subsidiaries, (ii) any intercompany accounts or other Liabilities to be repaid or extinguished pursuant to this Agreement in connection with the Closing, including pursuant to Section 6.7, (iii) any Liabilities in respect of Taxes (other than Purchaser Accrued Income Taxes or Seller Accrued Income Taxes), including any reserves for contingent Taxes, or (iv) any amounts included in the calculation of the Business Working Capital or Purchaser Working Capital.
FUTA has the meaning set forth in Section 6.6(p).
GAAP means generally accepted accounting principles in the United States.
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Global Trade Control Laws means U.S. Export Administration Regulations; the U.S. International Traffic in Arms Regulations; the U.S. economic sanctions rules and regulations implemented under statutory authority and/or the Presidents Executive Orders and administered by the U.S. Department of the Treasury Office of Foreign Assets Control; European Union (E.U.) Council Regulations on export controls, including Nos. 428/2009, 267/2012; other E.U. Council sanctions regulations, as implemented in E.U. Member States; United Nations sanctions policies; and other relevant economic sanctions, export and import control Laws in any other jurisdiction in which the Business or the Purchaser Business, as applicable, markets, commercializes, distributes and sells products as of the date of this Agreement or as of Closing.
Goods in Transit means Products that have left a facility of Seller Parent (or any Subsidiary of Seller Parent), were recorded by Seller Parent (or the Subsidiary of Seller Parent) as sales in their accounting systems at or prior to 12:01 a.m. (New York time) on the Closing Date, but have not been received by customers or Purchaser.
Governmental Antitrust Authority means any of the U.S. Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice, the attorneys general of the several states of the United States and any other Governmental Authority having jurisdiction with respect to the transactions contemplated hereby pursuant to applicable Antitrust Laws.
Governmental Authority means any supra-national, transnational, national, state, municipal or local government, any federal, state, city, municipality or other political subdivision thereof and any entity, department, bureau, body, agency, commission, authority or court of competent jurisdiction, whether domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, taxing or administrative functions of or pertaining to government and any executive official thereof or any arbitral body.
Governmental Authorizations means all licenses, permits, certificates, clearances, registrations, consents and other authorizations and approvals from any Governmental Authority required to carry on the Business or the Purchaser Business, as applicable, under the applicable Laws of any Governmental Authority.
Governmental Order means any order, writ, judgment, injunction, decree, ruling, stipulation, determination or award entered by or with any Governmental Authority.
Hazardous Materials means all pollutants, contaminants, wastes or chemicals or other materials or substances defined, classified, listed or regulated as hazardous, extremely hazardous, restricted hazardous wastes, dangerous, pollutants, contaminants, toxic, or words of similar import under any Environmental Law, including asbestos, asbestos containing materials, lead-based paint, toxic mold, petroleum, and petroleum products, or for which Liability may be imposed under Environmental Law.
Hold-Back Termination Date has the meaning set forth in Section 6.3(e)(i).
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
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IFRS means the body of pronouncements issued by the International Accounting Standards Board (IASB), including International Financial Reporting Standards and interpretations approved by the IASB, International Accounting Standards and Standing Interpretations Committee interpretations approved by the predecessor International Accounting Standards Committee as endorsed under the EU accounting regulations and included in the periodic report showing the status of endorsement by the European Financial Reporting Advisory Group.
Income Tax means any U.S. federal, state, local or non-U.S. Taxes imposed on or calculated by reference to net income or profits (however denominated), franchise Taxes and other similar Taxes.
Income Tax Return means any Tax Return in respect of Income Taxes.
Indebtedness means, with respect to any Person and as of any time, without duplication, the following obligations as of such time: (a) all Funded Indebtedness of such Person and (b) all letters of credit or performance bonds issued for the account of such Person (and reimbursement obligations in respect thereof).
Indemnified Party has the meaning set forth in Section 7.3(a).
Indemnifying Party has the meaning set forth in Section 7.3(a).
Independent Accountant means any registered independent public accounting firm of international standing as Seller Parent and Purchaser shall mutually agree upon.
Indirect Transfers has the meaning set forth in Section 6.5(g)(iii)(B).
Information Systems means (a) computer systems, servers, workstations, routers, hubs, switches, data communications networks (other than the Internet) and other information technology equipment used to create, store, transmit, exchange or receive information, voice or data and (b) documentation, user manuals, and training manuals documenting the functionality or use of any of the foregoing.
Insurance Matter has the meaning set forth in Section 6.18(b).
Insurance Policy has the meaning set forth in Section 6.18(b).
Intellectual Property means all intellectual property rights throughout the world, including: (a) Patent Rights, (b) trademarks, service marks, corporate names, trade names, Internet Identifiers, logos, slogans, trade dress, and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing (Trademarks), (c) copyrights and intellectual property rights in copyrightable and other works, moral rights, design rights and other sui generis rights (Copyrights), (d) trade secrets or other proprietary rights in clinical, technical, scientific, manufacturing, regulatory and other information, inventions (whether or not patentable), discoveries, designs, results, techniques, database rights, data, databases, data collections and other know-how, including plans, processes, practices, methods, trade secrets, instructions, formulae, formulations, recipes, compositions, specifications, protocols, analytical and quality control
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information and procedures, test data and results, reports, studies, and marketing, pricing, distribution, cost and sales information (Know-How), (e) intellectual property rights in Software and (f) applications and registrations and renewals for, and all associated rights with respect to, any of the foregoing in any jurisdiction, including all rights to collect royalties, products and proceeds with respect to any of the foregoing.
Intellectual Property License Agreement has the meaning set forth in Section 6.14(a).
Intentional Breach means, with respect to any representation, warranty, covenant or agreement in this Agreement, an action or omission taken or omitted to be taken on or after the date hereof that the breaching Person intentionally takes (or fails to take) and knows would, or would reasonably be expected to, cause a material breach of such representation, warranty, covenant or agreement.
Internet Identifier means any Internet domain name or electronic address, Internet domain name registration, uniform resource locator, social media accounts, or social media account addresses or other identifiers, alpha-numeric designations associated with any of the foregoing, and account names or identifiers, passwords or other credentials to access or modify the access rights to any of the foregoing.
Inventory means (a) all raw material inventory, work-in-process inventory, Goods in Transit and finished Products inventory, in each case, solely owned by Sellers or the Conveyed Subsidiaries (or any of their Subsidiaries) and solely used or held for use in the Business (other than any raw material inventory, work-in-process inventory and finished products inventory subject to a Manufacturing and Supply Agreement (Seller Parent as Supplier)) and (b) raw material inventory, work-in-process inventory and finished products inventory, in each case, solely owned by Sellers or the Conveyed Subsidiaries (or any of their Subsidiaries) and solely used or held for use in a Manufacturing and Supply Agreement (Purchaser as Supplier), but excluding any raw material inventory or work-in-process inventory (including any active pharmaceutical ingredients) that Seller Parent or any of its Affiliates supplies through a tolling or similar arrangement (including, following the Closing, any Manufacturing and Supply Agreement (Purchaser as Supplier), and including all Customer-Supplied Materials (as defined therein)) to a Facility prior to, on or following the Closing for the manufacture of products subject to a Manufacturing and Supply Agreement (Purchaser as Supplier) (which raw material inventory and work-in-process inventory (including such Customer-Supplied Materials), for clarity, shall not be Inventory or any other Purchased Asset and Purchaser shall acquire no right, title or interest therein).
IP Assignment Agreements has the meaning set forth in Section 6.14(a).
IP Schedules has the meaning set forth in Section 4.13(a).
IRS means the U.S. Internal Revenue Service.
Know-How has the meaning set forth in the definition of Intellectual Property.
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Knowledge of Purchaser Parent means the actual knowledge of any of the individuals listed in Section 1.1(B) of the Purchaser Parent Disclosure Letter.
Knowledge of Seller Parent means the actual knowledge of any of the individuals listed in Section 1.1(D) of the Seller Disclosure Letter.
Laws means any law, act, statute, ordinance, rule, directive, regulation, code, treaty (including any Tax treaty) of any Governmental Authority or any Governmental Order.
Lease Agreement has the meaning set forth in Section 6.14(d).
Leased Purchaser Real Property means all real property primarily related to, held for use with, or used in connection with the Purchaser Business, other than the Owned Purchaser Real Property.
Leased Real Property has the meaning set forth in Section 2.1(c).
Liabilities means any and all Losses, debts, liabilities and obligations, whether accrued or unaccrued, fixed or variable, known or unknown, absolute or contingent, matured or unmatured or determined or determinable.
Liens means any lien, security interest, mortgage, charge, pledge, license, easement or other similar encumbrance, title defect or material use or transfer restriction, it being understood and agreed that Lien does not include any non-exclusive license or other non-exclusive grant of rights to Intellectual Property.
Listing Rules means the rules and regulations made by the FCA pursuant to Part 6, section 73A of the FSMA and contained in the FCAs publication of the same name.
Local Implementing Agreements means the various Share transfer agreements, Purchased Asset transfer agreements and other agreements and the schedules and exhibits thereto to be entered into by Purchaser and the Purchaser Designated Affiliates and the applicable Sellers for purposes of implementing the sale, transfer, conveyance, and assignment, as applicable, of the applicable Sellers right, title and interest in the Shares and the other Purchased Assets to, and the employment of the Business Employees consistent with Section 6.6 by, Purchaser and such Purchaser Designated Affiliates, and the assumption of the Assumed Liabilities, as the case may be, in the appropriate jurisdictions, prepared and executed in accordance with Section 6.14. The Parties agree that the Local Implementing Agreements shall not expand or limit the rights and obligations of the Parties or their Affiliates beyond those provided for in this Agreement, and that the Local Implementing Agreements shall not provide for any additional rights, obligations or indemnities of the Parties or their Affiliates, that are not provided for in this Agreement. For clarity, the Indirect Transfers shall be effected pursuant to a Local Implementing Agreement.
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Loss means any and all damages, losses, Taxes, penalties, judgments, settlements, payments, fines, interest, costs and expenses (including the reasonable out-of-pocket costs and expenses of attorneys and other professional advisors incurred in the investigation, defense and/or settlement thereof), but excluding any damages to the extent not reasonably foreseeable, loss of business reputation, or punitive or exemplary damages (in each case, other than to the extent such damages are awarded to any third party by Governmental Order against, and paid by, an Indemnified Party).
Make-Whole Award has the meaning set forth in Section 6.6(c)(vi).
Manufacturing and Supply Agreement (Purchaser as Supplier) has the meaning set forth in Section 6.14(a).
Manufacturing and Supply Agreement (Seller Parent as Supplier) has the meaning set forth in Section 6.14(a).
Manufacturing Registrations means all Governmental Authorizations granted to Seller Parent or any of its Affiliates by, or pending with, any Governmental Authority for manufacturing facilities that are Facilities.
Material Adverse Effect means any change, event, development, occurrence or effect that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on the business, results of operations or financial condition of the Business, taken as a whole; provided, however, that any change, event, development, occurrence or effect to the extent resulting from or arising out of any of the following, either alone or in combination, shall not be considered in determining whether there has been or may be a Material Adverse Effect: (i) general economic conditions (including changes in (A) financial or market conditions, (B) currency exchange rates, (C) prevailing interest rates or credit markets or (D) the price of commodities or raw materials) applicable in countries, jurisdictions or markets in which there are Purchased Assets or sales of Products (or the securities, syndicated loan, credit or financial markets globally or in any such economies, countries, jurisdictions or markets); (ii) changes (or proposed changes) in the legal, Tax, regulatory or political conditions (including changes in Law or in the interpretation or application of Law) applicable in countries, jurisdictions or markets in which there are Purchased Assets or sales of Products; (iii) changes (or proposed changes) in GAAP or other applicable accounting standards or the interpretations thereof; (iv) conditions in or affecting the industries in which the Business operates; (v) conditions resulting from natural disasters, earthquakes, hurricanes, tsunamis, floods, fires, storms, typhoons, lightning, hail storms, blizzards, tornadoes, droughts, cyclones, arctic frosts, mudslides, wildfires, manmade disasters, acts of God, pandemics or other weather-related or natural conditions, or the commencement, occurrence, continuation or intensification of any war (whether or not declared), sabotage, armed hostilities, civil unrest, military attacks or acts of terrorism or declaration of national emergency; (vi) any failure by the Business to meet budgets, plans, projections or forecasts (whether internal or otherwise) for any period (it being understood that the underlying causes of the failure to meet such budgets, plans, projections or forecasts may be taken into account in determining whether a Material Adverse Effect has occurred unless such causes are otherwise excepted under this paragraph; provided that this clause (vi) shall not be construed as implying that Seller Parent is making any representation or warranty herein with respect to any budgets, plans, projections or forecasts, and no such representations or warranties are being made); (vii) any change in Seller Parents stock price or trading volume (it being understood that the underlying causes of such change may be taken
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into account in determining whether a Material Adverse Effect has occurred unless such causes are otherwise excepted under this paragraph); (viii) Seller Parents pursuit of strategic alternatives for the Business or the negotiation, execution, announcement, performance, pendency or consummation of this Agreement, the transactions contemplated hereby or by any of the Ancillary Agreements (it being understood and agreed that the foregoing shall not apply to the representations and warranties set forth in Section 4.4), the identity of Purchaser or any of its Affiliates or any acts or omissions of Purchaser or its Affiliates or any communication by Purchaser or any of its Affiliates, including in respect of its plans or intentions (including in respect of the Business Employees) with respect to the Business, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners or employees; (ix) without limiting clause (viii) above, any action taken by Seller Parent or its Affiliates (including any Conveyed Subsidiary and their Subsidiaries) as expressly required by this Agreement, including any changes, events or effects arising out of the application of Antitrust Laws (including any action or judgment arising under Antitrust Laws) to this Agreement or the transactions contemplated hereby or the effect of any action taken (or agreed to be taken) by Seller Parent, Purchaser, or any of their respective Affiliates pursuant to Section 6.3; (x) any action taken, or failure to take action, or such other changes or events, in each case, to which Purchaser has consented in writing; (xi) any labor strike, slow down, lockout or stoppage, pending or threatened, against the Business; or (xii) any Excluded Assets or Retained Liabilities; provided, further, that any change, event, development, occurrence or effect referred to in clauses (i), (ii), (iii), (iv) and (v) may be considered in determining whether there has been or may be a Material Adverse Effect to the extent such change, event, development, occurrence or effect has a disproportionate adverse impact on the business, results of operations or financial condition of the Business, taken as a whole, relative to the other businesses in the industries in which the Business operates (in which case only such incremental disproportionate impact may be considered in determining whether there has been or may be a Material Adverse Effect).
Material Contract has the meaning set forth in Section 4.12(a).
Most Cost-Effective Manner means a Remedial Action based upon (a) the least stringent clean-up standards that, based on the use classification (industrial, commercial or residential) as of the Closing Date of the applicable real property subject to the Remedial Action, are established under Environmental Law and (b) the least-costly methods that are in accordance with Environmental Law, in each case of (a) and (b) that are approved by or otherwise acceptable to the applicable Governmental Authorities, including the use of engineering and institutional controls to eliminate or minimize exposure pathways, and may also include, in the reasonable discretion of the Party responsible for such Remedial Action, any other Remedial Action that is allowed under applicable Environmental Law and approved by or otherwise acceptable to the applicable Governmental Authorities.
Name Change Date has the meaning set forth in Section 6.15(a).
New Subsidiaries has the meaning set forth in Section 6.27.
Non-Controlling Party has the meaning set forth in Section 6.5(e)(iii).
Non-Indemnified Claims has the meaning set forth in Section 6.17(b).
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Notice 7 has the meaning set forth in Section 6.5(g)(iii)(B).
Off-the-Shelf Software means software licensed from a third party on general commercial terms that continues to be commonly available for license on such general commercial terms.
Ordinary Shares means the A Ordinary Shares and the B Ordinary Shares.
Outside Date has the meaning set forth in Section 9.1(b).
Outstanding Antitrust Jurisdiction has the meaning set forth in Section 6.3(e)(i).
Owned Purchaser Real Property means the real property that both (a) is owned by Purchaser Parent or its Subsidiaries and (b) is primarily related to, held for use with, or used in connection with the Purchaser Business.
Owned Real Property has the meaning set forth in Section 2.1(b).
Parent Indemnified Parties has the meaning set forth in Section 7.2.
Parents has the meaning set forth in the preamble of this Agreement.
Parties has the meaning set forth in the preamble of this Agreement.
Patent Rights means (a) issued patents, (b) invention disclosures, and pending patent applications, including all provisional applications, substitutions, continuations, continuations-in-part, divisions and renewals, and all patents granted thereon, (c) patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including patent term adjustments, patent term extensions, supplementary protection certificates or the equivalent thereof, (d) inventors certificates, (e) registered or other utility model rights, registered or other design rights and registered or other industrial property rights and (f) United States and foreign counterparts of any of the foregoing.
PCH Split Products has the meaning set forth in the definition of Retained Businesses.
Pension Transfer Amounts has the meaning set forth in Section 6.6(e)(ii).
Permitted Liens means (a) Liens approved in writing by Purchaser; (b) statutory Liens arising out of operation of Law with respect to a Liability incurred in the ordinary course of business for amounts which are not yet due and payable or for which an adequate reserve has been established in the Financial Statements; (c) Liens and other imperfections of title that do not materially detract from the value or materially impair the use of the property subject thereto or make such property unmarketable or uninsurable; (d) with respect to real property, (i) easements, declarations, covenants, rights-of-way, restrictions and other charges, instruments or encumbrances that are recorded against title to real estate which do not materially impair the use or occupancy of such real property in the operation of the Business conducted thereon; (ii) zoning ordinances,
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variances, conditional use permits and similar regulations, permits, approvals and conditions which are not violated by the current use of the real property subject thereto in the operation of the Business conducted thereon; (iii) Liens not created by the Sellers that affect the underlying fee interest of any leased real property, including master leases or ground leases, which do not materially impair the use or occupancy of such real property in the operation of the Business conducted thereon; and (iv) all matters of record and any state of facts that an accurate survey or inspection of the property would disclose to the extent such matters or states of fact do not materially detract from the value or materially impair the use or occupancy of such real property in the operation of the Business conducted thereon; (e) Liens for Taxes, assessments or other governmental charges or levies (i) that are not yet due or payable or (ii) that are being contested in good faith by appropriate proceedings and for which an adequate reserve has been established in the Financial Statements; (f) mechanics, materialmens, carriers, workmens, warehousemens, repairmens, landlords or other similar Liens and security obligations arising in the ordinary course of business for amounts which are not yet due and payable or for which an adequate reserve has been established in the Financial Statements; (g) Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; (h) Liens that will be released and, as appropriate, removed of record, at or prior to the Closing Date in accordance with the terms of this Agreement; (i) Liens arising on assets and products sold in the ordinary course of business; (j) Liens arising in connection with any consignment arrangement entered into in the ordinary course of business; (k) Liens identified in the Financial Statements (including in the notes thereto); (l) with respect to any equity of a Conveyed Subsidiary (or any of its Subsidiaries), any restrictions under applicable securities Laws and any Lien set forth in the governing documents of such Conveyed Subsidiary (or any of its Subsidiaries); (m) other Liens that do not materially detract from the value of, or materially impair the current use of, the assets subject thereto; and (n) Liens disclosed or set forth in the Seller Disclosure Letter.
Person means an individual, a limited liability company, joint venture, a corporation, a partnership, an association, a trust, a division or operating group of any of the foregoing or other entity or organization, including a Governmental Authority.
Plan Regulatory or Funding Documents means (to the extent applicable) (i) the most recent summary plan description with respect to each such plan, (ii) any related trust or other funding vehicle and any current administrative or service contract or insurance policy, (iii) the most recent annual report on IRS Form 5500 and the most recent actuarial report, financial statements or similar reports or statements, (iv) the most recent determination or opinion letter received from the IRS with respect to each such plan intended to qualify under Section 401 of the Code and (v) any documents applicable to a Foreign Seller Group Plan or Foreign Purchaser Group Plan (as applicable) that are analogous to those contemplated by clauses (i) through (iv).
Post-Closing Representation has the meaning set forth in Section 10.17(a).
Post-Closing Tax Period means any taxable period (or portion thereof) beginning after the Closing Date and, in the case of any Straddle Period, the portion of such period beginning after the Closing Date.
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PRC Taxing Authority means any Taxing Authority in the Peoples Republic of China.
Pre-Closing Income Tax Amount has the meaning set forth in Section 6.5(d)(vi)(A).
Pre-Closing Separate Tax Returns has the meaning set forth in Section 6.5(a)(i).
Pre-Closing Tax Period means any taxable period (or portion thereof) ending on or before the Closing Date and, in the case of any Straddle Period, the portion of such period ending on and including the Closing Date.
Preference Shares means non-voting, irredeemable preference shares with a nominal value of £1.00 each in the capital of Purchaser, having the rights and restrictions set out in the Restated Purchaser Articles of Association and the Purchaser Shareholders Agreement.
Product Registrations means all Governmental Authorizations granted to a Conveyed Subsidiary or a Seller by, or pending with, any Governmental Authority and Related to the Business, to market any Product, including FDA drug listings, FDA Product Marketing Authorizations, other national or regional marketing authorizations or permits and CE marks anywhere in the world. Product Registrations shall not include any Manufacturing Registrations.
Products means (a) the products researched, developed, manufactured, marketed, commercialized, distributed and/or sold under the brand names set forth on Annex E-1 or variations or derivatives of such names (including translations thereof) that are researched, developed, manufactured, marketed, commercialized, distributed and/or sold by or on behalf of Seller Parent (directly and indirectly through its Subsidiaries) as of the date hereof and as of immediately prior to the Closing, (b) any over-the-counter consumer healthcare or medicine products, wellness products and other personal care, oral care, nutrition, skin health, cosmetic and related products (other than the PCH Split Products) that are researched, developed, manufactured, marketed, commercialized, distributed and/or sold by or on behalf of Seller Parent (directly and indirectly through its Subsidiaries) through the Pfizer Consumer Healthcare business unit (directly or indirectly pursuant to a contractual arrangement with any other Pfizer business unit, to the extent of the Pfizer Consumer Healthcare business units rights pursuant to such contractual arrangement) as of the date hereof and as of immediately prior to the Closing and (c) with respect to each of the foregoing products (clauses (a) and (b)), any line extensions or other developments with respect to such product that are in progress as of the date hereof or immediately prior to the Closing Date.
Property Taxes means real, personal and intangible ad valorem property Taxes.
Proposed Closing Statement has the meaning set forth in Section 2.9(a).
Proposed Divestiture has the meaning set forth in Section 6.3(d)(ii).
Purchase Consideration has the meaning set forth in Section 2.7.
Purchased Assets has the meaning set forth in Section 2.1.
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Purchaser has the meaning set forth in the preamble of this Agreement.
Purchaser Account means the bank account or accounts controlled solely by Purchaser specified by Purchaser in writing to the other Parties at least two (2) Business Days before the Closing Date.
Purchaser Accrued Income Taxes means an amount (not less than zero) equal to the aggregate current Income Tax liabilities of Purchaser and its Subsidiaries (other than the Conveyed Subsidiaries and their Subsidiaries) (which shall not be less than zero in any jurisdiction) for all taxable periods (or portions thereof) ending on or before the Closing Date for which final Tax Returns have not been filed. The calculation of Purchaser Accrued Income Taxes shall (i) exclude any deferred Tax liabilities or deferred Tax assets and any amounts in respect of speculative or contingent liabilities for Tax, (ii) include estimated (or other prepaid) Income Tax payments only to the extent that such payments have the effect of reducing (not below zero) the particular current Income Tax liability in respect of which such payments were made, (iii) include Income Tax deductions or Tax refunds (including for overpayments of estimated Taxes), in each case, only to the extent such deductions or Tax refunds have the effect of reducing (not below zero) a particular current Income Tax liability to which they are relevant, (iv) be prepared in accordance with the past practice (including reporting positions and accounting methods) of Purchaser or its applicable Subsidiary in preparing Tax Returns for Income Taxes and (v) in the case of a Straddle Period, be determined in accordance with Section 6.5(d)(iii).
Purchaser Accounting Principles has the meaning set forth in Section 2.8(a).
Purchaser Adverse Action has the meaning set forth in Section 6.3(f).
Purchaser Ancillary Agreement has the meaning set forth in Section 6.7(b).
Purchaser Assumed Employee Liabilities has the meaning set forth in Section 6.6(a)(i).
Purchaser Assumed Severance Liabilities has the meaning set forth in Section 6.6(c)(ii).
Purchaser Business means (a) the worldwide business of researching, developing, manufacturing, marketing, commercializing, distributing and selling the products sold under the brand names set forth on Annex E-2 or variations or derivatives of such names (including translations thereof) (the Purchaser Key Products, and such brands, the Purchaser Key Brands), as conducted by Purchaser Parent (directly and indirectly through its Subsidiaries, including Purchaser and its Subsidiaries) as of the date of this Agreement and as of immediately prior to the Closing, (b) the business reflected in the Purchaser Financial Statements, including the assets, rights, properties, activities, operations and liabilities that comprise such business, (c) the business of marketing, commercializing, distributing and selling any over-the-counter consumer healthcare or medicine products, wellness products and other personal care, oral care, nutrition, skin health, cosmetic and related products (the Consumer Healthcare Products) as conducted by Leo Asia Private Limited (including, for clarity, pursuant to the Amended Consignment Selling Agreement) as of the date of
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this Agreement and as of immediately prior to the Closing and (d) to the extent not otherwise reflected in the Purchaser Financial Statements, the research and development of any Consumer Healthcare Products, as conducted by Purchaser Parent (directly and indirectly through its Subsidiaries) through its GlaxoSmithKline Consumer Healthcare business (directly or indirectly pursuant to a contractual arrangement with any other GlaxoSmithKline business, to the extent of the GlaxoSmithKline Consumer Healthcare business rights pursuant to such contractual arrangement) as of the date of this Agreement and as of immediately prior to the Closing. Notwithstanding the foregoing, the following shall not be included in Purchaser Business: (x) the worldwide business of researching, developing, manufacturing, marketing, commercializing, distributing and selling pharmaceutical products to the extent such business and the economic benefit attendant to such business is not reflected in the Purchaser Financial Statements and (y) those assets listed in Annex G.
Purchaser Business Employee means each individual who, immediately prior to the Closing: (a) is employed by Purchaser Parent or its Affiliates (other than Purchaser or its Subsidiaries) and devotes 70% or more of his or her services to the Purchaser Business but excluding any individual who is based in France or employed by any French Affiliate of Purchaser Parent, or (b) is employed by Purchaser (or its Subsidiaries).
Purchaser Business Employee (non-U.S.) means a Purchaser Business Employee based outside of the United States.
Purchaser Business Employee (U.S.) means a Purchaser Business Employee based in the United States.
Purchaser Business Plan means each Purchaser Group Plan and each Foreign Purchaser Group Plan sponsored and maintained by Purchaser or a Subsidiary of Purchaser.
Purchaser Copyrights means all Copyrights, Copyright registrations and applications for Copyright registration that are owned by Purchaser or its Subsidiaries.
Purchaser Current Representation has the meaning set forth in Section 10.17(b).
Purchaser DC Plans (non-U.S.) has the meaning set forth in Section 6.6(g)(i).
Purchaser DC Plans (U.S.) has the meaning set forth in Section 6.6(f)(i).
Purchaser Designated Affiliate has the meaning set forth in Section 10.3(b).
Purchaser Designated Person has the meaning set forth in Section 10.17(b).
Purchaser Environmental Permit means any Governmental Authorization held by Purchaser Parent or any of its Subsidiaries for the then-current operations of the Purchaser Business or for the then-current operation of any Purchaser Real Property, as of the Closing Date, and required pursuant to an Environmental Law.
Purchaser Facilities has the meaning set forth in Section 5.15(d).
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Purchaser Financial Statements has the meaning set forth in Section 5.6(a).
Purchaser FSA Plan has the meaning set forth in Section 6.6(i).
Purchaser Group Plan means any employee benefit plan as defined in Section 3(3) of ERISA and any other material written fringe benefit, incentive, bonus, employment, retention, change in control, termination or severance plan, program, fund, agreement or arrangement, whether or not subject to ERISA, maintained (or contributed to or required to be contributed to) by Purchaser Parent or any of its Affiliates, in which any Purchaser Business Employee (U.S.) or Former Purchaser Business Employee (U.S.) participates or is a party.
Purchaser Indemnified Parties has the meaning set forth in Section 7.1(a).
Purchaser Internal Restructurings has the meaning set forth in Section 6.5(f)(ii).
Purchaser IP means (a) all Purchaser Copyrights, Purchaser Patent Rights, Purchaser Trademark Rights, Purchaser Know-How and Purchaser Software, and (b) all other Intellectual Property that is owned, or purported to be owned, by Purchaser or its Subsidiaries.
Purchaser IT Systems means all Information Systems that are owned by Purchaser or its Subsidiaries.
Purchaser Key Products has the meaning set forth in the definition of Purchaser Business.
Purchaser Key Brands has the meaning set forth in the definition of Purchaser Business.
Purchaser Know-How means all Know-How that is owned by Purchaser or its Subsidiaries.
Purchaser Liabilities means any and all Liabilities of Purchaser Parent or any of its Affiliates (including Purchaser and its Subsidiaries), other than Liabilities identified as Purchaser Parent Retained Liabilities in clauses (a) through (f) of the definition of Purchaser Parent Retained Liabilities, whether arising prior to, on or after the Closing, to the extent resulting from or arising out of the past, present or future ownership, operation, use or conduct of the Purchaser Business.
Purchaser Licensed IP means all Intellectual Property owned by Purchaser Parent or any of its Affiliates that has been licensed to Purchaser or its Subsidiaries pursuant to a Purchaser Ancillary Agreement, including the Purchaser Licensed Trademark Rights.
Purchaser Licensed Trademark Rights has the meaning set forth in Section 5.14(h).
Purchaser Manufacturing Registrations means all Governmental Authorizations granted to Purchaser Parent or any of its Affiliates by, or pending with, any Governmental Authority for manufacturing facilities that are Purchaser Facilities.
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Purchaser Material Adverse Effect means any change, event, development, occurrence or effect that, individually or in the aggregate, has had, or would reasonably be expected to have, a material adverse effect on the business, results of operations or financial condition of the Purchaser Business, taken as a whole, or Purchaser and its Subsidiaries, taken as a whole; provided, however, that any change, event, development, occurrence or effect to the extent resulting from or arising out of any of the following, either alone or in combination, shall not be considered in determining whether there has been or may be a Purchaser Material Adverse Effect: (i) general economic conditions (including changes in (A) financial or market conditions, (B) currency exchange rates, (C) prevailing interest rates or credit markets or (D) the price of commodities or raw materials) applicable in countries, jurisdictions or markets in which there are assets of the Purchaser Business or sales of Purchaser Products (or the securities, syndicated loan, credit or financial markets globally or in any such economies, countries, jurisdictions or markets); (ii) changes (or proposed changes) in the legal, Tax, regulatory or political conditions (including changes in Law or in the interpretation or application of Law) applicable in countries, jurisdictions or markets in which there are assets of the Purchaser Business or sales of Purchaser Products; (iii) changes (or proposed changes) in IFRS or other applicable accounting standards or the interpretations thereof; (iv) conditions in or affecting the industries in which the Purchaser Business operates; (v) conditions resulting from natural disasters, earthquakes, hurricanes, tsunamis, floods, fires, storms, typhoons, lightning, hail storms, blizzards, tornadoes, droughts, cyclones, arctic frosts, mudslides, wildfires, manmade disasters, acts of God, pandemics or other weather-related or natural conditions, or the commencement, occurrence, continuation or intensification of any war (whether or not declared), sabotage, armed hostilities, civil unrest, military attacks or acts of terrorism or declaration of national emergency; (vi) any failure by the Purchaser Business to meet budgets, plans, projections or forecasts (whether internal or otherwise) for any period (it being understood that the underlying causes of the failure to meet such budgets, plans, projections or forecasts may be taken into account in determining whether a Purchaser Material Adverse Effect has occurred unless such causes are otherwise excepted under this paragraph; provided that this clause (vi) shall not be construed as implying that Purchaser Parent is making any representation or warranty herein with respect to any budgets, plans, projections or forecasts, and no such representations or warranties are being made); (vii) any change in Purchaser Parents stock price or trading volume (it being understood that the underlying causes of such change may be taken into account in determining whether a Purchaser Material Adverse Effect has occurred unless such causes are otherwise excepted under this paragraph); (viii) the negotiation, execution, announcement, performance, pendency or consummation of this Agreement, the transactions contemplated hereby or by any of the Ancillary Agreements (it being understood and agreed that the foregoing shall not apply to the representations and warranties set forth in Section 5.4); (ix) without limiting clause (viii) above, any action taken by Purchaser Parent, Purchaser or any of their Affiliates as expressly required by this Agreement, including any changes, events or effects arising out of the application of Antitrust Laws (including any action or judgment arising under Antitrust Laws) to this Agreement or the transactions contemplated hereby or the effect of any action taken (or agreed to be taken) by Seller Parent, Purchaser or any of their respective Affiliates pursuant to Section 6.3; (x) any action taken, or failure to take action, or such other changes or events, in each case, to which Seller Parent has consented in writing; (xi) any labor strike, slow down, lockout or stoppage, pending or threatened, against the Purchaser Business; or (xii) any Purchaser Parent Retained Liabilities; provided, further, that any change, event, development, occurrence or effect referred to in clauses (i), (ii), (iii), (iv) and (v)
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may be considered in determining whether there has been or may be a Purchaser Material Adverse Effect to the extent such change, event, development, occurrence or effect has a disproportionate adverse impact on the business, results of operations or financial condition of the Purchaser Business, taken as a whole, relative to the other businesses in the industries in which the Purchaser Business operates (in which case only such incremental disproportionate impact may be considered in determining whether there has been or may be a Purchaser Material Adverse Effect).
Purchaser Material Contract has the meaning set forth in Section 5.13(a).
Purchaser Net Cash means the amount (which may be a positive or negative number) equal to (a) all Cash Equivalents minus (b) all outstanding Funded Indebtedness, in each case, of Purchaser and its Subsidiaries (other than the Conveyed Subsidiaries and their Subsidiaries), as of 12:01 a.m. (New York time) on the Closing Date; provided that all proceeds, payments or consideration received by Purchaser Parent or any of its Affiliates (including Purchaser and its Subsidiaries) as a result of any action taken (or agreed to be taken) by Seller Parent, Purchaser Parent, Purchaser or any of their respective Affiliates pursuant to Section 6.3 shall be excluded from the calculation of Purchaser Net Cash.
Purchaser Parent has the meaning set forth in the preamble of this Agreement.
Purchaser Parent Account means the bank account or accounts specified by Purchaser Parent in writing to the other Parties hereto at least two (2) Business Days before the Closing Date.
Purchaser Parent Adverse Recommendation Change has the meaning set forth in Section 6.24(e).
Purchaser Parent Board Recommendation has the meaning set forth in Section 5.2(a).
Purchaser Parent Combined Tax Returns has the meaning set forth in Section 6.5(e)(v).
Purchaser Parent Disclosure Letter means the disclosure letter that Purchaser Parent has delivered to Seller Parent as of the date of this Agreement.
Purchaser Parent Estimated Closing Statement means a written statement setting forth the Estimated Purchaser Working Capital and the Estimated Purchaser Net Cash, prepared in a manner consistent with the Purchaser Accounting Principles and the Purchaser Sample Closing Statement.
Purchaser Parent Final Plan has the meaning set forth in Section 6.5(f)(iv).
Purchaser Parent Indemnified Parties has the meaning set forth in Section 7.1(a).
Purchaser Parent Indemnified Taxes has the meaning set forth in Section 6.5(d)(ii).
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Purchaser Parent Retained Businesses mean all businesses of Purchaser Parent or any of its Subsidiaries other than the Purchaser Business, including the worldwide business of researching, developing, manufacturing, marketing, commercializing, distributing and selling (i) any products not included in the definition of Purchaser Business and (ii) without limiting the foregoing clause (i), any pharmaceutical products or pharmaceutical products that have become or may in the future become, in whole or in part, over-the-counter products (other than the products included in the definition of Purchaser Business).
Purchaser Parent Retained Liabilities means any Liabilities of Purchaser Parent or its Affiliates (including Purchaser and its Subsidiaries) other than the Purchaser Liabilities. The Purchaser Parent Retained Liabilities shall include:
(a) all Liabilities for which Purchaser Parent or any of its Affiliates (other than Purchaser and its Subsidiaries) expressly has responsibility pursuant to the terms of this Agreement or any Purchaser Ancillary Agreement;
(b) all Purchaser Parent Transaction Expenses;
(c) all Liabilities, including Liabilities for Taxes, of Purchaser Parent or its Subsidiaries to the extent related to or arising out of the assets, properties and rights of Purchaser Parent or its Affiliates (other than Purchaser and its Subsidiaries) or the Purchaser Parent Retained Businesses (including the assets listed in Annex G) (other than any Liabilities for which Purchaser or Seller Parent expressly has responsibility pursuant to the terms of this Agreement or any Ancillary Agreement, and other than any Liabilities that are separately allocated pursuant to any other agreement or transaction related to such assets, properties or rights between Seller Parent or any of its Affiliates, on the one hand, and Purchaser Parent or any of its Affiliates, on the other hand, including any commercial or other agreements unrelated to this Agreement), including Environmental Liabilities, whether arising prior to, on or after the Closing, to the extent arising out of or related to the ownership or occupancy of any manufacturing, office, research and development, or warehouse facilities owned, leased or operated by Purchaser Parent or its Affiliates other than the Purchaser Facilities;
(d) all Indebtedness of Purchaser Parent and its Affiliates other than (i) Funded Indebtedness of Purchaser and its Subsidiaries included in the calculation of Final Purchaser Net Cash and (ii) Indebtedness of Purchaser and its Subsidiaries that is not Funded Indebtedness;
(e) all Liabilities of Purchaser Parent or any of its Affiliates (including Purchaser and its Subsidiaries) (i) pursuant to the Put Option Implementation Agreement, dated as of March 27, 2018, by and among Purchaser Parent, Purchaser and Novartis AG (among others), or (ii) related to or arising out of the divestiture of Horlicks and other consumer healthcare nutrition brands to Unilever plc or its Affiliates and the merger of GSK Consumer Healthcare Limited India with Hindustan Unilever Limited, and the transactions contemplated thereby and any related Contracts entered into in connection therewith other than the Amended Consignment Selling Agreement; and
(f) all Liabilities of Purchaser Parent or any of its Affiliates (including Purchaser and its Subsidiaries) set forth in Section 1.1(C) of the Purchaser Parent Disclosure Letter.
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Purchaser Parent Shareholder Approval has the meaning set forth in Section 5.2(a).
Purchaser Parent Shareholder Approval Resolution means the ordinary resolution of Purchaser Parents shareholders required to approve the arrangements as contemplated herein or by any of the Ancillary Agreements.
Purchaser Parent Shareholder Circular means the related party (as defined in Chapter 11 of the Listing Rules) circular to be prepared and published by Purchaser Parent in connection with the Purchaser Parent Shareholder Meeting.
Purchaser Parent Shareholder Meeting has the meaning set forth in Section 6.24(a).
Purchaser Parent Termination Fee has the meaning set forth in Section 9.2(b).
Purchaser Parent Transaction Expenses means any outside counsel, investment banking, accounting, financial advisory and other advisory costs, fees and expenses incurred by Purchaser Parent or any of its Affiliates (including Purchaser and its Subsidiaries) at or prior to the Closing specifically in connection with the evaluation and negotiation of a transaction involving Seller Parent and the Business, and the negotiation, execution and performance of this Agreement and the consummation of the transactions contemplated by this Agreement, including the Purchaser Internal Restructurings, in each case other than costs, fees and expenses for which Seller Parent or its Affiliates expressly has responsibility (including pursuant to payment, reimbursement, indemnification or other similar obligations set forth herein) pursuant to the terms of this Agreement.
Purchaser Patent Rights means all Patent Rights that are owned by Purchaser or its Subsidiaries.
Purchaser Pension Plans has the meaning set forth in Section 6.6(e)(i).
Purchaser Permitted Liens means (a) Liens approved in writing by Seller Parent; (b) statutory Liens arising out of operation of Law with respect to a Liability incurred in the ordinary course of business for amounts which are not yet due and payable or for which an adequate reserve has been established in the Purchaser Financial Statements; (c) Liens and other imperfections of title that do not materially detract from the value or materially impair the use of the property subject thereto or make such property unmarketable or uninsurable; (d) with respect to real property, (i) easements, declarations, covenants, rights-of-way, restrictions and other charges, instruments or encumbrances that are recorded against title to real estate which do not materially impair the use or occupancy of such real property in the operation of the Purchaser Business conducted thereon; (ii) zoning ordinances, variances, conditional use permits and similar regulations, permits, approvals and conditions which are not violated by the current use of the real property subject thereto in the operation of the Purchaser Business conducted thereon; (iii) Liens not created by Purchaser Parent or its Affiliates that affect the underlying fee interest of any leased real property, including master leases or ground leases, which do not materially impair the use or occupancy of such real property in the operation of the Purchaser Business conducted thereon; and (iv) all matters of record and any state of facts that an accurate survey or inspection of the property would disclose to the extent such matters or states of fact do not materially detract from the value or materially impair the use
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or occupancy of such real property in the operation of the Purchaser Business conducted thereon; (e) Liens for Taxes, assessments or other governmental charges or levies (i) that are not yet due or payable or (ii) that are being contested in good faith by appropriate proceedings and for which an adequate reserve has been established in the Purchaser Financial Statements; (f) mechanics, materialmens, carriers, workmens, warehousemens, repairmens, landlords or other similar Liens and security obligations arising in the ordinary course of business for amounts which are not yet due and payable or for which an adequate reserve has been established in the Purchaser Financial Statements; (g) Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; (h) Liens that will be released and, as appropriate, removed of record, at or prior to the Closing Date in accordance with the terms of this Agreement; (i) Liens arising on assets and products sold in the ordinary course of business; (j) Liens arising in connection with any consignment arrangement entered into in the ordinary course of business; (k) Liens identified in the Purchaser Financial Statements (including in the notes thereto); (l) with respect to any equity of Purchaser or any of its Subsidiaries, any restrictions under applicable securities Laws and any Lien set forth in the governing documents of Purchaser (or any of its Subsidiaries); (m) other Liens that do not materially detract from the value of, or materially impair the current use of, the assets subject thereto; and (n) Liens disclosed or set forth in the Purchaser Parent Disclosure Letter.
Purchaser Privileged Communications has the meaning set forth in Section 10.17(d).
Purchaser Product Registrations means all Governmental Authorizations granted to Purchaser Parent or a Subsidiary of Purchaser Parent by, or pending with, any Governmental Authority and Related to the Purchaser Business to market any Purchaser Products, including FDA drug listings, FDA Product Marketing Authorizations, other national or regional marketing authorizations or permits and CE marks anywhere in the world. Purchaser Product Registrations shall not include any Purchaser Manufacturing Registrations.
Purchaser Products means the products researched, developed, manufactured, marketed, commercialized, distributed and/or sold by the Purchaser Business, and any line extensions or other developments with respect to such products that are in progress as of the date hereof or immediately prior to the Closing Date.
Purchaser Real Property means, collectively, the Leased Purchaser Real Property and the Owned Purchaser Real Property.
Purchaser Real Property Leases means real property leases, subleases, licenses and occupancy arrangements with respect to the Leased Purchaser Real Property.
Purchaser Related Party Contract means any Contract between Purchaser Parent and any of its Affiliates (other than Purchaser and its Subsidiaries), on the one hand, and Purchaser or its Subsidiaries, on the other hand.
Purchaser Retiree Medical Plan has the meaning set forth in Section 6.6(h).
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Purchaser Shared Contract means any Contract, sales order, purchase order, instrument or other commitment, obligation or arrangement entered into prior to the date hereof (or entered into prior to the Closing in accordance with this Agreement) that is between Purchaser Parent or any of its Subsidiaries (including Purchaser and its Subsidiaries), on the one hand, and one or more third parties, on the other hand, that inures to the benefit or burden of both the Purchaser Business and any Purchaser Parent Retained Business, other than any enterprise-wide Contracts, Contracts with respect to Off-the-Shelf Software, Purchaser Group Plans, Foreign Purchaser Group Plans, Collective Bargaining Agreements and any agreement or grant with any Taxing Authority; provided that any such Contract that provides only de minimis assets or services to the Purchaser Business or the Purchaser Parent Retained Business, as the case may be, shall not be deemed to be a Purchaser Shared Contract for purposes hereof.
Purchaser Shareholders Agreement has the meaning set forth in Section 6.14(b).
Purchaser Software means all Software (a) that is owned by Purchaser or its Subsidiaries and (b) that is exclusively used by Purchaser or its Subsidiaries in the operation of the Purchaser Business.
Purchaser Tax Act has the meaning set forth in Section 6.5(d)(i).
Purchaser Tax Indemnified Parties has the meaning set forth in Section 6.5(d)(i).
Purchaser Trademark Rights means all Trademarks, including Trademark registrations and applications for Trademark registrations, (a) that are owned by or registered to Purchaser or its Subsidiaries (including any Purchaser Key Brands); or (b) containing, comprising, or including (but only to the extent they include) any of the foregoing clause (a), including, in each case of clauses (a) and (b), (x) all Trademarks that are confusingly similar to the Trademarks described in clauses (a) and (b) (such that they could not be used in commerce without infringing such Trademarks), (y) all Internet Identifiers and telephone numbers or other alphanumeric addresses or mnemonics containing any of the foregoing and (z) the goodwill symbolized by any of the foregoing.
Purchaser Working Capital means the amount (which may be a positive or negative number) equal to (a) the sum of the assets of Purchaser and its Subsidiaries (other than the Conveyed Subsidiaries and their Subsidiaries), on a consolidated basis, as of 12:01 a.m. (New York time) on the Closing Date represented in the asset line items shown on the Purchaser Sample Closing Statement as of such time, minus (b) the sum of the liabilities of Purchaser and its Subsidiaries (other than the Conveyed Subsidiaries and their Subsidiaries), on a consolidated basis, as of 12:01 a.m. (New York time) on the Closing Date represented in the liability line items shown on the Purchaser Sample Closing Statement for Purchaser as of such time, in each case calculated in a manner consistent with the Purchaser Accounting Principles and the Purchaser Sample Closing Statement; provided that there shall be excluded from such calculation any Purchased Assets (regardless of the time of day at which the Closing occurs), the Purchaser Parent Retained Liabilities, all assets or Liabilities in respect of Income Taxes (whether current, deferred, or contingent), any amounts included in the calculation of Purchaser Net Cash, the proceeds, payments or consideration paid or payable to Purchaser Parent or any of its Affiliates (including Purchaser and its Subsidiaries)
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as a result of any action taken (or agreed to be taken) by Seller Parent, Purchaser Parent, Purchaser or any of their respective Affiliates pursuant to Section 6.3, any intercompany accounts or other Liabilities to be repaid or extinguished pursuant to this Agreement in connection with the Closing, including pursuant to Section 6.7, and any intercompany receivables and intercompany payables, and other intercompany Liabilities, solely between or among Purchaser (or any of its Subsidiaries) and any of its Subsidiaries.
Real Property means, collectively, the Leased Real Property and the Owned Real Property.
Real Property Leases has the meaning set forth in Section 2.1(c).
Records means (a) all current and historical books, records, reports and other documents and information that pertain to business plans, budgets, financial and accounting data, brand insights and research, Business IP, vendors, manufacturing, customers, research and development of the Products, invoices, marketing and advertising operations, policies, procedures, techniques, systems, employee handbooks or manuals, training materials, operating manuals and documentation, and production manuals and documentation, in each case, in any form or medium, but in each case excluding personnel files and Seller Combined Tax Returns and (b) Registration Information (including in relation to pending applications for Product Registrations and Manufacturing Registrations).
Registered IP has the meaning set forth in Section 4.13(a).
Registered Business IP has the meaning set forth in Section 4.13(a).
Registered Purchaser IP has the meaning set forth in Section 5.14(a).
Registration Information means copies of the Product Registrations and Manufacturing Registrations and any existing files Related to the Product Registrations and Manufacturing Registrations in the possession of the relevant Seller.
Regulatory Action has the meaning set forth in Section 6.3(c)(iv).
Related to the Business or Relating to the Business means primarily relating to, primarily held for use with, or primarily used in connection with the Business.
Related to the Purchaser Business or Relating to the Purchaser Business means primarily relating to, primarily held for use with, or primarily used in connection with the Purchaser Business.
Release means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, injecting, depositing, disposing, discharging, dispersal, escaping, dumping, migrating or leaching into the environment, including ambient air, indoor air, sediments, drinking water, water, surface or subsurface strata or groundwater, including the movement of Hazardous Materials through or in the indoor or outdoor air, soil, surface water, groundwater or property.
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Remedial Action means any action required by a Governmental Authority or Governmental Order or pursuant to Environmental Law to clean up or remediate soil, sediments, air, building materials, drinking water, surface water, groundwater or other environmental media in response to a Release or presence of Hazardous Materials, including any associated action taken to investigate, monitor, assess and evaluate the extent and severity of any such Release, action taken to remediate any such Release, post-remediation monitoring of any such Release, and preparation of all reports, studies, analyses or other documents relating to the foregoing. Remedial Action also refers to any Action relating to any of the above, including the negotiation and execution of judicial or administrative consent decrees, or defending claims brought by any Governmental Authority or any other Person, whether such claims are equitable or legal in nature, relating to the relevant cleanup or remediation in response to the relevant Release or presence of Hazardous Materials and associated actions.
Remediation Completion Date means the date that (a) the Governmental Authority with jurisdiction over a Remedial Action issues a written notice indicating that no further action, other than operation and maintenance of institutional or engineering controls is required, or (b) if, after requesting in writing such a notice from such a Governmental Authority, despite the Party responsible for such a Remedial Action having reasonably completed the requirements to obtain such a written notice, no such written notice is issued within 90 days after such Governmental Authoritys receipt of such request or any longer time period granted to such Governmental Authority under the relevant Environmental Law, then the Remediation Completion Date shall mean the date that an engineering firm mutually selected by the Parties and consistently ranked on the list of the Top 200 Environmental Firms published by the Engineering News-Record, and employing an Environmental Professional as defined in 40 CFR Part 312.10 and ASTM E1527-13, concurs that no further action, other than operation and maintenance of institutional or engineering controls, is required.
Replacement Shared Contract has the meaning set forth in Section 2.2(d).
Representatives means, with respect to any Person, such Persons Affiliates and any of such Persons or any of its Affiliates directors, officers, managers, partners, employees, counsel, financial advisors, accountants, consultants and other advisors, representatives and agents.
Resolution Period has the meaning set forth in Section 2.9(c).
Restated Purchaser Articles of Association has the meaning set forth in Section 3.2.
Restricted Market means, as applicable under Global Trade Control Laws, the Crimean Peninsula, Cuba, the Donbass Region, Iran, North Korea, Sudan, and Syria.
Restricted Party means any individual(s) or entity(ies) on any of the following lists (such lists, the Restricted Party Lists): the list of sanctioned entities maintained by the United Nations; the Specially Designated Nationals List and the Sectoral Sanctions Identifications List, as administered by the U.S. Department of the Treasury Office of Foreign Assets Control; the U.S. Denied Persons List, the U.S. Entity List, and the U.S. Unverified List, all administered by the U.S. Department of Commerce; the entities subject to restrictive measures and the Consolidated List of
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Persons, Groups and Entities Subject to E.U. Financial Sanctions, as implemented by the E.U. Common Foreign & Security Policy; the List of Excluded Individuals / Entities, as published by the U.S. Health and Human Services Office of Inspector General; any lists of prohibited or debarred parties established under the U.S. Federal Food Drug and Cosmetic Act; the list of persons and entities suspended or debarred from contracting with the U.S. government; and similar lists of restricted parties maintained by a Governmental Authority of any other jurisdiction in which the Business or the Purchaser Business, as applicable, markets, commercializes, distributes and sells products as of the date of this Agreement or as of the Closing Date.
Restricted Party Lists has the meaning set forth in the definition of Restricted Party.
Retained Brands has the meaning set forth in Section 6.15(a).
Retained Businesses mean all businesses of Seller Parent or any of its Subsidiaries (including the Conveyed Subsidiaries and any of their Subsidiaries) other than the Business, including the worldwide business of researching, developing, manufacturing, marketing, commercializing, distributing and selling (a) any products not included in the definition of Business, (b) each of the products set forth on Annex D (the PCH Split Products), (c) without limiting the foregoing clauses (a) and (b), any pharmaceutical products or pharmaceutical products that have become or may in the future become, in whole or in part, over-the-counter products (other than the products included in the definition of Business) and (d) any products set forth on Annex F.
Retained Environmental Liabilities has the meaning set forth in Section 2.5(b).
Retained Facilities means the manufacturing, office, research and development, and warehouse facilities owned, leased or operated by Seller Parent or any of its Affiliates, other than the Facilities.
Retained Facilities Environmental Liabilities has the meaning set forth in Section 2.5(b).
Retained Liabilities has the meaning set forth in Section 2.5.
Retained Names means (a) the Pfizer trademark, name and brand, (b) the Wyeth trademark, name and brand, (c) all Trademarks owned or used by Seller Parent or any of its Affiliates other than the Business Trademark Rights, and (d) all Trademarks containing, comprising, or related to any of the foregoing, including (i) all Trademarks that are variations or derivatives thereof or confusingly similar thereto, and (ii) all Internet Identifiers and telephone numbers or other alphanumeric addresses or mnemonics containing any of the foregoing. Notwithstanding anything in this Agreement to the contrary, Retained Names expressly includes those Trademarks set forth in Section 1.1(E) of the Seller Disclosure Letter.
Retained Real Property shall mean all real property owned, leased or used by Seller Parent or any of its Affiliates, other than the Owned Real Property and the Leased Real Property.
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Retained Subsidiaries means any Subsidiary of Seller Parent, other than the Conveyed Subsidiaries and their Subsidiaries.
Review Period has the meaning set forth in Section 2.9(b).
Safety Data Exchange Agreement has the meaning set forth in Section 6.14(a).
Sale has the meaning set forth in Section 2.6.
Sample Closing Statement means the calculation set forth on Annex B-2, in a manner consistent with the Accounting Principles, for illustrative purposes only, of the Business Working Capital and the Business Net Cash, in each case, as of December 31, 2017, including the line items to be included as assets and liabilities in the calculation of the Business Working Capital.
Sample Purchaser Closing Statement means the calculation set forth on Annex B-4, in a manner consistent with the Purchaser Accounting Principles, for illustrative purposes only, of the Purchaser Working Capital and the Purchaser Net Cash, in each case, as of December 31, 2017, including the line items to be included as assets and liabilities in the calculation of the Purchaser Working Capital.
Securities Act means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Seller Account means the bank account or accounts specified by Seller Parent in writing to the other Parties at least two (2) Business Days before the Closing Date.
Seller Accrued Income Taxes means an amount (not less than zero) equal to the aggregate current Income Tax liabilities of the Conveyed Subsidiaries and their Subsidiaries (which shall not be less than zero in any jurisdiction) for all taxable periods (or portions thereof) ending on or before the Closing Date for which final Tax Returns have not been filed. The calculation of Seller Accrued Income Taxes shall (i) exclude any deferred Tax liabilities or deferred Tax assets and any amounts in respect of speculative or contingent liabilities for Tax, (ii) include estimated (or other prepaid) Income Tax payments only to the extent that such payments have the effect of reducing (not below zero) the particular current Income Tax liability in respect of which such payments were made, (iii) include Income Tax deductions or Tax refunds (including for overpayments of estimated Taxes), in each case, only to the extent such deductions or Tax refunds have the effect of reducing (not below zero) a particular current Income Tax liability to which they are relevant, (iv) be prepared in accordance with the past practice (including reporting positions and accounting methods) of the applicable Conveyed Subsidiary or its applicable Subsidiary in preparing Tax Returns for Income Taxes and (v) in the case of a Straddle Period, be determined in accordance with Section 6.5(d)(iii).
Seller Cash Incentive Plan has the meaning set forth in Section 6.6(c)(v).
Seller Closing Bonus has the meaning set forth in Section 6.6(c)(v).
Seller Combined Tax Returns has the meaning set forth in Section 6.5(a)(i).
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Seller Current Representation has the meaning set forth in Section 10.17(a).
Seller DC Plans (non-U.S.) has the meaning set forth in Section 6.6(g)(i).
Seller DC Plans (U.S.) has the meaning set forth in Section 6.6(f)(i).
Seller Designated Person has the meaning set forth in Section 10.17(a).
Seller Disclosure Letter means the disclosure letter that Seller Parent has delivered to Purchaser as of the date of this Agreement.
Seller Facilities has the meaning set forth in Section 4.14(d).
Seller FSA Plan has the meaning set forth in Section 6.6(i).
Seller Group Plan means any employee benefit plan as defined in Section 3(3) of ERISA and any other material written fringe benefit, incentive, bonus, employment, retention, change in control, termination or severance plan, program, fund, agreement or arrangement, whether or not subject to ERISA, maintained (or contributed to or required to be contributed to) by any Seller or any Conveyed Subsidiary (or Subsidiary thereof), or any of their respective Affiliates, in which any Business Employee (U.S.) or Former Business Employee (U.S.) participates or is a party.
Seller Indemnifiable Tax Return has the meaning set forth in Section 6.5(a)(ii).
Seller Indemnified Taxes has the meaning set forth in Section 6.5(d)(i).
Seller Internal Restructurings has the meaning set forth in Section 6.5(f)(i).
Seller LTD Plan has the meaning set forth in Section 6.6(b)(iv).
Seller Parent has the meaning set forth in the preamble of this Agreement.
Seller Parent Equity Awards has the meaning set forth in Section 6.6(c)(vi).
Seller Parent Final Plan has the meaning set forth in Section 6.5(f)(iii).
Seller Parent Guarantees means all obligations of Seller Parent or any of the Retained Subsidiaries under any Contract, instrument or other commitment, obligation or arrangement (other than Seller Parent LCs) or other obligation in existence as of the Closing Date to the extent related to the Business for which Seller Parent or any of the Retained Subsidiaries is or may be liable, as guarantor, indemnitor, original tenant, primary obligor, Person required to provide financial support or collateral in any form whatsoever, or otherwise (including by reason of performance guarantees).
Seller Parent Indemnified Parties has the meaning set forth in Section 7.1(b).
Seller Parent LCs means all letters of credit issued by or for the account of Seller Parent or the Retained Subsidiaries on behalf of or in favor of any Conveyed Subsidiary, any of their Subsidiaries or the Business, and all obligations (including reimbursement obligations) of Seller Parent or the Retained Subsidiaries in respect of the foregoing.
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Seller Parent Related Party Contract means any Contract between a Conveyed Subsidiary or any of their Subsidiaries, on the one hand, and Seller Parent or its Subsidiaries (other than the Conveyed Subsidiaries or any of their Subsidiaries), on the other hand.
Seller Pension Plans has the meaning set forth in Section 6.6(e)(i).
Seller Privileged Communications has the meaning set forth in Section 10.17(c).
Seller Retained Plan means each Seller Group Plan and Foreign Seller Group Plan that is not a Conveyed Subsidiary Plan.
Seller Retained Severance Liabilities has the meaning set forth in Section 6.6(c)(ii).
Seller Retention Awards has the meaning set forth in Section 6.6(j).
Seller Retiree Medical Plans has the meaning set forth in Section 6.6(h).
Seller Tax Act has the meaning set forth in Section 6.5(d)(ii).
Seller Transaction Expenses means any outside counsel, investment banking, accounting, financial advisory and other advisory costs, fees and expenses incurred by Seller Parent or any of its Subsidiaries (including the Conveyed Subsidiaries and any of their Subsidiaries) at or prior to the Closing specifically in connection with the Strategic Process conducted by Seller Parent or the negotiation, execution and performance of this Agreement and the consummation of the transactions contemplated by this Agreement, including the Seller Internal Restructurings, other than costs, fees and expenses for which Purchaser or its Affiliates expressly has responsibility (including pursuant to payment, reimbursement, indemnification or other similar obligations set forth herein) pursuant to the terms of this Agreement.
Sellers means (i) Seller Parent and (ii) all of the Subsidiaries of Seller Parent that, as of immediately prior to the Closing, own any Purchased Assets.
Shared Contract means any Contract, sales order, purchase order, instrument or other commitment, obligation or arrangement entered into prior to the date hereof (or entered into prior to the Closing in accordance with this Agreement) that is between Seller Parent or any of its Subsidiaries (including the Conveyed Subsidiaries and their Subsidiaries), on the one hand, and one or more third parties, on the other hand, that inures to the benefit or burden of both the Business and any Retained Business, other than any enterprise-wide Contracts, Contracts with respect to Off-the-Shelf Software, Seller Group Plans, Foreign Seller Group Plans, Collective Bargaining Agreements and any agreement or grant with any Taxing Authority; provided that any such Contract that provides only de minimis assets or services to the Business or the Retained Businesses, as the case may be, shall not be deemed to be a Shared Contract for purposes hereof.
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Shared Contractual Liabilities means Liabilities in respect of Shared Contracts.
Shares has the meaning set forth in Section 2.1(a).
Software means (a) computer programs, including software implementation of algorithms, models and methodologies, whether in source code, object code, human readable form or other form, (b) user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons and (c) documentation, user manuals, and training manuals documenting the functionality or use of any of the foregoing.
Specified Records has the meaning set forth in Section 2.1(j).
Straddle Period has the meaning set forth in Section 6.5(a)(ii).
Straddle Period Tax Returns has the meaning set forth in Section 6.5(a)(ii).
Strategic Process means all matters, whether occurring before or after the date of this Agreement, relating to the review of strategic alternatives with respect to the Business, including the potential sale or other separation of the Business, and all activities in connection therewith, including matters relating to (a) the solicitation of proposals from and negotiations with third parties in connection with the potential sale of the Business or (b) the drafting, negotiation or interpretation of any of the provisions of this Agreement or the Ancillary Agreements, or the determination of the allocation of any assets or Liabilities pursuant to the foregoing agreements or the transactions contemplated thereby.
Subsequent Loss has the meaning set forth in Section 6.5(b).
Subsidiary means an entity as to which Seller Parent, Purchaser Parent or Purchaser or any other relevant entity, as the case may be, owns as of the date of determination, directly or indirectly, more than fifty percent (50%) of the voting power or other similar interests. Any Person which comes within this definition as of the date of this Agreement but thereafter fails to meet such definition shall from and after such time not be deemed to be a Subsidiary of Seller Parent, Purchaser Parent or Purchaser or any other relevant entity, as the case may be. Similarly, any Person which does not come within such definition as of the date of this Agreement but which thereafter meets such definition shall from and after such time be deemed to be a Subsidiary of Seller Parent, Purchaser Parent or Purchaser or any other relevant entity, as the case may be.
Target Business Net Cash means [***].
Target Business Working Capital means [***].
Target Purchaser Net Cash means [***].
Target Purchaser Working Capital means [***].
Note: Confidential treatment has been requested with respect to the information contained within the [***] marking. Such portions have been omitted from this filing and have been filed separately with the SEC.
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Tax Asset means any Tax Item that could reduce a Tax otherwise payable, including a net operating loss, net capital loss, general business credit, foreign Tax credit, investment credit, research or experimentation credit, charitable deduction or credit related to alternative minimum Tax or other Tax credit.
Tax Benefit means the Tax effect of any Tax Item that decreases Taxes paid or payable, including any interest with respect thereto or interest that would have been payable but for such item. For purposes of determining the amount and timing of any Tax Benefit, the recipient of the Tax Benefit shall be deemed to realize or utilize any Tax Benefit as and when such recipient actually receives such Tax Benefit in the form of a reduction in the amount of Taxes that would otherwise be payable, including as a credit against estimated Taxes, or actually receives such Tax Benefit in the form of a cash refund, with the amount of such Tax Benefit being determined on a with and without basis taking the Tax Item into account by treating it as the last item available in computing taxable income and as having been used after any other Tax attribute, and such Tax Benefit shall be determined net of any Tax detriments (including reduction of Tax basis of any asset) attributable to any Loss generating the Tax Item giving rise to such Tax Benefit.
Tax Claim has the meaning set forth in Section 6.5(e)(i).
Tax Item means any item of income, gain, loss, deduction, credit, recapture of credit or any other item that increases or decreases Taxes paid or payable, including an adjustment under Section 481 of the Code (or any similar provision of state, local or foreign Law) resulting from a change in accounting method.
Tax Proceeding means any audit, inquiry, examination, contest, litigation or other Action by, with, or against any Taxing Authority.
Tax Return means any return, report, declaration, information return, statement or other document filed or required to be filed with any Taxing Authority (including any schedule or attachment thereto and any amendment thereof), in connection with the determination, assessment or collection of any Tax or the administration of any Laws relating to any Tax.
Taxes means all taxes, charges, duties, imposts, fees, levies and other assessments of any kind whatsoever, whether or not disputed, including income, alternative or add-on minimum, gross receipts, estimated, capital stock, excise, real or personal property, sales or use, value added, goods and services, registration, windfall, profits, excess profits, documentary, ad valorem, intangibles, license, withholding (with respect to compensation or otherwise), payroll, employment, workers compensation, unemployment compensation, premium, occupancy, disability, net worth, capital gains, transfer, stamp, social security, environmental, occupation and franchise taxes, imposed by any Governmental Authority, and including any interest, penalties and additions attributable thereto.
Taxing Authority means any Governmental Authority responsible for the imposition, regulation, collection or administration of any Taxes.
Termination Expenses has the meaning set forth in Section 6.6(c)(ii).
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Third Party Claim has the meaning set forth in Section 7.3(a).
Trademarks has the meaning set forth in the definition of Intellectual Property.
Transfer of Undertakings Laws means (a) the Council of the European Union Directive 2001/23/EC of March 21, 2001 on the approximation of the Laws of the member states of the European Union relating to the safeguarding of employees rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses and/or local implementing legislation both as amended from time to time or (b) any similar or equivalent Laws applicable in jurisdictions outside of the European Union providing for an automatic transfer of employment or employer substation.
Transfer Taxes means any federal, state, county, local, foreign and other sales, bulk sales, use, transfer, real property transfer, excise, license, privilege, gross receipts, conveyance, documentary transfer, stamp, land, customs, recording, registration or other similar Tax (including any notarial fee), but excluding any VAT, imposed in connection with, or otherwise relating to, the transactions contemplated by this Agreement or the recording of any sale, transfer, conveyance or assignment of property (or any interest therein) effected pursuant to or contemplated by this Agreement.
Transferred Employee (non-U.S.) has the meaning set forth in Section 6.6(b)(v).
Transferred Employee (U.S.) has the meaning set forth in Section 6.6(b)(v).
Transferred Employees has the meaning set forth in Section 6.6(b)(v).
Transferred FSA Balances has the meaning set forth in Section 6.6(i).
Transferred Pension Plan Employees has the meaning set forth in Section 6.6(e)(i).
Transition Plan has the meaning set forth in Section 6.4(c).
Transition Services Agreement has the meaning set forth in Section 6.14(a).
Transition Team has the meaning set forth in Section 6.4(b).
Transitional Trademark License Agreement has the meaning set forth in Section 6.14(a).
Treasury Regulations means the United States Treasury regulations promulgated under the Code.
TUL Employee has the meaning set forth in Section 6.6(b)(ii).
UKLA means the United Kingdom Listing Authority.
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United States means the United States of America, including its territories and possessions.
VAT means goods and services Tax, value added Tax and other similar transactional indirect Taxes (but excluding transfer Tax, stamp duty and other similar Taxes).
WARN means the Worker Adjustment and Retraining Notification Act of 1988, as amended or any similar Law.
Section 1.2 Interpretation. The words hereof, herein, hereto and hereunder and words of similar import refer to this Agreement as a whole, including all Annexes, Exhibits and Schedules, and not to any particular provision of this Agreement and the words date hereof refer to the date of this Agreement. The terms defined in the singular have a comparable meaning when used in the plural, and vice versa. The terms dollars and $ mean U.S. dollars. Wherever the words include, includes or including are used in this Agreement, they shall be deemed to be followed by the words without limitation. Unless otherwise specifically provided for herein, the term or shall not be deemed to be exclusive. When a reference is made in this Agreement to an Article, a Section, an Annex, an Exhibit or a Schedule, such reference shall be to an Article or a Section of, or an Annex, an Exhibit or a Schedule to, this Agreement unless otherwise indicated. Any Law defined or referred to in this Agreement or in any agreement or instrument that is referred to herein means such Law as from time to time amended, modified or supplemented, including (in the case of statutes) by succession of comparable successor Laws and the related regulations thereunder and published interpretations thereof; provided that, for purposes of any representations and warranties contained in this Agreement that are made as of a specific date or dates, references to any Law shall be deemed to refer to such Law, as amended, and the related regulations thereunder and published interpretations thereof, in each case, as of such date. Any reference to writing or comparable expressions includes a reference to facsimile transmission, e-mail or comparable means of communication. Where used with respect to information, the phrases delivered or made available means that the information referred to has been physically or electronically delivered to the relevant parties or their respective Representatives, including material that has been posted in the data room (virtual or otherwise) established by a Party two (2) Business Days prior to the date hereof (or the Closing Date, but only in the case of information required to be delivered or made available under this Agreement prior to the Closing Date). The term disclosed, when used in reference to information disclosed to Purchaser Parent or Purchaser, shall be understood to include (but not be limited to) all disclosures contained in the Seller Disclosure Letter and all written information as shared over e-mail or otherwise included in Seller Parents virtual data room made available to Purchaser Parent or its Affiliates or Representatives (including in any confidential information memorandum) two (2) Business Days prior to the date hereof (or the Closing Date, but only in the case of information required to be disclosed under this Agreement prior to the Closing Date), and when used in reference to information disclosed to Seller Parent, shall be understood to include (but not be limited to) all disclosures contained in the Purchaser Parent Disclosure Letter and all written information as shared over e-mail or otherwise included in Purchaser Parents virtual data room made available to Seller Parent or its Affiliates or Representatives (including in any confidential information memorandum) two (2) Business Days prior to the date hereof (or the Closing Date, but only in the case of information required to be
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disclosed under this Agreement prior to the Closing Date). Reference to day or days are to calendar days. When calculating the period of time before which, within which or following which any act is to be done or step taken (or not taken) pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded, except that if the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. Amounts used in any calculations for purposes of this Agreement, the Ancillary Agreements or any other document delivered in connection herewith may be either positive or negative, it being understood that the addition of a negative number shall mean the subtraction of the absolute value of such negative number and the subtraction of a negative number shall mean the addition of the absolute value of such negative number.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller Parent shall, and shall cause the other Sellers to, sell, convey, assign and transfer to Purchaser or the applicable Purchaser Designated Affiliates, and Purchaser shall or shall cause the applicable Purchaser Designated Affiliates to purchase, acquire and accept, all of Seller Parents and its Subsidiaries right, title and interest, free and clear of all Liens other than Permitted Liens, as at the Closing in the following (collectively, the Purchased Assets):
(a) the equity interests in the Conveyed Subsidiaries (collectively, the Shares);
(b) the real property that is set forth in Section 2.1(b) of the Seller Disclosure Letter (collectively, the Owned Real Property) and the Facilities (including the related improvements and fixtures), and all easements and other rights and interests appurtenant thereto;
(c) the real property leases, subleases, licenses and occupancy arrangements that are set forth in Section 2.1(c) of the Seller Disclosure Letter (collectively, the Real Property Leases and the real property related to such Real Property Leases, the Leased Real Property), including the right to all security deposits and other amounts and instruments deposited by or on behalf of the Sellers thereunder;
(d) (i) other than Information Systems (which are the subject of clauses (ii) and (iii)), the owned and leased furniture, equipment, fixtures, machinery, supplies, spare parts, tools, tangible personal property and other tangible property (A) that is Related to the Business and located at a Facility, except as set forth on Section 2.3(a)(xx) of the Seller Disclosure Letter, or (B) set forth on Section 2.1(d)(i)(B) of the Seller Disclosure Letter, (ii) personal computers and vehicles primarily used by the Transferred Employees in respect of the Business (the assets described in the foregoing clauses (i) and (ii), collectively, the Equipment), (iii) Business IT Systems, and (iv) any leases relating to such Equipment or Business IT Systems (the Equipment Leases);
(e) Contracts, sales orders, purchase orders, instruments and other commitments, obligations and arrangements (i) to which Seller Parent or any of its Subsidiaries is a party and that are related solely to the Business, a Purchased Asset or an Assumed Liability, or (ii) that constitute a Shared Contract, but only the portion of such Shared Contract related to the Business (collectively, the Assumed Contracts);
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(f) all Inventory and samples of any Product;
(g) all Business IP, including the right to sue and recover and retain damages for past, present and future infringement or misappropriation of or other violation of any Business IP and all corresponding rights that, now or hereafter, may be secured throughout the world with respect to any Business IP, but for clarity excluding all Retained Names;
(h) all Registration Information (including in relation to pending applications for Product Registrations and Manufacturing Registrations) Related to the Business;
(i) all Governmental Authorizations, including Product Registrations, Manufacturing Registrations and Environmental Permits, that are owned, used or licensed (subject to the terms of such licenses) and Related to the Business;
(j) without duplication, (A) all Records Relating to the Business (including any applicable attorney-client privilege, attorney work product protection and expectation of client privilege attaching to any such Record), other than the Records set forth on Section 2.1(j) of the Seller Disclosure Letter (the Specified Records); provided that the Sellers and their Affiliates may retain one (1) copy of each of the foregoing pursuant to Section 6.8 and remove or redact the names of any customers or vendors from such lists to the extent such customers or vendors relate solely to the Retained Businesses, (B) copies of (x) the portions of all Records that relate to, but do not primarily relate to, the Business and (y) the Specified Records, and (C) the corporate books and records (including Tax Returns other than any Seller Combined Tax Returns) of the Conveyed Subsidiaries and their Subsidiaries to the extent related to the Business; provided, further, that in each case of clauses (A)-(C), Seller Parent may redact or remove any information not related to the Business;
(k) all accounts receivable and all other assets, in each case included in the calculation of Final Business Working Capital, and all Cash Equivalents included in the calculation of Final Business Net Cash;
(l) the goodwill Relating to the Business, together with the right to represent to third parties that Purchaser is the successor to the Business;
(m) all claims, defenses, causes of action, counterclaims and rights of set-off against third parties (at any time or in any manner arising or existing, whether choate or inchoate, known or unknown, contingent or non-contingent) relating primarily to the Business, a Purchased Asset or an Assumed Liability;
(n) all credits, prepaid expenses, rebates, deferred charges, advance payments, security deposits and other deposits or amounts held as surety by third Persons and prepaid items, in each case Related to the Business or primarily related to a Purchased Asset or an Assumed Liability and included in the calculation of Final Business Working Capital or Final Business Net Cash;
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(o) the amount of any insurance proceeds, recoveries or refunds (net of any reasonable costs of investigating and pursuing the underlying claim and of collection and any Taxes imposed in respect thereof) received by Seller Parent or any of its Affiliates under the Insurance Policies after the date hereof in respect of any Loss prior to the Closing in respect of any Purchased Asset or Assumed Liability to the extent Purchaser does not otherwise receive the benefit thereof (including through application of such proceeds) and except to the extent the related Liabilities are included in the calculation of Final Business Working Capital or Final Business Net Cash;
(p) the assets of all Conveyed Subsidiary Plans and the assets transferred to Purchaser and the Purchaser Designated Affiliates pursuant to Section 6.6;
(q) the assets set forth in Section 2.1(q) of the Seller Disclosure Letter;
(r) to the extent legally transferable, all third-party warranties, indemnities, further assurance and other similar covenants, and guarantees to the extent relating to any of the Equipment, Inventory, other Purchased Assets and Assumed Liabilities; and
(s) any other assets, properties or rights in each case Relating to the Business, other than those assets specifically identified as Excluded Assets in clauses (i) through (xx) of Section 2.3(a).
Notwithstanding anything else herein to the contrary, (i) any assets, properties or rights of any Conveyed Subsidiary (or Subsidiary thereof) that constitute Purchased Assets hereunder shall be deemed Purchased Assets for all purposes of this Agreement (including Article VII), except to the extent any such asset, property or right otherwise would be an Excluded Asset had it not been an asset, property or right of such Conveyed Subsidiary or Subsidiary (and instead an asset, right, or property of Seller Parent or any of its Affiliates (other than a Conveyed Subsidiary (or a Subsidiary thereof))) (a Conveyed Subsidiary Excluded Asset), (ii) any Conveyed Subsidiary Excluded Asset shall be deemed an Excluded Asset for all purposes of this Agreement (including Article VII) and Seller Parent shall use commercially reasonable efforts to transfer such Conveyed Subsidiary Excluded Asset, subject to obtaining required consents and Approvals, out of the relevant Conveyed Subsidiary (or Subsidiary thereof) on or prior to the Closing, or thereafter in accordance with Section 6.22, and (iii) any Liability of any Conveyed Subsidiary (or Subsidiary thereof) that otherwise would be a Retained Liability had it not been a Liability of such Conveyed Subsidiary or Subsidiary (and instead a Liability of Seller Parent or any of its Affiliates (other than a Conveyed Subsidiary (or a Subsidiary thereof))) shall be deemed a Retained Liability for all purposes of this Agreement (including Article VII) and Seller Parent shall use commercially reasonable efforts to transfer such Retained Liability, subject to obtaining required consents and Approvals, out of such Conveyed Subsidiary (or Subsidiary thereof) on or prior to the Closing, or thereafter in compliance with Section 6.22. The transfer of assets, properties and rights of any Conveyed Subsidiaries (or any Subsidiary thereof) deemed a Purchased Asset shall be effected solely by virtue of the transfer of the Sellers right, title and interest in the Shares and not through the direct transfer of such assets, properties or rights, and Seller Parent and its Subsidiaries shall not be required to transfer any such assets, properties or rights of the Conveyed Subsidiaries and their Subsidiaries other than through the transfer of the Sellers right, title and interest in the Shares.
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Section 2.2 Consents; Shared Contracts.
(a) Notwithstanding any other provision of this Agreement, neither this Agreement nor any Ancillary Agreement shall constitute an agreement to, directly or indirectly, sell, convey, assign, transfer or deliver any interest in any Purchased Asset (other than the Shares) or any right or benefit arising thereunder or resulting therefrom if such sale, conveyance, assignment, transfer or delivery, or the purchase or assumption thereof by Purchaser or the applicable Purchaser Designated Affiliates, without the consent or Approval of any Person(s) (including consents or Approvals of any Governmental Authorities), or otherwise, (i) would constitute a breach or other contravention of the rights of such Person(s), (ii) would be ineffective under, or contravene, applicable Law or (iii) would result in the termination, cancellation or acceleration of any material right or obligation of, or result in the loss of any material benefit of, or otherwise adversely affect in any material respect the contractual rights of, the Sellers or any of their Affiliates, or upon transfer, Purchaser or the applicable Purchaser Designated Affiliates; provided, however, that the Parties shall treat Purchaser or the applicable Purchaser Designated Affiliate, as the case may be, as the owner of any such Purchased Asset (and of (x) any portion of any Shared Contract that relates to and is allocated to the Business and the benefits and burdens of which are to be transferred to Purchaser or a Purchaser Designated Affiliate, as the case may be, pursuant to Section 2.2(d) and (y) any Delayed Business) to the fullest extent permitted by applicable Law for all purposes as of the Closing Date. Without limiting the foregoing, if any direct or indirect sale, conveyance, assignment, transfer or delivery, or any agreement to do the same, by the Sellers of, or any direct or indirect purchase or assumption by Purchaser or any Purchaser Designated Affiliate of, any interest in any Purchased Asset or any right or benefit arising thereunder or resulting therefrom, requires the consent or Approval of any Person(s) (including consents or Approvals of any Governmental Authorities), then such sale, conveyance, assignment, transfer, delivery, agreement, purchase or assumption shall be made subject to (and shall only be effective upon) such consent or Approval being obtained and the remainder of this Section.
(b) Each of Seller Parent, Purchaser Parent and Purchaser shall, and shall cause its Affiliates to, use their reasonable best efforts to obtain all consents or Approvals referred to in Section 2.2(a) (other than from Governmental Authorities under applicable Law, which are the subject of Section 6.3 and Section 6.4, and with respect to the Purchaser Parent Shareholder Approval, which is the subject of Section 6.24), including by executing, acknowledging and delivering such assignments, transfers, consents, assumptions, and other agreements, documents and instruments and taking such other actions as may reasonably be requested by the other Party in order to carry out the intent of this Agreement and any Ancillary Agreements and in order to convey and transfer to, and vest in, Purchaser and the applicable Purchaser Designated Affiliates, the Sellers right, title and interest in the Purchased Assets and to effectuate the assumption by Purchaser of the Assumed Liabilities, as contemplated by this Agreement, the Local Implementing Agreements and the transactions contemplated hereby and thereby; provided that except as otherwise expressly provided by this Agreement or any Ancillary Agreement, none of Seller Parent, Purchaser Parent or Purchaser or any of their respective Affiliates shall be required to expend any money or
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commence any litigation, or offer or grant any accommodation (financial or otherwise) to obtain any such consent or Approval. Purchaser Parent and Purchaser agree to provide such reasonable security and assurances as to financial capability, resources and creditworthiness as may be reasonably requested by any Person(s) whose consent or Approval is sought in connection with the transactions contemplated hereby. If any consent or Approval referred to in Section 2.2(a) is not obtained prior to the Closing, subject to Article VIII, the Closing shall nonetheless take place, and (i) for a period of up to twenty-four (24) months following the Closing Date or until such earlier time as such consent or Approval is obtained, in the case of consents or Approvals other than those required from Governmental Authorities under applicable Law, and (ii) until (A) the earliest to occur of (x) thirty-six (36) months following the Closing Date, (y) the completion of a Listing Transaction (as defined in the Purchaser Shareholders Agreement) or (z) such time as such consent or Approval is obtained, in the case of consents or Approvals from Governmental Authorities under applicable Law other than Antitrust Laws or (B) the Delayed Business Cut-Off Date, in the case of any Delayed Business subject to a Delayed Antitrust Approval, Seller Parent shall use reasonable best efforts to continue to perform its obligations under and comply with the terms of any Purchased Asset, as applicable, upon the direction of Purchaser, in all material respects in the ordinary course of business, and the Parties shall (and shall cause their Affiliates to) use reasonable best efforts to, at no cost to the Sellers or their Affiliates, (x) in the case of consents or Approvals other than those required from Governmental Authorities under applicable Law (which are the subject of Section 6.3 and Section 6.4), obtain such consents or Approvals, subject to and in accordance with the first sentence of this Section 2.2(b) and (y) obtain or structure an arrangement for Purchaser or such Purchaser Designated Affiliates to receive (or for the Sellers and their Affiliates to enforce for the benefit of Purchaser or such Purchaser Designated Affiliates), whether by license, sub-license, sub-assignment, or by other means, the economic and operational claims, rights and benefits of ownership of such Purchased Assets (including any Delayed Business), including the net profits from the operation or subsequent sale of such Purchased Assets (including any Delayed Business), and including the right to manage and control such Purchased Assets and direct the exercise of voting rights associated with any Purchased Assets that are Shares or, if such arrangement is not made, to agree to such other good faith equitable result; provided that the Sellers and their Affiliates shall not be required to take any action that would, in the good-faith reasonable judgment of the Sellers, constitute a breach or other contravention of the rights of any Person(s), be ineffective under, or contravene, applicable Law (but only to the extent enforceable against Seller Parent or any of its Affiliates) or result in the termination, cancellation or acceleration of any material right or obligation of, or result in the loss of any material benefit of, or otherwise adversely affect in any material respect the contractual rights of, the Sellers or any of their Affiliates. To the extent Seller Parent is not permitted under applicable Law to obtain or structure an arrangement for Purchaser or such Purchaser Designated Affiliates to receive (or for the Sellers and their Affiliates to enforce for the benefit of Purchaser or such Purchaser Designated Affiliates) the economic and operational claims, rights and benefits of ownership of such Purchased Assets (including any Delayed Business), Seller Parent shall use reasonable best efforts to segregate any net profits associated with the ownership of such Purchased Assets (including any Delayed Business) in an account for Purchasers benefit, such funds to be released as promptly as practicable once permitted under applicable Law. Purchaser shall indemnify and hold harmless the Sellers and the Seller Parent Indemnified Parties for and against all burdens (including losses from the operation or subsequent sale of such Purchased Assets (including any Delayed Business)) and Liabilities arising out of or relating to each such arrangement
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or the ownership of the underlying Purchased Asset (including any Delayed Business), and any risk of loss or damage to such Purchased Asset (including any Delayed Business), and shall be responsible for all Assumed Liabilities related thereto in accordance with this Agreement (without limiting any express indemnification obligations of Seller Parent set forth in Section 7.1). Without limiting Section 6.3(f), upon obtaining the requisite consents and Approvals following the Closing, any such Purchased Asset shall be transferred and assigned to, and accepted and assumed by, Purchaser and the applicable Purchaser Designated Affiliates hereunder. The obligations of the Parties pursuant to Section 6.3 shall be in addition to this Section 2.2(b), and in the event of any conflict between this Section 2.2(b) and Section 6.3, Section 6.3 shall control. Without limiting Section 2.2(a) or Section 6.3(f)(i), notwithstanding the fact that any applicable consent or Approval referred to in Section 2.2(a) is not obtained prior to the Closing (including any consent or Approval required to transfer an interest in a Purchased Asset to which an Assumed Liability relates), each of the assets, properties and rights described in Section 2.1 shall be deemed to be Purchased Assets under this Agreement and each of the Liabilities described in Section 2.4 shall be deemed to be Assumed Liabilities under this Agreement.
(c) Purchaser Parent and Purchaser acknowledge that certain consents or Approvals of or related to the transactions contemplated by this Agreement may be required from certain Persons (including Governmental Authorities) with respect to the Purchased Assets, and the sale, conveyance, assignment, transfer, delivery, purchase or assumption of any interest therein, and that such consents and Approvals may not be obtained. Notwithstanding anything to the contrary set forth in this Agreement, Purchaser Parent and Purchaser agree that the Sellers and their Affiliates shall not have any Liability whatsoever arising out of or relating to the failure to obtain any consents or Approvals that may have been or may be required in connection with or related to the transactions contemplated by this Agreement or because of any default under, or acceleration or termination of or loss of any benefit under, any Real Property Lease, Equipment Lease, Contract, sales order, purchase order, instrument or other commitment, obligation or arrangement, Product Registration, Manufacturing Registration, Environmental Permit, Governmental Authorization or any claim, right or benefit arising under or from any Purchased Asset, as a result thereof, except in the case of a breach by Seller Parent of its express covenants, agreements, obligations, representations or warranties set forth in this Agreement related thereto. Notwithstanding anything to the contrary set forth in this Agreement, Purchaser Parent and Purchaser expressly acknowledge and agree that (other than the conditions expressly set forth in Sections 8.1(a) and 8.1(b)) in no event shall the receipt of any such consents and Approvals be a condition to the obligations of Purchaser Parent or Purchaser to consummate the Sale and the other transactions contemplated by this Agreement, and Purchaser Parent and Purchaser reaffirm their respective obligations to consummate the Sale and the other transactions contemplated by this Agreement subject only to the express conditions set forth in Sections 8.1 and 8.2, irrespective and independent of whether any such consents or Approvals are obtained.
(d) Except as otherwise agreed by Seller Parent and Purchaser Parent or as otherwise provided in this Agreement or an Ancillary Agreement, and except with respect to any Shared Contracts that relate to services to be provided under the Transition Services Agreement, and without limiting the other provisions of this Section 2.2, to the extent reasonably requested by Purchaser (i) Seller Parent, Purchaser Parent and Purchaser shall, and shall cause their respective
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Affiliates to, reasonably cooperate and use their reasonable best efforts (at Purchasers cost) to obtain the consent and agreement of the third party that is a counterparty to any Shared Contract to enter into a new Contract with Purchaser or the applicable Purchaser Designated Affiliate (or a Conveyed Subsidiary or its Subsidiary) or to assign or transfer, to the extent assignable or transferable under the terms of such Shared Contract, to Purchaser or the applicable Purchaser Designated Affiliate (or a Conveyed Subsidiary or its Subsidiary) the portion of such Shared Contract (and the rights, benefits, obligations and burdens thereunder) that relates to the Business, pursuant to which Purchaser or the applicable Purchaser Designated Affiliate (or a Conveyed Subsidiary or its Subsidiary) receives the rights and benefits, and bears the obligations and burdens, of such portion of any such Shared Contract that relates to and is allocated to the Business, as reasonably agreed by Seller Parent and Purchaser, in each case effective as of the Closing Date (each, a Replacement Shared Contract), unless such Shared Contract relates to a Delayed Business, in which case effective as of the date of transfer of such Delayed Business to Purchaser or the applicable Purchaser Designated Affiliate; provided that the failure to obtain such consent or agreement or such Replacement Shared Contract shall in no event be deemed a breach of this Agreement by Seller Parent or any of its Affiliates, except in the case of a breach by Seller Parent of its express covenants, agreements, obligations, representations or warranties set forth in this Agreement related thereto, and (ii) to the extent such a Replacement Shared Contract is not obtained, until the earlier of twenty-four (24) months following the Closing Date and the expiration or termination date of the applicable Shared Contract (assuming, for these purposes, that the then-current term in effect as of immediately prior to the Closing is not renewed or extended), the Parties shall (and shall cause their Affiliates to) use reasonable best efforts to, at Purchasers cost, obtain or structure an arrangement for Purchaser or the applicable Purchaser Designated Affiliates to receive the rights and benefits, and bear the obligations and burdens, of such portion of any such Shared Contract that relates to and is allocated to the Business, as reasonably agreed by Seller Parent and Purchaser; provided that in the case of each of clauses (i) and (ii), the Sellers, Purchaser Parent and Purchaser and their respective Affiliates shall not be required to take any action that would, in the good-faith reasonable judgment of the Sellers or Purchaser, constitute a breach or other contravention of the rights of any Person(s), be ineffective under, or contravene, applicable Law or any such Shared Contract or result in the termination, cancellation or acceleration of any material right or obligation of, or result in the loss of any material benefit of, or otherwise adversely affect in any material respect the contractual rights of, the Sellers, Purchaser or any of their respective Affiliates. Purchaser shall indemnify and hold harmless the Sellers and the Seller Parent Indemnified Parties for and against all burdens and Liabilities arising out of any Replacement Shared Contract, each such arrangement referred to in this Section 2.2(d) and the portion of any Shared Contract that is subject to any such arrangement (other than Shared Contractual Liabilities allocated to Seller Parent in accordance with the following sentence). With respect to Shared Contractual Liabilities pursuant to, under or relating to any Shared Contract, such Shared Contractual Liabilities shall be allocated between Seller Parent and Purchaser as follows: (i) if a Liability is incurred solely in respect of the Business or the Retained Businesses, such Liability shall be allocated to Purchaser (in respect of the Business) or Seller Parent (in respect of the Retained Businesses); and (ii) if a Liability cannot be so allocated under clause (i), such Liability shall be allocated to Seller Parent or Purchaser, as the case may be, based on the relative proportion of total benefit received by the Business and the Retained Businesses under the relevant Shared Contract, as reasonably agreed by Seller Parent and Purchaser. Notwithstanding the foregoing, (A) each of Seller Parent and Purchaser shall be responsible for any or all Liabilities arising from its (or its Affiliates) direct or indirect breach of any Shared Contract and (B) Purchaser shall be solely responsible for any or all Liabilities arising out of or relating to any Replacement Shared Contract.
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(e) To the extent an asset or liability that comprises the business as reflected in the Financial Statements is not a Purchased Asset or an Assumed Liability, the Parties shall work together in good faith to determine whether, consistent with the terms of this Agreement, and if so how best to, transfer the benefit or detriment of such asset or liability to Purchaser.
Section 2.3 Excluded Assets.
(a) Notwithstanding any provision in this Agreement, Purchaser and the Purchaser Designated Affiliates are not purchasing or acquiring any of Seller Parents or its Affiliates (including the Conveyed Subsidiaries or their Subsidiaries) right, title or interest in any assets, properties or rights other than the Purchased Assets (the Excluded Assets), including:
(i) all assets constituting ownership interests in, or that are used or held for use in, the Retained Businesses, other than those assets identified as Purchased Assets in clauses (a) through (s) of Section 2.1;
(ii) all Retained Real Property;
(iii) (A) the Retained Facilities, (A) any owned and leased furniture, equipment, fixtures, machinery, supplies, spare parts, tools, tangible personal property and other tangible property located at the Retained Facilities or not Related to the Business, except as set forth on Section 2.1(d)(i)(B) of the Seller Disclosure Letter, and any personal computers and vehicles that are not primarily used by the Transferred Employees in respect of the Business, (A) the Information Systems of Seller Parent and its Subsidiaries, other than the Business IT Systems and (A) any leases relating to the assets described in the foregoing clauses (B) through (D);
(iv) all legal and beneficial interest in the share capital or equity interest of any Person other than the Conveyed Subsidiaries (and their Subsidiaries), other than those equity interests set forth on Section 2.1(q) of the Seller Disclosure Letter;
(v) all Shared Contracts and all other Contracts, sales orders, purchase orders, instruments and other commitments, obligations and arrangements to which Seller Parent or any of its Affiliates is a party or by which any of its or their properties, assets or rights is subject, in each case other than Assumed Contracts;
(vi) all inventory (including all raw material inventory, work-in-process inventory, spare parts inventory and finished products inventory) other than the Inventory and any samples of Products;
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(vii) the Retained Names and all other Intellectual Property that is not Business IP, including such Intellectual Property licensed to Purchaser under an Ancillary Agreement or otherwise, and including as set forth on Section 2.3(a)(vii) of the Seller Disclosure Letter, and including the right to sue and recover and retain damages for past, present and future infringement or misappropriation or any other violation of any such Intellectual Property;
(viii) all Governmental Authorizations, including product registrations, manufacturing registrations and environmental permits, owned, used or licensed by Seller Parent or any of its Affiliates and not Related to the Business;
(ix) all customer and vendor lists, all advertising, marketing, sales and promotional materials, and business and financial records, books, and documents and other Records, in each case not Related to the Business, and the Specified Records;
(x) all accounts receivable and other current assets and all cash and cash equivalents, checks, money orders, marketable securities, short-term instruments, bank and other depositary accounts, certificates of deposit, time deposits, negotiable instruments, securities and brokerage accounts, funds in time and demand deposits or similar accounts of Seller Parent or any of its Affiliates (including the Conveyed Subsidiaries or any of their Subsidiaries) (other than the accounts receivable and other assets, in each case included in the calculation of the Final Business Working Capital, and the Cash Equivalents included in the calculation of Final Business Net Cash);
(xi) all Tax refunds, Tax credits or other Tax Assets of the Sellers and any refund or credit against Seller Indemnified Taxes to which Seller Parent is entitled pursuant to Section 6.5(c), whether or not derived from the Business and whether or not existing prior to the Closing, but excluding any refunds or credits or other Tax Assets to the extent reflected as an asset on the Final Closing Statement and taken into account in the calculation of (a) the Final Business Working Capital or (b) Seller Accrued Income Taxes (to the extent, with respect to clause (b), offsetting a Tax Liability in such calculation);
(xii) all Seller Combined Tax Returns and all Tax Returns of the Sellers or any of their Affiliates (other than the Conveyed Subsidiaries and their Subsidiaries) that do not relate solely to Purchased Assets or Assumed Liabilities, and in each case any books and records relating thereto;
(xiii) all claims, defenses, causes of action, counterclaims and rights of set-off against third parties (at any time or in any manner arising or existing, whether choate or inchoate, known or unknown, contingent or non-contingent) other than those identified as Purchased Assets in Section 2.1;
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(xiv) all rights of Seller Parent or any of its Affiliates (for clarity, other than, from and after the Closing, the Conveyed Subsidiaries and their Subsidiaries) under this Agreement or the Ancillary Agreements and any documents delivered or received in connection herewith or therewith;
(xv) except as set forth in Section 2.1(o) and subject to Section 6.18, all current and prior insurance policies and all rights of any nature with respect thereto, including all insurance recoveries thereunder and rights to assert claims with respect to any such insurance recoveries;
(xvi) except as expressly set forth in this Agreement (including Section 2.1(p) and Section 6.6), all assets of any Seller Group Plan or Foreign Seller Group Plan that is not a Conveyed Subsidiary Plan;
(xvii) all corporate-level services (but not the assets related to such services to the extent such assets are Purchased Assets) of the type currently provided to the Business by Seller Parent or any of its Affiliates, and without limiting Seller Parents obligations under the Transition Services Agreement;
(xviii) all third-party warranties, indemnities, further assurances and similar covenants and guarantees other than those identified as Purchased Assets in Section 2.1;
(xix) all assets, properties and rights of any Person that are not Related to the Business, including all assets, properties and rights constituting ownership interests in, or that are used or held for use in, or related to, the Retained Businesses, in each case other than those assets, properties or rights identified as Purchased Assets in clauses (a) through (s) of Section 2.1; and
(xx) the assets set forth in Section 2.3(a)(xx) of the Seller Disclosure Letter.
(b) Notwithstanding anything in this Agreement to the contrary but subject to Section 6.5(f), prior to the Closing, Seller Parent shall use commercially reasonable efforts to take (or cause one or more of its Affiliates to take) such action as is necessary, advisable or desirable to transfer the Excluded Assets from the Conveyed Subsidiaries and their Subsidiaries (and, if needed, from the Sellers) to Seller Parent or one or more of its Retained Subsidiaries for such consideration or for no consideration, as may be determined by Seller Parent in its sole discretion, but in compliance with all applicable Laws and as would not result in any material adverse impact to the Purchased Assets or the Business. After the Closing Date, the Parties shall continue to use commercially reasonable efforts to take all actions (and shall cause their Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) to continue to use commercially reasonable efforts to take all actions) reasonably requested by the other Party to effect the provisions of this Section 2.3, including the return of any Excluded Assets for no additional consideration. Any action taken pursuant to this Section 2.3(b) after the Closing Date shall be deemed for purposes of calculating the Business Working Capital and the Business Net Cash pursuant to Section 2.9 to have occurred as of 12:01 a.m. (New York time) on the Closing Date.
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Section 2.4 Assumption of Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, at the Closing, Purchaser shall (i) assume and, subject to Section 2.5, Section 6.5, Section 6.6 and Article VII, pay, perform, satisfy and discharge any and all Liabilities of the Sellers or any of their Affiliates (including the Conveyed Subsidiaries and their Subsidiaries), whether arising prior to, on or after the Closing, to the extent resulting from or arising out of the past, present or future ownership, operation, use or conduct of the Business or the Purchased Assets (including the Shares) and (ii) cause the Conveyed Subsidiaries and their Subsidiaries to pay, perform, satisfy and discharge any and all of their respective Liabilities, in each case of the foregoing clauses (i) and (ii), other than Liabilities identified as Retained Liabilities in clauses (a) through (g) of Section 2.5 (all of the foregoing Liabilities being collectively referred to herein as the Assumed Liabilities). The Assumed Liabilities shall also include the following:
(a) all Liabilities to the extent expressly assumed by, retained by or agreed to be performed by Purchaser or its Subsidiaries (including the Conveyed Subsidiaries and their Subsidiaries) pursuant to the terms of this Agreement, including all Liabilities to the extent transferred to or assumed or retained by Purchaser or its Subsidiaries pursuant to Section 6.6 and Section 6.13;
(b) all Liabilities in respect of any Action, whether class, individual or otherwise in nature, in law or in equity, whether or not presently threatened, asserted or pending, to the extent arising out of, or to the extent relating to, the Business or the operation or conduct of the Business prior to, on or after the Closing;
(c) all Liabilities for Taxes of the Conveyed Subsidiaries and their Subsidiaries and, without duplication, all other Liabilities for Taxes imposed with respect to, arising out of or relating to the Purchased Assets or the Business, in each case, other than Seller Indemnified Taxes for which Seller Parent is liable pursuant to this Agreement;
(d) all Liabilities to the extent arising out of, or to the extent relating to, the design, manufacture, testing, marketing, distribution, use or sale of Products prior to, on or after the Closing, including warranty obligations and irrespective of the legal theory asserted;
(e) all Liabilities to suppliers and customers, in each case to the extent arising out of, or to the extent relating to, the Business, including in respect of any Products returned prior to, on or after the Closing;
(f) all accounts payable and all other Liabilities, in each case included in the calculation of Final Business Working Capital, all Funded Indebtedness included in the calculation of Final Business Net Cash and all other Indebtedness of the Conveyed Subsidiaries (or their Subsidiaries) that is not Funded Indebtedness;
(g) all Environmental Liabilities of any nature whatsoever to the extent arising out of, or relating to, or in respect of the Conveyed Subsidiaries (or their Subsidiaries), the Purchased Assets, the Business or the Facilities, whether arising prior to, on or after the Closing, other than the Retained Facilities Environmental Liabilities or the Retained Environmental Liabilities;
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(h) all Liabilities to the extent relating to, resulting from or arising out of the Assumed Contracts, including Purchasers or its Affiliates (including any Conveyed Subsidiarys or its Subsidiaries) portion of Shared Contractual Liabilities pursuant to Section 2.2(d); and
(i) the Liabilities set forth in Section 2.4(i) of the Seller Disclosure Letter.
Section 2.5 Retained Liabilities. Except as otherwise set forth in this Agreement, and subject to Article VII, the Sellers shall retain, and none of Purchaser or any of its Affiliates shall assume or be responsible for pursuant to this Agreement, any Liabilities of Sellers or any of their Affiliates other than the Assumed Liabilities (such Liabilities other than the Assumed Liabilities, the Retained Liabilities). The Retained Liabilities shall include:
(a) all Liabilities for which any Seller expressly has responsibility pursuant to the terms of this Agreement or any Ancillary Implementing Agreement, including all Liabilities for which the Sellers have responsibility pursuant to Section 6.6;
(b) all Liabilities of any Seller or Conveyed Subsidiary (or Subsidiaries thereof) to the extent related to or arising out of (i) the Excluded Assets (other than any Liabilities for which Purchaser or its Affiliates expressly has responsibility pursuant to the terms of this Agreement or any Ancillary Agreement, and other than any Liabilities that are separately allocated pursuant to any other agreement or transaction related to such Excluded Assets between Seller Parent or any of its Affiliates, on the one hand, and Purchaser or any of its Affiliates, on the other hand, including any commercial or other agreements unrelated to this Agreement), including Environmental Liabilities, whether arising prior to, on or after the Closing, to the extent arising out of or related to the ownership or occupancy of the Retained Facilities (the Retained Facilities Environmental Liabilities) or (ii) the matters set forth on Section 2.5(b)(ii) of the Seller Disclosure Letter (the Retained Environmental Liabilities);
(c) all Seller Indemnified Taxes;
(d) all Seller Transaction Expenses;
(e) Seller Parents portion of Shared Contractual Liabilities pursuant to Section 2.2(d);
(f) all Indebtedness of Seller Parent and its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) that are not Assumed Liabilities under Section 2.4; and
(g) all Liabilities of Seller Parent or any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) set forth in Section 2.5(g) of the Seller Disclosure Letter.
Section 2.6 Purchase Consideration. In consideration of the sale and transfer to Purchaser or the applicable Purchaser Designated Affiliates of the applicable Sellers right, title and interest in the Purchased Assets, including the Shares, in accordance with and subject to the terms of this Agreement (the Sale), and the other obligations of Seller Parent pursuant to this Agreement, at the Closing, Purchaser shall, and Purchaser Parent shall cause Purchaser to, (a) allot, issue and deliver the Purchase Consideration in accordance with Section 2.7, and (b) assume the Assumed Liabilities.
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Section 2.7 Delivery of the Purchase Consideration. At the Closing, Purchaser shall, and Purchaser Parent shall cause Purchaser to, allot and issue to Seller Parent (and/or Seller Parents designee(s) (which shall be one or more Affiliates of Seller Parent), in such allocations as may be directed by Seller Parent), free and clear of all Liens except for Liens arising under applicable securities Laws, and credited as fully paid, a number of B ordinary shares in the capital of Purchaser, having the rights and restrictions set out in the Restated Purchaser Articles of Association (the B Ordinary Shares), in such number so that, immediately following Closing, (a) the B Ordinary Shares owned by Seller Parent (and/or Seller Parents designee(s)) will represent 32% of the Ordinary Shares (such B Ordinary Shares, the Purchase Consideration) and (b) the A ordinary shares in the capital of Purchaser, having the rights and restrictions set out in the Restated Purchaser Articles of Association, owned by a wholly owned Subsidiary of Purchaser Parent (the A Ordinary Shares) will represent the remaining 68% of the Ordinary Shares, in each case of the foregoing clauses (a) and (b), after giving effect to (and including) the issuance of the B Ordinary Shares, and, together with the Preference Shares, such shares will represent all of the issued share capital of Purchaser.
Section 2.8 Estimated Closing Statement; Estimated Adjustment Payments.
(a) No fewer than seven (7) Business Days before the Closing Date, (a) Seller Parent shall prepare in good faith and deliver to Purchaser Parent the Estimated Closing Statement, which shall include Seller Parents good faith calculation of the Estimated Business Working Capital, Estimated Business Net Cash and any Estimated Business Excess Adjustment or Estimated Business Deficit Adjustment to be paid at Closing, prepared in a manner consistent with the accounting principles, procedures, policies and methods set forth in Annex B-1 (the Accounting Principles) and the Sample Closing Statement and (b) Purchaser Parent shall prepare in good faith and deliver to Seller Parent the Purchaser Estimated Closing Statement, which shall include Purchaser Parents good faith calculation of the Estimated Purchaser Working Capital, Estimated Purchaser Net Cash and any Estimated Purchaser Parent Excess Adjustment or Estimated Purchaser Parent Deficit Adjustment to be paid at Closing, prepared in a manner consistent with the accounting principles, procedures, policies and methods set forth in Annex B-3 (the Purchaser Accounting Principles) and the Sample Purchaser Closing Statement. The Parties shall have the right to review the Estimated Closing Statement and the Purchaser Parent Estimated Closing Statement and the Parties shall cooperate in good faith in an effort to agree to any required modification based on such review.
(b) If (i) the amount equal to (A) the Estimated Business Working Capital plus (B) the Estimated Business Net Cash exceeds (ii) the amount equal to (A) the Target Business Working Capital plus (B) the Target Business Net Cash (the amount of such excess, the Estimated Business Excess Adjustment), at the Closing, Purchaser shall, and Purchaser Parent shall cause Purchaser to, pay to Seller Parent (and/or Seller Parents designee(s), in such allocations as may be directed by Seller Parent) by wire transfer of immediately available funds to the Seller Account, an amount in cash equal to the Estimated Business Excess Adjustment.
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(c) If (i) the amount equal to (A) the Target Business Working Capital plus (B) the Target Business Net Cash exceeds (ii) the amount equal to (A) the Estimated Business Working Capital plus (B) the Estimated Business Net Cash (the amount of such excess, the Estimated Business Deficit Adjustment), at the Closing, Seller Parent shall pay to Purchaser by wire transfer of immediately available funds to the Purchaser Account, an amount in cash equal to the Estimated Business Deficit Adjustment.
(d) If (i) the amount equal to (A) the Estimated Purchaser Working Capital plus (B) the Estimated Purchaser Net Cash exceeds (ii) the amount equal to (A) the Target Purchaser Working Capital plus (B) the Target Purchaser Net Cash (the amount of such excess, the Estimated Purchaser Parent Excess Adjustment), at the Closing, Purchaser shall, and Purchaser Parent shall cause Purchaser to, pay to Purchaser Parent (and/or Purchaser Parents designee(s), in such allocations as may be directed by Purchaser Parent) by wire transfer of immediately available funds to the Purchaser Parent Account, an amount in cash equal to the Estimated Purchaser Parent Excess Adjustment.
(e) If (i) the amount equal to (A) the Target Purchaser Working Capital plus (B) the Target Purchaser Net Cash exceeds (ii) the amount equal to (A) the Estimated Purchaser Working Capital plus (B) the Estimated Purchaser Net Cash (the amount of such excess, the Estimated Purchaser Parent Deficit Adjustment), at the Closing, Purchaser Parent shall pay to Purchaser by wire transfer of immediately available funds to the Purchaser Account, an amount in cash equal to the Estimated Purchaser Parent Deficit Adjustment.
(f) Any Estimated Business Excess Adjustment, Estimated Business Deficit Adjustment, Estimated Purchaser Parent Excess Adjustment or Estimated Purchaser Parent Deficit Adjustment paid at the Closing shall be subject to the post-Closing adjustment provisions of Section 2.9.
Section 2.9 Post-Closing Working Capital and Net Cash Adjustments.
(a) Within one hundred and twenty (120) days after the Closing Date, Purchaser shall deliver to Seller Parent and Purchaser Parent a statement setting forth Purchasers calculation of the Business Working Capital, the Business Net Cash, Purchaser Working Capital and Purchaser Net Cash (together with reasonable documentation, back-up and supporting detail for each of the items and calculations in such statement, the Proposed Closing Statement). The Proposed Closing Statement shall be unaudited but shall be prepared in a manner consistent with (i) with respect to the calculation of Business Working Capital and Business Net Cash, the Accounting Principles and the Sample Closing Statement and (ii) with respect to the calculation of Purchaser Working Capital and Purchaser Net Cash, the Purchaser Accounting Principles and the Sample Purchaser Closing Statement, including as to line items and the classification of asset and liability line items set forth thereon, and take into account any transfers made pursuant to Section 2.3(b), and to the extent the Proposed Closing Statement reflects amounts that are different from amounts presented on the balance sheet included in the Financial Statements or the Purchaser Financial Statements, as applicable, as of the Balance Sheet Date, such differences shall be based on facts or occurrences arising solely between the Balance Sheet Date and the Closing.
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(b) Following the delivery of the Proposed Closing Statement until the date that is ninety (90) days thereafter (the Review Period), either or both Parents may, by delivering a written notice to the other Parties, dispute the amounts reflected on the line items of the Proposed Closing Statement (any such disputed amount, a Disputed Item). A Parents written notice of Disputed Items shall identify each Disputed Item and specify the nature of such Parents disagreement, the amount of each item in dispute and the basis therefor, and the amount that such Parent believes is the correct amount of the Business Working Capital, the Business Net Cash, Purchaser Working Capital or Purchaser Net Cash, as applicable, based on the disagreements set forth in its notice of Disputed Items, including the adjustments applied by such Parent to the Proposed Closing Statement in calculating any such amounts. A Parent shall be deemed to have agreed with all other items and amounts contained in the Proposed Closing Statement not so objected to by it in a notice of Disputed Items within the Review Period in accordance with this Section 2.9(b), and the failure by a Parent to provide a notice of Disputed Items to the other Parties within the Review Period will constitute such Parents agreement with all of the items in the Proposed Closing Statement, and the Proposed Closing Statement shall be conclusive, final and binding upon the Parties as the Final Closing Statement with respect to the items thereon so agreed by both Parents.
(c) If a notice of Disputed Items shall be timely delivered in accordance with Section 2.9(b), the Parties shall, during the forty-five (45) days following the date of such delivery (the Resolution Period), negotiate in good faith to resolve the Disputed Items. During the Review Period and the Resolution Period, each Party and its Representatives (including its accountants) shall be permitted to review the working papers of the other Parties and their accountants relating to the notice of Disputed Items and the Proposed Closing Statement (subject to execution of customary working paper access letters). To the extent any Disputed Items are so resolved in writing by mutual agreement of all Parties within the Resolution Period, then the Proposed Closing Statement, as revised to incorporate such changes as have been agreed between all Parties, shall be conclusive, final and binding upon the Parties as the Final Closing Statement with respect to the items thereon so agreed.
(d) If during such Resolution Period the Parties are unable to reach agreement on all Disputed Items, the Parties shall refer all unresolved Disputed Items to the Independent Accountant. The Independent Accountant shall make a determination with respect to each unresolved Disputed Item within forty-five (45) days after its engagement by the Parties to resolve such Disputed Items, which determination shall be made in accordance with the rules set forth in this Section 2.9. Except as the Parties may otherwise agree, all communications between any of the Parties or any of their respective Representatives, on the one hand, and the Independent Accountant, on the other hand, will be in writing with copies simultaneously delivered to the non-communicating Parties. The Parties shall cooperate with the Independent Accountant in its proceedings, including by providing such accounting books and records and working papers of each Party and its accountants, as the Independent Accountant may reasonably request (subject to execution of customary working paper access letters). The Independent Accountant shall make its determination (i) based solely on the documentation submitted by, and presentations made by, any of the Parties (any such documentation or presentation must be provided to the other Parties at the same time as its submission or presentation to the Independent Accountant) and (ii) in a manner consistent with (A) the Accounting Principles and the Sample Closing Statement and the definitions
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of Business Working Capital and Business Net Cash, in the case of the calculation of Business Working Capital and Business Net Cash, and (B) the Purchaser Accounting Principles and the Sample Purchaser Closing Statement, and the definitions of Purchaser Working Capital and Purchaser Net Cash, in the case of the calculation of Purchaser Working Capital and Purchaser Net Cash (and in each case each of the defined terms used in each of those terms or in which those terms are used and the related provisions of this Agreement). The Independent Accountant shall deliver to the Parties, within such forty-five (45)-day period, a written report setting forth its adjustments, if any, to the Proposed Closing Statement and the calculations supporting such adjustments, and any such adjustments must be within the range of values established for such Disputed Item by Purchaser in the Proposed Closing Statement and by the applicable Parent(s) in the notice of Disputed Items delivered pursuant to Section 2.9(b). Absent manifest errors, such report shall be conclusive, final and binding on the Parties and enforceable in a court of law, effective as of the date the Independent Accountants written determination is received by the Parties, and the Proposed Closing Statement, as revised to incorporate the Independent Accountants resolution of the Disputed Items, shall be conclusive, final and binding upon the Parties as the Final Closing Statement. Purchaser shall pay the fees and expenses of the Independent Accountant, and the Independent Accountant shall bill Purchaser accordingly. The Parties acknowledge that they have discussed their past contacts, if any, with the Independent Accountant, and that no Party shall have the right to object to the Independent Accountants service in such role by reason of non-disclosure of past contacts, conflicts of interest or any other reason. If, before the Independent Accountant renders its determination with respect to the Disputed Items in accordance with this Section 2.9(d), any Disputed Items are resolved in writing by mutual agreement of all Parties, then in each case such items as so agreed will be conclusive, final and binding on the Parties immediately upon such notice as the Final Closing Statement with respect to the items thereon so agreed.
(e) As used herein, Final Business Working Capital, Final Business Net Cash, Final Purchaser Working Capital and Final Purchaser Net Cash mean (i) if no notice of Disputed Items with respect to the Business Working Capital, Business Net Cash, Purchaser Working Capital or Purchaser Net Cash, respectively, is delivered by either Parent within the period provided in Section 2.9(b), the Business Working Capital, Business Net Cash, Purchaser Working Capital or Purchaser Net Cash, respectively, as shown in the Proposed Closing Statement as prepared by Purchaser, or (ii) if such a notice of Disputed Items with respect to the Business Working Capital, Business Net Cash, Purchaser Working Capital or Purchaser Net Cash, respectively, is timely delivered by either Parent, either (A) the Business Working Capital, Business Net Cash, Purchaser Working Capital or Purchaser Net Cash, respectively, as mutually agreed to in writing by the Parties or (B) the Business Working Capital, Business Net Cash, Purchaser Working Capital or Purchaser Net Cash, respectively, as shown in the Independent Accountants calculation delivered pursuant to Section 2.9(d).
(f) Until the date on which the Proposed Closing Statement shall become conclusive, final and binding on the Parties pursuant to this Section 2.9 (the Closing Statement Finalization Date), each Party agrees that following the Closing it shall, and shall cause its Representatives to, preserve the accounting books and records of the Business and of Purchaser and its Affiliates on which the Proposed Closing Statement is to be based and shall not take any actions with respect to such books and records that would obstruct or prevent the procedures set forth in this Section 2.9 (including books and records related to the Business Working Capital, the Business Net Cash, the Purchaser Working Capital and the Purchaser Net Cash or the Proposed Closing Statement or the preparation of the Proposed Closing Statement).
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(g) If (i) the amount equal to (A) the Final Business Working Capital plus (B) the Final Business Net Cash exceeds (ii) the amount equal to (A) the Estimated Business Working Capital plus (B) the Estimated Business Net Cash (the amount of such excess, the Final Business Excess Adjustment), Purchaser shall, and Purchaser Parent shall cause Purchaser to, pay within five (5) Business Days of the Closing Statement Finalization Date to Seller Parent (and/or Seller Parents designee(s), in such allocations as may be directed by Seller Parent) by wire transfer of immediately available funds to the Seller Account, an amount in cash equal to the amount of the Final Business Excess Adjustment.
(h) If (i) the amount equal to (A) the Estimated Business Working Capital plus (B) the Estimated Business Net Cash exceeds (ii) the amount equal to (A) the Final Business Working Capital plus (B) the Final Business Net Cash (the amount of such excess, the Final Business Deficit Adjustment), Seller Parent shall pay within five (5) Business Days of the Closing Statement Finalization Date to Purchaser by wire transfer of immediately available funds to the Purchaser Account, an amount in cash equal to the amount of the Final Business Deficit Adjustment.
(i) If (i) the amount equal to (A) the Final Purchaser Working Capital plus (B) the Final Purchaser Net Cash exceeds (ii) the amount equal to (A) the Estimated Purchaser Working Capital plus (B) the Estimated Purchaser Net Cash (the amount of such excess, the Final Purchaser Parent Excess Adjustment), Purchaser shall, and Purchaser Parent shall cause Purchaser to, pay within five (5) Business Days of the Closing Statement Finalization Date to Purchaser Parent (and/ or Purchaser Parents designee(s), in such allocations as may be directed by Purchaser Parent) by wire transfer of immediately available funds to the Purchaser Parent Account, an amount in cash equal to the amount of the Final Purchaser Parent Excess Adjustment.
(j) If (i) the amount equal to (A) the Estimated Purchaser Working Capital plus (B) the Estimated Purchaser Net Cash exceeds (ii) the amount equal to (A) the Final Purchaser Working Capital plus (B) the Final Purchaser Net Cash (the amount of such excess, the Final Purchaser Parent Deficit Adjustment), Purchaser Parent shall pay within five (5) Business Days of the Closing Statement Finalization Date to Purchaser by wire transfer of immediately available funds to the Purchaser Account, an amount in cash equal to the amount of the Final Purchaser Parent Deficit Adjustment.
(k) Until the date on which the Proposed Closing Statement shall become conclusive, final and binding on the Parties pursuant to this Section 2.9, each Party agrees that following the Closing it shall afford and cause to be afforded to the other Parties and their Affiliates and the Representatives retained by the other Parties in connection with the preparation of the Proposed Closing Statement and any adjustment to the Estimated Business Excess Adjustment, Estimated Business Deficit Adjustment, Estimated Purchaser Parent Excess Adjustment or Estimated Purchaser Parent Deficit Adjustment contemplated by this Section 2.9, reasonable access upon reasonable notice during normal business hours to the properties, books, contracts, personnel and records of the Business and Purchaser and Purchaser Parent and such Partys, its Affiliates and
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their respective accountants working papers (subject to execution of customary working paper access letters) relevant to the preparation of the Proposed Closing Statement and any adjustment contemplated by this Section 2.9, including any notice of Disputed Items, and shall provide the other Parties and their Affiliates and Representatives, upon the other Partys reasonable request, with copies of any such books, contracts, records and work papers.
(l) Except in cases of fraud with respect to the representations, warranties, covenants and agreements contained in this Agreement, the process set forth in this Section 2.9 shall be the sole and exclusive remedy of any of the Parties and their respective Affiliates for any disputes related to the Final Business Excess Adjustment, the Final Business Deficit Adjustment, the Final Purchaser Parent Excess Adjustment and the Final Purchaser Parent Deficit Adjustment.
Section 2.10 Withholding. Absent any change in Law after the date hereof, Purchaser acknowledges and agrees that no withholding is required in respect of the payment of the Purchase Consideration or any amounts payable to Seller Parent pursuant to Section 2.8 or Section 2.9 as a result of Purchasers tax residence to the extent Seller Parent satisfies its obligations pursuant to Section 3.1(b). In the event that any deduction or withholding for Taxes in respect of the payment of the Purchase Consideration or any amounts payable to Seller Parent pursuant to Section 2.8 or Section 2.9 is required by Law, Purchaser and the Purchaser Designated Affiliates shall be entitled to deduct and withhold such amounts from such payments to the extent required under applicable Law; provided that Purchaser shall give Seller Parent written notice of any such requirement to deduct and withhold any Taxes from such amounts promptly after becoming aware of such requirement. Purchaser and Seller Parent shall reasonably cooperate with each other to minimize the amounts, if any, required to be deducted and withheld. If any amount is withheld in accordance with the foregoing provisions of this Section 2.10, such withheld amount shall be treated for all purposes of this Agreement as having been paid to the applicable recipient of such amount otherwise payable.
ARTICLE III
CLOSING
Section 3.1 Closing.
(a) Subject to Section 3.1(d), the Closing shall take place at the offices of Wachtell, Lipton, Rosen & Katz located at 51 West 52nd Street, New York, New York 10019, at 10:00 a.m. (New York time) on the third (3rd) Business Day following the satisfaction or waiver of all the conditions set forth in Article VIII (other than the conditions that by their nature are to be satisfied on the Closing Date, but subject to the satisfaction or waiver of such conditions), or at such other time and place as the Parties may mutually agree. The date on which the Closing occurs is referred to as the Closing Date. Unless the Parties agree otherwise, and notwithstanding the actual occurrence of the Closing at any particular time on the Closing Date, the Closing shall be deemed to occur and be effective as of 12:01 a.m. (New York time) on the Closing Date. In addition to payment of the amounts set forth in Section 2.8:
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(b) At the Closing, Seller Parent shall deliver, or cause to be delivered, to Purchaser the instruments and documents set forth in Exhibit A.
(c) At the Closing, Purchaser shall, and Purchaser Parent shall cause Purchaser to, deliver to Seller Parent, as agent for the Sellers, or its designee(s) the following: (i) customary and satisfactory evidence of the allotment and issuance of the Purchase Consideration to Seller Parent or its designee(s), credited as fully paid and (ii) the instruments and documents set forth in Exhibit B.
(d) Seller Parent and Purchaser Parent hereby agree that if the Closing Date does not fall on the last day of a calendar month, the Parties shall cooperate in good faith and discuss designing a lock box construct to facilitate a month end closing for accounting purposes pursuant to which each of Seller Parent and Purchaser Parent is put in the same economic position as if the Closing had occurred on the originally contemplated Closing Date and so that neither Party bears any additional closing conditionality risk or value leakage risk during the interim period.
Section 3.2 Restated Purchaser Articles of Association. Purchaser Parent shall, in accordance with applicable Law and the articles of association of Purchaser, cause the articles of association of Purchaser to be amended and restated, effective as of immediately prior to the Closing, to be in the form set forth in Exhibit E (the Restated Purchaser Articles of Association).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER PARENT
Except as set forth in the Seller Disclosure Letter and in accordance with Section 10.8, Seller Parent hereby represents and warrants to Purchaser Parent and Purchaser as follows:
Section 4.1 Organization. Seller Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware. Each Seller is, or will be as of the Closing, a corporation, partnership or other legal entity duly organized, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its organization, except where the failure to be so organized, existing or in good standing would not, individually or in the aggregate, be materially adverse to the Business or prevent or reasonably be expected to prevent the Sellers from consummating the Closing prior to the Outside Date.
Section 4.2 Authority; Binding Effect.
(a) Seller Parent has all requisite corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it will be a party and to perform its obligations hereunder and thereunder. The execution and delivery by Seller Parent of this Agreement and each such Ancillary Agreement, and the performance by Seller Parent of its obligations hereunder and thereunder, have been, or will have been as of the Closing, duly authorized by all requisite corporate action. Each Seller has, or will have as of the Closing, all requisite corporate or other similar applicable power and authority to execute and deliver each Ancillary Agreement to which it will be a party and to perform its obligations thereunder. The execution and delivery by each Seller of each Ancillary Agreement to which it will be a party, if applicable, and the performance by it of its obligations thereunder, have been, or will have been as of the Closing, duly authorized by all requisite corporate or other similar applicable action.
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(b) Seller Parent has, and each other Seller has, or will have as of the Closing, all requisite corporate or other similar applicable power and authority to carry on its respective business as it pertains to the Business as currently conducted and to own, lease and operate its properties and assets related to the Business, except where the failure to have such power and authority would not, individually or in the aggregate, be materially adverse to the Business or prevent or reasonably be expected to prevent the Sellers from consummating the Closing prior to the Outside Date.
(c) This Agreement has been duly executed and delivered by Seller Parent and, assuming this Agreement has been duly executed and delivered by Purchaser Parent and Purchaser, constitutes a legal, valid and binding obligation of Seller Parent, and each Ancillary Agreement will be as of the Closing duly executed and delivered by each Seller that will be a party thereto and will, assuming such Ancillary Agreement has been duly executed and delivered by Purchaser Parent, Purchaser or the applicable Purchaser Designated Affiliate, constitute a legal, valid and binding obligation of such Seller, in each case enforceable against Seller Parent or such other Seller in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law).
Section 4.3 Conveyed Subsidiaries; Capital Structure.
(a) Each of the Conveyed Subsidiaries is, or will be as of the Closing, a corporation, partnership or other legal entity duly organized and validly existing, with all requisite corporate or other similar applicable power and authority to own, lease and operate its properties and assets related to the Business and to carry on its respective business as it pertains to the Business, as currently conducted, except where the failure to be so organized or existing or to have such power and authority would not, individually or in the aggregate, be materially adverse to the Business. Each of the Conveyed Subsidiaries is, or will be as of the Closing, duly qualified to do business and, where applicable, in good standing in each jurisdiction where the nature of its business or properties makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, be materially adverse to the Business.
(b) Section 4.3(b) of the Seller Disclosure Letter sets forth, as of immediately prior to the Closing, (i) the name and the jurisdiction of organization of each of the Conveyed Subsidiaries and (ii) the record owners of such outstanding equity interests. All of the outstanding equity interests of each of the Conveyed Subsidiaries are, or will be as of the Closing, validly issued, fully paid and, in the case of any Conveyed Subsidiary which is a corporation, non-assessable, and the Shares are not subject to, and were not issued in violation of, any preemptive right. As of the Closing, there will be no outstanding warrants, options, agreements, subscriptions, convertible or exchangeable securities or other commitments pursuant to which any of the Conveyed Subsidiaries
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is or may become obligated to issue, sell, purchase, return, redeem or otherwise acquire any equity interests of the Conveyed Subsidiaries, or any securities convertible into or exchangeable for the capital stock or voting securities of any Conveyed Subsidiary. As of the Closing, there will be no rights of first refusal, rights of first offer, voting trusts, stockholder agreements, proxies or other Contracts in effect with respect to the sale or voting of the equity interests of the Conveyed Subsidiaries. The Sellers own of record and beneficially as of the date of this Agreement, or will own of record and beneficially as of immediately prior to the Closing, all of the issued and outstanding Shares, free and clear of all material Liens except for Liens arising under applicable securities Laws. Except for the Shares and the equity interests of any Subsidiary of a Conveyed Subsidiary, the Purchased Assets do not include, and the Conveyed Subsidiaries do not own, any other equity interests of any Person.
(c) Section 4.3(c) of the Seller Disclosure Letter sets forth, as of immediately prior to the Closing, (i) the name and the jurisdiction of organization of each Subsidiary of the Conveyed Subsidiaries and (ii) the record owners of the outstanding equity interests of such Subsidiaries. Each such Subsidiary is, or will be as of the Closing, a corporation, partnership or other legal entity duly organized and validly existing, with all requisite corporate or other similar applicable power and authority to own, lease and operate its properties and assets related to the Business and to carry on its respective business as it pertains to the Business, as currently conducted, except where the failure to be so organized or existing or to have such power and authority would not, individually or in the aggregate, be materially adverse to the Business. Except as set forth in Section 4.3(c) of the Seller Disclosure Letter, all of the outstanding equity interests of each Subsidiary of a Conveyed Subsidiary are owned of record and beneficially by such Conveyed Subsidiary (or a Subsidiary thereof) as of the date of this Agreement, or will be owned of record and beneficially by such Conveyed Subsidiary (or a Subsidiary thereof) as of immediately prior to the Closing, free and clear of all Liens except for Liens arising under applicable securities Laws. All of the outstanding equity interests of each Subsidiary of a Conveyed Subsidiary are, or will be as of the Closing, validly issued, fully paid and, in the case of any such Subsidiary which is a corporation, non-assessable. As of the Closing, there will be no outstanding warrants, options, agreements, subscriptions, convertible or exchangeable securities or other commitments pursuant to which any Subsidiary of a Conveyed Subsidiary is or may become obligated to issue, sell, purchase, return, redeem or otherwise acquire any equity interests of such Subsidiary, or any securities convertible into or exchangeable for the capital stock or voting securities of such Subsidiary. As of the Closing, there will be no rights of first refusal, rights of first offer, voting trusts, stockholder agreements, proxies or other Contracts in effect with respect to the sale or voting of the equity interests of any Subsidiary of a Conveyed Subsidiary.
Section 4.4 No Conflicts; Consents. The execution, delivery and performance of this Agreement by Seller Parent and each Ancillary Implementing Agreement by a Seller party to such Ancillary Implementing Agreement, and the consummation of the transactions contemplated hereby and thereby, by Seller Parent and such Seller do not and will not (a) violate any provision of the certificate of incorporation or bylaws of Seller Parent or the comparable organizational documents of any of the other Sellers or any of the Conveyed Subsidiaries (or any Subsidiary thereof), (b) subject to obtaining the consents set forth in Section 4.4 of the Seller Disclosure Letter, result in a violation of, or require the consent of any Person pursuant to, or conflict with, constitute
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a default under, or result in the breach or termination, cancellation or acceleration (whether with or without the giving of notice or the lapse of time or both) of any right or obligation of the Sellers or the Conveyed Subsidiaries (or any Subsidiary thereof) under, or to a loss of any benefit of the Business to which the Sellers or the Conveyed Subsidiaries (or their Subsidiaries) is entitled, under any Material Contract or Real Property Lease, or result in the imposition of a Lien on any Purchased Assets, other than Permitted Liens, and (c) assuming compliance with the matters set forth in Sections 4.5 and 5.5, violate or result in a breach of or constitute a default under any Law, Governmental Authorization or other restriction of any Governmental Authority to which any Seller or Conveyed Subsidiary (or Subsidiary thereof) is subject, except, with respect to clauses (b) and (c), as would not, individually or in the aggregate, be materially adverse to the Business or prevent or reasonably be expected to prevent the Sellers from consummating the Closing prior to the Outside Date.
Section 4.5 Governmental Authorization. The execution, delivery and performance of this Agreement by Seller Parent and each Ancillary Implementing Agreement by a Seller party to such Ancillary Implementing Agreement does not require any Approval of, or Filing with, any Governmental Authority, except for (a) the expiration or early termination of the applicable waiting period under the HSR Act, (b) the Approvals and Filings set forth in Section 4.5 of the Seller Disclosure Letter, (c) the Approvals and Filings which if not obtained or made would not, individually or in the aggregate, be materially adverse to the Business or prevent or reasonably be expected to prevent the Sellers from consummating the Closing prior to the Outside Date, and (d) the Approvals and Filings required due to the regulatory obligations of Purchaser, Purchaser Parent or any of their Affiliates.
Section 4.6 Financial Information.
(a) Section 4.6(a) of the Seller Disclosure Letter contains copies of the audited balance sheet of the Business as of December 31, 2017 (the Balance Sheet Date), December 31, 2016 and December 31, 2015 and the related audited income statement for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 (together with any notes thereto, the Financial Statements). Section 4.6(a) of the Seller Disclosure Letter also sets forth the accounts of the Business as of March 31, 2018, June 30, 2018, and September 30, 2018 corresponding to the accounts included in the Sample Closing Statement (the Business Working Capital Accounts). The Business Working Capital Accounts were prepared using principles, procedures, policies and methods consistent in all material respects with those used in the preparation of the balance sheet of the Business as of the Balance Sheet Date included in the Financial Statements.
(b) Except as set forth in Section 4.6(b) of the Seller Disclosure Letter or as noted in the Financial Statements, the Financial Statements were prepared in accordance with GAAP, on a consistent basis for each period presented, and present fairly in all material respects, (i) the financial condition, assets and liabilities of the Business as of the dates therein specified and (ii) the results of operations of the Business for the periods indicated; provided that the Financial Statements and the foregoing representations and warranties concerning the Financial Statements are qualified by the fact that the Business has not operated as a separate standalone entity and has received certain allocated charges and credits as stated therein which do not necessarily reflect amounts that would have resulted from arms-length transactions or that the Business would incur on a standalone basis.
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(c) Except as set forth in Section 4.6(c) of the Seller Disclosure Letter, the Business does not have any Indebtedness or other Liabilities of any nature or kind whatsoever (whether accrued, known or unknown, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet of the Business prepared in accordance with GAAP except for (i) Liabilities accrued for, reflected on, disclosed and/or reserved against on the Financial Statements, (ii) Liabilities incurred subsequent to the Balance Sheet Date in the ordinary course of business, (iii) Liabilities taken into account in the Final Closing Statement, Final Business Working Capital or Final Business Net Cash, (iv) the Retained Liabilities, (v) Liabilities incurred in connection with or arising out of the transactions contemplated hereby, (vi) Liabilities disclosed or set forth in the Seller Disclosure Letter and (vii) Liabilities which would not, individually or in the aggregate, be materially adverse to the Business.
(d) All of the information supplied by Seller Parent or its Affiliates to Purchaser Parent expressly for inclusion, or to support statements made, in the announcement of the Sale and the other transactions contemplated by this Agreement to be released immediately following execution of this Agreement in compliance with the Listing Rules, the Purchaser Parent Shareholder Circular, or any amendment or supplement thereto, or any announcement to any regulatory information service approved by the UKLA in connection with the Purchaser Parent Shareholder Circular, and any other related documents required to be filed or published in connection with the Sale and/or the other transactions contemplated by this Agreement, will have been prepared in good faith and will not to the Knowledge of Seller Parent, in the case of the Purchaser Parent Shareholder Circular, at the time the Purchaser Parent Shareholder Circular and any amendments or supplements thereto are first published in accordance with the Listing Rules and at the time of the Purchaser Parent Shareholder Meeting, and in the case of any other such document, at the time it is first published, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
Section 4.7 Absence of Material Changes. Except as otherwise contemplated by this Agreement and the transactions contemplated hereby (including the Strategic Process and the Seller Internal Restructurings), since December 31, 2017 (a) there has not been any Material Adverse Effect and (a) until the date of this Agreement, the Business has been operated, in all material respects, in the ordinary course of business.
Section 4.8 No Litigation.
(a) Except as set forth in Section 4.8(a) of the Seller Disclosure Letter, there is no Action pending or, to the Knowledge of Seller Parent, threatened against a Conveyed Subsidiary or any Subsidiaries thereof or the Sellers or their Affiliates relating to the Business or any properties or rights of a Conveyed Subsidiary or its Subsidiaries or any Purchased Asset, before any Governmental Authority or arbitration tribunal other than Actions which would not, individually or in the aggregate, be materially adverse to the Business.
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(b) Except as set forth in Section 4.8(b) of the Seller Disclosure Letter, none of the Conveyed Subsidiaries or any Subsidiaries thereof or the Sellers is subject to any Governmental Order relating to the Business or any Purchased Asset other than those which would not, individually or in the aggregate, be materially adverse to the Business.
Section 4.9 Compliance with Laws. Except as set forth in Section 4.9 of the Seller Disclosure Letter:
(a) Each Seller and each Conveyed Subsidiary (and Subsidiary thereof) is, and for the last three (3) years has been, in compliance with all Laws applicable to the ownership, lease or operation of the Purchased Assets and the Business, including (i) the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §301 et seq. and applicable binding implementing regulations issued by the U.S. Food and Drug Administration, (ii) the applicable Laws of the European Union and applicable binding implementing regulations issued by applicable Governmental Authorities in those jurisdictions in the European Union in which the Business markets, commercializes, distributes and sells Products, or otherwise operates, or has marketed, commercialized, distributed or sold Products, or otherwise operated, in the last three (3) years (including European Unions Directive 95/46/EC, as amended, and Regulation EU 2016/679 (the General Data Protection Regulation), and any national implementing legislation of the foregoing) and as of the Closing and (iii) the applicable Laws of any other jurisdiction in which the Business markets, commercializes, distributes and sells Products, or otherwise operates, or has marketed, commercialized, distributed or sold Products, or otherwise operated, in the last three (3) years and as of the Closing, except in the case of each of the foregoing clauses (i), (ii) and (iii) to the extent that the failure to comply therewith would not, individually or in the aggregate, be materially adverse to the Business.
(b) The Sellers and the Conveyed Subsidiaries (and Subsidiaries thereof) collectively possess, or will possess as of the Closing, all Governmental Authorizations necessary for the conduct of the Business, as currently conducted, and each such Governmental Authorization is in full force and effect, except where the failure to possess any such Governmental Authorization or the failure of such Governmental Authorization to be in full force and effect would not, individually or in the aggregate, materially impair the operations of the Business, taken as a whole.
Section 4.10 Product Registrations; Manufacturing Registrations; Regulatory Compliance; Product Liability and Recalls.
(a) Except with respect to Environmental Permits (which are the subject of Section 4.11):
(i) Seller Parent and its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) own, possess or validly have the right to use all Governmental Authorizations required to research, develop, manufacture, market, commercialize, distribute, test, use, store and sell the Products, except where the failure to so own, possess or validly have such right would not, individually or in the aggregate, materially impair the operations of the Business, taken as a whole;
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(ii) All Products sold under the Product Registrations are manufactured and marketed in accordance with the specifications and standards contained in such Product Registrations, and the applicable Manufacturing Registrations, except where the failure to comply therewith would not, individually or in the aggregate, be materially adverse to the Business; and
(iii) Except as set forth in Section 4.10(a)(iii) of the Seller Disclosure Letter, a Seller or Conveyed Subsidiary (or Subsidiary thereof) is, or will be as of the Closing, the sole and exclusive owner of each Product Registration and Manufacturing Registration.
(b) Except as set forth in Section 4.10(b) of the Seller Disclosure Letter, there is no Action pending, or, to the Knowledge of Seller Parent, threatened, relating to the Business or Purchased Assets (i) arising from complaints, allegations or Actions relating to any injury to person or property or as a result of ownership, possession, provision or use of any of the Products that were manufactured, processed, distributed, shipped or sold prior to the date of this Agreement or (ii) relating to any alleged hazard or alleged defect in design, manufacture, materials or workmanship, including any failure to warn or alleged breach of express or implied warranty or representation, relating to the Products, except in the case of each of the foregoing clauses (i) and (ii), for Actions which would not, individually or in the aggregate, be materially adverse to the Business.
(c) Except as set forth in Section 4.10(c) of the Seller Disclosure Letter, since January 1, 2016, there have been no recalls or market withdrawals of Products and, to the Knowledge of Seller Parent, no facts or circumstances exist that would reasonably be expected to result in recalls or market withdrawals of Products that would, individually or in the aggregate, be materially adverse to the Business.
(d) Notwithstanding any other provision of this Agreement, this Section 4.10 sets forth the sole and exclusive representations and warranties of Seller Parent with respect to Product Registrations and Manufacturing Registrations, products liability and product recalls, and the other regulatory matters described in this Section 4.10.
Section 4.11 Environmental Matters. Except as set forth in Section 4.11 of the Seller Disclosure Letter:
(a) (i) the Sellers (with respect to the Business), the Conveyed Subsidiaries and their Subsidiaries, the Business (as currently or formerly conducted), the Purchased Assets and the Facilities are and have been since January 1, 2016 in compliance with all applicable Environmental Laws and Governmental Authorizations required under Environmental Law (including Environmental Permits); (ii) none of the Sellers nor their Affiliates (in each case, with respect to the Business or the Purchased Assets) are undertaking or required to undertake any Remedial Action at the Real Property or any property formerly owned, leased or operated by a Conveyed Subsidiary or their Subsidiaries (or any of their respective predecessors) or by the Business (as currently or formerly conducted); and (iii) since January 1, 2016, none of the Sellers or their Affiliates has received written notice from a Governmental Authority or other Person that it is subject to any unresolved enforcement action or Liability with respect to the Conveyed Subsidiaries or their Subsidiaries, the Business (as currently or formerly conducted), the Purchased Assets or the Facilities under any applicable Environmental Laws or Environmental Permits, except for such noncompliance, Remedial Actions, Liabilities or enforcement actions that would not, individually or in the aggregate, be materially adverse to the Business;
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(b) all Governmental Authorizations (including Environmental Permits) required of the Sellers and their Affiliates (in each case, with respect to the Business or the Purchased Assets) under all applicable Environmental Laws have been obtained and are held by a Seller or Conveyed Subsidiary (or Subsidiary thereof), except for such failures to obtain as would not, individually or in the aggregate, materially impair the operations of the Business, taken as a whole; and
(c) no Actions or written claims are pending or, to the Knowledge of Seller Parent, threatened against any Seller or their Affiliates (in each case, with respect to the Business or the Purchased Assets) arising from or as a result of, and there have been no (i) exposures to Hazardous Materials, including on, in, under, about or from the Purchased Assets or at the Facilities, (ii) Releases of Hazardous Materials, including at, on, in, under, or from any Purchased Assets or from any Facilities, (iii) off-site treatment, storage or disposal of Hazardous Materials generated by the Business (as currently or formerly conducted), the Sellers (with respect to the Business) or any Conveyed Subsidiary or their Subsidiaries or (iv) any violations of any Environmental Laws arising, directly or indirectly, in connection with the Business (as currently or formerly conducted) or any of the Purchased Assets or Facilities, in each case that has resulted or would result in Environmental Liability, except for such claims, Actions, Environmental Liabilities or investigations that would not, individually or in the aggregate, be materially adverse to the Business.
(d) Notwithstanding any other provision of this Agreement, the representations and warranties set forth in this Section 4.11 are the sole and exclusive representations and warranties of Seller Parent with respect to Environmental Laws, Environmental Permits, Environmental Liabilities, Hazardous Materials and other environmental matters.
Section 4.12 Material Contracts.
(a) Except (x) for Contracts entered into after the date of this Agreement, (y) for intercompany agreements solely between or among Conveyed Subsidiaries (or any of their Subsidiaries) or that shall be terminated as of or prior to the Closing Date in accordance with Section 6.7 or (z) as set forth in Section 4.12(a) of the Seller Disclosure Letter, none of the Conveyed Subsidiaries (or any Subsidiary thereof), Seller Parent or any of its Affiliates is a party to or bound by any Contract in effect as of the date hereof that is material to the Business, taken as a whole (a Material Contract).
(b) Except as set forth in Section 4.12(b) of the Seller Disclosure Letter, (i) except as would not, individually or in the aggregate, be materially adverse to the Business, each Material Contract is legal, valid and binding on the Seller or Conveyed Subsidiary (or Subsidiary thereof) that is a party thereto and, to the Knowledge of Seller Parent, each other party thereto, and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights
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generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law), and (ii) no Seller or Conveyed Subsidiary (or Subsidiary thereof) or, to the Knowledge of Seller Parent, any other party thereto, is in breach of, or default under, any such Material Contract, except for such breaches or defaults as would not, individually or in the aggregate, be materially adverse to the Business.
(c) Section 4.12(c) of the Seller Disclosure Letter lists all material Seller Parent Related Party Contracts.
Section 4.13 Intellectual Property.
(a) Seller Parent has made available to Purchaser (at least two (2) Business Days prior to the date hereof), a complete and accurate listing (the IP Schedules) of all issued Patent Rights, pending applications for Patent Rights, registered Trademarks, pending Trademark registration applications and registered Copyrights (collectively, the Registered IP) that are Business IP (collectively, the Registered Business IP) which listing shall be incorporated by reference into Section 4.13(a) of the Seller Disclosure Letter. To the Knowledge of Seller Parent (but only as to validity and enforceability), as of the date of this Agreement, except as would not, individually or in the aggregate, be materially adverse to the Business, the Registered Business IP is in effect and subsisting and, if registered, is not invalid or unenforceable. The Business Trademarks Rights, together with Trademarks that are licensed to the Sellers or the Conveyed Subsidiaries by a third party, include all of the Business Key Brands.
(b) All material Business IP and Business Licensed IP shall be, following the Closing, transferable and licensable (or sublicensable, as the case may be) by Purchaser and its Subsidiaries, without payment of any kind to Seller Parent or any Affiliate of Seller Parent, as may be needed in the ordinary course of the operation of the Business, and shall be fully transferable, assignable and assumable, as the case may be, without payment of any kind to Seller Parent or any Affiliate of Seller Parent, in connection with a change of control (that constitutes an assignment) of Purchaser or any Listing Transaction (as defined in the Purchaser Shareholders Agreement) or the sale of substantially all of the assets of a business unit of Purchaser to the extent such Business IP or Business Licensed IP is related to such business unit.
(c) Except as would not, individually or in the aggregate, be materially adverse to the Business, and taking into account Section 6.22, the Business IP, together with the Intellectual Property (i) licensed to Purchaser or its Subsidiaries by Seller Parent or any of its Affiliates under the Ancillary Agreements (the Business Licensed IP), (ii) covered by the Assumed Contracts or Shared Contracts, or (iii) to which Purchaser or its Affiliates are provided access under any Ancillary Agreement, including in connection with the services provided under the Transition Services Agreement, constitutes all of the Intellectual Property owned or controlled by Seller Parent or any of its Subsidiaries that is used or held for use in, or that is necessary for, the conduct of the Business, as conducted as of the date of this Agreement. The operation of the Business immediately following the Closing will not infringe any of Seller Parents or any of its Affiliates Intellectual Property.
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(d) Except as would not, individually or in the aggregate, be materially adverse to the Business, (x) the conduct of the Business does not, to the Knowledge of Seller Parent, infringe, misappropriate or otherwise violate the Intellectual Property of any Person and (y) as of the date of this Agreement, there is no Action pending or, to the Knowledge of Seller Parent, threatened in writing against any Conveyed Subsidiary or any Subsidiary thereof or any Seller or any of its Affiliates (i) alleging any such infringement, misappropriation, or other violation, or (ii) challenging the validity, enforceability, ownership, use, registrability, or patentability of the Business IP, other than ordinary course prosecution proceedings associated with the application for or registration of Registered IP.
(e) Except as would not, individually or in the aggregate, be materially adverse to the Business, as of the date of this Agreement, to the Knowledge of Seller Parent, no Person is infringing, misappropriating or otherwise violating any Business IP and as of the date of this Agreement, no such Actions are pending or, to the Knowledge of Seller Parent, threatened against any Person by Seller Parent, or any of its Affiliates (including any Conveyed Subsidiary or any Subsidiary thereof) or any other Seller.
(f) Seller Parent or its Subsidiaries (including the Conveyed Subsidiaries), as applicable, are the sole legal owners of all Registered Business IP that is owned or purported to be owned by Seller Parent or its Affiliates. None of the Registered Business IP or any other material Business IP is subject to any Lien, other than Permitted Liens.
(g) Since January 1, 2016, to the Knowledge of Seller Parent, there (i) have been no failures of the Business IT Systems that have materially and adversely impacted the conduct of the Business and (ii) has been no unauthorized access, loss, use or breach of security with respect to the Business IT Systems or any material sensitive, confidential or proprietary information (including personally identifiable information) relating to the Business that have materially and adversely impacted the Business.
(h) Notwithstanding any provision of this Agreement to the contrary, except with respect to Section 4.7, Section 4.12, and this Section 4.13 sets forth the sole and exclusive representations and warranties of Seller Parent with respect to Intellectual Property.
Section 4.14 Real Property.
(a) The Sellers or the Conveyed Subsidiaries (or their Subsidiaries) have, or will have as of the Closing, insurable title in fee simple to the Owned Real Property, free and clear of any Liens, other than Permitted Liens. Except as set forth in Section 4.14(a) of the Seller Disclosure Letter or as would not, individually or in the aggregate, materially impair the operations of the Business, taken as a whole, neither Sellers nor the Conveyed Subsidiaries (or their Subsidiaries) is leasing or otherwise granting to any third party the right to use or occupy any Owned Real Property or any portion thereof.
(b) Except as set forth in Section 4.14(b)(i) of the Seller Disclosure Letter, Sellers or the Conveyed Subsidiaries (or their Subsidiaries) has a valid leasehold interest and valid and continuing right to use and occupy each Leased Real Property pursuant to a Real Property Lease. Except (x) as set forth in Section 4.14(b)(ii) of the Seller Disclosure Letter, or (y) as would not, individually or in the aggregate, materially impair the operations of the Business, taken as a whole,
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(i) each Real Property Lease is legal, valid and binding on the Seller or Conveyed Subsidiary (or Subsidiary thereof) that is a party thereto and, to the Knowledge of Seller Parent, each other party thereto and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law), (ii) no Seller or Conveyed Subsidiary (or Subsidiary thereof) or, to the Knowledge of Seller Parent, any other party thereto, is in breach of, or default under, any such Real Property Lease and (iii) neither the Sellers nor the Conveyed Subsidiaries (or their Subsidiaries) is leasing or otherwise granting to any third party the right to use or occupy any Leased Real Property or any portion thereof.
(c) Except as set forth in Section 4.14(c) of the Seller Disclosure Letter, (i) no certificate, permit or license from any Governmental Authority having jurisdiction over any of the Real Property, or any Contract, easement or other right which is necessary to permit the lawful occupancy of the buildings and improvements on any of the Real Property or which is necessary to permit the lawful use of all driveways, roads and other means of egress and ingress to and from any of the Real Property, in each case, with respect to the Business, has not been obtained or, to the Knowledge of Seller Parent, is not in full force and effect, which would, individually or in the aggregate, materially impair the operations of the Business, taken as a whole, and (ii) none of the Sellers (in respect of the Business) or the Conveyed Subsidiaries or their Subsidiaries has received any written notice from any Governmental Authority that the Real Property is currently in violation of any applicable Law that would, individually or in the aggregate, materially impair the operations of the Business, taken as a whole.
(d) Section 4.14(d)(i) of the Seller Disclosure Letter sets forth each manufacturing and research and development facility at which Products are manufactured or developed that is owned or operated by Sellers or the Conveyed Subsidiaries (or their Subsidiaries) (the Seller Facilities). Except as set forth in Section 4.14(d)(ii) of the Seller Disclosure Letter, Sellers or the Conveyed Subsidiaries (or their Subsidiaries) has insurable title in fee simple to, or a valid leasehold interest and valid and continuing right to use and occupy, each Seller Facility.
Section 4.15 Assets.
(a) Except as otherwise provided in this Agreement or as would not, individually or in the aggregate, materially impair the operations of the Business, taken as a whole, the Sellers or the Conveyed Subsidiaries (or their Subsidiaries) have, or will have as of the Closing, good and valid title to, or other legal rights to possess and use, all of the assets comprising the business reflected in the Financial Statements (for clarity, excluding any assets sold or disposed of in the ordinary course of business after the date thereof), free and clear of any Liens other than Permitted Liens.
(b) Except (i) as set forth in Section 4.15(b) of the Seller Disclosure Letter (ii) for Excluded Services (as defined in the Transition Services Agreement) and (iii) as would not, individually or in the aggregate, materially impair the operations of the Business, taken as a whole, the Purchased Assets (assuming all consents and Approvals as may be required in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements
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have been obtained; provided, that no such assumption shall be made to the extent Seller Parent is not in compliance with its obligations under Section 2.2 and Section 6.3 of this Agreement), together with the benefits, services, assets, licenses, sublicenses and other rights and benefits to be provided to Purchaser and its Affiliates pursuant to this Agreement and the Ancillary Agreements, will, in the aggregate, constitute all of the assets either used in or necessary for Purchaser and its Subsidiaries (including the Conveyed Subsidiaries and their Subsidiaries) to conduct the Business as conducted as of the date of this Agreement and as of the Closing.
(c) After giving effect to the Seller Internal Restructurings and the other transactions contemplated by this Agreement and the Ancillary Agreements (assuming all consents and Approvals as may be required in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements have been obtained; provided, that no such assumption shall be made to the extent Seller Parent is not in compliance with its obligations under Section 2.2 and Section 6.3 of this Agreement) and except as provided for in the Ancillary Agreements, the Conveyed Subsidiaries (and the Subsidiaries thereof) will not, directly or indirectly, be engaged in any Retained Business, or hold or be subject to any Retained Liability or Excluded Asset (other than non-material or ministerial liabilities, assets, rights or properties).
Section 4.16 Taxes.
(a) All income and other material Tax Returns that are required to be filed in respect of the Purchased Assets or the Business or by or on behalf of any Conveyed Subsidiary or Subsidiary thereof have been timely filed (taking into account any applicable extensions), and all such Tax Returns are true, correct and complete in all material respects.
(b) All income and other material Taxes required to be paid in respect of the Purchased Assets or the Business or by or in respect of any Conveyed Subsidiary or any Subsidiary thereof have been timely paid (taking into account any applicable extensions).
(c) The Conveyed Subsidiaries (and the Subsidiaries thereof), and the Sellers solely with respect to the Business, have deducted or withheld and paid over to the applicable Taxing Authority all material Taxes required to have been deducted or withheld and paid over in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party and each such Conveyed Subsidiary or Subsidiary thereof has (if required by any applicable Laws to do so) provided appropriate certificates of deduction.
(d) There are no Liens for material Taxes upon any of the Purchased Assets or the assets of the Conveyed Subsidiaries or any of their Subsidiaries, except for Permitted Liens.
(e) Within the past three (3) years, none of the Conveyed Subsidiaries and none of their Subsidiaries has been a distributing corporation or a controlled corporation in a distribution intended to qualify under Section 355(a) of the Code.
(f) There are no current or pending audits, examinations, contests or other Actions with respect to material Taxes of any Conveyed Subsidiary or any Subsidiary thereof or of any Seller with respect to any Purchased Assets or the Business, and no such audits, examinations, contests or other Actions have been threatened in writing.
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(g) There are no outstanding powers of attorney granted by any of the Conveyed Subsidiaries or any Subsidiary thereof with respect to material Taxes for any taxable period beginning after the Closing Date, other than powers of attorney granted to other Conveyed Subsidiaries or Subsidiaries thereof.
(h) None of the Conveyed Subsidiaries or any Subsidiary thereof is party to any Tax sharing, allocation, indemnity or similar agreement or arrangement (other than (x) any such agreement or arrangement solely between or among two or more Conveyed Subsidiaries and/or Subsidiaries thereof and (y) provisions contained in commercial agreements or arrangements the primary purpose of which is not Taxes (including employment agreements, credit agreements, leases and supply or manufacturing agreements)).
(i) None of the Conveyed Subsidiaries or Subsidiaries thereof is or has been party to any listed transaction as defined in Section 6707A of the Code and Treasury Regulations Section 1.6011-4. No Conveyed Subsidiary or Subsidiary thereof has at any time entered into or been engaged in or been a party to or promoter of any scheme, transaction or arrangement which was required by Law to be specifically disclosed to a Taxing Authority or a main or dominant purpose or object of which was the avoidance or deferral of or the obtaining of a reduction in or other advantage in respect of any Taxes.
(j) In the last three (3) years, no claim has been made in writing by any Taxing Authority in any jurisdiction in which any of the Conveyed Subsidiaries or Subsidiaries thereof, or any Seller with respect to the Business or any Purchased Assets, does not file income or franchise Tax Returns to the effect that such entity is or may be subject to income or franchise taxation by such jurisdiction.
(k) None of the Conveyed Subsidiaries or Subsidiaries thereof will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period beginning after the Closing Date as a result of: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date made prior to the Closing, (ii) closing agreement executed prior to the Closing, (iii) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code entered into or existing prior to the Closing, (iv) prepaid amount received on or prior to the Closing, (v) election under Section 108(i) of the Code made prior to the Closing or (vi) installment sale or open transaction disposition occurring on or before the Closing Date.
(l) Neither entering into this Agreement nor consummating the transactions contemplated hereby, nor, so far as Seller Parent is aware, any other event, transaction, action or circumstance will give rise to any Liability for Tax or result in the withdrawal or clawback of any Tax Benefit for any Conveyed Subsidiary or any Subsidiary of any Conveyed Subsidiary as a result of any Conveyed Subsidiary or any Subsidiary of any Conveyed Subsidiary ceasing to be a member of a group with any other Person for Tax purposes.
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(m) Notwithstanding any other provision of this Agreement, the representations and warranties set forth in this Section 4.16 and Section 4.17 (to the extent related to Taxes) are the sole and exclusive representations and warranties of Seller Parent with respect to Taxes.
Section 4.17 Employee Benefits; Employees.
(a) Set forth in Section 4.17(a) of the Seller Disclosure Letter is a true and complete list of each material Seller Group Plan and Foreign Seller Group Plan categorized by (i) whether the Seller Group Plan or Foreign Seller Group Plan is a Conveyed Subsidiary Plan and (ii) the country or countries for which such Seller Group Plan or Foreign Seller Group Plan provides benefits. No Conveyed Subsidiary Plan provides benefits to, or otherwise covers, any individual who is not a Business Employee, Former Business Employee, or the dependents or beneficiaries thereof.
(b) With respect to each material Conveyed Subsidiary Plan (other than Foreign Seller Group Plans that are not defined benefit pension plans), Seller Parent has made available to Purchaser Parent, prior to the date of this Agreement, true and complete copies of (i) each such plans governing document and any amendments thereto (or a written summary of all material terms if the plan has not been reduced to writing) and (ii) any applicable Plan Regulatory or Funding Documents. In addition, within thirty (30) days following the date hereof, with respect to each (x) material Conveyed Subsidiary Plan that is a Foreign Seller Group Plan, Seller Parent shall make available to Purchaser true and complete copies of the documents contemplated by the immediately preceding sentence, and (y) each other material Seller Group Plan or Foreign Seller Group Plan for which Purchaser, the Conveyed Subsidiaries or their respective Affiliates have or will assume Liability following the Closing, Seller Parent shall make available to Purchaser Parent summaries of the material terms of such plans, the most recent summary plan description (if any) and excerpts or summaries of the actuarial reports for such plans to the extent relevant to the Liabilities being assumed. Seller Parent has made available to Purchaser Parent, on or prior to the date of this Agreement, a summary that is accurate in all material respects of the value of the assets and Liabilities of the Seller Pension Plans that relate to Business Employees and Former Business Employees as of the end of the 2017 fiscal year of Seller Parent.
(c) The IRS has issued a favorable determination letter, or for a prototype plan, opinion letter, with respect to each Conveyed Subsidiary Plan intended to be qualified within the meaning of Section 401(a) of the Code or, if no such determination has been made, either an application for such determination is pending with the IRS or the time within which such determination may be sought from the IRS has not yet expired, and, to the Knowledge of Seller Parent, nothing has occurred since the date of such determination or opinion that would reasonably be expected to result in disqualification of such Conveyed Subsidiary Plan. Each Conveyed Subsidiary Plan that is intended to qualify for any particular tax or regulatory treatment under the Laws of a country other than the United States (i) has received documentation of such qualification from a Governmental Authority (if available), and, to the Knowledge of Seller Parent, nothing has occurred since the date of such documentation that would reasonably be expected to result in disqualification of such Conveyed Subsidiary Plan or (ii) if such documentation is not available, to the Knowledge of Seller Parent, so qualifies.
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(d) No Seller Group Plan is a multiemployer plan, as such term is defined in Section 3(37) of ERISA, nor is any Conveyed Subsidiary Plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code. None of the Purchased Assets is subject to a lien under Section 430(k) of the Code or Section 4068 of ERISA, and neither Seller Parent nor any of its ERISA Affiliates has incurred any liability under Title IV of ERISA (other than premium payments to the Pension Benefit Guaranty Corporation in the ordinary course) or Section 4971 of the Code which has not been and will not be fully paid as of the Closing. None of the Conveyed Subsidiaries (or the Subsidiaries thereof) or the Business has as of the date of this Agreement, or will have as of the Closing, any Liability in respect of post-employment or post-retirement medical, health or life insurance benefits for any current or former employees, except as required by applicable Law or to avoid excise tax under Section 4980B of the Code. Except as set forth on Section 4.17(d) of the Seller Disclosure Letter, no Seller Group Plan or Foreign Seller Group Plan is a defined benefit pension plan.
(e) Each Seller Group Plan and Foreign Seller Group Plan (other than a Conveyed Subsidiary Plan) has been maintained, operated, funded and administered in compliance in all respects with its terms and applicable Law, except for such instances of noncompliance that would not, individually or in the aggregate, be materially adverse to the Business. Each Conveyed Subsidiary Plan has been established, maintained, funded and administered in compliance in all material respects its terms and applicable Law. All material contributions or premiums with respect to each Conveyed Subsidiary Plan have been paid or deducted in a timely fashion and there are no material outstanding defaults or violations thereunder that have not been properly recorded in the Financial Statements. Other than routine claims for benefits, there are no suits, claims, proceedings, actions, governmental audits or investigations that are pending or threatened against or involving any Seller Group Plan or Foreign Seller Group Plan or asserting any rights to or claims for benefits under any Seller Group Plan or Foreign Seller Group Plan, except for such actions that have not had and would not, individually or in the aggregate, a be materially adverse to the Business.
(f) Except as set forth in Section 4.17(f) of the Seller Disclosure Letter: (i) none of the Conveyed Subsidiaries (or employers of Business Employees who are not as of Closing employed in a Conveyed Subsidiary) recognize a labor union (in the case of employers that are not Conveyed Subsidiaries or Subsidiaries thereof, excluding any labor union that does not represent the Business Employees) and none of the Business Employees are represented by any labor organization, works council or consultation body (other than industry-wide or national labor organizations) or subject to, or covered by, the terms of any material Collective Bargaining Agreement in connection with their services to the Business, (ii) no labor union, labor organization, works council or consultation body has made a demand for recognition or certification, and there are no representation or certification proceedings, union elections or, to the Knowledge of Seller Parent, union organizing activities, pending or threatened in writing with respect to the Business Employees, the Business or the Conveyed Subsidiaries or their Affiliates with respect to the Business, (iii) there are no pending or threatened in writing strikes, lockouts, work stoppages or slowdowns involving the Business Employees or against the Business or the Conveyed Subsidiaries or their Affiliates with respect to the Business and (iv) there is no unfair labor practice charge, labor arbitration or labor grievance proceeding pending or threatened in writing against the Business or the Conveyed Subsidiaries or their Affiliates with respect to the Business that would, in the case of
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the foregoing clauses (iii) and (iv), individually or in the aggregate, be materially adverse to the Business. As of the date hereof, Seller Parent has provided copies to Purchaser of all material Collective Bargaining Agreements applicable to Business Employees, the Business or the Conveyed Subsidiaries or their Subsidiaries. Seller Parent, the Conveyed Subsidiaries and their respective Subsidiaries have satisfied any material pre-signing requirement to provide notice to, or enter into any information and consultation procedure with, any labor union, labor organization, works council or consultation body in connection with the execution of this Agreement or the transactions contemplated by this Agreement as required by any Contract or Laws.
(g) As of the Closing, Seller Parent represents that each Business Employee devotes, and has devoted seventy percent (70%) or more of his or her working time in the last twelve (12) months (or such shorter period he or she has been employed by Seller Parent and its Affiliates) to performing services on behalf of the Business.
(h) As at the date hereof, the Seller Internal Restructurings in France and Netherlands have been completed in accordance with applicable Laws (including obtaining requisite opinions from applicable works councils and employee representative bodies) such that there are no Business Employees employed in the Business in France or Netherlands other than those employed by a Conveyed Subsidiary.
(i) Except as required by plans, programs, or arrangements required to be maintained or contributed to by the Laws of a non-U.S. jurisdiction, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby (either alone or in conjunction with any other event), will cause any (i) payments to become due or payable to any Business Employee, Former Business Employee, current or former consultant or director, (ii) acceleration, vesting or increase in any compensation or benefits to any Business Employee, Former Business Employee, current or former consultant or director, or (iii) Conveyed Subsidiary (or a Subsidiary thereof) to transfer or set aside any assets to fund any benefits under any Conveyed Subsidiary Plan, or limit or restrict in any material respect the right of Purchaser or any of its Affiliates or any Conveyed Subsidiary (or a Subsidiary thereof) to amend, terminate or transfer the assets of any Conveyed Subsidiary Plan. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated herein, will constitute a change in ownership or control or change in effective control of Seller Parent within the meaning of Section 280G of the Code. No Conveyed Subsidiary (or any Subsidiary thereof) is party to any plan, program, policy or arrangement providing for the gross-up or other compensation to any individual because of the imposition of any Tax on any payment to the individual related to Section 4999 or Section 409A of the Code.
Section 4.18 Global Trade Controls; Anti-Corruption Matters.
(a) The Sellers (with respect to the Business), the Conveyed Subsidiaries (and their Subsidiaries), as well as their respective directors, officers, and employees, are in compliance with all Global Trade Control Laws, including possession of and compliance with Governmental Authorizations required by Global Trade Control Laws, except for such noncompliance as would not, individually or in the aggregate, be materially adverse to the Business.
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(b) The Sellers (with respect to the Business) and the Conveyed Subsidiaries (and their Subsidiaries) do not engage in any business with, or use, directly or indirectly, any corporate funds to contribute to or finance the activities of, any Restricted Party or in any Restricted Market except as permitted by Governmental Authorization, except as would not, individually or in the aggregate, be materially adverse to the Business.
(c) None of the Sellers (with respect to the Business), the Conveyed Subsidiaries (and their Subsidiaries), nor any of their respective directors, officers, and employees, is a Restricted Party or owned or controlled by a Restricted Party.
(d) To Seller Parents Knowledge, the Sellers (with respect to the Business), the Conveyed Subsidiaries (and their Subsidiaries), as well as their respective directors, officers, and employees are in compliance with all Anti-Corruption Laws, except for such noncompliance as would not, individually or in the aggregate, be materially adverse to the Business. For purposes of this Section 4.18(d) only, Seller Parents Knowledge means that the conduct giving rise to the noncompliance with or violation of Anti-Corruption Law was reported to the Compliance Division of Seller Parent and such conduct is or was the subject of a Compliance Division investigation on or prior to the Closing Date.
(e) Notwithstanding any other provision of this Agreement, the representations and warranties set forth in this Section 4.18 are the sole and exclusive representations and warranties of Seller Parent with respect to Global Trade Control Laws and Anti-Corruption Laws.
Section 4.19 Brokers. No broker, finder or investment banker is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller Parent for which Purchaser or any of its Affiliates (including, after the Closing, the Conveyed Subsidiaries or their Subsidiaries) would be liable. Seller Parent is solely responsible for the fees and expenses of Centerview Partners, LLC, Guggenheim Securities, LLC and Morgan Stanley & Co. LLC.
Section 4.20 No Other Representations or Warranties.
(a) Except for the representations and warranties contained in this Article IV or in any Ancillary Implementing Agreement, neither Seller Parent, the other Sellers nor any of their respective Affiliates, Representatives or any other Person makes any express or implied representation or warranty with respect to Seller Parent, the other Sellers, the Conveyed Subsidiaries or any of their respective Subsidiaries or Affiliates, the Purchased Assets, the Business or with respect to any other information provided, or made available, to Purchaser Parent, Purchaser or any of their Affiliates or Representatives in connection with the transactions contemplated hereby. Except as expressly set forth in the representations and warranties contained in this Article IV or in any Ancillary Implementing Agreement, neither Seller Parent nor any of its Affiliates, Representatives or any other Person has made any representation or warranty, express or implied, as to the prospects of the Business or its profitability, or with respect to any forecasts, projections or business plans or other information (including any Evaluation Material (as defined in the Confidentiality Agreement)) delivered to Purchaser Parent, Purchaser or any of their Affiliates or Representatives in connection with Purchaser Parents and Purchasers review of the Business and
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the negotiation and execution of this Agreement, including as to the accuracy or completeness thereof or the reasonableness of any assumptions underlying any such forecasts, projections or business plans or other information. Except to the extent expressly provided in this Agreement with respect to the representations and warranties contained in this Article IV or in any Ancillary Implementing Agreement, neither Seller Parent, the other Sellers nor any of their respective Affiliates, Representatives or any other Person will have, or be subject to, any Liability or other obligation to Purchaser Parent, Purchaser, their Affiliates or Representatives or any other Person resulting from the sale and purchase of the Purchased Assets, or the Business to Purchaser Parent, Purchaser or their Affiliates or Purchaser Parents or Purchasers use of, or the use by any of their Affiliates or Representatives of, any information, including information, documents, projections, forecasts, business plans or other material (including any Evaluation Material (as defined in the Confidentiality Agreement)) made available to Purchaser Parent, Purchaser, their Affiliates or Representatives by any means, including in any virtual data room, confidential information memorandum, management presentations, offering materials, site tours or visits, diligence calls or meetings or any documents prepared by, or on behalf of, Seller Parent, the other Sellers or any of their respective Affiliates or Representatives, or Purchaser Parent, Purchaser or their Affiliates or Representatives. Each of Seller Parent and the other Sellers and their respective Affiliates disclaims any and all representations and warranties, whether express or implied, except for the representations and warranties contained in this Article IV or in any Ancillary Implementing Agreement. Notwithstanding anything to the contrary contained in this Agreement, neither Seller Parent, the other Sellers nor any of their respective Affiliates makes any express or implied representation or warranty with respect to Excluded Assets, Retained Businesses or Retained Liabilities.
(b) Seller Parent acknowledges and agrees that, except for the representations and warranties contained in Article V or in any Ancillary Implementing Agreement, neither Purchaser Parent, Purchaser nor any of their respective Affiliates, Representatives or any other Person makes any express or implied representation or warranty with respect to Purchaser Parent, Purchaser or any of their respective Subsidiaries or Affiliates, the Purchaser Business or with respect to any other information provided, or made available, to Seller Parent or any of its Affiliates or Representatives in connection with the transactions contemplated hereby. Seller Parent acknowledges and agrees that, except to the extent expressly provided in this Agreement with respect to the representations and warranties contained in Article V or in any Ancillary Implementing Agreement, neither Purchaser Parent, Purchaser nor any of their respective Affiliates, Representatives or any other Person will have, or be subject to, any Liability or other obligation to Seller Parent or any of its Affiliates or Representatives or any other Person resulting from Seller Parents use of, or the use by any of its Affiliates or Representatives of any information, including information, documents, projections, forecasts, business plans or other material (including any Evaluation Material (as defined in the Confidentiality Agreement)) made available to Seller Parent or any of its Affiliates or Representatives by any means, including in any virtual data room, confidential information memorandum, management presentations, offering materials, site tours or visits, diligence calls or meetings or any documents prepared by, or on behalf of, Purchaser Parent, Purchaser or any of their respective Affiliates or Representatives. Seller Parent acknowledges and agrees that it is not relying on any representation or warranty of Purchaser Parent, Purchaser, or any of their Affiliates or Representatives or any other Person, other than those representations and warranties specifically set forth in Article V or in any Ancillary Implementing Agreement. Seller
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Parent acknowledges and agrees that each of Purchaser Parent and Purchaser and their respective Affiliates disclaims any and all representations and warranties, whether express or implied, except for the representations and warranties contained in Article V or in any Ancillary Implementing Agreement. Seller Parent acknowledges and agrees that neither Purchaser Parent, Purchaser nor any of their respective Affiliates makes any express or implied representation or warranty with respect to the Purchaser Parent Retained Businesses or Purchaser Parent Retained Liabilities.
(c) Seller Parent acknowledges that it has conducted to its satisfaction an independent investigation of the financial condition, results of operations and projected operations of Purchaser and the Purchaser Business and the nature and condition of its properties, assets, liabilities and businesses and, in making the determination to proceed with the transactions contemplated hereby, has relied solely on the results of its own independent investigation and the representations and warranties set forth in Article V or any Ancillary Implementing Agreement. In light of these inspections and investigations and the representations and warranties made to Seller Parent by Purchaser Parent in Article V or in any Ancillary Implementing Agreement, Seller Parent is relinquishing any right to any claim based on any representations and warranties other than those specifically included in Article V or in any Ancillary Implementing Agreement. Any claims Seller Parent may have for breach of representation or warranty shall be based solely on the representations and warranties of Purchaser Parent set forth in Article V or in any Ancillary Implementing Agreement.
(d) Seller Parent acknowledges that, except as explicitly set forth herein, neither Purchaser Parent, Purchaser nor any of their Affiliates has made any warranty, express or implied, as to the prospects of Purchaser or the Purchaser Business or their profitability, or with respect to any forecasts, projections or business plans or other information (including any Evaluation Material (as defined in the Confidentiality Agreement)) delivered to Seller Parent or any of its Affiliates or Representatives in connection with Seller Parents review of the Purchaser Business and the negotiation and execution of this Agreement, including as to the accuracy or completeness thereof or the reasonableness of any assumptions underlying any such forecasts, projections or business plans or other information.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER PARENT
Except as set forth in the Purchaser Parent Disclosure Letter and in accordance with Section 10.8, Purchaser Parent hereby represents and warrants to Seller Parent and Purchaser as follows:
Section 5.1 Organization. Each of Purchaser Parent and Purchaser is validly existing and is a company duly incorporated and registered under the laws of England.
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Section 5.2 Authority; Binding Effect.
(a) Purchaser Parent, Purchaser and each applicable Purchaser Designated Affiliate have all requisite corporate or other similar applicable power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it will be a party, and, subject to receipt of the Purchaser Parent Shareholder Approval, to perform their obligations hereunder and thereunder. The execution and delivery by Purchaser Parent and Purchaser of this Agreement and, subject to receipt of the Purchaser Parent Shareholder Approval, the performance by Purchaser Parent and Purchaser of their obligations hereunder have been, and the execution and delivery by Purchaser Parent, Purchaser and each Purchaser Designated Affiliate of each Ancillary Agreement to which it will be a party and the performance by Purchaser Parent, Purchaser and such Purchaser Designated Affiliates of their obligations thereunder have been or will have been as of the Closing, duly authorized by all requisite corporate or other similar applicable action. At a meeting duly called and held, the Board of Directors of Purchaser Parent has unanimously (i) approved this Agreement and the Sale and the other transactions contemplated hereby in accordance with applicable Law, (ii) directed that the Purchaser Parent Shareholder Circular be prepared and, subject to the approval of that circular by the UKLA, published in accordance with the terms of this Agreement, (iii) subject to the publication of the Purchaser Parent Shareholder Circular and Section 6.24(f), resolved that the Purchaser Parent Shareholder Meeting be convened for the purpose of obtaining the Purchaser Parent Shareholder Approval and (iv) resolved, subject to Section 6.24(f), to (1) unanimously recommend approval by Purchaser Parents shareholders of the Purchaser Parent Shareholder Approval Resolution to Purchaser Parents shareholders, including in the Purchaser Parent Shareholder Circular, without qualification, and (2) state in the Purchaser Parent Shareholder Circular that the Sale and the other transactions contemplated by this Agreement are, in the Board of Directors of the Purchaser Parents opinion, fair and reasonable so far as the Purchaser Parent shareholders are concerned and that the Board of Directors have been so advised by Citigroup Global Markets Limited and J.P. Morgan Securities plc (such recommendation and statement being together, the Purchaser Parent Board Recommendation). As of the date of this Agreement, the Board of Directors of Purchaser Parent has not subsequently rescinded, modified or withdrawn any of the foregoing resolutions. The approval of the Sale and the other transactions contemplated by this Agreement by the holders of ordinary shares of Purchaser Parent, by way of approval of the Purchaser Parent Shareholder Approval Resolution at the Purchaser Parent Shareholder Meeting (the Purchaser Parent Shareholder Approval) is the only Approval required from the holders of Purchaser Parents ordinary shares or other securities of Purchaser Parent or its Affiliates in connection with the consummation of the Sale and the other transactions contemplated by this Agreement.
(b) Purchaser Parent, Purchaser and each Subsidiary of Purchaser has, or will have as of the Closing, all requisite corporate or other similar applicable power and authority to carry on its respective business as it pertains to the Purchaser Business as currently conducted and to own, lease and operate its properties and assets related to the Purchaser Business, except where the failure to have such power and authority would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business or prevent or reasonably be expected to prevent Purchaser Parent, Purchaser or any Purchaser Designated Affiliate from consummating the Closing prior to the Outside Date. Purchaser is duly qualified to do business and, where applicable, in good standing in each jurisdiction where the nature of its business or properties makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
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(c) This Agreement has been duly executed and delivered by Purchaser Parent and Purchaser and, assuming this Agreement has been duly executed and delivered by Seller Parent, constitutes a legal, valid and binding obligation of Purchaser Parent and Purchaser, and each Ancillary Agreement will be as of the Closing duly executed and delivered by Purchaser Parent, Purchaser and each Purchaser Designated Affiliate which will be a party thereto and will, assuming such Ancillary Agreement has been duly executed and delivered by each Seller that will be a party thereto, constitute a legal, valid and binding obligation of Purchaser Parent, Purchaser and such Purchaser Designated Affiliate, in each case enforceable against Purchaser Parent, Purchaser and such Purchaser Designated Affiliate (as applicable) in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law).
Section 5.3 Purchaser; Purchaser Subsidiaries; Capital Structure.
(a) As of the date hereof, the issued share capital of Purchaser is 63,500 ordinary shares. All of the issued ordinary shares of Purchaser have been validly issued, fully paid and non-assessable, and are not subject to, and were not issued in violation of, any preemptive right. The B Ordinary Shares, when issued in accordance with this Agreement at Closing, will be validly issued, fully paid and non-assessable, and will not be issued in violation of any preemptive right. As of the Closing, there will be no outstanding warrants, options, agreements, subscriptions, convertible or exchangeable securities or other commitments pursuant to which Purchaser is or may become obliged to issue, sell, purchase, return, redeem or otherwise acquire any of its shares, or any securities convertible into or exchangeable for its shares. As of the Closing, there will be no rights of first refusal, rights of first offer, voting trusts, shareholder agreements, proxies or other Contracts in effect with respect to the sale or voting of any of the shares of Purchaser. A wholly owned Subsidiary of Purchaser Parent owns legally and beneficially as of the date of this Agreement, and will own legally and beneficially as of immediately prior to the Closing, all of the issued shares in the capital of Purchaser, free and clear of all Liens except for Liens arising under applicable securities Laws. As of and immediately following the Closing, after giving effect to the Sale and the issuance of the Purchase Consideration, a wholly owned Subsidiary of Purchaser Parent will own legally and beneficially 680,000 A Ordinary Shares and 300,000 Preference Shares, and Seller Parent (or its applicable designee(s)) will own legally and beneficially 320,000 B Ordinary Shares, in each case on the terms and subject to the rights and restrictions set forth in the Restated Purchaser Articles of Association and the Purchaser Shareholders Agreement, which such shares shall together constitute the entire issued share capital of Purchaser, and there will be no other ordinary shares, preference shares or other equity interests, or warrants, options, agreements, subscriptions, convertible or exchangeable securities or other commitments pursuant to which Purchaser is or may become obliged to issue, sell, purchase, return, redeem or otherwise acquire any shares, or any other equity interests, or any securities convertible into or exchangeable for shares, or any other equity interests, of Purchaser.
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(b) Each Subsidiary of Purchaser is, or will be as of the Closing, a corporation, partnership or other legal entity duly organized and validly existing under the laws of its jurisdiction of organization, with all requisite corporate or other similar applicable power and authority to own, lease and operate its properties and assets and to carry on its respective business, as currently conducted, except where the failure to be so organized or existing or to have such power and authority would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business. Each Subsidiary of Purchaser is duly qualified to do business and, where applicable, in good standing in each jurisdiction where the nature of its business or properties makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business. Section 5.3(b) of the Purchaser Parent Disclosure Letter sets forth (i) the name and the jurisdiction of organization of each Subsidiary of Purchaser and (ii) the record owners of such outstanding equity interests. All of the issued and outstanding equity interests of each Subsidiary of Purchaser are validly issued, fully paid and, in the case of any Subsidiary of Purchaser which is a corporation, non-assessable, and are not subject to, and were not issued in violation of, any preemptive right. As of the Closing, there will be no outstanding warrants, options, agreements, subscriptions, convertible or exchangeable securities or other commitments pursuant to which any Subsidiary of Purchaser is or may become obliged to issue, sell, purchase, return, redeem or otherwise acquire any equity interests of any Subsidiary of Purchaser, or any securities convertible into or exchangeable for any equity interests of any Subsidiary of Purchaser. As of the Closing, there will be no rights of first refusal, rights of first offer, voting trusts, stockholder agreements, proxies or other Contracts in effect with respect to the sale or voting of the equity interests of any Subsidiary of Purchaser. Purchaser or another wholly owned Subsidiary of Purchaser owns legally and beneficially, or will own legally and beneficially as of the Closing, all of the issued and outstanding equity interests of each Subsidiary of Purchaser, free and clear of all Liens except for Liens arising under applicable securities Laws. Except for the equity interests of the Subsidiaries of Purchaser, Purchaser and its Subsidiaries do not own any other equity interests of any Person.
Section 5.4 No Conflicts; Consents. Subject to the receipt of the Purchaser Parent Shareholder Approval, the execution, delivery and performance by Purchaser Parent and Purchaser of this Agreement and each Ancillary Implementing Agreement by Purchaser Parent, Purchaser or a Purchaser Designated Affiliate party to such Ancillary Implementing Agreement, and the consummation of the transactions contemplated hereby and thereby by Purchaser Parent, Purchaser and such Purchaser Designated Affiliate, do not and will not (a) violate any provision of the articles of association or equivalent organizational documents of Purchaser Parent, Purchaser or any of their Affiliates, (b) subject to obtaining the consents set forth in Section 5.4 of the Purchaser Parent Disclosure Letter, result in a violation of, or require the consent of any Person pursuant to, or conflict with, constitute a default under, or result in the breach or termination, cancellation or acceleration (whether with or without the giving of notice or the lapse of time or both) of any right or obligation of (or to the loss of any benefit of) Purchaser Parent, Purchaser or any of their Affiliates under any Purchaser Material Contract or Purchaser Real Property Lease, or result in the imposition of a Lien on any assets, properties or rights, other than Purchaser Permitted Liens, relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries, or (c) assuming compliance with the matters set forth in Sections 4.5 and 5.5, violate or result in a breach of or constitute a default under any Law, Governmental Authorization or other restriction of any Governmental Authority to which Purchaser Parent, Purchaser or any of their Affiliates is subject, except, with respect to clauses (b) and (c), as would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business or prevent or reasonably be expected to prevent Purchaser Parent, Purchaser or any Purchaser Designated Affiliate from consummating the Closing prior to the Outside Date.
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Section 5.5 Governmental Authorization. The execution, delivery and performance of this Agreement by Purchaser Parent and Purchaser and each Ancillary Implementing Agreement by any of Purchaser Parent, Purchaser or any Purchaser Designated Affiliate party thereto does not require any Approval of, or Filing with, any Governmental Authority, except for (a) the expiration or early termination of the applicable waiting period under the HSR Act, (b) the Approvals and Filings set forth in Section 5.5 of the Purchaser Parent Disclosure Letter, (c) Approvals and Filings which if not obtained or made would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business or prevent or reasonably be expected to prevent Purchaser Parent, Purchaser or any Purchaser Designated Affiliate from consummating the Closing prior to the Outside Date, and (d) the Approvals and Filings required due to the regulatory obligations of Seller Parent or any of its Subsidiaries.
Section 5.6 Financial Information.
(a) Section 5.6(a) of the Purchaser Parent Disclosure Letter contains copies of (i) the unaudited balance sheet of Purchaser Business as of September 30, 2018, June 30, 2018 and March 31, 2018 (the Purchaser Working Capital Statements) and (ii) the audited balance sheet of the Purchaser Business as of December 31, 2017, December 31, 2016, and December 31, 2015, and the related audited income statement for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 (the Audited Purchaser Financial Statements) (the foregoing clauses (i) and (ii) collectively, and together with any notes thereto, the Purchaser Financial Statements).
(b) Except as set forth in Section 5.6(b) of the Purchaser Parent Disclosure Letter or as noted in the Audited Purchaser Financial Statements, the Audited Purchaser Financial Statements were prepared in accordance with IFRS, on a consistent basis for each period presented and present a true and fair view of (x) the state of affairs of the Purchaser Business as of the dates therein specified and (y) the results of operations of the Purchaser Business for the periods indicated. The Purchaser Working Capital Statements were prepared using principles, procedures, policies and methods consistent in all material respects with those used in the preparation of the balance sheet of the Purchaser Business as of the Balance Sheet Date included in the Audited Purchaser Financial Statements.
(c) Except as set forth in Section 5.6(c) of the Purchaser Parent Disclosure Letter, the Purchaser Business does not have any Indebtedness or other Liabilities of any nature or kind whatsoever (whether accrued, known or unknown, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet of the Purchaser Business prepared in accordance with IFRS, except for (i) Liabilities accrued for, reflected on, disclosed and/or reserved against on the Purchaser Financial Statements, (ii) Liabilities incurred subsequent to the Balance Sheet Date in the ordinary course of business, (iii) Liabilities taken into account in the Final Closing Statement, Final Purchaser Working Capital or Final Purchaser Net Cash, (iv) Liabilities incurred in connection with or arising out of the transactions contemplated hereby, (v) Liabilities disclosed or set forth in the Purchaser Disclosure Letter and (vi) Liabilities which would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
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Section 5.7 Absence of Material Changes. Except as otherwise contemplated by this Agreement and the transactions contemplated hereby (including in connection with the review of strategic alternatives with respect to the Purchaser Business), since December 31, 2017 (a) there has not been any Purchaser Material Adverse Effect and (a) until the date of this Agreement, the Purchaser Business has been operated, in all material respects, in the ordinary course of business.
Section 5.8 Securities Act. Purchaser is acquiring the Shares solely for the purpose of investment and not with a view to, or for sale in connection with, any distribution thereof in violation of the Securities Act. Purchaser acknowledges that the Shares are not registered under the Securities Act, any applicable state securities Laws or any applicable foreign securities Laws, and that such Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act and applicable state and foreign securities Laws or pursuant to an applicable exemption therefrom. Purchaser has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Shares and is capable of bearing the economic risks of such investment.
Section 5.9 No Litigation. Except as set forth in Section 5.9 of the Purchaser Parent Disclosure Letter, there is no Action pending or, to the Knowledge of Purchaser Parent, threatened against Purchaser or any of its Subsidiaries, or against Purchaser Parent or any of its Affiliates relating to the Purchaser Business or any assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries, before any Governmental Authority or arbitration tribunal other than Actions which would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business. Neither Purchaser nor any of its Affiliates is subject to any outstanding Governmental Order which would, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
Section 5.10 Compliance with Laws. Except as set forth in Section 5.10 of the Purchaser Parent Disclosure Letter:
(a) Purchaser Parent and its Subsidiaries (including Purchaser and its Subsidiaries) are, and for the last three (3) years have been, in compliance with all Laws applicable to the ownership, lease or operation of the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries and the Purchaser Business, including (i) the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §301 et seq. and applicable binding implementing regulations issued by the U.S. Food and Drug Administration, (ii) the applicable Laws of the European Union and applicable binding implementing regulations issued by applicable Governmental Authorities in those jurisdictions in the European Union in which the Purchaser Business markets, commercializes, distributes and sells Purchaser Products, or otherwise operates, or has marketed, commercialized, distributed or sold Purchaser Products, or otherwise operated, in the last three (3) years (including European Unions Directive 95/46/EC, as amended, and Regulation EU 2016/679 (the General Data Protection Regulation), and any national implementing legislation of the foregoing) and (iii) the applicable Laws of any other jurisdiction in which the Purchaser Business markets, commercializes, distributes and sells Purchaser Products, or otherwise operates, or has marketed, commercialized, distributed or sold Purchaser Products, or otherwise operated, in the last three (3) years, except in the case of each of the foregoing clauses (i), (ii) and (iii) to the extent that the failure to comply therewith would not, individually or in the aggregate, be materially adverse to the Purchaser Business.
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(b) Purchaser and its Subsidiaries collectively possess all Governmental Authorizations necessary for the conduct of the Purchaser Business, as currently conducted, and each such Governmental Authorization is in full force and effect, except where the failure to possess any such Governmental Authorization or the failure of such Governmental Authorization to be in full force and effect would not, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole.
Section 5.11 Product Registrations; Manufacturing Registrations; Regulatory Compliance; Product Liability and Recalls.
(a) Except with respect to Purchaser Environmental Permits (which are the subject of Section 5.12):
(i) Purchaser and its Subsidiaries own, possess or validly have the right to use all Governmental Authorizations required to research, develop, manufacture, market, commercialize, distribute, test, use, store and sell the Purchaser Products, except where the failure to so own, possess or validly have such right would not, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole;
(ii) All Purchaser Products sold under the Purchaser Product Registrations are manufactured and marketed in accordance with the specifications and standards contained in such Purchaser Product Registrations, and the applicable Purchaser Manufacturing Registrations, except where the failure to comply therewith would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business; and
(iii) Except as set forth in Section 5.11(a)(iii) of the Purchaser Parent Disclosure Letter, Purchaser or a Subsidiary of Purchaser is, or will be as of the Closing, the sole and exclusive owner of each Purchaser Product Registration and Purchaser Manufacturing Registration.
(b) Except as set forth in Section 5.11(b) of the Purchaser Parent Disclosure Letter, there is no Action pending, or, to the Knowledge of Purchaser Parent, threatened, against Purchaser or any of its Subsidiaries or relating to the Purchaser Business or any assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries (i) arising from complaints, allegations or Actions relating to any injury to person or property or as a result of ownership, possession, provision or use of any of the Purchaser Products that were manufactured, processed, distributed, shipped or sold prior to the date of this Agreement or (ii) relating to any alleged hazard or alleged defect in design, manufacture, materials or workmanship, including any failure to warn or alleged breach of express or implied warranty or representation, relating to the Purchaser Products, except in the case of each of the foregoing clauses (i) and (ii), for Actions which would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
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(c) Except as set forth in Section 5.11(c) of the Purchaser Parent Disclosure Letter, since January 1, 2016, there have been no recalls or market withdrawals of Purchaser Products and, to the Knowledge of Purchaser Parent, no facts or circumstances exist that would reasonably be expected to result in recalls or market withdrawals of Purchaser Products that would, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
(d) Notwithstanding any other provision of this Agreement, this Section 5.11 sets forth the sole and exclusive representations and warranties of Purchaser Parent with respect to Purchaser Product Registrations and Purchaser Manufacturing Registrations, products liability and product recalls, and the other regulatory matters described in this Section 5.11.
Section 5.12 Environmental Matters. Except as set forth in Section 5.12 of the Purchaser Parent Disclosure Letter:
(a) (i) Purchaser Parent and its Subsidiaries (in each case, with respect to the Purchaser Business), Purchaser and its Subsidiaries, the Purchaser Business (as currently or formerly conducted), the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries, and the Purchaser Real Property are and have been since January 1, 2016 in compliance with all applicable Environmental Laws and Governmental Authorizations required under Environmental Law (including Purchaser Environmental Permits); (ii) neither Purchaser Parent nor its Subsidiaries (in each case, with respect to the Purchaser Business or the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries) are undertaking or required to undertake any Remedial Action at the Purchaser Facilities or any property formerly owned, leased or operated by Purchaser or its Subsidiaries (or any of their respective predecessors) or by the Purchaser Business (as currently or formerly conducted); and (iii) since January 1, 2016, neither Purchaser Parent nor its Subsidiaries has received written notice from a Governmental Authority or other Person that it is subject to any unresolved enforcement action or Liability with respect to Purchaser or its Subsidiaries, the Purchaser Business (as currently or formerly conducted), the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries, or the Purchaser Facilities under any applicable Environmental Laws or Purchaser Environmental Permits, except for such noncompliance, Remedial Actions, Liabilities or enforcement actions that would not, individually or in the aggregate, be materially adverse to the Purchaser Business;
(b) all Governmental Authorizations (including Purchaser Environmental Permits) required of Purchaser Parent and its Subsidiaries (in each case, with respect to the Purchaser Business or the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries) under all applicable Environmental Laws have been obtained and are held by Purchaser or a Subsidiary of Purchaser, except for such failures to obtain as would not, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole; and
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(c) no Actions or written claims are pending or, to the Knowledge of Purchaser Parent, threatened against Purchaser Parent or its Subsidiaries (in each case, with respect to the Purchaser Business or the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries) arising from or as a result of, and there have been no (i) exposures to Hazardous Materials, including on, in, under, about or from the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries or at the Purchaser Facilities, (ii) Releases of Hazardous Materials, including at, on, in, under, or from any assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries or from any Purchaser Facilities, (iii) off-site treatment, storage or disposal of Hazardous Materials generated by the Purchaser Business (as currently or formerly conducted), Purchaser Parent or its Subsidiaries (with respect to the Purchaser Business) or Purchaser or its Subsidiaries or (iv) any violations of any Environmental Laws arising, directly or indirectly, in connection with the Purchaser Business (as currently or formerly conducted) or any of the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries or Purchaser Facilities, in each case that has resulted or would result in Environmental Liability, except for such claims, Actions, Environmental Liabilities or investigations that would not, individually or in the aggregate, be materially adverse to the Purchaser Business.
(d) Notwithstanding any other provision of this Agreement, the representations and warranties set forth in this Section 5.12 are the sole and exclusive representations and warranties of Purchaser Parent with respect to Environmental Laws, Purchaser Environmental Permits, Environmental Liabilities, Hazardous Materials and other environmental matters.
Section 5.13 Material Contracts.
(a) Except (x) for Contracts entered into after the date of this Agreement, (y) for intercompany agreements solely between or among Purchaser (or any of its Subsidiaries) and any of its Subsidiaries or that shall be terminated as of or prior to the Closing Date in accordance with Section 6.7 or (z) as set forth in Section 5.13(a) of the Purchaser Parent Disclosure Letter, neither Purchaser Parent nor any of its Affiliates is a party to or bound by any Contract in effect as of the date hereof that is material to Purchaser or the Purchaser Business, taken as a whole (a Purchaser Material Contract).
(b) Except as set forth in Section 5.13(b) of the Purchaser Parent Disclosure Letter, (i) except as would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business, each Purchaser Material Contract is legal, valid and binding on Purchaser or its Subsidiary that is a party thereto and, to the Knowledge of Purchaser Parent, each other party thereto, and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law), and (ii) neither Purchaser Parent nor any of its Affiliates or, to the Knowledge of Purchaser Parent, any other party thereto, is in breach of, or default under, any such Purchaser Material Contract, except for such breaches or defaults as would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business. Neither Purchaser nor any of its Subsidiaries is a party to or bound by any Contract that contains any non-compete or similar provision that would materially limit or impair Seller Parent or any of the Retained Subsidiaries ability to operate the Retained Businesses after the Closing.
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(c) Section 5.13(c) of the Purchaser Parent Disclosure Letter lists all material Purchaser Related Party Contracts.
Section 5.14 Intellectual Property.
(a) To the Knowledge of Purchaser Parent (but only as to validity and enforceability), as of the date of this Agreement, except as would not, individually or in the aggregate, be materially adverse to the Purchaser Business, all issued Patent Rights, pending applications for Patent Rights, registered Trademarks, pending Trademark registration applications and registered Copyrights that are included in the Purchaser IP (collectively, the Registered Purchaser IP) are in effect and subsisting, and, if registered, not invalid or unenforceable. The Purchaser Trademark Rights, together with Trademarks that are licensed to Purchaser or its Subsidiaries by Purchaser Parent or its Subsidiaries or by a third party, include all of the Purchaser Key Brands.
(b) All material Purchaser IP and Purchaser Licensed IP shall be, following the Closing, transferable and licensable (or sublicensable as the case may be) by Purchaser and its Subsidiaries, without payment of any kind to Purchaser Parent or any Affiliate of Purchaser Parent, as may be needed in the ordinary course of the operation of the Purchaser Business, and shall be fully transferable, assignable and assumable, as the case may be, without payment of any kind to Purchaser Parent or any Affiliate of Purchaser Parent, in connection with a change of control (that constitutes an assignment) of Purchaser or any Listing Transaction (as defined in the Purchaser Shareholders Agreement) or the sale of substantially all of the assets of a business unit of Purchaser to the extent such Purchaser IP or Purchaser Licensed IP is related to such business unit.
(c) Except as would not, individually or in the aggregate, be materially adverse to the Purchaser Business, and taking into account Section 6.22, the Purchaser IP and the Purchaser Licensed IP constitutes all of the Intellectual Property owned by either Purchaser Parent or any of its Subsidiaries or Purchaser or any of its Subsidiaries that is used or held for use in, or that is necessary for, the conduct of the Purchaser Business as conducted as of the date of this Agreement. The operation of the Purchaser Business immediately following the Closing will not infringe any of Purchaser Parents or any of its Affiliates Intellectual Property.
(d) Except as would not, individually or in the aggregate, be materially adverse to the Purchaser Business, (x) the conduct of the Purchaser Business does not, to the Knowledge of Purchaser Parent, infringe, misappropriate or otherwise violate the Intellectual Property of any Person and (y) as of the date of this Agreement, there is no Action pending or, to the Knowledge of Purchaser Parent, threatened in writing against Purchaser Parent or any of its Affiliates (i) alleging any such infringement, misappropriation, or other violation, or (ii) challenging the validity, enforceability, ownership, use, registrability, or patentability of the Purchaser IP, other than ordinary course prosecution proceedings associated with the application for or registration of Registered Purchaser IP.
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(e) Except as would not, individually or in the aggregate, be materially adverse to the Purchaser Business, as of the date of this Agreement, to the Knowledge of Purchaser Parent, no Person is infringing, misappropriating or otherwise violating any Purchaser IP and as of the date of this Agreement, no such Actions are pending or, to the Knowledge of Purchaser Parent, threatened against any Person by Purchaser Parent or any of its Affiliates.
(f) Purchaser or its Subsidiaries, as applicable, are the sole legal owners of all Registered Purchaser IP that is owned or purported to be owned by Purchaser or its Subsidiaries. None of the Registered Purchaser IP or any other material Purchaser IP is subject to any Lien, other than Purchaser Permitted Liens.
(g) Since January 1, 2016, to the Knowledge of Purchaser Parent, there (i) have been no failures of the Purchaser IT Systems that have materially and adversely impacted the conduct of the Purchaser Business and (ii) has been no unauthorized access, loss, use or breach of security with respect to the Purchaser IT Systems or any material sensitive, confidential or proprietary information (including personally identifiable information) relating to the Purchaser Business that have materially and adversely impacted the Purchaser Business.
(h) Except for the Trademarks licensed by Purchaser Parent or any of its Subsidiaries (other than Purchaser and its Subsidiaries) to Purchaser or any of its Subsidiaries under a Purchaser Ancillary Agreement (the Purchaser Licensed Trademark Rights), and taking into account Section 6.22, as of the Closing Date, the Purchaser Trademark Rights will include all material Trademarks under which the Purchaser Business operates that are owned by Purchaser Parent or any Subsidiary of Purchaser Parent. The Purchaser Licensed Trademark Rights are licensed to Purchaser or one or more of its Subsidiaries by Purchaser Parent or its Subsidiaries (other than Purchaser and its Subsidiaries) on a perpetual, royalty free basis, and such license is (i) exclusive in the field in which the Purchaser Business operates (subject to limited exceptions to exclusivity for brands managed by Purchaser Parents Affiliates pharmaceutical division, rights granted to third parties prior to the date licensed to Purchaser Parent, brands used for both prescription and non-prescription products, and products switched from prescription to non-prescription sales) and (ii) non-terminable solely due to a change of control of Purchaser or the occurrence of any Listing Transaction (as defined in the Purchaser Shareholders Agreement) and assignable, without restriction, on the sale of substantially all of the assets of a business unit of Purchaser to the extent such Purchaser Licensed Trademarks is related to such business unit.
(i) Notwithstanding any provision of this Agreement to the contrary, except with respect to Section 5.7, Section 5.13, and this Section 5.14 sets forth the sole and exclusive representations and warranties of Purchaser Parent with respect to Intellectual Property.
Section 5.15 Real Property.
(a) Except as set forth in Section 5.15(a)(i) of the Purchaser Parent Disclosure Letter, Purchaser or a Subsidiary of Purchaser has insurable title in fee simple to the Owned Purchaser Real Property, free and clear of any Liens, other than Purchaser Permitted Liens. Except as set forth in Section 5.15(a)(ii) of the Purchaser Parent Disclosure Letter or as would not, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole, neither Purchaser Parent nor any of its Subsidiaries is leasing or otherwise granting to any third party the right to use or occupy any Owned Purchaser Real Property or any portion thereof.
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(b) Except as set forth in Section 5.15(b)(i) of the Purchaser Parent Disclosure Letter, Purchaser or a Subsidiary of Purchaser has a valid leasehold interest and valid and continuing right to use and occupy each Leased Purchaser Real Property pursuant to a Purchaser Real Property Lease. Except (x) as set forth in Section 5.15(b)(ii) of the Purchaser Parent Disclosure Letter or (y) as would not, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole, (i) each Purchaser Real Property Lease is legal, valid and binding on Purchaser or its Subsidiary party thereto and, to the Knowledge of Purchaser Parent, each other party thereto and is in full force and effect, except as enforcement may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or similar Laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law), (ii) neither Purchaser Parent nor any of its Subsidiaries or, to the Knowledge of Purchaser Parent, any other party thereto, is in breach of, or default under, any such Purchaser Real Property Lease and (iii) neither Purchaser Parent nor any of its Subsidiaries is leasing or otherwise granting to any third party the right to use or occupy any Purchaser Leased Real Property or any portion thereof.
(c) Except as set forth in Section 5.15(c) of the Purchaser Parent Disclosure Letter, (i) no certificate, permit or license from any Governmental Authority having jurisdiction over any of the Purchaser Real Property, or any Contract, easement or other right which is necessary to permit the lawful occupancy of the buildings and improvements on any of the Purchaser Real Property or which is necessary to permit the lawful use of all driveways, roads and other means of egress and ingress to and from any of the Purchaser Real Property, in each case, with respect to the Purchaser Business, has not been obtained or, to the Knowledge of Purchaser Parent, is not in full force and effect, which would, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole, and (ii) neither Purchaser Parent or any of its Subsidiaries (in respect of the Purchaser Business) or Purchaser or its Subsidiaries has received any written notice from any Governmental Authority that the Purchaser Real Property is currently in violation of any applicable Law that would, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole.
(d) Section 5.15(d)(i) of the Purchaser Parent Disclosure Letter sets forth each manufacturing and research and development facility at which Purchaser Products are manufactured or developed that is owned or operated by Purchaser Parent or its Subsidiaries (the Purchaser Facilities). Except as set forth in Section 5.15(d)(ii) of the Purchaser Parent Disclosure Letter, Purchaser or a Subsidiary of Purchaser has insurable title in fee simple to, or a valid leasehold interest and valid and continuing right to use and occupy, each Purchaser Facility.
Section 5.16 Assets.
(a) Except as otherwise provided in this Agreement or as would not, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole, Purchaser or its Subsidiaries have, or will have as of the Closing, good and valid title to, or other legal rights to possess and use, all of the assets, properties and rights Relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries, free and clear of any Liens other than Purchaser Permitted Liens.
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(b) Except as set forth in Section 5.16(b) of the Purchaser Parent Disclosure Letter and as would not, individually or in the aggregate, materially impair the operations of Purchaser or the Purchaser Business, taken as a whole (assuming all consents and Approvals as may be required in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements have been obtained; provided, that no such assumption shall be made to the extent Purchaser Parent is not in compliance with its obligations under Section 2.2 or Section 6.3 of this Agreement), together with the benefits, services, assets, licenses, sublicenses and other rights and benefits to be provided to Purchaser and its Subsidiaries pursuant to this Agreement, the Ancillary Agreements and the Purchaser Ancillary Agreements, the assets, properties and rights owned, or leased and licensed from third parties, by Purchaser or its Subsidiaries do and will following the Closing, in the aggregate, constitute all of the assets either used in or necessary for Purchaser and its Subsidiaries to conduct the Purchaser Business as conducted as of the date of this Agreement and as of the Closing.
(c) Except as set forth in Section 5.16(c) of the Purchaser Parent Disclosure Letter, there are no material assets, properties or rights that are used or held for use by Purchaser or any Subsidiary of Purchaser or necessary for the conduct of the Purchaser Business and owned or controlled by Purchaser Parent or any Affiliate of Purchaser Parent (other than Purchaser or a Subsidiary of Purchaser).
(d) Purchaser and its Subsidiaries are not, or will not at Closing be, directly or indirectly, engaged in any Purchaser Parent Retained Businesses, and do not, or will not at Closing, hold and are not, or will not at Closing be, subject to any Purchaser Parent Retained Liability or assets, properties and rights not relating to the Purchaser Business (other than non-material or ministerial liabilities, assets, rights or properties).
Section 5.17 Taxes.
(a) All income and other material Tax Returns that are required to be filed by (i) Purchaser or any Subsidiary of Purchaser or (ii) in respect of the Purchaser Business have, in each case, been timely filed (taking into account any applicable extensions), and all such Tax Returns are true, correct and complete in all material respects.
(b) All income and other material Taxes required to be paid by (i) Purchaser or any Subsidiary of Purchaser or (ii) in respect of the Purchaser Business have, in each case, been timely paid (taking into account any applicable extensions).
(c) Purchaser and its Subsidiaries, and Purchaser Parent and its Subsidiaries with respect to the Purchaser Business, have deducted or withheld and paid over to the applicable Taxing Authority all material Taxes required to have been deducted or withheld and paid over in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and Purchaser and each of its Subsidiaries, and Purchaser Parent and each of its Subsidiaries with respect to the Purchaser Business, has (if required by any applicable Laws to do so) provided appropriate certificates of deduction.
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(d) There are no Liens for material Taxes upon any of the assets relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries, except for Purchaser Permitted Liens.
(e) Within the past three (3) years, neither Purchaser nor any of its Subsidiaries has been a distributing corporation or a controlled corporation in a distribution intended to qualify under Section 355(a) of the Code.
(f) There are no current or pending audits, examinations, contests or other Actions with respect to material Taxes of Purchaser or any Subsidiary of Purchaser or of Purchaser Parent or any of its Subsidiaries with respect to the Purchaser Business, and no such audits, examinations, contests or other Actions have been threatened in writing.
(g) There are no outstanding powers of attorney granted by Purchaser or any Subsidiary of Purchaser with respect to material Taxes for any taxable period beginning after the Closing Date, other than powers of attorney granted to Purchaser or another Subsidiary of Purchaser.
(h) Neither Purchaser nor any Subsidiary of Purchaser is party to any Tax sharing, allocation, indemnity or similar agreement or arrangement (other than (x) any such agreement or arrangement solely between or among Purchaser and/or any of the Subsidiaries of Purchaser and (y) provisions contained in commercial agreements or arrangements the primary purpose of which is not Taxes (including employment agreements, credit agreements, leases and supply or manufacturing agreements)).
(i) Neither Purchaser nor any Subsidiary of Purchaser is or has been party to any listed transaction as defined in Section 6707A of the Code and Treasury Regulations Section 1.6011-4. Neither Purchaser nor any Subsidiary of Purchaser has at any time entered into or been engaged in or been a party to or promoter of any scheme, transaction or arrangement which was required by Law to be specifically disclosed to a Taxing Authority or a main or dominant purpose or object of which was the avoidance or deferral of or the obtaining of a reduction in or other advantage in respect of any Taxes.
(j) In the last three (3) years, no claim has been made in writing by any Taxing Authority in any jurisdiction in which Purchaser or any Subsidiary of Purchaser, or Purchaser Parent or any of its Subsidiaries with respect to the Purchaser Business, does not file income or franchise Tax Returns to the effect that such entity is or may be subject to income or franchise taxation by such jurisdiction.
(k) Neither Purchaser nor any Subsidiary of Purchaser will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period beginning after the Closing Date as a result of: (i) change in method of accounting for a taxable period ending on or prior to the Closing Date made prior to the Closing, (ii) closing agreement executed prior to the Closing, (iii) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code entered into or existing prior to the Closing, (iv) prepaid amount received on or prior to the Closing, (v) election under Section 108(i) of the Code made prior to the Closing or (vi) installment sale or open transaction disposition occurring on or before the Closing Date.
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(l) Neither entering into this Agreement nor consummating the transactions contemplated hereby, nor, so far as the Purchaser or Purchaser Parent is aware, will give rise to any other event, transaction, action, or circumstance Liability for Tax or result in the withdrawal or clawback of any Tax Benefit for Purchaser or any Subsidiary of Purchaser as a result of Purchaser or any Subsidiary of Purchaser ceasing to be a member of a group with any other Person for Tax purposes.
(m) Notwithstanding any other provision of this Agreement, the representations and warranties set forth in this Section 5.17 and Section 5.18 (to the extent relating to Taxes) are the sole and exclusive representations and warranties of Purchaser Parent with respect to Taxes.
Section 5.18 Employee Benefits; Employees.
(a) Set forth in Section 5.18(a) of the Purchaser Parent Disclosure Letter is a true and complete list of each material Purchaser Group Plan and Foreign Purchaser Group Plan categorized by (i) whether the Purchaser Group Plan or Foreign Purchaser Group Plan is a Purchaser Business Plan and (ii) the country or countries for which such Purchaser Group Plan or Foreign Purchaser Group Plan provides benefits. No Purchaser Business Plan provides benefits to, or otherwise covers, any individual who is not a Purchaser Business Employee, Former Purchaser Business Employee, or the dependents or beneficiaries thereof.
(b) With respect to each material Purchaser Business Plan (other than Foreign Purchaser Group Plans that are not defined benefit pension plans), Purchaser Parent has made available to Seller Parent, prior to the date of this Agreement, true and complete copies of (i) each such plans governing document and any amendments thereto (or a written summary of all material terms if the plan has not been reduced to writing) and (ii) any applicable Plan Regulatory or Funding Documents. In addition, within thirty (30) days following the date hereof, with respect to each (x) material Purchaser Business Plan that is a Foreign Purchaser Group Plan, Purchaser Parent shall make available to Seller Parent true and complete copies of the documents contemplated by the immediately preceding sentence, and (y) each other material Purchaser Group Plan or Foreign Purchaser Group Plan for which Purchaser or its Subsidiaries has any Liability, Purchaser Parent shall make available to Seller Parent summaries of the material terms of such plans, the most recent summary plan description (if any) and excerpts or summaries of the actuarial reports for such plans to the extent relevant to the Liabilities of Purchaser or its Subsidiaries. Purchaser Parent has made available to Seller Parent, on or prior to the date of this Agreement, a summary that is accurate in all material respects of the value of the assets and Liabilities of all Purchaser Business Plans that are defined benefit pension plans as of the end of the 2017 fiscal year of Purchaser Parent.
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(c) The IRS has issued a favorable determination letter, or for a prototype plan, opinion letter, with respect to each Purchaser Business Plan intended to be qualified within the meaning of Section 401(a) of the Code or, if no such determination has been made, either an application for such determination is pending with the IRS or the time within which such determination may be sought from the IRS has not yet expired, and, to the Knowledge of Purchaser Parent, nothing has occurred since the date of such determination or opinion that would reasonably be expected to result in disqualification of such Purchaser Business Plan. Each Purchaser Business Plan that is intended to qualify for any particular tax or regulatory treatment under the Laws of a country other than the United States (i) has received documentation of such qualification from a Governmental Authority (if available), and, to the Knowledge of Purchaser Parent, nothing has occurred since the date of such documentation that would reasonably be expected to result in disqualification of such Purchaser Business Plan or (ii) if such documentation is not available, to the Knowledge of Purchaser Parent, so qualifies.
(d) No Purchaser Group Plan is a multiemployer plan, as such term is defined in Section 3(37) of ERISA, nor is any Purchaser Business Plan subject to Section 302 or Title IV of ERISA or Section 412 of the Code. Neither Purchaser nor its Subsidiaries (or any assets of Purchaser or its Subsidiaries) is subject to a lien under Section 430(k) of the Code or Section 4068 of ERISA, and neither Purchaser Parent nor any of its ERISA Affiliates has incurred any liability under Title IV of ERISA (other than premium payments to the Pension Benefit Guaranty Corporation in the ordinary course) or Section 4971 of the Code which has not been and will not be fully paid as of the Closing. None of Purchaser, its Subsidiaries or the Purchaser Business has as of the date of this Agreement, or will have as of the Closing, any Liability in respect of post-employment or post-retirement medical, health or life insurance benefits for any current or former employees, except as required by applicable Law or to avoid excise tax under Section 4980B of the Code. Except as set forth on Section 5.18(d) of the Purchaser Parent Disclosure Letter, no Purchaser Group Plan or Foreign Purchaser Group Plan is a defined benefit pension plan.
(e) Each Purchaser Group Plan and Foreign Purchaser Group Plan (other than a Purchaser Business Plan) has been maintained, operated, funded and administered in compliance in all respects with its terms and applicable Law, except for such instances of noncompliance that would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business. Each Purchaser Business Plan has been established, maintained, funded and administered in compliance in all material respects its terms and applicable Law. All material contributions or premiums with respect to each Purchaser Business Plan have been paid or deducted in a timely fashion and there are no material outstanding defaults or violations thereunder that have not been properly recorded in the Purchaser Financial Statements. Other than routine claims for benefits, there are no suits, claims, proceedings, actions, governmental audits or investigations that are pending or threatened against or involving any Purchaser Group Plan or Foreign Purchaser Group Plan or asserting any rights to or claims for benefits under any Purchaser Group Plan or Foreign Purchaser Group Plan, except for such actions that have not had and would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
(f) Except as set forth in Section 5.18(f) of the Purchaser Parent Disclosure Letter: (i) none of Purchaser or its Subsidiaries (or employers of Purchaser Business Employees other than Purchaser or its Subsidiaries) recognize a labor union (in the case of employers that are not Purchaser or its Subsidiaries, excluding any labor union that does not represent the Purchaser Business Employees) and none of the Purchaser Business Employees are represented by any labor
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organization, works council or consultation body (other than industry-wide or national labor organizations) or subject to, or covered by, the terms of any material Collective Bargaining Agreement in connection with their services to the Purchaser Business, (ii) no labor union, labor organization, works council or consultation body has made a demand for recognition or certification, and there are no representation or certification proceedings, union elections or, to the Knowledge of Purchaser Parent, union organizing activities pending or threatened in writing with respect to the Purchaser Business or Purchaser or its Affiliates with respect to the Purchaser Business, (iii) there are no pending or threatened in writing strikes, lockouts, work stoppages or slowdowns involving the Purchaser Business Employees or against the Purchaser Business or Purchaser or its Affiliates with respect to the Purchaser Business and (iv) there is no unfair labor practice charge, labor arbitration or labor grievance proceeding pending or threatened in writing against the Purchaser Business or Purchaser or its Affiliates with respect to the Purchaser Business that would, in the case of the foregoing clauses (iii) and (iv), individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business. As of the date hereof, Purchaser Parent has provided copies to Seller Parent of all material Collective Bargaining Agreements applicable to Purchaser Business Employees, the Purchaser Business or Purchaser or its Subsidiaries. Purchaser Parent, Purchaser and their respective Subsidiaries have satisfied any material pre-signing requirement to provide notice to, or enter into any information and consultation procedure with, any labor union, labor organization, works council or consultation body in connection with the execution of this Agreement or the transactions contemplated by this Agreement as required by any Contract or Laws.
(g) As of the Closing, Purchaser Parent represents that each Purchaser Business Employee devotes, and has devoted seventy percent (70%) or more of his or her working time in the last twelve (12) months (or such shorter period he or she has been employed by Purchaser Parent and its Affiliates) to performing services on behalf of the Purchaser Business.
(h) Except as required by plans, programs, or arrangements required to be maintained or contributed to by the Laws of a non-U.S. jurisdiction, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby (either alone or in conjunction with any other event), will cause any (i) payments to become due or payable to any Purchaser Business Employee, Former Purchaser Business Employee, current or former consultant or director, (ii) acceleration, vesting or increase in any compensation or benefits to any Purchaser Business Employee, Former Purchaser Business Employee, current or former consultant or director, or (iii) Purchaser or any of its Subsidiaries to transfer or set aside any assets to fund any benefits under any Purchaser Business Plan, or limit or restrict in any material respect the right of Purchaser or any of its Affiliates to amend, terminate or transfer the assets of any Purchaser Business Plan. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated herein, will constitute a change in ownership or control or change in effective control of Purchaser Parent within the meaning of Section 280G of the Code. Neither Purchaser nor any of its Subsidiaries is party to any plan, program, policy or arrangement providing for the gross-up or other compensation to any individual because of the imposition of any Tax on any payment to the individual related to Section 4999 or Section 409A of the Code.
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Section 5.19 Global Trade Controls; Anti-Corruption Matters.
(a) Purchaser Parent and its Subsidiaries (with respect to the Purchaser Business) and Purchaser and its Subsidiaries, as well as their respective directors, officers, and employees, are in compliance with all Global Trade Control Laws, including possession of and compliance with Governmental Authorizations required by Global Trade Control Laws, except for such noncompliance as would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
(b) Purchaser and its Subsidiaries and, with respect to the Purchaser Business, Purchaser Parent and its other Subsidiaries, do not engage in any business with, or use, directly or indirectly, any corporate funds to contribute to or finance the activities of, any Restricted Party or in any Restricted Market except as permitted by Governmental Authorization, except as would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business.
(c) None of Purchaser or its Subsidiaries or, with respect to the Purchaser Business, Purchaser Parent or its other Subsidiaries, nor any of their respective directors, officers, and employees, is a Restricted Party or owned or controlled by a Restricted Party.
(d) To Purchaser Parents Knowledge, Purchaser and its Subsidiaries, and Purchaser Parent and its other Subsidiaries (with respect to the Purchaser Business), as well as their respective directors, officers, and employees are in compliance with all Anti-Corruption Laws, except for such noncompliance as would not, individually or in the aggregate, be materially adverse to Purchaser or the Purchaser Business. For purposes of this Section 5.19 only, Purchaser Parents Knowledge means that the conduct giving rise to the noncompliance with or violation of Anti-Corruption Law was reported to the Compliance Division (or similar responsible group or body) of Purchaser Parent and such conduct is or was the subject of an investigation by it on or prior to the Closing Date.
(e) Notwithstanding any other provision of this Agreement, the representations and warranties set forth in this Section 5.19 are the sole and exclusive representations and warranties of Purchaser Parent with respect to Global Trade Control Laws and Anti-Corruption Laws.
Section 5.20 Brokers. No broker, finder or investment banker is entitled to any brokerage, finders or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Purchaser Parent or its Affiliates for which Purchaser or any of its Subsidiaries would be liable. Purchaser Parent is solely responsible for the fees and expenses of Citigroup Global Markets Limited, J.P. Morgan Securities plc and Greenhill & Co., which shall be a Purchaser Parent Transaction Expense hereunder.
Section 5.21 No Other Representations or Warranties.
(a) Except for the representations and warranties contained in this Article V or in any Ancillary Implementing Agreement, neither Purchaser Parent nor Purchaser nor any of their respective Affiliates, Representatives or any other Person makes any express or implied representation or warranty with respect to Purchaser Parent or Purchaser or any of their respective Subsidiaries or Affiliates, the Purchaser Business or with respect to any other information provided,
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or made available, to Seller Parent or any of its Affiliates or Representatives in connection with the transactions contemplated hereby. Except as expressly set forth in the representations and warranties contained in this Article V or in any Ancillary Implementing Agreement, neither Purchaser Parent nor Purchaser nor any of their respective Affiliates, Representatives or any other Person has made any representation or warranty, express or implied, as to the prospects of Purchaser or the Purchaser Business or their profitability, or with respect to any forecasts, projections or business plans or other information (including any Evaluation Material (as defined in the Confidentiality Agreement)) delivered to Seller Parent or any of its Affiliates or Representatives in connection with Seller Parents review of Purchaser or the Purchaser Business and the negotiation and execution of this Agreement, including as to the accuracy or completeness thereof or the reasonableness of any assumptions underlying any such forecasts, projections or business plans or other information. Except to the extent expressly provided in this Agreement with respect to the representations and warranties contained in this Article V or in any Ancillary Implementing Agreement, neither Purchaser Parent nor Purchaser nor any of their respective Affiliates, Representatives or any other Person will have, or be subject to, any Liability or other obligation to Seller Parent, its Affiliates or Representatives or any other Person resulting from Seller Parents use of, or the use by any of its Affiliates or Representatives of, any information, including information, documents, projections, forecasts, business plans or other material made available to Seller Parent, its Affiliates or Representatives by any means, including in any virtual data room, confidential information memorandum, management presentations, offering materials, site tours or visits, diligence calls or meetings or any documents prepared by, or on behalf of, Purchaser Parent, Purchaser or any of their respective Affiliates or Representatives. Each of Purchaser Parent, Purchaser and their respective Affiliates disclaims any and all representations and warranties, whether express or implied, except for the representations and warranties contained in this Article V or in any Ancillary Implementing Agreement. Notwithstanding anything to the contrary contained in this Agreement, neither Purchaser Parent, Purchaser nor any of their respective Affiliates makes any express or implied representation or warranty with respect to the Purchaser Parent Retained Businesses or Purchaser Parent Retained Liabilities.
(b) Purchaser Parent and Purchaser acknowledge and agree that, except for the representations and warranties contained in Article IV or in any Ancillary Implementing Agreement, neither Seller Parent, the other Sellers nor any of their respective Affiliates, Representatives or any other Person makes any express or implied representation or warranty with respect to Seller Parent, the other Sellers, the Conveyed Subsidiaries or any of their respective Subsidiaries or Affiliates, the Purchased Assets, the Business or with respect to any other information provided, or made available, to Purchaser Parent, Purchaser or any of their respective Affiliates or Representatives in connection with the transactions contemplated hereby. Purchaser Parent and Purchaser acknowledge and agree that, except to the extent expressly provided in this Agreement with respect to the representations and warranties contained in Article IV or in any Ancillary Implementing Agreement, neither Seller Parent, the other Sellers nor any of their respective Affiliates, Representatives or any other Person will have, or be subject to, any Liability or other obligation to Purchaser Parent, Purchaser, any of their respective Affiliates or Representatives or any other Person resulting from the sale and purchase of the Purchased Assets or the Business to Purchaser Parent, Purchaser or their Affiliates or Purchaser Parents or Purchasers use of, or the use by any of their respective Affiliates or Representatives of any information, including information, documents, projections,
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forecasts, business plans or other material (including any Evaluation Material (as defined in the Confidentiality Agreement)) made available to Purchaser Parent, Purchaser, any of their respective Affiliates or Representatives by any means, including in any virtual data room, confidential information memorandum, management presentations, offering materials, site tours or visits, diligence calls or meetings or any documents prepared by, or on behalf of, Seller Parent, the other Sellers or any of their respective Affiliates or Representatives. Purchaser Parent and Purchaser acknowledge and agree that they are not relying on any representation or warranty of Seller Parent, the other Sellers, or any of their Affiliates or Representatives or any other Person, other than those representations and warranties specifically set forth in Article IV or in any Ancillary Implementing Agreement. Purchaser Parent and Purchaser acknowledge and agree that each of Seller Parent and the other Sellers and their respective Affiliates disclaims any and all representations and warranties, whether express or implied, except for the representations and warranties contained in Article IV or in any Ancillary Implementing Agreement. Purchaser Parent and Purchaser acknowledge and agree that neither Seller Parent, the other Sellers nor any of their respective Affiliates makes any express or implied representation or warranty with respect to Excluded Assets, Retained Businesses or Retained Liabilities.
(c) Purchaser Parent and Purchaser acknowledge that they have conducted to their satisfaction an independent investigation of the financial condition, results of operations and projected operations of the Business and the nature and condition of its properties, assets, liabilities and businesses and, in making the determination to proceed with the transactions contemplated hereby, have relied solely on the results of their own independent investigation and the representations and warranties set forth in Article IV or any Ancillary Implementing Agreement. In light of these inspections and investigations and the representations and warranties made to Purchaser Parent and Purchaser by Seller Parent in Article IV or in any Ancillary Implementing Agreement, Purchaser Parent and Purchaser are relinquishing any right to any claim based on any representations and warranties other than those specifically included in Article IV or in any Ancillary Implementing Agreement. Any claims Purchaser Parent or Purchaser may have for breach of representation or warranty shall be based solely on the representations and warranties of Seller Parent set forth in Article IV or in any Ancillary Implementing Agreement.
(d) Purchaser Parent and Purchaser acknowledge that, except as explicitly set forth herein, neither Seller Parent nor any of its Affiliates has made any warranty, express or implied, as to the prospects of the Business or its profitability for Purchaser, or with respect to any forecasts, projections or business plans or other information (including any Evaluation Material (as defined in the Confidentiality Agreement)) delivered to Purchaser Parent or Purchaser or any of their respective Affiliates or Representatives in connection with Purchaser Parents and Purchasers review of the Business and the negotiation and execution of this Agreement, including as to the accuracy or completeness thereof or the reasonableness of any assumptions underlying any such forecasts, projections or business plans or other information.
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ARTICLE VI
COVENANTS
Section 6.1 Information and Documents.
(a) From and after the date of this Agreement and to the earlier of the Closing Date and the date on which this Agreement is terminated pursuant to Section 9.1, to the extent permitted by applicable Law and upon reasonable advance notice, and solely for purposes of integration planning or in furtherance of the transactions contemplated by this Agreement and the Ancillary Agreements, (1) Seller Parent shall, and shall cause its Subsidiaries to, permit Purchaser Parent and its Representatives to have reasonable access, during normal business hours, to the books and records that constitute Purchased Assets, and to such personnel, offices and other facilities and properties that constitute Purchased Assets, and to provide such other information in respect of the Business as may be reasonably requested by Purchaser Parent for such purposes and (2) Purchaser Parent shall, and shall cause its Subsidiaries to, permit Seller Parent and its Representatives to have reasonable access, during normal business hours, to the books and records of Purchaser and its Subsidiaries or that are related to the Purchaser Business (provided that Purchaser Parent may redact any information in any such record not related to the Purchaser Business), and to such personnel, offices and other facilities and properties of Purchaser and its Subsidiaries or that are related to the Purchaser Business, and to provide such other information in respect of the Purchaser Business as may be reasonably requested by Seller Parent for such purposes; provided that all requests for access pursuant to this Section 6.1 shall be directed to and coordinated with a person or persons designated by Seller Parent or Purchaser Parent, as applicable, in writing; provided, further, that each Parent and its Subsidiaries may restrict the foregoing access or the provision of such information to the extent that, in the reasonable judgment of such Parent, (i) applicable Law requires such Parent or any of its Subsidiaries to restrict or prohibit such access or the provision of such information, (ii) providing such access would unreasonably interfere with the operation of such Parents and its Subsidiaries respective businesses, including the Business and the Purchaser Business, as applicable, (iii) providing such access or information would breach a confidentiality obligation to a third party, (iv) providing such access or information would result in disclosure of any information that is competitively or commercially sensitive, (v) in the case of access or information provided by Seller Parent, the information relates to the Strategic Process, or in the case of access or information provided by Purchaser Parent, the information relates to review of strategic alternatives with respect to the Purchaser Business, or (vi) providing such access or disclosure of any such information would reasonably be expected to result in the loss or waiver of the attorney-client or other applicable privilege or protection. In the event that a Parent or its Subsidiaries restricts access or withholds information on the basis of the foregoing clauses (i) through (vi), such Parent shall, if permitted, inform the other Parent as to the general nature of what is being restricted or withheld and the reason therefor, and such Parent shall, and shall cause its Subsidiaries to, use its commercially reasonable efforts to make appropriate substitute arrangements to permit disclosure of the relevant information in a manner that does not suffer from such impediments. Notwithstanding the foregoing, (A) prior to the Closing, neither Parent, nor any of its Affiliates and Representatives, shall conduct any phase II environmental site assessment or conduct any invasive testing or any sampling of soil, sediment, surface water, groundwater or building material at, on, under or within any property of the other Parent or its Subsidiaries and (B) prior to Closing, none of Seller Parent or any of its Affiliates, including the Conveyed Subsidiaries (and their Subsidiaries), shall provide Business Employee personnel files to Purchaser Parent or its Affiliates or Representatives and none of Purchaser Parent or any of its Affiliates, including Purchaser (and its Subsidiaries), shall provide
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Purchaser Business Employee personnel files to Seller Parent or its Affiliates or Representatives. Notwithstanding the foregoing, following Closing (x) to the extent permitted by Law, Seller Parent shall, and shall cause its Affiliates to, provide Purchaser and its Subsidiaries access to personnel records and other personnel information related to the Business Employees and Former Business Employees reasonably requested by Purchaser and its Subsidiaries and (y) Seller Parent shall, and shall cause its Affiliates to, retain all material records related to the Business Employees and Former Business Employees in accordance with Seller Parents records retention policies and, in no event, for less than such period of time required by applicable Law. It is further agreed that, prior to the Closing, each Parent and its Affiliates and Representatives shall not contact any of the directors, officers, employees, agents, customers, suppliers, licensors, licensees, distributors or other business partners of the other Parent or any of its Affiliates (including, with respect to Seller Parent, the Conveyed Subsidiaries (or their Subsidiaries) and, with respect to Purchaser Parent, Purchaser and its Subsidiaries) in connection with the transactions contemplated by this Agreement, whether in person or by telephone, mail or other means of communication, without the specific prior authorization by the other Parent (not to be unreasonably withheld, conditioned or delayed); provided that the foregoing shall not prevent any Parent or its Affiliates from operating in the ordinary course of business and communicating with such parties on matters unrelated to the Business or the Purchaser Business, as applicable, and the transactions contemplated by this Agreement. Notwithstanding anything to the contrary contained herein, in no event shall Seller Parent or any of its Affiliates, including the Conveyed Subsidiaries (and their Subsidiaries), be required to provide any information as and to the extent it relates to any Retained Businesses, any Excluded Assets or any Retained Liabilities, or be required to provide a copy of, or otherwise disclose the contents of, any Seller Combined Tax Return, and in no event shall Purchaser Parent or any of its Affiliates, including Purchaser and its Subsidiaries, be required to provide any information as and to the extent it relates to any Purchaser Parent Retained Businesses or any Purchaser Parent Retained Liabilities. The Parties agree that, with respect to any matters that are the subject of both this Section 6.1(a) and Section 6.5(i), the provisions of Section 6.5(i) (and not this Section 6.1(a)) shall control.
(b) Subject to Section 6.12, all information received or otherwise obtained by either Parent or its Affiliates or Representatives from, by or on behalf of the other Parent or any of its Affiliates or Representatives, in connection with the negotiation, execution, performance or consummation of this Agreement and the transactions contemplated hereby, whether prior to, on or following the date of this Agreement, will be held by such Parent and its Affiliates and Representatives pursuant to the terms of the Confidentiality Agreement and Section 6.12. Subject to Section 6.12(d), the Confidentiality Agreement and the Clean Team Agreement shall remain in full force and effect in accordance with their terms (subject to Section 9.2(d)) notwithstanding any termination of this Agreement.
(c) From and after the date of this Agreement until the earlier of the Closing Date and the date on which this Agreement is terminated pursuant to Section 9.1, Seller Parent and its Subsidiaries shall consult with and provide material updates to Purchaser Parent regarding the matters disclosed on Section 6.1(c) of the Purchaser Disclosure Letter.
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Section 6.2 Conduct of Business.
(a) From and after the date of this Agreement until the earlier of the Closing Date and the date on which this Agreement is terminated pursuant to Section 9.1, except (i) as set forth in Section 6.2(a) of the Seller Disclosure Letter or as otherwise expressly contemplated by this Agreement (including Section 6.3), (ii) as Purchaser Parent shall otherwise consent in writing, which consent shall not be unreasonably withheld, conditioned or delayed, (iii) in connection with the Seller Internal Restructurings, the settlement of any intercompany accounts or arrangements pursuant to Section 6.7 or the transfer of the Excluded Assets pursuant to Section 2.3(b), (iv) as required by Law or the terms of any Contract currently in effect and made available to Purchaser Parent, Purchaser or any of their Representatives prior to the date hereof or (v) to the extent solely related to any Excluded Assets, Retained Businesses or Retained Liabilities, Seller Parent covenants and agrees that (x) it shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to conduct the Business in the ordinary course of business in all material respects and to maintain and preserve intact the Business in all material respects, and (y) it shall not, and shall cause its Subsidiaries not to, in each case, to the extent with respect to the Purchased Assets and the Business:
(A) change or amend the charter, bylaws or similar organizational documents of any of the Conveyed Subsidiaries (or any of their Subsidiaries);
(B) incur, create or assume any Lien, other than Permitted Liens, with respect to any Purchased Asset that is material to the Business other than (1) those that will be discharged at or prior to the Closing or (2) in the ordinary course of business;
(C) acquire any assets outside of the ordinary course of business, except for transactions where the amount of upfront consideration paid or transferred in connection with such transactions would not exceed the amounts set forth on Section 6.2(a)(C) of the Seller Disclosure Letter;
(D) (1) amend any material term of, or waive any material right under, or terminate (other than upon expiration in accordance with its terms), any Material Contract or Real Property Lease, or (2) enter into any Contract that, if in effect on the date hereof, would be a Material Contract or Real Property Lease, other than, in the case of each of clauses (1) and (2), in the ordinary course of business or Contracts entered into in order to effect an acquisition, divestiture or other transaction or action expressly permitted under this clause (y) of this Section 6.2(a), or (3) enter into any Contract that, if in effect on the date hereof, would be a Shared Contract;
(E) issue, sell, pledge or transfer to any third party or propose to issue, sell, pledge or transfer to any third party any shares or equity interests of any of the Conveyed Subsidiaries (or any of their Subsidiaries), or securities convertible into, or exchangeable or exercisable for, or options with respect to, or warrants to purchase, or rights to subscribe for, shares or equity interests of any of the Conveyed Subsidiaries (or any of their Subsidiaries);
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(F) change in any material respect any financial accounting method used with respect to the Business, unless required by GAAP or Law or interpretation thereof;
(G) (1) enter into, adopt, amend in any material respect or terminate any Conveyed Subsidiary Plan (or any other Seller Group Plan or Foreign Seller Group Plan to the extent applicable to any Business Employee, Former Business Employee, current or former consultant or director), (2) grant any new, or increase any existing, or accelerate the vesting, funding or payment of any compensation or benefits of, or pay or otherwise grant any benefit not required by any Seller Group Plan or Foreign Seller Group Plan to, any Business Employee, Former Business Employee, current or former consultant or director, except, in the case of either clause (1) or (2), (I) to the extent required by applicable Law or as required under any Seller Group Plan or Foreign Seller Group Plan as in effect on the date of this Agreement (or as amended in accordance with the terms of this Agreement), (II) other than with respect to any transaction or retention bonus or similar award or severance or termination enhancements, in the ordinary course of business consistent with past practice, (III) as would not reasonably be expected, individually or in the aggregate, to result in any non-de minimis Liabilities to Purchaser or any of its Affiliates or (IV) for amendments similarly affecting all participating employees in any Seller Group Plan or Foreign Seller Group Plan, (3) grant any transaction or retention bonus or similar award to any Business Employee, Former Business Employee, current or former consultant or director or (4) transfer any Seller Retained Plan to a Conveyed Subsidiary (or Subsidiary thereof);
(H) solely with respect to the Conveyed Subsidiaries or their Subsidiaries or the other Purchased Assets, and except with respect to any Seller Combined Tax Return, (1) make, change or revoke any material Tax election, (2) adopt or change any material method of Tax accounting on which Tax reporting is based, (3) amend any material Tax Return, (4) settle any Tax Proceeding, or (5) enter into any closing agreement within the meaning of 7121 of the Code (or any similar provision of state, local or foreign Law) that would be binding on Purchaser or any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) in respect of a Post-Closing Tax Period, in each case, if such action would reasonably be expected to materially increase the Tax liability of Purchaser and its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries after the Closing) for any Post-Closing Tax Period;
(I) except in the ordinary course of business or as contemplated by Section 6.6, (1) enter into, materially amend, extend or terminate any material Collective Bargaining Agreement covering any Business Employee or otherwise binding upon the Business or the Conveyed Subsidiaries or their Subsidiaries, (2) hire any individual who will be a Business Employee at Closing, (3) terminate the employment of (other than for cause) any individual who would have been a Business Employee at Closing, but for such termination of employment, or (4) reassign the duties of (x) any individual who would have been a Business Employee at Closing, but for such reassigned duties, or (y) any employee of Seller Parent or its Affiliates who would not have been a Business Employee at Closing, but for such reassigned duties;
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(J) incur, assume or guarantee any material Indebtedness, other than (1) as would not exceed the amounts set forth on Section 6.2(a)(J) of the Seller Disclosure Letter or (2) intercompany Indebtedness that will be settled at or prior to the Closing;
(K) defer payment of any accounts payable or accelerate payment of any accounts receivable, in any material respect, outside of the ordinary course of business;
(L) make capital expenditures in connection with the operation of the Business that are materially inconsistent with, or fail to make capital expenditures materially consistent with, the capital expenditure budget set forth in Section 6.2(a)(L) of the Seller Disclosure Letter;
(M) sell, assign, transfer, license, sublicense, abandon or otherwise dispose of any material Purchased Assets, other than sales of Inventory and other assets, and non-exclusive licenses or sublicenses, in each case, in the ordinary course of business;
(N) (1) settle or compromise any Action made or pending against the Business or any of the Conveyed Subsidiaries (or any of their Subsidiaries) to the extent such settlement or compromise imposes material ongoing obligations or restrictions on the operations of the Business, or (2) settle, compromise or file any Action that relates to the Business IP that could materially impact such Business IP without consulting with and considering in good faith the opinion of Purchaser;
(O) materially accelerate or increase the quantity of the Products distributed to the relevant distributors or wholesalers outside of the ordinary course of business, except with respect to a bona fide increase in demand for any Product by the relevant distributor or wholesaler which has not been stimulated in any way following the date hereof by discounts, rebates, claw-backs or the like outside the ordinary course of business or the grant of preferred terms offered by Seller Parent or any of its Affiliates outside the ordinary course of business; or
(P) agree to take any of the foregoing actions described in this clause (y) of this Section 6.2(a).
(b) From and after the date of this Agreement until the earlier of the Closing Date and the date on which this Agreement is terminated pursuant to Section 9.1, except (i) as set forth in Section 6.2(b) of the Purchaser Parent Disclosure Letter or as otherwise expressly contemplated by this Agreement (including Section 6.3), (ii) as Seller Parent shall otherwise consent in writing, which consent shall not be unreasonably withheld, conditioned or delayed, (iii) in
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connection with the Purchaser Internal Restructurings or the settlement of any intercompany accounts or arrangements pursuant to Section 6.7, (iv) as required by Law or the terms of any Contract currently in effect and made available to Seller Parent or any of its Representatives prior to the date hereof or (v) to the extent solely related to any Purchaser Parent Retained Businesses or Purchaser Parent Retained Liabilities, each of Purchaser Parent and Purchaser covenants and agrees that (x) it shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to conduct the Purchaser Business in the ordinary course of business in all material respects and to maintain and preserve intact the Purchaser Business in all material respects, and (y) it shall not, and shall cause its Subsidiaries not to, in each case, to the extent with respect to the Purchaser Business or the assets, properties or rights comprising the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries:
(A) change or amend the charter, bylaws or similar organizational documents of Purchaser or any of its Subsidiaries;
(B) incur, create or assume any Lien, other than Purchaser Permitted Liens, with respect to any asset, property or right that is material to the Purchaser Business other than (1) those that will be discharged at or prior to the Closing or (2) in the ordinary course of business;
(C) acquire any assets outside of the ordinary course of business, except for transactions where the amount of upfront consideration paid or transferred in connection with such transactions would not exceed the amounts set forth on Section 6.2(b)(C) of the Purchaser Parent Disclosure Letter;
(D) (1) amend any material term of, or waive any material right under, or terminate (other than upon expiration in accordance with its terms), any Purchaser Material Contract or Purchaser Real Property Lease, (2) enter into any Contract that, if in effect on the date hereof, would be a Purchaser Material Contract or Purchaser Real Property Lease, other than, in the case of each of clauses (1) and (2), in the ordinary course of business or Contracts entered into in order to effect an acquisition, divestiture or other transaction or action expressly permitted under this clause (y) of this Section 6.2(b), or (3) enter into any Contract that, if in effect on the date hereof, would be a Purchaser Shared Contract;
(E) issue, sell, pledge or transfer to any third party or propose to issue, sell, pledge or transfer to any third party any shares or equity interests of Purchaser or any of its Subsidiaries, or securities convertible into, or exchangeable or exercisable for, or options with respect to, or warrants to purchase, or rights to subscribe for, shares or equity interests of Purchaser or any of its Subsidiaries, including in each case any ordinary shares or preference shares of Purchaser (other than the Preference Shares issued in accordance with this Agreement);
(F) change in any material respect any financial accounting method used with respect to Purchaser, its Subsidiaries or the Purchaser Business, unless required by IFRS or Law or interpretation thereof;
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(G) (1) enter into, adopt, amend in any material respect or terminate any Purchaser Business Plan (or any other Purchaser Group Plan or Foreign Purchaser Group Plan to the extent applicable to any Purchaser Business Employee, Former Purchaser Business Employee, current or former consultant or director), (2) grant any new, or increase any existing, or accelerate the vesting, funding or payment of any compensation or benefits of, or pay or otherwise grant any benefit not required by any Purchaser Group Plan or Foreign Purchaser Group Plan to, any Purchaser Business Employee, Former Purchaser Business Employee, current or former consultant or director, except, in the case of either clause (1) or (2), (I) to the extent required by applicable Law or as required under any Purchaser Group Plan or Foreign Purchaser Group Plan as in effect on the date of this Agreement (or as amended in accordance with the terms of this Agreement), (II) other than with respect to any transaction or retention bonus or similar award or severance or termination enhancements, in the ordinary course of business consistent with past practice, (III) as would not reasonably be expected, individually or in the aggregate, to result in any non-de minimis Liabilities to Purchaser or any of its Affiliates or (IV) for amendments similarly affecting all participating employees in any Purchaser Group Plan or Foreign Purchaser Group Plan, (3) grant any transaction or retention bonus or similar award to any Purchaser Business Employee, Former Purchaser Business Employee, current or former consultant or director or (4) transfer any Purchaser Group Plan or Foreign Purchaser Group Plan that is not a Purchaser Business Plan to Purchaser or any of its Subsidiaries;
(H) solely with respect to Purchaser and its Subsidiaries, and except with respect to any Purchaser Parent Combined Tax Return, (x) (1) make, change or revoke any material Tax election, (2) adopt or change any material method of Tax accounting on which Tax reporting is based, (3) amend any material Tax Return, (4) settle any Tax Proceeding, or (5) enter into any closing agreement within the meaning of 7121 of the Code (or any similar provision of state, local or foreign Law) that would be binding on Purchaser or any of its Affiliates in respect of a Post-Closing Tax Period, in each case, if such action would reasonably be expected to materially increase the Tax liability of Purchaser and its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries following the Closing) for any Post-Closing Tax Period, or (y) take any action other than in the ordinary course of business that would reasonably be expected to violate Clauses 11.4(a) and 11.4(b) of the Structuring Considerations Agreement if such Clauses were in effect from and after the date of this Agreement until the earlier of the Closing Date and the date on which this Agreement is terminated pursuant to Section 9.1;
(I) except in the ordinary course of business, (1) enter into, materially amend, extend or terminate any material Collective Bargaining Agreement covering any Purchaser Business Employee or otherwise binding upon the Purchaser Business or Purchaser or its Subsidiaries, (2) hire any individual who will be a Purchaser Business Employee at Closing, (3) terminate the employment of (other than for cause) any individual who would have been a Purchaser Business Employee at
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Closing, but for such termination of employment, or (4) reassign the duties of (x) any individual who would have been a Purchaser Business Employee at Closing, but for such reassigned duties, or (y) any employee of Purchaser Parent or its Affiliates who would not have been a Purchaser Business Employee at Closing, but for such reassigned duties;
(J) incur, assume or guarantee any material Indebtedness, other than (1) as would not exceed the amounts set forth on Section 6.2(b)(J) of the Purchaser Parent Disclosure Letter or (2) intercompany Indebtedness that will be settled at or prior to the Closing;
(K) defer payment of any accounts payable or accelerate payment of any accounts receivable, in any material respect, outside of the ordinary course of business;
(L) make capital expenditures in connection with the operation of the Purchaser Business or for which Purchaser or any Subsidiary of Purchaser is responsible that are materially inconsistent with, or fail to make capital expenditures materially consistent with, the capital expenditure budget set forth in Section 6.2(b)(L) of the Purchaser Parent Disclosure Letter;
(M) sell, assign, transfer, license, sublicense, abandon or otherwise dispose of any material assets, properties or rights (x) Related to the Purchaser Business and owned by Purchaser Parent or any of its Subsidiaries or (y) owned or held by Purchaser or any of its Subsidiaries, other than sales of inventory and other assets, and non-exclusive licenses or sublicenses, in each case, in the ordinary course of business;
(N) (1) settle or compromise any Action made or pending against the Purchaser Business or Purchaser or any of its Subsidiaries to the extent such settlement or compromise imposes material ongoing obligations or restrictions on the operations of Purchaser or the Purchaser Business, or (2) settle, compromise or file any Action that relates to the Purchaser IP that could materially impact such Purchaser IP without consulting with and considering in good faith the opinion of Seller Parent;
(O) enter into or modify the terms of any material transaction, arrangement or Contract between Purchaser or its Subsidiaries, on the one hand, and Purchaser Parent or any of its Affiliates other than Purchaser or its Subsidiaries, on the other hand;
(P) materially accelerate or increase the quantity of the Purchaser Products distributed to the relevant distributors or wholesalers outside of the ordinary course of business, except with respect to a bona fide increase in demand for any Purchaser Product by the relevant distributor or wholesaler which has not been stimulated in any way following the date hereof by discounts, rebates, claw-backs or the like outside the ordinary course of business or the grant of preferred terms offered by Purchaser Parent or any of its Affiliates outside the ordinary course of business; or
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(Q) agree to take any of the foregoing actions described in this clause (y) of this Section 6.2(b).
(c) Notwithstanding any provision in this Agreement to the contrary, subject to Section 6.5(f), prior to the Closing and without the consent of Purchaser Parent or Purchaser, each of Seller Parent and its Affiliates, including the Conveyed Subsidiaries and their Subsidiaries, will be permitted in their sole discretion in compliance with applicable Law to (i) declare and pay dividends and distributions of, or otherwise transfer to Seller Parent or any Subsidiary thereof, (A) any Cash Equivalents or, subject to Section 2.3(b), Excluded Assets, and (B) any of the books and records of Seller Parent or any of its Affiliates that are not Purchased Assets, (ii) conduct their activities regarding cash management matters (including, to the extent consistent with Section 6.2(a)(K), the collection and transfer of accounts receivable and disbursement of funds, or in connection with any cash sweep practices), including to settle intercompany payables and receivables and to effect intercompany funding, (iii) make any payments under, or repay (in part or in full), any indebtedness and (iv) execute, deliver and perform obligations under the Local Implementing Agreements.
(d) Notwithstanding any provision in this Agreement to the contrary, subject to Section 6.5(f), prior to the Closing and without the consent of Seller Parent, each of Purchaser Parent and its Affiliates, including Purchaser and its Subsidiaries, will be permitted in their sole discretion in compliance with applicable Law to (i) declare and pay dividends and distributions of, or otherwise transfer to Purchaser Parent or any Subsidiary thereof, (A) any Cash Equivalents or assets that are not Related to the Purchaser Business, and (B) any of the books and records of Purchaser Parent or any of its Affiliates that are not Related to the Purchaser Business, (ii) conduct their activities regarding cash management matters (including, to the extent consistent with Section 6.2(b)(K), the collection and transfer of accounts receivable and disbursement of funds, or in connection with any cash sweep practices), including to settle intercompany payables and receivables and to effect intercompany funding, (iii) make any payments under, or repay (in part or in full), any indebtedness and (iv) execute, deliver and perform obligations under the Local Implementing Agreements. Until the earlier of the Closing Date and the date on which this Agreement is terminated pursuant to Section 9.1, neither Purchaser nor any of its Subsidiaries shall, and Purchaser Parent shall cause Purchaser and its Subsidiaries not to, without the written consent of Seller Parent, make any distributions of, or otherwise transfer, any assets, properties or rights (other than Cash Equivalents) Related to the Purchaser Business to Purchaser Parent or any of its Affiliates (other than to Purchaser or a Subsidiary of Purchaser).
(e) Nothing contained in this Agreement shall be construed to give to Purchaser Parent or Purchaser, directly or indirectly, rights to control or direct the Businesss operations prior to the Closing, or give to Seller Parent, directly or indirectly, rights to control or direct the Purchaser Businesss operations prior to the Closing. Prior to the Closing, Seller Parent (and its Affiliates) shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of the operations of the Business and Purchaser Parent (and its Affiliates) shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision of the operations of the Purchaser Business.
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(f) Purchaser agrees that it shall, and shall cause its applicable Affiliates to, on and immediately following the Closing, use the Purchased Assets to carry on the same kind of business as that carried on by the Sellers with respect to the Purchased Assets prior to the Closing.
Section 6.3 Regulatory Approvals.
(a) Upon the terms and subject to the conditions herein provided, Purchaser Parent, Purchaser and Seller Parent each agree to take, and to cause their Affiliates to take, all actions and to do, and cause their Affiliates to do, all things necessary under applicable Antitrust Laws to consummate and make effective the transactions contemplated by this Agreement or any Ancillary Agreement as promptly as reasonably practicable (and in any event as required to effect the Closing prior to the Outside Date), including all actions and all things necessary (i) to obtain, as promptly as reasonably practicable (and in any event as required to effect the Closing prior to the Outside Date), any consent, authorization, order or approval of, or any exemption by, or negative clearance from, or the expiration or early termination of any waiting period imposed by, or any other Approval of, any Governmental Antitrust Authority required to be obtained or made by Seller Parent, Purchaser Parent, Purchaser or their Affiliates in connection with the acquisition of the Purchased Assets or the consummation of the transactions contemplated hereby or by the Ancillary Agreements, (ii) to satisfy, as promptly as reasonably practicable and in any event prior to the date that is the third (3rd) Business Day prior to the Outside Date, the conditions precedent set forth in Sections 8.1(a) and 8.1(b) to the extent relating to Antitrust Laws, (iii) to defend any Actions, whether judicial or administrative, brought by any Governmental Antitrust Authority or brought under, pursuant to or relating to any Antitrust Law challenging this Agreement, the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby, and (iv) to comply as promptly as reasonably practicable with all legal requirements under Antitrust Laws which may be imposed with respect to this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby. Without limiting the foregoing, Purchaser Parent, Purchaser, Seller Parent and their Affiliates shall be obligated to take such actions as are necessary to obtain, as promptly as reasonably practicable and in any event prior to the date that is the third (3rd) Business Day prior to the Outside Date, the expiration or termination of any applicable waiting period under the HSR Act and any consent, authorization, order or approval of, or any exemption by, or negative clearance from, or the expiration or early termination of any waiting period imposed by, or any other Approval under, Antitrust Laws of the jurisdictions set forth on Annex C.
(b) Subject to appropriate confidentiality protections, each of the Parties will furnish to the other Parties such necessary information and reasonable assistance as such other Parties may reasonably request in connection with the foregoing and will provide the other Parties with any information supplied by such Party or its Affiliates to a Governmental Antitrust Authority in connection with this Agreement and the transactions contemplated hereby.
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(c) Without limiting the generality of the undertakings pursuant to this Section 6.3:
(i) Purchaser Parent, Purchaser, Seller Parent, and their respective Affiliates shall, with respect to the execution of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, (A) as promptly as reasonably practicable, and in any event no later than fifteen (15) Business Days after the date hereof unless otherwise agreed to in writing by the Parties, file any notification and report form and related material required under the HSR Act, and (A) as promptly as reasonably practicable submit all necessary Filings with the Governmental Antitrust Authorities set forth in Section 6.3(c)(i) of the Seller Disclosure Letter;
(ii) In addition to the foregoing, in the event that a Party reasonably determines following the date hereof that Filings other than the Filings described in Section 6.3(c)(i) are required to be made by one or more of the Parties with, or additional Approvals are required to be obtained by the Parties from, any Governmental Antitrust Authorities under any applicable Antitrust Law in connection with the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, the applicable Parties shall timely make all such Filings and timely seek all such Approvals in accordance with the terms of this Section 6.3. If, following good faith discussion and consideration, the Parties mutually agree that any such additional Approval would be required under applicable Antitrust Law to effect the Closing, and that effecting the Closing without having obtained such additional Approval would reasonably be expected to violate applicable Antitrust Law (and that such violation could not be avoided or cured if the Business in the relevant jurisdiction were a Delayed Business), the jurisdiction to which such additional Approval relates shall be added to Annex C, Part 1, subject to each Partys consent (which shall not be unreasonably withheld, conditioned or delayed). If, following good faith discussion and consideration, the Parties mutually agree that effecting the Closing without having obtained the Approval of any Governmental Antitrust Authority under applicable Antitrust Laws of any jurisdiction set forth on Annex C, Part 2 (as it may be supplemented pursuant to the immediately preceding sentence) would not violate applicable Antitrust Law (or that such violation could be avoided or cured if the Business in the relevant jurisdiction were a Delayed Business), such jurisdiction shall be removed from Annex C, subject to each Partys consent (which shall not be unreasonably withheld, conditioned or delayed).
(iii) Purchaser Parent, Purchaser, Seller Parent and their respective Affiliates shall each promptly respond to any formal or informal requests for additional information or documentary material that may be made by a Governmental Antitrust Authority and, in the case of a formal request for additional information and documentary material under the HSR Act or any other Antitrust Law (to the extent applicable), certify substantial compliance therewith as promptly as reasonably practicable, unless the Parties otherwise agree in order to allow the Closing to occur more promptly;
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(iv) In addition to the foregoing, Purchaser Parent, Purchaser and their Affiliates shall, as promptly as reasonably practicable take, or cause to be taken, any and all actions and do, or cause to be done, any and all things necessary, required or advisable to avoid, eliminate and resolve each and every impediment and obtain all Approvals under Antitrust Laws that may be required by any Governmental Antitrust Authority with respect to the consummation of the transactions contemplated hereby or by the Ancillary Agreements, in order to allow the Closing to occur as promptly as reasonably practicable after the date of this Agreement but in any event prior to the Outside Date, including proposing, negotiating, offering to commit and effect (and if such offer is accepted, committing to and effecting) through order, consent decree, settlement or otherwise, to (d) license, sell, divest, hold separate or otherwise dispose of, directly or indirectly, any of the Purchased Assets (including any of the Shares), or any operations, divisions, Subsidiaries, specific assets or categories of assets, specific products (including any of the Products or Purchaser Products) or categories of products, product lines or businesses of Purchaser (or any of its Subsidiaries), the Conveyed Subsidiaries (or any Subsidiary thereof), the Purchaser Business or the Business (whether now owned or hereafter acquired by Purchaser Parent, Purchaser or their Affiliates), (e) terminate any existing relationships and contractual rights and obligations of Purchaser and its Subsidiaries, the Conveyed Subsidiaries (and their Subsidiaries) and any such relationships, rights or obligations that form part of the Purchased Assets, (f) amend or terminate any licenses or other Intellectual Property agreements of Purchaser and its Subsidiaries, the Conveyed Subsidiaries (and their Subsidiaries) and any such licenses or other Intellectual Property agreements that form a part of the Purchased Assets and enter into such new licenses or other Intellectual Property agreements and (g) take any actions or make any behavioral commitments that may limit or modify Purchasers (or any of its Subsidiaries) or the Conveyed Subsidiaries (or any of their Subsidiaries) rights of ownership in, or ability to conduct the business of, one or more of its operations, divisions, businesses, product lines, specific products (including any of the Products or Purchaser Products), categories of products, customers, specific assets or categories of assets, including, after the Closing, those of the Business or any of the Purchased Assets; provided that, without limiting any of Purchaser Parents and its Subsidiaries obligations hereunder, Seller Parent and its Affiliates shall not take or agree to take any of the actions listed in this Section 6.3(c)(iv) without the prior written consent of Purchaser Parent and Purchaser (not to be unreasonably withheld, delayed or conditioned); provided further that neither Parent shall be required to take any action listed in Section 6.3(c)(iv)(A)-(D) (Regulatory Action) with respect to the Retained Businesses, Excluded Assets or Purchaser Parent Retained Businesses, as applicable; and provided further that the proceeds, payments or consideration received or receivable in respect of any action contemplated by clauses (A) through (D) of this Section 6.3(c)(iv) shall be paid directly to Purchaser and held by Purchaser through the Closing Date, it being agreed that such proceeds, payments and consideration shall not be included in the calculation of Purchaser Net Cash or Purchaser Working Capital.
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(v) In furtherance of the foregoing: (x) (I) Purchaser Parent and Purchaser shall keep Seller Parent reasonably informed of all matters, discussions and activities relating to any of the matters described in or contemplated by clauses (A) through (D) of Section 6.3(c)(iv), including satisfying each of its obligations under Section 6.3(d) with respect to any such matters, and (II) Purchaser Parent and Purchaser shall consider in good faith any of Seller Parents reasonable suggestions with respect to potential purchasers, licensees or other counterparties in respect of any of the agreements, arrangements, transactions or other relationships described in or contemplated by clauses (A) through (D) of Section 6.3(c)(iv), (y) (I) Purchaser Parent and Purchaser shall permit Seller Parent to review on a reasonably current basis, and shall discuss with Seller Parent, drafts of any agreements that Purchaser Parent or Purchaser contemplates entering into, or contemplates causing any of their Affiliates (including, after the Closing, the Conveyed Subsidiaries and their Subsidiaries) to enter into, with respect to any of the matters described in or contemplated by clauses (A) through (D) of Section 6.3(c)(iv), (II) Purchaser Parent and Purchaser shall consider in good faith Seller Parents views and comments with respect to such agreements, and (III) the Parties and their respective Affiliates, as applicable, shall not be required to enter into any such agreements unless the effectiveness of the transactions contemplated by such agreements is subject to the Closing and (IV) in the case of any license, sale, divestiture, disposition or similar transaction, neither Purchaser Parent nor Seller Parent nor any of their respective Affiliates (other than Purchaser and its Subsidiaries) shall be the licensing, selling, divesting or disposing party under any such agreements unless and except to the extent required by the relevant Governmental Antitrust Authority or applicable Law and, even if so required, shall have no direct or indirect obligation thereunder for which they are not fully indemnified by Purchaser and (z) notwithstanding anything in any such agreement to the contrary, Seller Parent, Purchaser Parent and Purchaser agree (I) that neither Purchaser Parent nor Seller Parent nor any of their respective Affiliates (other than Purchaser and its Subsidiaries) shall have any Liability, including with respect to indemnification obligations, in respect of any agreements, arrangements, transactions or other relationships described in or contemplated by clauses (A) through (D) of Section 6.3(c)(iv), including the cooperation contemplated by Section 6.3(d)(ii), (II) that Purchaser shall indemnify Purchaser Parent, Seller Parent and their respective Affiliates (other than Purchaser and its Subsidiaries) for any Liabilities arising from, or attributable or related to, any such agreements, arrangements, transactions or other relationships, including with respect to any agreements to which Purchaser Parent, Seller Parent or any of their respective Affiliates (other than Purchaser and its Subsidiaries) are party (except, in the case of (I) and (II), to the extent Seller Parent or Purchaser Parent, as applicable, is expressly liable for such Liabilities or indemnification pursuant to this Agreement or any Ancillary Agreement) and (IV) that neither Purchaser Parent nor Seller Parent nor their respective Affiliates (other than Purchaser and its Subsidiaries) shall be required to take any of the actions contemplated by clauses (A) through (D) of Section 6.3(c)(iv), or otherwise in connection with the matters contemplated by this Section 6.3, with respect to any of the Retained Businesses, Excluded Assets or Purchaser Parent Retained Businesses.
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(vi) In the event that any Action is threatened or commenced under Antitrust Laws, or a permanent or preliminary injunction or other Governmental Order is threatened or entered under Antitrust Laws, that would make consummation of the transactions contemplated hereby or by the Ancillary Agreements in accordance with the terms of this Agreement and the Ancillary Agreements unlawful or that would prevent or delay consummation of the transactions contemplated hereby or by the Ancillary Agreements (in each case, under Antitrust Laws), each of Purchaser Parent, Purchaser and Seller Parent shall reasonably promptly take any and all actions and steps (including the defense against or appeal thereof, the posting of a bond and the taking of the steps contemplated by this Section 6.3(c)) necessary to resist and contest such Action and to have vacated, modified, reversed or suspended such injunction or Governmental Order so as to permit such consummation as promptly as reasonably practicable, but in any event as required to allow the Closing to occur prior to the Outside Date.
(d) Cooperation.
(i) Each Parent shall, and shall cause its Affiliates to, to the extent permitted by applicable Antitrust Law, (i) promptly notify the other Parent of, and, if in writing, provide to the other Parent copies of (or in the case of oral communications, advise the other orally of) all material or substantive communications between it (or its Affiliates or Representatives) and any Governmental Antitrust Authority relating to the consummation of the transactions contemplated hereby and by the Ancillary Agreements or any of the matters described in this Section 6.3, (ii) consult with the other in good faith as regards strategy, permit the other to review and discuss in advance, and consider in good faith the views of the other in connection with, any Filings, notifications or material or substantive communications (whether written or oral) with any Governmental Antitrust Authority, including any presentations, memoranda, briefs, arguments, opinions or proposals and (iii) not participate in any material or substantive telephone calls or any meetings with a Governmental Antitrust Authority regarding the consummation of the transactions contemplated hereby and by the Ancillary Agreements or any of the matters described in this Section 6.3 without consulting with the other Parent in advance and, to the extent permitted by such Governmental Antitrust Authority, giving the other Parent a reasonable opportunity to attend and participate thereat.
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(ii) Subject to and without limiting Section 6.3(c)(iv), Seller Parent shall, and shall cause its Affiliates to, reasonably cooperate, at Purchasers sole cost and expense (it being agreed that any expenses incurred by Seller Parent or any of its Affiliates shall be reasonable, documented and out-of-pocket), with Purchaser Parent and Purchaser on any proposed license, sale, divestiture, hold separate, disposal or other action undertaken by Purchaser Parent or Purchaser which Purchaser Parent or Purchaser reasonably concludes, in good faith, may be necessary to comply with its obligations under Section 6.3(c)(iv)(A) (a Proposed Divestiture), including using reasonable best efforts in connection with:
(A) providing, or causing to be provided, to Purchaser Parent and Purchaser, as well as any potential counterparty in any Proposed Divestiture (each, a Counterparty), any information, in an electronic data room or other customary format, solely with respect to the business, operations, financial condition and projections of the assets or business which are the subject of the Proposed Divestiture as may be reasonably requested by Purchaser Parent, Purchaser or the Counterparty, in each case, solely to the extent such information is in Seller Parents possession at such time;
(B) reasonably cooperating with Purchaser Parent and Purchaser in the preparation for Counterparties of a customary confidential information memorandum and other customary marketing materials related to the Proposed Divestiture (and Seller Parent and its Affiliates hereby consent to the use of the logos of Seller Parent and its Affiliates that solely relate to the Business in such confidential information memorandum and marketing materials and solely in connection with the Proposed Divestiture during the period prior to the Closing (so long as such logos are used solely in a manner that is not intended to and is not reasonably likely to suggest or imply any affiliation, association or similar relationship with Seller Parent or its Affiliates, cause confusion arising out of their use of such logos simultaneously with the use of such logos by Seller Parent and its Affiliates, or harm or disparage Seller Parent or its Affiliates or the goodwill of Seller Parent or its Affiliates, including the Business, and are used solely in connection with a truthful, non-misleading description of the Business and the Products subject to the Proposed Divestiture, and subject to Seller Parents review thereof);
(C) causing the reasonable participation by relevant employees of the Business in marketing efforts related to the Proposed Divestiture and its potential transfer, during normal business hours, including participation in a reasonable number of customary due diligence sessions, management presentations and other meetings with Counterparties;
(D) taking such actions within its reasonable control as are reasonably requested by Purchaser Parent to facilitate the timely satisfaction of all conditions to the completion of the Proposed Divestiture, subject in all respects to Section 2.2 and the other applicable provisions of this Agreement;
(E) seeking any consents and Approvals required to consummate the Proposed Divestiture from third parties (other than Governmental Authorities) reasonably requested by Purchaser Parent, subject in all respects to Section 2.2; and
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(F) requesting Seller Parents independent auditors to cooperate with Counterparties as may be reasonably requested by Seller Parent;
provided, however, that notwithstanding the foregoing or anything to the contrary in this Agreement, nothing herein shall (i) require Seller Parent and its Affiliates to provide any information to any Counterparties prior to receipt of executed confidentiality and clean team agreements with respect to such information and on terms no less favorable (to the extent relevant) to Seller Parent than the Confidentiality Agreement and Clean Team Agreement, (ii) require the Sellers or any of their Affiliates to agree to pay any amounts for which they are not promptly reimbursed by Purchaser, or deliver or execute any opinions, authorization letters, certificates or other instruments, (iii) require the Sellers or any of their Affiliates to take any action that would reasonably be expected to conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time or both) under, any of their respective organizational documents, any applicable Laws or Governmental Authorization or any material Contract or other material obligation to a third party, (iv) cause any representation or warranty in this Agreement to be breached by Seller Parent (unless such breach is waived by Purchaser Parent and Purchaser), (v) cause any Representative of the Sellers or any of their Affiliates to incur any personal liability, (vi) provide access to or disclose information that any of the Sellers or any of their Affiliates reasonably determines would jeopardize any attorney-client or other privilege or protection of any of the Sellers or any of their Affiliates or (vii) prevent, impair or materially delay the consummation of the transactions contemplated hereby or by the Ancillary Agreements; provided, further, that in the case of the foregoing clause (iii) and (vi) Sellers shall, and shall cause their Affiliates to, inform Purchaser as to the general nature of what is being restricted or withheld and the reason therefor, and shall use its commercially reasonable efforts to make appropriate substitute arrangements to permit disclosure of the relevant information in a manner that does not suffer from such impediments.
(e) Delayed Antitrust Approvals.
(i) Subject to Section 6.3(c)(ii), in the event an Approval of a Governmental Antitrust Authority (other than a Governmental Antitrust Authority of the United States or Approvals under Antitrust Laws of the jurisdictions set forth on Annex C) having jurisdiction that is necessary to lawfully consummate the transactions contemplated hereby is not obtained on or prior to the date on which the conditions set forth in Sections 8.1 and 8.2 (other than the conditions that, by their nature, are to be satisfied on the Closing Date) shall have been satisfied or waived (each, a Delayed Antitrust Approval and, each such jurisdiction, an Outstanding Antitrust Jurisdiction), the Parties agree (subject to the satisfaction of the conditions set forth in Article VIII) that, provided that the Laws of such Outstanding Antitrust Jurisdiction permit consummation of the transactions contemplated hereby in all territories other than the Outstanding Antitrust Jurisdiction, they will effect the Closing (which the Parties shall determine in
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accordance with Section 6.3(c)(ii)) (including the issuance, allotment and delivery of the full Purchase Consideration), subject to the terms of this Agreement, including by selling, conveying, assigning, transferring or delivering to Purchaser or the applicable Purchaser Designated Affiliates all of Seller Parents and its Subsidiaries right, title and interest in the Purchased Assets pursuant to the terms and conditions hereof to the extent permissible under any applicable Law and subject to Section 2.2, it being agreed that the Closing shall refer to the consummation of such sale, conveyance, assignment, transfer or delivery of such Purchased Assets at such time and shall only exclude, subject to Section 2.2, the Purchased Assets in that Outstanding Antitrust Jurisdiction to which such Delayed Antitrust Approval relates (a Delayed Business). The obligations of the Parties set forth in this Section 6.3 shall continue with respect to each such Delayed Antitrust Approval until the earliest to occur of (A) the date such Delayed Antitrust Approval is obtained, (B) the date on which such Delayed Business is sold to a third party designated by Purchaser (a Delayed Business Purchaser) (it being agreed that Purchaser shall consider in good faith Seller Parents reasonable suggestions with respect to potential purchasers), as set forth in a written notice (a Delayed Business Notice) delivered by Purchaser to Seller Parent in accordance with Section 10.1 and Section 6.3(e)(iii) and (C) the date that is thirty-six (36) months after the Closing Date (the Hold-Back Termination Date), and until the earliest to occur of the foregoing (the date of such earliest occurrence, the Delayed Business Cut-Off Date), Seller Parent shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to operate the Delayed Business in the ordinary course of business in all material respects.
(ii) Upon obtaining a Delayed Antitrust Approval pursuant to Section 6.3(e)(i)(A), the Parties shall effect the transfer of such Delayed Business pursuant to a Local Implementing Agreement for the jurisdiction relating thereto, and, to the extent permissible under applicable Antitrust Laws, such transfer shall be retroactive to, and be deemed to have occurred on, the Closing Date; provided that, in accordance with Section 2.2(a), to the fullest extent permitted by applicable Law, the Parties shall treat Purchaser or the applicable Purchaser Designated Affiliate, as the case may be, as the owner of the Delayed Business as of the Closing Date.
(iii) In the event that Purchaser delivers a Delayed Business Notice to Seller Parent with respect to a Delayed Business, Seller Parent shall, and shall cause its Affiliates to, use commercially reasonable efforts to facilitate the sale of such Delayed Business to the Delayed Business Purchaser by Purchaser and on its behalf and at its direction as promptly as reasonably practicable, including the efforts described in Section 6.3(d)(ii); provided that (A) Purchaser acknowledges and agrees nothing in this Section 6.3(e) shall require Seller Parent to transfer to the Delayed Business Purchaser such Delayed Business if Purchaser Parent or Purchaser is in material breach of its obligations under this Section 6.3, (B) such Delayed Business Purchaser has obtained or will obtain prior to such sale all necessary Approvals under applicable Antitrust Laws with respect to such Delayed Business
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and the sale of such Delayed Business would reasonably be expected to be consummated within ninety (90) days following the delivery of such Delayed Business Notice, (C) the sale of such Delayed Business to such Delayed Business Purchaser is not prohibited by, illegal under, or in contravention of, any applicable Law or Governmental Order and (D) neither Purchaser Parent nor Seller Parent nor any of their respective Affiliates (other than Purchaser and its Subsidiaries) shall be the selling party under any agreements required to implement the transfer of the Delayed Business unless and except to the extent required by the relevant Governmental Antitrust Authority or applicable Law and, even if so required, shall have no direct or indirect obligation thereunder for which they are not fully indemnified by Purchaser. The Parties agree (I) that neither Purchaser Parent nor Seller Parent nor any of their respective Affiliates (other than Purchaser and its Subsidiaries) shall have any Liability, including with respect to indemnification obligations, in respect of any agreements, arrangements or transactions contemplated by this Section 6.3(e)(iii) and (II) that Purchaser shall indemnify Purchaser Parent and Seller Parent and their respective Affiliates (other than Purchaser and its Subsidiaries) for any Liabilities arising from, or attributable or related to, any such agreements, arrangements or transactions, including with respect to any agreements to which Seller Parent or Purchaser Parent or any of their respective Affiliates are party (except in the case of (I) and (II) to the extent Seller Parent or Purchaser Parent, as applicable, is expressly liable for such Liabilities or indemnification pursuant to this Agreement or any Ancillary Agreement). Purchaser shall promptly reimburse Seller Parent and Purchaser Parent, as applicable, for any and all reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys and other Representatives fees) incurred in connection with the foregoing, including any such costs (including payments) or expenses incurred or made following the consummation of such transaction. Subject to applicable Law, the proceeds of any sale of a Delayed Business shall be paid directly to Purchaser (or a Subsidiary of Purchaser) by the Delayed Business Purchaser; provided that Seller Parent or Purchaser Parent, as applicable, may require payment of its reasonable and documented out-of-pocket fees and expenses (or an estimate thereof) and any Taxes payable as a result of such transaction from such proceeds as a direct wire transfer of immediately available funds at such applicable closing.
(iv) In the event that a Delayed Antitrust Approval is not obtained with respect to a Delayed Business and Purchaser does not deliver a Delayed Business Notice in accordance with Section 6.3(e)(iii) with respect to such Delayed Business, in each case, prior to the Hold-Back Termination Date, the Parties shall withdraw any pending Filing or notification for Approval for the transfer of such Delayed Business under applicable Antitrust Laws and Seller Parent may, as mutually agreed by the Parties, dispose of such Delayed Business, including by way of a sale to a third party. Purchaser Parent and Purchaser agree (1) that Seller Parent and its Affiliates shall not have any obligation or Liability, including with respect to indemnification obligations, in respect of any agreements, arrangements or transactions contemplated by this Section 6.3(e)(iv) for which it is not fully
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indemnified by Purchaser and (2) that Purchaser shall indemnify Seller Parent and its Affiliates for any Liabilities arising from, or attributable or related to, any such agreements, arrangements or transactions, including with respect to any agreements to which Seller Parent or any of its Affiliates are party (except in the case of (1) and (2) to the extent Seller Parent is expressly liable for such Liabilities or indemnification pursuant to this Agreement or any Ancillary Agreement). Purchaser shall promptly reimburse Seller Parent for any and all reasonable and documented out-of-pocket costs and expenses (including reasonable attorneys and other Representatives fees) incurred in connection with the foregoing, including any such costs (including payments) or expenses incurred or made following the consummation of such transaction. Subject to applicable Law, the proceeds of any sale of a Delayed Business in accordance with this Section 6.3(e)(iv) shall be paid directly to Purchaser (or a Subsidiary of Purchaser) by the purchaser of such Delayed Business; provided that Seller Parent may require payment of its reasonable and documented out-of-pocket fees and expenses (or an estimate thereof) and any Taxes payable as a result of such transaction from such proceeds as a direct wire transfer of immediately available funds at such applicable closing.
(f) None of Purchaser Parent, Purchaser or any of their Affiliates shall, or shall agree to, acquire, whether by merging with or into, consolidating with, purchasing all or a portion of the assets of or all or a portion of the equity in, or otherwise, any business or corporation, partnership, or other business organization or division thereof or other Person, or dissolve, merge or consolidate with any other Person, or engage in any business combination transaction or sale, whether by merging with or into, consolidating with, or selling all or a portion of its or its Affiliates assets or equity to, any other Person, or enter into, or agree to enter into, any license, joint venture or other similar agreement or transaction, which would reasonably be expected to, in each case or in the aggregate, (i) impose any material delay in the obtaining of, or increase in any material respect the risk of not obtaining, the expiration, termination or waiver of any applicable waiting period or any consent, approval, permit, ruling, authorization, clearance or other Approval pursuant to the Antitrust Laws necessary to consummate the transactions contemplated hereby or by the Ancillary Agreements, (ii) increase in any material respect the risk of any Governmental Antitrust Authority entering an injunction or other Governmental Order prohibiting the consummation of the transactions contemplated hereby or by the Ancillary Agreements, (iii) increase in any material respect the risk of not being able to remove any such injunction or other Governmental Order on appeal or otherwise, (iv) impair, impede, hinder, or prevent or materially delay or adversely affect the consummation of the transactions contemplated hereby or by the Ancillary Agreements or (v) cause any of the conditions set forth in Article VIII to fail to be satisfied or impair, impede, hinder, or prevent or materially delay or adversely affect the ability of Purchaser Parent, Purchaser and their Affiliates to perform their obligations under this Agreement and the Ancillary Agreements (any foregoing action or transaction, a Purchaser Adverse Action).
(g) Neither Seller Parent nor any of its Affiliates shall, or shall agree to, acquire, whether by merging with or into, consolidating with, purchasing all or a portion of the assets of or all or a portion of the equity in, or otherwise, any business or corporation, partnership, or other business organization or division thereof or other Person, or dissolve, merge or consolidate with
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any other Person, or engage in any business combination transaction or sale, whether by merging with or into, consolidating with, or selling all or a portion of its or its Affiliates assets or equity to, any other Person, or enter into, or agree to enter into, any license, joint venture or other similar agreement or transaction, which would reasonably be expected to, in each case or in the aggregate, (i) impose any material delay in the obtaining of, or increase in any material respect the risk of not obtaining, the expiration, termination or waiver of any applicable waiting period or any consent, approval, permit, ruling, authorization, clearance or other Approval pursuant to the Antitrust Laws necessary to consummate the transactions contemplated hereby or by the Ancillary Agreements, (ii) increase in any material respect the risk of any Governmental Antitrust Authority entering an injunction or other Governmental Order prohibiting the consummation of the transactions contemplated hereby or by the Ancillary Agreements, (iii) increase in any material respect the risk of not being able to remove any such injunction or other Governmental Order on appeal or otherwise, (iv) impair, impede, hinder, or prevent or materially delay or adversely affect the consummation of the transactions contemplated hereby or by the Ancillary Agreements or (v) cause any of the conditions set forth in Article VIII to fail to be satisfied or impair, impede, hinder, or prevent or materially delay or adversely affect the ability of Seller Parent and its Affiliates to perform their obligations under this Agreement and the Ancillary Agreements.
(h) Each Party may, as each deems advisable or necessary, reasonably designate any competitively sensitive material provided to the other under this Section 6.3 or otherwise as Antitrust Counsel Only Material or some similar notation agreed by the Parties. Such materials and the information contained therein shall be given only to the internal and outside antitrust counsel of the recipient and will not be disclosed by such counsel to employees, officers or directors of the recipient and any economic consultants retained in connection with the Parties obligations under this Section 6.3 unless express permission is obtained in advance from the source of the materials (Seller Parent, Purchaser Parent or Purchaser, as the case may be) or its legal counsel. Notwithstanding anything to the contrary in this Section 6.3, and without limiting the restrictions on access and disclosure set forth in Section 6.1(a), materials provided to the other Party or its counsel pursuant to this Agreement may be redacted (i) as necessary to comply with contractual requirements, (ii) as necessary to address attorney-client or other privilege or protection or confidentiality concerns and (iii) to remove references concerning the valuation of the Purchased Assets, the Business, or the Purchaser Business (or the Retained Businesses or Purchaser Parent Retained Businesses).
(i) Purchaser shall be responsible for the payment of all filing and other fees owed to any Governmental Authority in connection with the Filings to be made, and Approvals to be obtained, pursuant to this Section 6.3.
Section 6.4 Reasonable Best Efforts; Further Assurances.
(a) Under the terms and subject to the conditions set forth herein, except as otherwise provided in this Agreement or any Ancillary Agreement (and subject to Section 6.3), each of the Parties agrees to use and to cause its Affiliates to use its reasonable best efforts before and, as may be applicable, after the Closing Date, until the earlier to occur of (i) thirty-six (36) months following the Closing Date and (ii) the completion of a Listing Transaction (as defined in the
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Purchaser Shareholders Agreement), to take or cause to be taken all action, to do or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper or advisable under applicable Laws (other than with respect to Antitrust Laws, which are the subject of Section 6.3, and with respect to the Purchaser Parent Shareholder Approval, which is the subject of Section 6.24) to consummate and make effective, as promptly as practicable, the transactions contemplated by this Agreement and the Ancillary Agreements, including: (a) the satisfaction of the conditions precedent to the obligations of any of the Parties, (b) the obtaining of all necessary actions, consents, approvals, waivers and other Approvals of all Governmental Authorities under applicable Law (other than with respect to Antitrust Laws, which are the subject of Section 6.3, and with respect to the Purchaser Parent Shareholder Approval, which is the subject of Section 6.24), (c) without limiting the obligations of the Parties set forth in Section 6.3, the defending of any Action, whether judicial or administrative, challenging this Agreement or the performance of the obligations hereunder, (d) the effecting of all registrations, filings and transfers of Governmental Authorizations (including Environmental Permits) that constitute Purchased Assets, and the effecting of all registrations, filings and transfers of any licenses, permits, certificates or other authorizations or approvals which constitute Excluded Assets to be transferred to Seller Parent or any Retained Subsidiary and (e) the executing, acknowledging and delivering of such documents and instruments and the taking of such other actions as may reasonably be requested by the other Party in furtherance of the matters described in the foregoing clauses (a) through (d); provided that except as otherwise expressly provided by this Agreement or any Ancillary Implementing Agreement, including Section 6.3, none of Seller Parent, Purchaser Parent or any of their respective Affiliates shall be required to expend any money, commence any litigation or offer or grant any accommodation (financial or otherwise) in connection with the foregoing (other than filing and other fees owed to any Governmental Authority in connection with any Filings to be made with or Approvals to be obtained from Governmental Authorities, for which Purchaser shall be responsible and shall reimburse Seller Parent and its Affiliates). Purchaser agrees to provide such reasonable security and assurances as to financial capability, resources and creditworthiness as may be reasonably requested by any Governmental Authority whose Approval is sought in connection with the transactions contemplated hereby.
(b) Without limiting and in furtherance of the provisions of Section 6.4(a), and in order to facilitate the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements on a timely basis, promptly following the date hereof Seller Parent and Purchaser Parent shall organize a transition team (the Transition Team), co-chaired by a representative of Seller Parent and by a representative of Purchaser Parent and including equal representation of Seller Parent and Purchaser Parent, which Transition Team shall, following the Closing, have responsibility for (A) coordinating and directing the efforts of the Parties with respect to (1) the administration and coordination of the Ancillary Agreements following the Closing, (2) subject to the terms of this Agreement, including Section 2.2, Section 6.3 and Section 6.4(a), the process for seeking applicable third party consents, Approvals, and Governmental Authorizations and making required filings or notices in connection with the consummation of the transactions contemplated hereby, and (3) coordinating and directing the efforts of the Parties with respect to Shared Contracts in accordance with Section 2.2 as well as the efforts of the Parties with respect to the assets and liabilities contemplated by Section 2.2, (B) coordinating communications, public relations and investor relations strategy and approach of the Parties regarding this Agreement and
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the transactions contemplated hereby in accordance with this Agreement, and (C) overseeing other business and operational matters relating to this Agreement and the transactions contemplated hereby in accordance with this Agreement, in the case of each of clauses (A), (B) and (C), subject to applicable Laws, including Laws regarding the exchange of information and Antitrust Laws, and the other provisions of this Agreement, including those regarding access and cooperation (it being understood that this Section 6.4(b) is intended to facilitate the administration of the matters referred to herein and is not intended to expand the scope of or alter the substantive rights and obligations of the Parties under any other provisions of this Agreement).
(c) Purchaser Parent shall develop, in consultation with Seller Parent, a detailed written transition plan (the Transition Plan) which shall set forth integration planning goals, activities and processes with respect to the period from the date hereof through the Closing Date and the transition activities to be implemented after the Closing Date. The Transition Plan shall also include reasonably detailed plans in respect of the matters set forth in Section 6.4(c) of the Purchaser Parent Disclosure Letter. The Parties acknowledge and agree that the Transition Plan shall be prepared for convenience and informational purposes only, shall not be binding on any Party or its respective Affiliates, and the taking of, or failure to take, any action set forth in the Transition Plan shall in no event be a condition to the obligations of either Party to consummate the Sale and the other transactions contemplated by this Agreement.
(d) Purchaser Parent shall consult in good faith with Seller Parent prior to the Closing regarding (i) the identity of the initial direct reports to the Chief Executive Officer and to the Chief Financial Officer of Purchaser and (ii) the initial Business Plan (as defined in the Purchaser Shareholders Agreement), including any updates to any draft Business Plan previously provided, to be adopted by Purchaser as of the Closing. If, as part of such consultation, Seller Parent wishes to escalate any matter regarding the foregoing matters, it shall be entitled to convene, on reasonable notice, a meeting between the Chief Executive Officers of Seller Parent and Purchaser Parent to discuss such matters. In the event any disagreements regarding the foregoing matters cannot be resolved by such Chief Executive Officers prior to the Closing, the Chief Executive Officer of Purchaser Parent shall make the final determination with respect thereto.
Section 6.5 Tax Matters.
(a) Preparation and Filing of Tax Returns.
(i) Seller Parent shall prepare or cause to be prepared all (A) Tax Returns that include Seller Parent or any of its Affiliates (other than any Conveyed Subsidiary or any Subsidiary thereof), on the one hand, and any Conveyed Subsidiary or Subsidiary thereof, on the other hand (Seller Combined Tax Returns) and (B) Tax Returns of the Conveyed Subsidiaries (and their Subsidiaries) for any Pre-Closing Tax Period other than any Straddle Period (Pre-Closing Separate Tax Returns). All Pre-Closing Separate Tax Returns shall, where applicable, be prepared in a manner consistent with the past practices of the applicable Conveyed Subsidiary (or Subsidiary thereof), other than as required as a result of the Seller Internal Restructurings and except to the extent that there is not at least a more likely than not basis for a position under applicable Law. In the case of any Pre-Closing
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Separate Tax Return that is required to be filed after the Closing (taking into account any applicable extensions), Seller Parent shall deliver to Purchaser for its review and comment, at least thirty (30) days, in the case of Income Tax Returns, and fifteen (15) days, in the case of non-Income Tax Returns, prior to the due date for the filing of such Pre-Closing Separate Tax Return (taking into account any applicable extensions), a draft copy of such Pre-Closing Separate Tax Return, together with any additional information that Purchaser may reasonably request. Purchaser shall have the right to review such Pre-Closing Separate Tax Return and any such additional information prior to the filing of such Pre-Closing Separate Tax Return, and Seller Parent shall consider in good faith any reasonable comments submitted by Purchaser at least fifteen (15) days, in the case of Income Tax Returns, and five (5) days, in the case of non-Income Tax Returns, prior to the due date of such Pre-Closing Separate Tax Return (taking into account any applicable extensions). Purchaser shall timely file (taking into account any applicable extensions), or cause to be timely filed, such Pre-Closing Separate Tax Returns as prepared by Seller Parent (and as may be revised by Seller Parent to reflect any comments received from Purchaser pursuant to the immediately preceding sentence), provided that such Tax Return was delivered to Purchaser at least five (5) days, in the case of Income Tax Returns, and three (3) days, in the case of non-Income Tax Returns, prior to the due date for filing such Tax Return (taking into account any applicable extensions). Seller Parent shall timely file, or cause to be timely filed (taking into account any applicable extensions), any Seller Combined Tax Returns and any Pre-Closing Separate Tax Returns that are due prior to the Closing (taking into account any applicable extensions) and pay any Taxes due on any such Tax Return and, at least three (3) days before any Pre-Closing Separate Tax Return that is required to be filed after the Closing is due (taking into account any applicable extensions), shall pay Purchaser (or a Subsidiary of Purchaser designated by Purchaser) the amount of Taxes shown as due thereon to the extent any such Taxes are Seller Indemnified Taxes for which Seller Parent is liable pursuant to this Agreement.
(ii) Other than Tax Returns for which Seller Parent is responsible pursuant to Section 6.5(a)(i) and any Tax Returns described in Section 6.5(g)(iii), Purchaser shall prepare and timely file, or cause to be prepared and timely filed, all Tax Returns of the Conveyed Subsidiaries and their Subsidiaries (taking into account any applicable extensions). Any such Tax Return required to be filed by Purchaser for a Tax period that includes (but does not end on) the Closing Date (any such Tax period, a Straddle Period, and any such Tax Return, a Straddle Period Tax Return,) and any Tax Return (or relevant portion thereof) of Purchaser or any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries after the Closing) that includes or reflects (or is required to include or reflect) Seller Indemnified Taxes for which Seller Parent would reasonably be expected to be liable pursuant to this Agreement (any such Tax Return, or relevant portion thereof, or any Straddle Period Tax Return, a Seller Indemnifiable Tax Return) shall, where applicable, be prepared (1) in a manner consistent with the past practices of the applicable Conveyed Subsidiary (or Subsidiary thereof), other than as required as a
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result of the Seller Internal Restructurings and except to the extent that there is not at least a more likely than not basis for a position under applicable Law or such position would reasonably be expected to result in Purchaser or its Subsidiaries being liable for any material Taxes that are not Seller Indemnified Taxes for which Seller Parent is liable pursuant to this Agreement and (2) in accordance with the terms of this Agreement. With respect to any Seller Indemnifiable Tax Return, Purchaser shall deliver to Seller Parent for its review, comment and approval, at least thirty (30) days, in the case of Income Tax Returns, and fifteen (15) days, in the case of non-Income Tax Returns, prior to the due date for the filing of such Seller Indemnifiable Tax Return (taking into account any applicable extensions), a statement setting forth the amount of Tax for which Seller Parent is responsible pursuant to Section 6.5(d)(i) and a copy of such Seller Indemnifiable Tax Return, together with any additional information that Seller Parent may reasonably request. Seller Parent shall have the right to review such Seller Indemnifiable Tax Return, statement and any additional information prior to the filing of such Seller Indemnifiable Tax Return, and Purchaser shall reflect on such Seller Indemnifiable Tax Return, as filed, any reasonable comments submitted by Seller Parent at least fifteen (15) days, in the case of Income Tax Returns, and five (5) days, in the case of non-Income Tax Returns, prior to the due date of such Seller Indemnifiable Tax Return (taking into account any applicable extensions) to the extent any such comments would not be reasonably expected to result in Purchaser or its Subsidiaries being liable for any material Taxes that are not Seller Indemnified Taxes for which Seller Parent is liable pursuant to this Agreement. Seller Parent shall, at least three (3) days before any Tax Return that Purchaser is obligated to file under Section 6.5(a) (ii) is due, pay Purchaser (or a Subsidiary of Purchaser designated by Purchaser) the amount of Taxes shown as due thereon to the extent any such Taxes are Seller Indemnified Taxes.
(iii) Neither Purchaser nor any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries after the Closing) shall amend or revoke any Pre-Closing Separate Tax Return or Straddle Period Tax Return, or agree to any waiver or extension of the statute of limitations, relating to Taxes with respect to any Conveyed Subsidiary (or any Subsidiary thereof) for a Pre-Closing Tax Period, without the prior written consent of Seller Parent (which consent shall not be unreasonably withheld, conditioned or delayed). Upon Seller Parents reasonable request, at the sole cost and expense of Seller Parent, Purchaser shall file, or cause to be filed, any amended Pre-Closing Separate Tax Return in the form and substance reasonably requested by Seller Parent and in a manner consistent with the past practices of the applicable Conveyed Subsidiary or its Subsidiary (other than as required as a result of the Seller Internal Restructurings), except to the extent that there is not at least a more likely than not basis for a position under applicable Law, provided that Purchaser shall not be required to file any such amended Tax Return to the extent it would reasonably be expected to result in Purchaser or its Subsidiaries being liable for any material Taxes that are not Seller Indemnified Taxes for which Seller Parent is liable pursuant to this Agreement or otherwise result in commercial consequences that materially and adversely affect Purchaser.
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(iv) Notwithstanding anything herein to the contrary, this Section 6.5(a) shall not apply to any Tax Returns in respect of Transfer Taxes described in Section 6.5(j) or any VAT described in Section 6.5(k).
(b) Carryforwards and Carrybacks. Purchaser shall cause the Conveyed Subsidiaries and their Subsidiaries, to the extent permitted by applicable Law, not to carry back into any Pre-Closing Tax Period, and to carry forward into any taxable period beginning after the Closing Date any Tax Asset arising after the Closing Date (a Subsequent Loss) that could, whether in the absence of an election or otherwise, be carried back to a Pre-Closing Tax Period. Purchaser shall take, and shall cause its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) to take, all steps reasonably necessary to avoid such carry back (and achieve such carryforward), including by making all necessary elections. If a Subsequent Loss is not permitted by applicable Law to be carried forward into any taxable period beginning after the Closing Date and is required to be carried back into any Pre-Closing Tax Period, then after providing notice to Seller Parent of such required carryback, Purchaser and its Subsidiaries shall be entitled to any refund of Taxes resulting from any carryback of such Subsequent Loss into any such Pre-Closing Tax Period; provided that Purchaser shall indemnify and hold Seller Parent and its Affiliates harmless from and against any Tax Liability resulting from the carryback of a Subsequent Loss and any other costs and expenses associated with or incurred in connection with obtaining, collecting or paying over a refund resulting from such carryback to the extent such carryback of a Subsequent Loss is reflected on a Seller Combined Tax Return. To the extent any such Subsequent Loss or related refund is subsequently disallowed or required to be returned by Seller Parent or its Affiliates to a Governmental Authority, Purchaser agrees to promptly repay any amounts previously paid over by Seller Parent to Purchaser (or its Subsidiaries) in respect of such Subsequent Loss or related refund, together with any interest, penalties or other additional amounts imposed by such Governmental Authority, to Seller Parent.
(c) Refunds and Other Tax Benefits.
(i) Any Loss or Tax that Seller Parent or any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries prior to the Closing), on the one hand, or Purchaser Parent or any of its Affiliates on the other hand, is responsible for under this Agreement (including pursuant to this Section 6.5, Section 6.6 or Article VII, and including any amounts that are economically borne by Seller Parent or Purchaser Parent, as the case may be, through an adjustment under Section 2.8 or Section 2.9), shall be determined net of any Tax Benefit arising from any Tax Item in respect of any such Loss or Tax realized in the taxable year of such Loss or Tax or the subsequent two taxable years. If any such Tax Benefit was not included in the initial computation of such Loss or Tax, the Purchaser shall pay to Seller Parent or Purchaser Parent, as the case may be, the amount of the applicable Tax Benefit. The amount of any payment for a Tax Benefit that is due under the prior sentence shall be paid within fifteen (15) days of the filing of the Tax Return with respect to
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which the Tax Benefit is actually realized (or, if the Tax Benefit is in the form of an increased cash Tax refund, within fifteen (15) days of the receipt of such cash Tax refund from the applicable Governmental Authority). To the extent permitted to be claimed or deducted on a more likely than not basis on an applicable relevant Tax Return, Purchaser shall, and shall cause its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries after the Closing) to claim any Tax Item in respect of any Loss or Tax described in the first sentence of this Section 6.5(c) resulting in a Tax Benefit described in this Section 6.5(c) on such Tax Return.
(ii) Without duplication of amounts covered by Section 6.5(c)(i), Seller Parent shall be entitled to any refund or credit against any Seller Indemnified Taxes for which Seller Parent is liable pursuant to this Agreement except to the extent any such refund or credit was (A) reflected as an asset on the Final Closing Statement and taken into account in the calculation of the Final Business Working Capital or Final Business Net Cash (with respect to the determination of Seller Accrued Income Taxes to the extent offsetting a Tax Liability in such calculation), (B) is described in Section 6.5(b), or (C) is required to be paid to any other Person pursuant to any Contract entered into prior to the Closing by a Conveyed Subsidiary or any Subsidiary thereof. Purchaser shall be entitled to any refunds or credits of or against any Taxes of the Conveyed Subsidiaries (and their Subsidiaries) other than refunds or credits to which Seller Parent is entitled pursuant to the foregoing sentence. If Seller Parent determines that any of the Conveyed Subsidiaries (or Subsidiaries thereof) is entitled to file or make a formal or informal claim for a refund of Taxes (including by filing an amended Tax Return) to which Seller Parent would be entitled under this Section 6.5(c)(ii), Seller Parent shall be entitled to file or make, or to request that Purchaser or its relevant Affiliate (including the applicable Conveyed Subsidiary or Subsidiary thereof) file or make, such formal or informal claim for refund, and Seller Parent shall be entitled to control the prosecution of such claim for refund as if such claim was a Tax Proceeding described in Section 6.5(e)(iii) and Seller Parent were the Controlling Party provided, that Seller Parent shall not be entitled to file or make, or to request that Purchaser or its relevant Affiliate (including the applicable Conveyed Subsidiary or Subsidiary thereof) file or make, such formal or informal claim for refund to the extent it would reasonably be expected to result in Purchaser or its Subsidiaries being liable for any material Taxes that are not Seller Indemnified Taxes for which Seller Parent is responsible under this Agreement or otherwise result in consequences that materially and adversely affect Purchaser. Purchaser shall reasonably cooperate, and cause its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries after the Closing) to reasonably cooperate, with respect to any such request by Seller Parent or in any such claim for refund, and shall pay or cause to be paid to Seller Parent the amount (including interest) of any related refund or credit received by Purchaser or any Affiliate thereof (including any Conveyed Subsidiary or Subsidiary thereof), net of any costs, expenses and Taxes occurred in obtaining, collecting or paying over such refund, credit, offset or other similar benefit within fifteen (15) days of receipt (or realization) thereof. Any refund of, or credit against, Taxes that is received or realized with respect to Taxes attributable to any Conveyed Subsidiary (or Subsidiary thereof), the Purchased Assets or the Business for a Straddle Period shall be equitably apportioned between Seller Parent and Purchaser in a manner consistent with the principles set forth in Section 6.5(d)(iii) and the first sentence of this Section 6.5(c)(ii).
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(iii) Without duplication of amounts covered by Section 6.5(c)(i), Purchaser Parent shall be entitled to any refund or credit against any Purchaser Parent Indemnified Taxes for which Purchaser Parent is responsible under this Agreement except to the extent any such refund or credit was (A) reflected as an asset on the Final Closing Statement and taken into account in the calculation of the Final Purchaser Working Capital or Final Purchaser Net Cash (with respect to the determination of Purchaser Accrued Income Taxes to the extent offsetting a Tax Liability in such calculation) or (B) required to be paid to any other Person pursuant to any Contract entered into prior to the Closing by Purchaser or any Subsidiary thereof. Purchaser shall be entitled to any refunds or credits of or against any Taxes of Purchaser or the Subsidiaries of Purchaser (other than the Conveyed Subsidiaries (and their Subsidiaries)) other than refunds or credits to which Purchaser Parent is entitled pursuant to the foregoing sentence. If Purchaser Parent determines that Purchaser or any of the Subsidiaries of Purchaser (other than the Conveyed Subsidiaries (and their Subsidiaries)) is entitled to file or make a formal or informal claim for a refund of Taxes (including by filing an amended Tax Return) to which Purchaser Parent would be entitled under this Section 6.5(c)(iii), Purchaser Parent shall be entitled to file or make, or to request that Purchaser or its relevant Affiliate (including the applicable Subsidiary of Purchaser thereof) file or make, such formal or informal claim for refund, and Purchaser Parent shall be entitled to control the prosecution of such claim for refund as if such claim was a Tax Proceeding described in Section 6.5(e)(iii) and Purchaser Parent were the Controlling Party; provided that Purchaser Parent shall not be entitled to file or make, or to request that Purchaser or its relevant Affiliate file or make, such formal or informal claim for refund to the extent it would reasonably be expected to result in Purchaser or its Subsidiaries being liable for any material Taxes that are not Purchaser Parent Indemnified Taxes for which Purchaser Parent is responsible under this Agreement or otherwise result in consequences that materially and adversely affect Purchaser. Purchaser shall reasonably cooperate, and cause its Affiliates to reasonably cooperate, with respect to any such request by Purchaser Parent or in any such claim for refund, and shall pay or cause to be paid to Purchaser Parent the amount (including interest) of any related refund or credit received or realized by Purchaser or any Affiliate thereof (including any Conveyed Subsidiary or Subsidiary thereof), net of any costs, expenses and Taxes occurred in obtaining, collecting or paying over such refund or credit within fifteen (15) days of receipt (or realization) thereof. Any refund of, or credit against, Taxes that is received or realized with respect to Taxes attributable to Purchaser or its Subsidiaries (other than the Conveyed Subsidiaries (and their Subsidiaries)) for a Straddle Period shall be equitably apportioned between Purchaser Parent and Purchaser in a manner consistent with the principles set forth in Section 6.5(d)(iii) and the first sentence of this Section 6.5(c)(iii).
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(d) Tax Indemnification.
(i) Subject to Section 6.5(d)(v), from and after the Closing, Seller Parent agrees to indemnify and hold harmless Purchaser and its Subsidiaries (including the Conveyed Subsidiaries and their Subsidiaries after the Closing Date) (collectively, the Purchaser Tax Indemnified Parties) from and against all liability, without duplication, for (1) Taxes of the Conveyed Subsidiaries and their Subsidiaries for any Pre-Closing Tax Period (including any Taxes payable in respect of an election under Section 965(h) of the Code), (2) Taxes of any Seller (other than any Transfer Taxes and VAT for which Purchaser is responsible hereunder) including, Taxes (other than Taxes of the Conveyed Subsidiaries and their Subsidiaries) imposed with respect to, arising out of or relating to the Purchased Assets or the Business for a Pre-Closing Tax Period, (3) Taxes of any Person (other than the Conveyed Subsidiaries and their Subsidiaries) for a Pre-Closing Tax Period for which any Conveyed Subsidiary (or any Subsidiary thereof) is liable under Treasury Regulation Section 1.1502-6 (or a similar provision of state, local or foreign Law), or as a transferee or successor or by Contract (other than Contracts that do not relate primarily to Taxes), (4) Taxes arising out of or resulting from any breach of any covenant or agreement of Seller Parent or any of its Affiliates contained in this Agreement, (5) Taxes for a Pre-Closing Tax Period imposed on (x) any transaction effected pursuant to Section 2.3(b), (y) any settlement of any intercompany accounts of Seller Parent or its Subsidiaries pursuant to Section 6.7, or (z) any transaction or step forming part of the Seller Internal Restructurings, (6) Transfer Taxes for which Seller Parent is responsible under Section 6.5(j), (7) Taxes required to be deducted or withheld with respect to the payment of the Purchase Consideration or any amounts payable to Seller Parent pursuant to Section 2.8 or Section 2.9, including any penalties imposed on Purchaser as a result of Purchasers failure to deduct or withhold any such amounts that Purchaser (or a Purchaser Designated Affiliate) was permitted to withhold under Section 2.10 (in each case, subject to Purchasers compliance with the notice and cooperation requirements of Section 2.10 and except for any such Taxes (and any related penalties) required to be deducted or withheld solely as a result of any assignment by Purchaser or its Affiliates for which Purchaser is responsible pursuant to Section 10.3), (8) Taxes arising from any breach of any representation or warranty contained in Section 4.16(k), (9) Taxes arising as a result of any Conveyed Subsidiary or any Subsidiary of any Conveyed Subsidiary at any time ceasing to be a member of a group for the purposes of any Tax, of which group Seller Parent or any Subsidiary of Seller Parent is or was also a member and (10) any costs and expenses, including reasonable legal and accounting fees and expenses, attributable to any item described in clauses (1) through (9) (any such Taxes for which Seller Parent is responsible pursuant to this Section 6.5(d)(i), subject to the following proviso, Seller Indemnified Taxes); provided that Seller Parent shall not be required to indemnify or hold harmless any Purchaser Tax Indemnified Party from and against any liability pursuant to this Section 6.5(d)(i) for (A) Taxes attributable to any action taken after the Closing by Purchaser, any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries), or any transferee of Purchaser or any of its Affiliates
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(including the Conveyed Subsidiaries and their Subsidiaries), other than any such action that (1) is in the ordinary course of business, (2) is expressly permitted or contemplated by this Agreement, or (3) is required to be taken in order to comply with applicable Law or as a result of a change in applicable Law (a Purchaser Tax Act), (B) Taxes that were reflected, accrued or reserved for in the Final Closing Statement, Final Business Working Capital, or Final Business Net Cash, (C) Income Taxes to the extent that a Conveyed Subsidiary or any Subsidiary thereof had any Tax Assets as of the close of business on the Closing Date that were available, or would have been available but for their prior utilization by Purchaser or any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries after the Closing) to offset or otherwise reduce the applicable Tax Liability in respect of such Income Taxes (except any Tax Asset reflected as an asset in the Final Closing Statement and taken into account in the calculation of the Final Business Working Capital or the Final Business Net Cash), or (D) Taxes for which Purchaser Parent is responsible under Section 6.5(d)(ii).
(ii) Subject to Section 6.5(d)(v), from and after the Closing, Purchaser Parent shall indemnify and hold harmless the Purchaser Tax Indemnified Parties from and against all liability, without duplication, for (1) all Taxes of Purchaser Parent and its Affiliates (other than Purchaser and its Subsidiaries) for any Tax period (other than Transfer Taxes and VAT for which Seller Parent is responsible hereunder), (2) Taxes of Purchaser and its Subsidiaries (other than the Conveyed Subsidiaries and their Subsidiaries) for any Pre-Closing Tax Period, (3) Taxes of any Person for a Pre-Closing Tax Period for which Purchaser (or any Subsidiary thereof other than any Conveyed Subsidiaries and their Subsidiaries) is liable under Treasury Regulation Section 1.1502-6 (or a similar provision of state, local or foreign Law), or as a transferee or successor or by Contract (other than Contracts that do not relate primarily to Taxes), (4) Taxes arising out of or resulting from any breach of any covenant or agreement of Purchaser Parent, Purchaser or their respective Affiliates contained in this Agreement, (5) Transfer Taxes for which Purchaser Parent is responsible under Section 6.5(j), (6) Taxes arising from any breach of any representation or warranty in Section 5.17(k), (7) Taxes for a Pre-Closing Tax Period imposed on (x) any settlement of any intercompany accounts of Purchaser or any Subsidiary of Purchaser, on the one hand, and Purchaser Parent or any Subsidiary of Purchaser Parent (other than Purchaser and its Subsidiaries), on the other hand, pursuant to Section 6.7 or (y) any transaction or step forming part of the Purchaser Internal Restructurings, (8) Taxes required to be deducted or withheld with respect to any amounts payable to Purchaser Parent pursuant to Section 2.8 or Section 2.9, including any penalties imposed on Purchaser as a result of Purchasers failure to deduct or withhold any such amounts, (9) Taxes arising as a result of Purchaser or any Subsidiary of Purchaser (other than any Conveyed Subsidiary or a Subsidiary thereof) at any time ceasing to be a member of a group for the purposes of any Tax, of which group Purchaser Parent or any Subsidiary of Purchaser Parent (other than Purchaser or any Subsidiary of Purchaser) is or was also a member and (10) any costs and expenses, including reasonable legal and accounting fees and expenses,
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attributable to any item described in clauses (1) through (9) (any such Taxes for which Purchaser Parent is responsible pursuant to this Section 6.5(d)(ii), subject to the following proviso, Purchaser Parent Indemnified Taxes); provided that Purchaser Parent shall not be required to indemnify or hold harmless any Purchaser Tax Indemnified Party from and against any liability for (A) Taxes attributable to any action taken after the Closing by Seller Parent or any of its Affiliates, other than any such action that (1) is in the ordinary course of business, (2) is expressly permitted or contemplated by this Agreement, or (3) is required to be taken in order to comply with applicable Law or as a result of a change in applicable Law (a Seller Tax Act), (B) Taxes that were reflected, accrued or reserved for in the Final Closing Statement, Final Purchaser Working Capital or the Final Purchaser Net Cash, (C) Income Taxes to the extent that Purchaser or any Subsidiary thereof had any Tax Assets as of the close of business on the Closing Date that were available, or would have been available but for their prior utilization by Purchaser or any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries after the Closing), to offset or otherwise reduce the applicable Tax Liability in respect of such Income Taxes (except any Tax Asset reflected as an asset in the Final Closing Statement and taken into account in the calculation of the Final Purchaser Working Capital or the Final Purchaser Net Cash), or (D) Taxes for which Seller Parent is responsible under Section 6.5(d)(i).
(iii) To the extent permitted or required by applicable Law, the taxable year of each of the Conveyed Subsidiaries and their Subsidiaries and any Subsidiary of Purchaser that includes the Closing Date shall be treated as closing on (and including) the Closing Date. Otherwise, for purposes of this Agreement, in the case of any Straddle Period:
(A) Property Taxes allocable to the Pre-Closing Tax Period shall be computed based upon the ratio of the number of days in the Pre-Closing Tax Period to the number of days in the entire Straddle Period; and
(B) Taxes (other than Property Taxes) allocable to the Pre-Closing Tax Period shall be computed as if such Tax period ended as of the close of business on the Closing Date and, in the case of any Taxes of Conveyed Subsidiaries (and their Subsidiaries) and Seller Parent, or in the case of any Taxes of Purchaser Parent and Purchaser (and their Subsidiaries prior to the Closing), in each case attributable to the ownership of any equity interest in any partnership or other flow through entity for tax purposes (including of any controlled foreign corporation, as defined under the Code) as if the Tax period of such partnership or other flow through entity ended as of the close of business on the Closing Date with the Taxes of such entity for the Pre-Closing Tax Period deemed to include any Taxes on the allocable income of such entity in respect of such Tax period; provided that exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions) shall be allocated between the period ending on the Closing Date and the period beginning after the Closing Date in proportion to the number of days in each period.
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(iv) Any claim for indemnification under this Section 6.5(d) shall be made in writing upon the party from whom indemnification is sought, and shall specify in reasonable detail the basis for such claim. Any indemnity payment required to be made pursuant to this Section 6.5(d) shall be made within thirty (30) days after the indemnified party makes written demand upon the indemnifying party, but in no case earlier than five (5) Business Days prior to the date on which the relevant Taxes are required to be paid to the applicable Taxing Authority.
(v) With respect to any Taxes suffered or incurred by any Conveyed Subsidiary (or any Subsidiary thereof) that was not wholly owned by Seller Parent (directly or indirectly) as of immediately prior to the Closing, the indemnification obligations of Seller Parent pursuant to Section 6.5(d)(i) in respect of such Taxes (or related costs and expenses) shall in no event exceed an amount equal to (A) the amount of such Taxes (or related costs and expenses) for which the Purchaser Tax Indemnified Parties would otherwise be entitled to indemnification pursuant to Section 6.5(d), as if such Conveyed Subsidiary (or any Subsidiary thereof) were wholly owned by Seller Parent, multiplied by (B) the direct and indirect percentage ownership of Seller Parent of such Conveyed Subsidiary (or Subsidiary thereof) as of immediately prior to the Closing. With respect to any Taxes suffered or incurred by any Subsidiary of Purchaser Parent (including Purchaser and its Subsidiaries) that was not wholly owned by Purchaser Parent (directly or indirectly) as of immediately prior to the Closing, the indemnification obligations of Purchaser Parent pursuant to Section 6.5(d)(ii) in respect of such Taxes (or related costs and expenses) shall in no event exceed an amount equal to (A) the amount of such Taxes (or related costs and expenses) for which the Purchaser Tax Indemnified Parties would otherwise be entitled to indemnification pursuant to Section 6.5(d), as if such Subsidiary were wholly owned by Purchaser Parent, multiplied by (B) the direct and indirect percentage ownership of Purchaser Parent of such Subsidiary as of immediately prior to the Closing.
(vi) Without duplication to any other amounts paid pursuant to this Section 6.5:
(A) Within thirty (30) days following the filing of any Income Tax Return for any Conveyed Subsidiary (or any Subsidiary thereof), on the one hand, or Purchaser (or any Subsidiary thereof, other than the Conveyed Subsidiaries and their Subsidiaries), on the other hand, for any Pre-Closing Tax Period or for any Straddle Period, Seller Parent or Purchaser Parent shall (or Purchaser Parent shall cause Purchaser to) prepare a statement showing (i) the amount of Income Taxes shown as due on such filed Income Tax Return with respect to the relevant Pre-Closing Tax Period or the portion of any Straddle Period ending on and including the Closing Date (the Final Pre-Closing Income Tax Amount) and (ii) the amount of the Seller
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Accrued Income Taxes or Purchaser Accrued Income Taxes, as applicable, attributable to such Income Tax Return as reflected on the Final Closing Statement (the Pre-Closing Income Tax Amount) and deliver such statement to Seller Parent and Purchaser Parent, as applicable. Purchaser Parent or Seller Parent, as applicable, shall have a period of fifteen (15) Business Days to provide comments to a schedule prepared (or caused to be prepared) by Seller Parent or Purchaser Parent, respectively. If Purchaser Parent or Seller Parent, as applicable, do not provide any comments to Seller Parent or Purchaser Parent, respectively, during such period, the statement as so prepared shall be final and binding.
(B) In the event the Final Pre-Closing Income Tax Amount with respect to any Income Tax Return is less than the amount of the Pre-Closing Income Tax Amount attributable to such Income Tax Return that was included on the Final Closing Statement, the Purchaser shall within five (5) Business Days following the finalization of the Final Pre-Closing Income Tax Amount hereunder (i) pay to Seller Parent the amount of such difference with respect to a Conveyed Subsidiary and their Subsidiaries and (ii) pay to Purchaser Parent the amount of such difference with respect to Purchaser and its Subsidiaries.
(vii) The Parties shall use reasonable best efforts to structure any indemnity payment, true-up payment, or payment in respect of Tax Benefits made by any Party pursuant to this Agreement (including pursuant to this Section 6.5, Section 6.6 and Article VII) and any payment made by Purchaser Parent to Purchaser pursuant to Section 2.8 or Section 2.9 in the manner set forth in Clause 10 of the Structuring Considerations Agreement. The Parties shall use reasonable best efforts to structure as a special dividend any payment made by Purchaser to Purchaser Parent pursuant to Section 2.8, Section 2.9 or this Section 6.5.
(e) Tax Contests.
(i) If a claim shall be made by any Taxing Authority (a Tax Claim) which, if successful, would reasonably be expected to result in an indemnity payment pursuant to Section 6.5(d), the indemnified party shall promptly notify the indemnifying party in writing of such claim (and provide copies of any documents received from the Taxing Authority in respect of such claim); provided that the failure to provide such notice shall not relieve the indemnifying party of its indemnification obligations hereunder except to the extent the indemnifying party is prejudiced thereby and expenses are incurred during the period in which notice was not provided. Such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of the relevant portion of any correspondence received from the Taxing Authority.
(ii) With respect to any Tax Claim relating to a Conveyed Subsidiary (or any Subsidiary thereof) for any Tax period ending on or before the Closing Date, to Seller Parent (or any Subsidiary thereof) for any taxable period, or with respect to, a Seller Combined Tax Return, Seller Parent shall control all Tax Proceedings and
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shall make all decisions taken in connection with such Tax Proceeding (including selection of counsel), and, without limiting the foregoing, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with any Taxing Authority with respect thereto, and may either pay the applicable Tax Liability and sue for a refund or contest the Tax Claim; provided, that in the case of such Tax Proceeding with respect to a Tax Return of a Conveyed Subsidiary (or any Subsidiary thereof) other than a Seller Combined Tax Return, Seller Parent shall not settle such Tax Proceeding if doing so would reasonably be expected to materially increase the Tax Liability of Purchaser or its Subsidiaries (including the Conveyed Subsidiaries and any Subsidiary thereof after the Closing), taking into account any indemnification for Tax Liabilities under this Agreement, without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, delayed or conditioned. In the case of any such Tax Proceeding with respect to a Conveyed Subsidiary (or a Subsidiary thereof), Seller Parent shall (x) notify Purchaser of any material development with respect to any such Tax Proceeding, (y) provide Purchaser with copies of any material documents submitted in connection with such Tax Proceeding and (z) notify Purchaser regarding any material action to be taken by Seller Parent with respect to such Tax Proceeding (and take Purchasers comments into consideration in good faith), in each case, solely to the extent relating to matters or aspects of such Tax Proceeding that would reasonably be expected to materially increase the Tax Liability of a Conveyed Subsidiary (or a Subsidiary thereof) in a Post-Closing Tax Period.
(iii) In the case of any Tax Proceeding relating to Taxes of the Conveyed Subsidiaries (and their Subsidiaries) for any Straddle Period, the Controlling Party shall have the right and obligation to conduct such Tax Proceeding; provided that the Controlling Party shall (u) notify the Non-Controlling Party of any material development with respect to such Tax Proceeding, (v) provide the Non-Controlling Party with copies of any material documents submitted in connection with such Tax Proceeding, (w) consult with the Non-Controlling Party before submitting any written materials or taking any significant action in connection with the conduct of such Tax Proceeding, (x) provide, to the extent possible, for the Non-Controlling Party to participate in such Tax Proceeding at its own expense, (y) defend such Tax Proceeding diligently and in good faith, and (z) not settle any such Tax Proceeding if doing so would reasonably be expected to materially increase the Tax Liability of the Non-Controlling Party or its Affiliates (taking into account any indemnification for Tax Liabilities under this Agreement), without the prior written consent of the Non-Controlling Party, which consent shall not be unreasonably withheld, delayed or conditioned. For purposes of this Agreement, Controlling Party shall mean Seller Parent if Seller Parent and its Affiliates are reasonably expected to bear the greater Tax Liability in connection with such Tax Proceeding, or Purchaser if Purchaser and its Affiliates are reasonably expected to bear the greater Tax Liability in connection with such Tax Proceeding; and Non-Controlling Party means whichever of Seller Parent or Purchaser is not the Controlling Party with respect to such Tax Proceeding.
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(iv) Except as otherwise provided herein, Purchaser shall control all Tax Proceedings with respect to the Conveyed Subsidiaries (and their Subsidiaries) for any taxable period beginning after the Closing Date and any Tax Proceeding with respect to Purchaser or any of its Affiliates relating to any Seller Indemnifiable Tax Return; provided that Seller Parent shall be deemed to be a Non-Controlling Party (with the rights described in Section 6.5(e)(iii)) with respect to any such Tax Proceeding if the resolution of any such Tax Proceeding would reasonably be expected to materially increase the Tax Liability of a Conveyed Subsidiary (or a Subsidiary thereof) in a Pre-Closing Tax Period or the amount of indemnification for which Seller Parent is responsible pursuant to Section 6.5(d)(i).
(v) Purchaser, the Conveyed Subsidiaries and each of their respective Affiliates, on the one hand, and Seller Parent and its Affiliates, on the other hand, shall cooperate in contesting any Tax Claim, which cooperation shall include the retention and, upon request, the provision to the requesting Party of records and information which are reasonably relevant to such Tax Claim, and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder or to testify at related Tax Proceedings. Purchaser Parent and Seller Parent and their applicable Affiliates shall execute and deliver such powers of attorney and other documents as are necessary to carry out the intent of this Section 6.5(e)(v). Notwithstanding anything herein to the contrary, (A) Seller Parent shall not be required to provide Purchaser or its Affiliates with a copy, or otherwise disclose the contents, of any Seller Combined Tax Return (except to the extent such information relates solely to a Conveyed Subsidiary or its Subsidiaries), (B) Seller Parent shall have the exclusive right to control in all respects, and neither Purchaser nor any of its Affiliates shall be entitled to participate in, any Tax Proceeding with respect to any Tax Return of Seller Parent or any of its Affiliates or any Seller Combined Tax Return, and (C) Purchaser Parent shall not be required to provide Seller Parent, Purchaser or its Affiliates with a copy, or otherwise disclose the contents, of any Tax Return that includes Purchaser Parent or any of its Affiliates (other than Purchaser and any Subsidiary thereof), on the one hand, and Purchaser and any Subsidiary thereof (other than any Conveyed Subsidiary or Subsidiary thereof), on the other hand (Purchaser Parent Combined Tax Returns) and Purchaser Parent shall have the exclusive right to control in all respects, and neither Seller Parent nor any of its Affiliates shall be entitled to participate in, any Tax Proceeding with respect to any Purchaser Parent Combined Tax Return.
(f) Internal Restructurings.
(i) Notwithstanding anything herein to the contrary, but subject to Section 2.2, Section 6.3 and Section 6.4, Seller Parent shall, at its sole cost and expense, effective from a date on or prior to the Closing Date, implement the transactions necessary to deliver on the Closing Date the Business and the Purchased Assets in a manner consistent with Section 6.5(f) of the Seller Disclosure Letter (such transactions, as finally described in the Seller Parent Final Plan (as defined below),
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the Seller Internal Restructurings); provided that within seventy-five (75) days of the date hereof, Seller Parent shall deliver to Purchaser Parent for Purchaser Parents review and reasonable comment an initial draft of a step plan (the Seller Parent Preliminary Plan) setting forth the steps Seller Parent shall undertake to effect the Seller Internal Restructurings; provided, further, that Seller Parent shall (x) consider in good faith any reasonable amendments, modifications or supplements to the Seller Parent Preliminary Plan proposed by Purchaser Parent and Purchaser and (y) shall, to the extent consistent with the principles set forth in Section 6.5(f) of the Seller Disclosure Letter, incorporate the input of Purchaser Parent and Purchaser on the Seller Parent Preliminary Plan (including the timing, structure and other details of such transactions). Subject to the finalization of the Seller Parent Final Plan pursuant to Section 6.5(f)(iii), at least twenty (20) Business Days prior to the Closing, Seller Parent shall provide to Purchaser Parent a list of the U.S. federal tax classification elections for each of the Conveyed Subsidiaries and Subsidiaries thereof as of the Closing, which list shall be true, correct and complete in all material respects and consistent with the Seller Parent Final Plan.
(ii) Notwithstanding anything herein to the contrary, but subject to Section 2.2, Section 6.3 and Section 6.4, Purchaser Parent shall, at its sole cost and expense, effective from a date on or prior to the Closing Date and Section 6.3(e)), implement the transactions necessary to deliver on the Closing Date any assets of Purchaser Parent or its Affiliates (other than Purchaser and its Subsidiaries and except for any assets and/or employees based in France or employed by any French Affiliate of Purchaser Parent) transferred to Purchaser or its Subsidiaries in connection with the transactions described herein in a manner consistent with Section 6.5(f) of the Purchaser Parent Disclosure Letter (such transactions, as finally described in the Purchaser Parent Final Plan (as defined below), the Purchaser Internal Restructurings); provided that within seventy-five (75) days of the date hereof, Purchaser Parent shall deliver to Seller Parent an initial draft of a step plan (the Purchaser Parent Preliminary Plan , and together with the Seller Parent Preliminary Plan, the Preliminary Plans) setting forth steps Purchaser Parent shall undertake to effect the Purchaser Internal Restructurings for Seller Parents review and reasonable comment; provided, further, that Purchaser Parent shall (x) consider in good faith any reasonable amendments, modifications or supplements to the Purchaser Parent Preliminary Plan proposed by Seller Parent and (y) Purchaser Parent shall, to the extent consistent with the principles set forth in Section 6.5(f) of the Purchaser Parent Disclosure Letter, incorporate the input of Seller Parent on the Purchaser Parent Preliminary Plan (including the timing, structure and other details of such transactions). Subject to the finalization of the Purchaser Parent Final Plan pursuant to Section 6.5(f)(iv), at least twenty (20) Business Days prior to the Closing, Purchaser Parent shall provide to Seller Parent a list of the U.S. federal tax classification elections for each of Purchaser and its Subsidiaries as of the Closing, which list shall be true, correct and complete in all material respects and consistent with the Purchaser Parent Final Plan.
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(iii) Following the delivery of the Seller Parent Preliminary Plan, any amendments, modifications or supplements to the Seller Parent Preliminary Plan reasonably proposed by Seller Parent shall be considered in good faith by Purchaser Parent, and the Parties shall negotiate in good faith regarding any such proposed amendments, modifications or supplements to which Purchaser Parent objects. Purchaser Parents approval shall be required before the Seller Parent Preliminary Plan becomes final (such approval not to be unreasonably, withheld, conditioned or delayed) (such plan, once finalized pursuant to this Section 6.5(f), the Seller Parent Final Plan). For the avoidance of doubt, if no amendments, modifications or supplements are reasonably proposed by Purchaser Parent following the delivery of the Seller Parent Preliminary Plan, the Seller Parent Preliminary Plan shall be the Seller Parent Final Plan.
(iv) Following the delivery of the Purchaser Parent Preliminary Plan, any amendments, modifications or supplements to the Purchaser Parent Preliminary Plan reasonably proposed by Purchaser Parent shall be considered in good faith by Seller Parent, and the Parties shall negotiate in good faith regarding any such proposed amendments, modifications or supplements to which Seller Parent objects. Seller Parents approval shall be required before the Purchaser Parent Preliminary Plan becomes final (such approval not to be unreasonably, withheld, conditioned or delayed) (such plan, once finalized pursuant to this Section 6.5(f), the Purchaser Parent Final Plan). For the avoidance of doubt, if no amendments, modifications or supplements are reasonably proposed by Seller Parent following the delivery of the Purchaser Parent Preliminary Plan, the Purchaser Parent Preliminary Plan shall be the Purchaser Parent Final Plan.
(v) Seller Parent and Purchaser Parent each shall, when proposing amendments, modifications and supplements to the Preliminary Plans and when reviewing and considering such proposed amendments, modifications and supplements for their respective approval, act reasonably and in good faith consistent with the principles set forth in Section 6.5(f) of the Seller Disclosure Letter.
(g) Certain Tax Elections and Post-Closing Actions.
(i) Purchaser shall not, and shall cause its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) not to, take any action on the Closing Date (after the Closing) other than in the ordinary course of business with respect to the Purchased Assets, the Assumed Liabilities, the Business or any Conveyed Subsidiaries or Subsidiaries thereof, except as expressly contemplated herein.
(ii) With respect to any Conveyed Subsidiary (or Subsidiary thereof), Purchaser shall not (A) make or cause or permit to be made an election under Section 338(g) of the Code (or any similar election permitted under state, local or foreign Law), (B) make or cause or permit to be made any election (including any election pursuant to Treasury Regulation Section 301.7701-3) that would be effective on or prior to the Closing Date or otherwise have retroactive effect with respect to a Pre-Closing Tax Period.
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(iii)
(A) Prior to the Closing, an Affiliate(s) of Seller Parent shall transfer the equity interests in Wyeth Pharmaceutical Co. Ltd and Treerly Health Co. Ltd (the China Entities ) to an Affiliate (or Affiliates) of Seller Parent in a direct equity transfer (the Direct Transfers) that is intended to be fully taxable for Chinese Tax purposes. Seller Parent or an applicable Affiliate shall timely pay any Chinese Taxes attributable to any such Direct Transfer, based on a third-party valuation by an independent PRC licensed appraiser of Seller Parents choosing, to the appropriate PRC Taxing Authority and file any applicable Tax Returns with the appropriate PRC Taxing Authority. The applicable Seller(s) shall, within five (5) business days in China after (i) the filing of any such Tax Returns, deliver to Purchaser complete copies of such Tax Returns and (ii) the tax receipts(s) are issued by the tax bureau(s), provide Purchaser with complete copies of such tax receipt(s). Any such Taxes shall be the sole responsibility of Seller Parent or the applicable Affiliate and subject to Section 6.5(d)(i).
(B)Following the Direct Transfers, Seller Parent shall effect, through Local Implementing Agreements, the indirect transfer of the China Entities to the Purchaser (the Indirect Transfers). Within thirty (30) days following the Indirect Transfers, Seller Parent or the applicable Affiliate shall voluntarily file (whether in one or more filings), on behalf of the applicable Seller(s) and Purchaser (or the applicable Purchaser Designated Affiliate), the documentation required by Circular SAT Notice [2015] 7 (Notice 7) as a result of the Indirect Transfers, and any related transfers, with the applicable PRC Taxing Authority. Seller Parent or the applicable Affiliate shall, within five (5) Business Days after the submission of such Notice 7 filing(s), deliver to Purchaser complete copies of any applicable Notice 7 filing(s) and, if provided, an acknowledgement of receipt of such Notice 7 filing(s) issued by the applicable PRC Taxing Authority. Seller Parent or the applicable Affiliate shall, in its sole discretion, control all communications relating to the Indirect Transfers and such Notice 7 filing(s) with the relevant PRC Taxing Authority and shall keep Purchaser reasonably informed of the progress of such communications (including by providing to Purchaser copies of all material reporting and filings relating to the Indirect Transfers and the Notice 7 filing(s)). If Seller Parent or the applicable Affiliate has fully complied with its obligations pursuant to this Section 6.5(g)(iii), then Purchaser (and its Affiliates) shall not communicate with or make any reporting to a PRC Taxing Authority regarding the Indirect Transfers or the Notice 7 filing(s), except in agreement with Seller Parent or the applicable Affiliate. Purchaser shall notify the applicable Seller(s) promptly, but in any event not later than five (5) Business Days after receipt, of any queries or requests by any PRC Taxing Authority related to the transfer of the China Entities to the Purchaser.
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(C) If the Indirect Transfers are determined to be taxable transactions in China, Seller Parent or the applicable Affiliate shall timely pay any additional China Taxes attributable to the Indirect Transfers to the appropriate PRC Taxing Authority and file any applicable Tax Returns with the appropriate PRC Taxing Authority. Any such Taxes shall be the sole responsibility of Seller Parent or the applicable Affiliate and subject to Section 6.5(d)(i).
(D) Absent a change in Law after the date hereof and subject to compliance with Clauses (A) through (C) of this Section 6.5(g)(iii), Purchaser Parent acknowledges and agrees that, notwithstanding anything herein to the contrary, it shall not, and it shall cause its Affiliates not to, withhold any amount with respect to Chinese Taxes in respect of the payment of the Purchase Consideration or any amounts payable to Seller Parent pursuant to Section 2.8 or Section 2.9 herein (nor reflect any such amount in the Final Closing Statement or take any such amount into account in the calculation of the Final Business Working Capital or the Final Business Net Cash).
(h) Tax Sharing Agreements. All Tax sharing agreements and arrangements between (i) any Conveyed Subsidiary or Subsidiary thereof, on the one hand, and Seller Parent or any of its Affiliates (other than any Conveyed Subsidiary or Subsidiary thereof), on the other hand, and (ii) Purchaser or any Subsidiary of Purchaser, on the one hand, and Purchaser Parent or any Subsidiary of Purchaser Parent (other than Purchaser and its Subsidiaries), on the other hand, shall be terminated effective at or before the Closing and shall have no further effect for any Tax period (whether past, present or future) and, after the Closing Date, neither Seller Parent nor any of its Affiliates, nor Purchaser nor any of its Affiliates, shall have any rights or obligations thereunder, and no additional payments shall be made thereunder with respect to any Tax period, whether in respect of a redetermination of Liabilities for Taxes or otherwise.
(i) Cooperation. Each of Purchaser and Seller Parent shall (and shall cause their respective Affiliates to) provide the other with such cooperation, information and records, and make such of its officers, directors, employees and agents available, as may reasonably be requested by the other Party in connection with the preparation or filing of any Tax Return, determining a liability for Taxes or payment under this Section 6.5, conducting any Tax Proceeding and the matters described in Section 6.5(f) of the Seller Disclosure Letter and Section 6.5(f) of the Purchaser Parent Disclosure Letter. Each of Purchaser and Seller Parent shall, within the earlier to occur of one hundred twenty (120) days after the Closing Date and forty-five (45) days prior to the due date for a Tax Return requiring such information (or as promptly as practicable to the extent any Tax Return is due within forty-five (45) days after the Closing Date), provide the other with Tax information materials, including schedules and work papers (including any information reasonably necessary to compile applicable transfer pricing documentation), prepared in a manner consistent with the Conveyed Subsidiaries (and their Subsidiaries) past practices, as requested by one another to enable one another to prepare, or cause to be prepared, all Tax Returns that each Party is obligated to prepare, or cause to be prepared, pursuant to Section 6.5(a)(i) or Section 6.5(a)(ii), as applicable. Notwithstanding anything in this Agreement to the contrary, (i) Seller Parent shall not be required to provide Purchaser Parent or Purchaser, or any of their respective Affiliates, with a copy of, or
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otherwise disclose the contents of, any Seller Combined Tax Return (provided that Seller Parent shall extract information therein and provide such information to Purchaser hereunder to the extent such information relates solely to a Conveyed Subsidiary or its Subsidiaries), and (ii) Purchaser Parent shall not be required to provide Seller Parent or any of its Affiliates with a copy of, or otherwise disclose the contents of, any Purchaser Parent Combined Tax Return. Each Party shall retain (and cause to be retained) all Tax Returns, schedules and work papers, and all material records and other documents relating to Tax matters, of the Conveyed Subsidiaries and their Subsidiaries for the Pre-Closing Tax Period until the expiration of the statute of limitations for the Tax periods to which the Tax Returns and other documents relate.
(j) Transfer Taxes. Notwithstanding anything to the contrary in this Agreement, Seller Parent shall be responsible for half of, and Purchaser Parent shall be responsible for half of, any Transfer Taxes imposed on the transfer of the Purchased Assets and Assumed Liabilities to Purchaser (or a Purchaser Designated Affiliate) and the costs of preparing and filing Tax Returns in respect of any such Transfer Taxes. The Party responsible under applicable Law for filing Tax Returns with respect to Transfer Taxes shall prepare and timely file such Tax Returns. Seller Parent and Purchaser Parent shall, and shall cause their respective Affiliates to, reasonably cooperate to timely prepare and file any Tax Returns or other filings relating to such Transfer Taxes and to minimize any such Transfer Taxes. For clarity, this Section 6.5(j) does not apply to any Transfer Taxes imposed on any transaction or step forming part of the Seller Internal Restructurings or the Purchaser Internal Restructurings. Seller Parent shall be solely responsible for any Transfer Taxes imposed on any transaction or step forming part of the Seller Internal Restructurings and the costs of preparing and filing any Tax Returns in respect of any such Transfer Taxes and Purchaser Parent shall be solely responsible for any Transfer Taxes imposed on any transaction or step forming part of the Purchaser Internal Restructurings and the costs of preparing and filing any Tax Returns in respect of any such Transfer Taxes.
(k) VAT.
(i) Subject to Section 6.5(k)(ii), all payments made pursuant to this Agreement are exclusive of VAT. Any VAT imposed on the transfers of the Purchased Assets and Assumed Liabilities to Purchaser (or any of the Purchaser Designated Affiliates) shall be charged to Purchaser (or the relevant Purchaser Designated Affiliate) in addition to the Purchase Consideration. Purchaser (or the relevant Purchaser Designated Affiliate) shall pay any such VAT upon receipt of the relevant VAT invoices, if such invoice is required under applicable Law. Purchaser and Seller Parent shall, and shall cause their respective Affiliates to, exercise commercially reasonable efforts to satisfy all compliance obligations necessary in order to treat any such transfer as a transfer of a going concern for VAT purposes where permissible under applicable Law. Where Seller Parent has treated, or caused its Affiliates to treat, a transaction under this Agreement as a transfer of a going concern or otherwise exempt from or outside the scope of VAT and it receives notice that a Taxing Authority disagrees with that treatment, it shall promptly notify Purchaser and reasonably cooperate with Purchaser to contest such disagreement upon Purchasers request, provided that Purchaser shall indemnify Seller Parent in respect of any costs,
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expenses, fees or Taxes incurred in connection with such contest. Seller Parent shall issue (or shall cause to be issued) any invoice necessary and reasonably cooperate with Purchaser and its Affiliates to provide information and documentation necessary for Purchaser and its Affiliates to comply with its VAT obligations under applicable Law. For clarity, this Section 6.5(k)(i) does not apply to any VAT imposed on any transaction or step forming part of the Seller Internal Restructurings or the Purchaser Internal Restructurings. Seller Parent shall be solely responsible for any VAT imposed on any transaction or step forming part of the Seller Internal Restructurings and the costs of preparing and filing any Tax Returns in respect of any such VAT and Purchaser Parent shall be solely responsible for any VAT imposed on any transaction or step forming part of the Purchaser Internal Restructurings and the costs of preparing and filing any Tax Returns in respect of any such VAT.
(ii) The Purchaser Parent Termination Fee is inclusive of any amounts in respect of VAT thereon but subject to the calculations set out in this Section 6.5(k) (ii). The Parties intend, and shall use reasonable efforts to secure, that the Purchaser Parent Termination Fee, being compensatory in nature, is not and will not be treated for VAT purposes as consideration for a taxable supply. If a Taxing Authority determines that the Purchaser Parent Termination Fee is, in whole or in part, consideration for a Tax supply for VAT purposes, then:
(A) if Purchaser Parent (or any other member of the VAT group to which it belongs) is liable to account for any VAT on the Purchaser Parent Termination Fee under a VAT reverse charge mechanism, the amount of the Purchaser Parent Termination Fee shall be reduced so that the sum of (x) the Purchaser Parent Termination Fee (as so reduced), and (y) any VAT reverse charge thereon which Purchaser Parent (or any other member of the VAT group to which it belongs) is not entitled to recover (by way of credit or repayment) as input tax, is equal to the unreduced amount of the Purchaser Parent Termination Fee. In that scenario, Purchaser Parent shall be responsible for complying with all obligations relating to that reverse charge imposed by the Laws of the jurisdiction in which the VAT is accountable under the reverse charge mechanism; and
(B) if Seller Parent is liable to account for any VAT on the Purchaser Parent Termination Fee, then to the extent that such VAT is recoverable (by way of credit or repayment) as input tax by Purchaser Parent (or any other member of the VAT group to which it belongs), the amount of the Purchaser Parent Termination Fee shall be increased such that, less any such recoverable VAT in respect thereof, it equals the amount of the Purchaser Parent Termination Fee before taking into account any adjustment under this Section 6.5(k)(ii)(B).
(l) Coordination. Notwithstanding anything herein to the contrary, (i) the indemnification obligations set forth in Section 6.5(d) shall survive until thirty (30) days following the expiration of the applicable statutes of limitations in respect of the relevant Taxes, (ii) the representations and warranties contained in Section 4.16(k) and Section 5.17(k) shall survive until
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thirty (30) days following the expiration of the applicable statute of limitations in respect of the relevant Taxes, and (iii) any and all indemnification in respect of Tax matters and the procedures relating thereto shall be governed exclusively by this Section 6.5 and, to the extent specified therein, Section 7.4, Section 7.6, Section 7.7, Section 7.8, Section 7.9, Section 7.10 and Section 7.11, and shall not be governed by the provisions of Article VII (other than, to the extent specified in Section 7.4, Section 7.6, Section 7.7, Section 7.8, Section 7.9, Section 7.10 and Section 7.11).
Section 6.6 Employees and Employee Benefits.
(a) Division of Liabilities Generally.
(i) Purchaser Assumed Employee Liabilities. Purchaser and its Subsidiaries (including, after the Closing, the Conveyed Subsidiaries and the Subsidiaries thereof) shall, effective as of the Closing, assume or retain all Liabilities in respect of (A) the Conveyed Subsidiary Plans (including Liabilities thereunder that relate to an employee or former employee who is not a Business Employee or Former Business Employee), (A) except as otherwise expressly provided in this Section 6.6, the service of the Business Employees and Former Business Employees to the Business or Purchaser Business prior to, on or following the Closing Date, including all Liabilities for compensation (including commissions, bonuses, incentive pay, overtime, premium pay, shift differentials and severance or termination pay) that become payable on or after the Closing, (A) except as otherwise expressly provided in this Section 6.6, compensation and benefits required to be provided by, or transferring to Purchaser pursuant to, applicable Law with respect to a Business Employee or Former Business Employee, (A) the other Liabilities specified in this Section 6.6 as being assumed, retained or reimbursable by Purchaser or its Subsidiaries, (A) except as otherwise expressly provided in this Section 6.6, all costs and expenses arising from the obligations of Purchaser or its Subsidiaries under this Section 6.6, and the implementation by Purchaser of the compensation and benefit plans as contemplated hereunder, and (A) any Liabilities arising out of the failure of Purchaser or its Subsidiaries to comply with its obligations under this Section 6.6, including the failure to extend offers pursuant to Section 6.6(b)(i) or engage in any consultations required or contemplated by Section 6.6(b)(i) or Section 6.6(j) (the Liabilities assumed by Purchaser and its Subsidiaries pursuant to this Section 6.6, collectively, the Purchaser Assumed Employee Liabilities). For the avoidance of doubt, except as contemplated by clause (A) of this Section 6.6(a)(i), the term Purchaser Assumed Employee Liabilities shall not include Liabilities with respect to current or former employees of Seller Parent or its Affiliates who are not Business Employees or Former Business Employees. For purposes of this Section 6.6, Liabilities in respect of all compensation and benefits items shall include the employer side Taxes or other payments related thereto.
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(ii) Seller Parent Retained Employee Liabilities. Seller Parent, or its applicable Affiliate (other than a Conveyed Subsidiary or Subsidiary thereof), shall, effective as of the Closing, retain or assume (A) all assets and Liabilities under or relating to each Seller Group Plan and each Foreign Seller Group Plan, and each other benefit or compensation plan, program, policy, agreement or arrangement at any time sponsored or maintained by Seller or any of its ERISA Affiliates (including non-U.S. Affiliates) that is not a Conveyed Subsidiary Plan, other than those Liabilities under any Seller Group Plan or Foreign Seller Group Plan expressly assumed by Purchaser and its Affiliates under this Section 6.6; (B) all Liabilities with respect to current or former employees of Seller Parent or its Affiliates who are not Business Employees or Former Business Employees; (C) all Liabilities with respect to the service prior to the Closing Date of the Business Employees and Former Business Employees to Seller Parent or its Affiliates (other than the Conveyed Subsidiaries and their Subsidiaries) to the extent such service was not related to the Business, and (D) all other Liabilities specified in this Section 6.6 as being retained or assumed by Seller Parent or its applicable Affiliates pursuant to this Section 6.6, which Liabilities shall be Retained Liabilities. Notwithstanding clause (A) of the immediately preceding sentence, this Section 6.6(a)(ii) shall not prevent Seller Parent or its Affiliates from allocating chargebacks to Purchaser or its Subsidiaries with respect to compensation and benefits costs that constitute current Liabilities for purposes of GAAP or IFRS (and excluding all other costs or Liabilities, such as pension underfunding or prior years accruals under qualified or non-qualified retirement or deferred compensation plans) in the ordinary course of business consistent with past practice related to Business Employees service for periods prior to the Closing; provided, however, that any such chargebacks shall be reflected as a Liability in Business Working Capital. Subject to the immediately preceding sentence, no Retained Liability shall be reflected as a Liability in Business Working Capital. Other than as expressly contemplated by this Section 6.6, in no event may Seller Parent or its Affiliates transfer a Seller Group Plan or Foreign Seller Group Plan (or any related Liabilities) that is not maintained by a Conveyed Subsidiary or a Subsidiary thereof as of the date of this Agreement to a Conveyed Subsidiary or a Subsidiary thereof.
(iii) Purchaser Parent Retained Employee Liabilities. Purchaser Parent and its Affiliates (other than Purchaser and its Subsidiaries), shall, effective as of the Closing, retain or assume (A) all assets and Liabilities under or relating to each Purchaser Group Plan and each Foreign Purchaser Group Plan, and each other benefit or compensation plan, program, policy, agreement or arrangement at any time sponsored or maintained by Purchaser Parent or any of its ERISA Affiliates (including non-U.S. Affiliates) that is not a Purchaser Business Plan; (B) all Liabilities with respect to current or former employees of Purchaser Parent or its Affiliates who are not Purchaser Business Employees or Former Purchaser Business Employees; (C) all Liabilities with respect to the service prior to the Closing Date of the Purchaser Business Employees and Former Purchaser Business Employees to Purchaser Parent or its Affiliates (other than Purchaser and its Subsidiaries) to the extent such service was not related to the Purchaser Business; and (D) all other Liabilities specified in this Section 6.6 as being retained or assumed by Purchaser Parent or its applicable Affiliates pursuant to this Section 6.6, which Liabilities shall
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be Purchaser Parent Retained Liabilities. Notwithstanding clause (A) of the immediately preceding sentence, this Section 6.6(a)(iii) shall not prevent Purchaser Parent or its Affiliates from allocating chargebacks to Purchaser or its Subsidiaries with respect to compensation and benefits costs that constitute current Liabilities for purposes of GAAP or IFRS (and excluding all other costs or Liabilities, such as pension underfunding or prior years accruals under qualified or non-qualified retirement or deferred compensation plans) in the ordinary course of business consistent with past practice related to Purchaser Business Employees and, with respect to periods following the Closing, Transferred Employees; provided, however, that any chargebacks in respect of the service of Purchaser Business Employees for periods prior to the Closing shall be reflected as a Liability in Purchaser Working Capital. Subject to the immediately preceding sentence, no Purchaser Parent Retained Liability shall be reflected as a Liability in Purchaser Working Capital. In no event may Purchaser Parent or its Affiliates transfer a Purchaser Group Plan or Foreign Purchaser Group Plan (or any related Liabilities) that is not maintained by Purchaser or a Subsidiary thereof as of the date of this Agreement to Purchaser or a Subsidiary thereof.
(b) Transfer of Employees.
(i) Business Employees Generally. At least ninety (90) days prior to the Closing Date, Seller Parent shall provide Purchaser with a list of all Business Employees as of such time, including each such Business Employees name, job title, date of hire, annual salary or hourly rate (as applicable) and incentive opportunity to which each such Business Employee is entitled, provided that such information may be redacted to the extent Seller Parent is required to comply with data privacy and other applicable Laws (the Transferring Employee List). At least fifteen (15) Business Days prior to the Closing Date (or earlier, if required by applicable Law), Purchaser agrees to offer or cause to be offered continued employment as of the Closing Date to each Business Employee detailed on the Transferring Employee List who is not employed at a Conveyed Subsidiary or a Subsidiary thereof or who is not a TUL Employee, in the same or a Comparable Position (as defined herein) and with compensation and benefits on terms that are consistent with this Section 6.6 and Seller Parent and its Affiliates will facilitate in finalizing and distributing such offers. In addition, effective as of the Closing, Purchaser agrees to cause the Conveyed Subsidiaries and their Subsidiaries to continue the employment of each Business Employee employed by such entities as of the Closing Date in the same or a Comparable Position and with compensation and benefits on terms that are consistent with this Section 6.6. A Comparable Position is a position with Purchaser or its Subsidiaries (including, after the Closing, a Conveyed Subsidiary or Subsidiary thereof) in which (A) the Business Employees level of responsibilities is not significantly reduced, and (B) the Business Employee is not required to relocate more than fifty (50) miles from the Business Employees principal business location immediately prior to the Closing.
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(ii) TUL Employees. Except as agreed between the Parties, with respect to each Business Employee who is not employed by a Conveyed Subsidiary or Subsidiary thereof and is employed in a jurisdiction in which the Transfer of Undertakings Laws have been implemented or apply (a TUL Employee), Seller Parent and Purchaser acknowledge that the transactions contemplated by this Agreement are likely to give rise to a relevant transfer (or otherwise sustain the automatic transfer of employees) for purposes of the Transfer of Undertakings Laws and to apply the Transfer of Undertakings Laws insofar as they apply by Law, and accept and agree that in such event the terms and conditions of employment of each such TUL Employee shall transfer effective as of the Closing and in a manner contemplated by the Transfer of Undertakings Laws or other applicable Law. Seller Parent and Purchaser shall inform and consult with the TUL Employees or any appropriate representatives of the TUL Employees to the extent required by the Transfer of Undertakings Laws or other applicable Law. In the event that a TUL Employee objects to the transfer of employment and cannot be transferred to Purchaser or its Subsidiaries, all Liabilities associated with the continued employment of such TUL Employee by Seller Parent or its Affiliates for up to a maximum of two (2) calendar months (or any longer period required by applicable Law or the notice period under any Foreign Seller Group Plan) following Closing, and the termination of employment of such TUL Employee by Seller Parent or its Affiliates shall be considered Purchaser Assumed Employee Liabilities. For the avoidance of doubt, if the Transfer of Undertakings Laws are determined not to apply to a TUL Employee, Purchaser agrees to offer or cause to be offered continued employment as of the Closing Date to such TUL Employee in accordance with Section 6.6(b)(i).
(iii) Delayed Transfer Employees. Notwithstanding the foregoing, in the case of any Business Employee whose employment does not and cannot commence or be transferred at the Closing by applicable Laws or Purchaser and Seller Parent mutually determine cannot commence or be transferred at the Closing or whose commencement or transfer of employment is otherwise delayed (a Delayed Transfer Employee), Seller Parent and Purchaser shall cooperate in good faith to cause the employment of such Delayed Transfer Employee to remain with Seller Parent or a Retained Subsidiary to allow such Delayed Transfer Employee to continue to participate on the compensation and benefit platforms, plans and programs of Seller Parent or such Retained Subsidiary. The Parties agree that each Delayed Transfer Employee shall commence employment with Purchaser, a Conveyed Subsidiary or another Subsidiary of Purchaser, as appropriate, as soon as reasonably practicable following the Closing as permitted by applicable Laws in such a manner that to the maximum extent possible does not trigger the right of such Business Employee to separation pay and is otherwise consistent with the terms and conditions of this Section 6.6 and applicable Law. Notwithstanding the foregoing, Seller Parent shall have no obligation to transfer the employment of a Delayed Transfer Employee out of a Conveyed Subsidiary if the delayed transfer of employment is due to a delay in the transfer of the Conveyed Subsidiary to Purchaser. In respect of the Delayed
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Transfer Employees, each reference in Section 6.6(a)(iii) (other than in this Section 6.6(b)(iii) and Section 6.6(b)(iv)) through Section 6.6(j) to Closing and Closing Date shall be treated as a reference to the first date on which the applicable Delayed Transfer Employees employment commences with or transfers to Purchaser. Notwithstanding the delayed transfer of such Delayed Transfer Employees, from and for a period of two (2) years after the Closing or, if earlier, the date of the applicable Delayed Transfer Employees termination of employment (Delayed Employment Period), the (A) compensation paid to such Delayed Transfer Employees in respect of the Delayed Employment Period and (B) the fringe benefit rate for such Delayed Transferred Employees benefits under a Seller Group Plan or Foreign Seller Group Plan that Seller Parent charges in the ordinary course of business consistent with past practice in respect of the Delayed Employment Period shall, in the case of (A) and (B), be considered Purchaser Assumed Employee Liabilities; provided that, during such period, Purchaser and its Subsidiaries receive the economic benefit of such Delayed Transferred Employees services.
(iv) Disability Employees. Without limiting the generality of Section 6.6(b)(iii), and except as prohibited by applicable Law or provided in the immediately following sentence, each Business Employee who is on a leave of absence as of the Closing due to short- or long-term disability (a Disability Employee) and is eligible for, or in an elimination period to be eligible for, long-term disability insurance coverage under a Seller Group Plan or Foreign Seller Group Plan (a Seller LTD Plan) that is not a Conveyed Subsidiary Plan shall be a Delayed Transfer Employee until he or she returns to active employment; provided, that such return to active employment occurs within six (6) months following the Closing (or such longer period as may be required by applicable Law or the notice period under any Seller Group Plan or Foreign Seller Group Plan). If it is administratively impractical to delay the transfer of a Disability Employee because Seller Parent and its Affiliates (other than the Conveyed Subsidiaries and their Subsidiaries) do not have an employing entity in the applicable jurisdiction following the Closing or because such Disability Employee is, prior to the Closing and prior his or her disability, already an employee of a Conveyed Subsidiary, such Disability Employee shall be treated in the same manner as all other Business Employees, except he or she shall remain eligible for coverage under the Seller LTD Plan until the elimination period in effect as of the Closing elapses, and neither Purchaser nor its Affiliates shall have any Liability to provide long-term disability benefits or otherwise with respect to the Seller LTD Plan. If such Disability Employee who is not a Delayed Transferred Employee in accordance with the first sentence hereof satisfies the requirements for coverage under the Seller LTD Plan at the end of such elimination period, the employment of such Disability Employee with Purchaser and its Affiliates shall terminate, and such Disability Employee shall be entitled to benefits under the Seller LTD Plan, and neither Purchaser nor its Affiliates shall have any Liability to provide long-term disability benefits or otherwise with respect to the Seller LTD Plan. Any Disability Employee who is a Delayed Transferred Employee in accordance with the first sentence hereof and who does not return to active employment within six
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(6)months following the Closing (or such longer period as may be required by applicable Law or the notice period under any Seller Group Plan or Foreign Seller Group Plan) shall not be a Transferred Employee under this Agreement and, upon the conclusion of such six (6)-month period (or such longer period as may be required by applicable Law or the notice period under any Seller Group Plan or Foreign Seller Group Plan), shall no longer be considered a Business Employee under this Agreement.
(v) Definitions. For purposes of this Agreement, (A) any Business Employee (U.S.) whose employment transfers pursuant to this Section 6.6(a)(iii) shall be referred to as a Transferred Employee (U.S.) and (B) any Business Employee (non-U.S.) whose employment transfers pursuant to this Section 6.6(a)(iii) shall be referred to as a Transferred Employee (non-U.S.) (collectively, the Transferred Employees).
(c) Compensation and Employee Benefits.
(i) Continued Employee Benefits. For a period from the Closing Date until December 31, 2020 (or such longer period as required by applicable Law) (the Continuation Period), Purchaser shall, or shall cause its Affiliates to, provide to each Transferred Employee whose terms and conditions of employment are not subject to an applicable Collective Bargaining Agreement (A) a Comparable Position, (B) base salary or wage rates that, in each case, are no less favorable than those in effect for each such Transferred Employee immediately prior to the Closing, (C) cash-based incentive opportunities (which shall include, collectively, commission, cash bonus and cash incentive pay opportunities), equity incentive opportunities and nonqualified deferred compensation benefits that, in each case, are no less favorable than those provided to similarly situated Purchaser Business Employees, (D) employee benefits (excluding equity incentive opportunities and non-qualified deferred compensation) that, in the aggregate, are substantially comparable to those in effect for each such Transferred Employee immediately prior to the Closing and (E) severance benefits that are no less favorable than the severance benefits that would have been payable to each such Transferred Employee under the Seller Group Plans or Foreign Seller Group Plans set forth in Section 6.6(c) of the Seller Disclosure Letter in which such Transferred Employee participated or was eligible for benefits immediately prior to the Closing, taking into account such Transferred Employees additional period of service and increases (but not decreases) in compensation following the Closing. In addition, notwithstanding anything to the contrary in this Agreement, Purchaser or its Subsidiaries shall, and shall cause the Conveyed Subsidiaries and their Subsidiaries to, maintain terms and conditions of employment for Transferred Employees to the extent necessary to (x) effect the automatic transfer of such employees under applicable Laws (including the Transfer of Undertakings Laws), Collective Bargaining Agreements or employment agreements, (y) comply with applicable Laws and (z) prevent severance from becoming payable to any such employee under applicable Law as a result of the transactions contemplated by this Agreement.
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(ii) Severance or Other Termination Liabilities. Purchaser and its Subsidiaries shall be solely responsible for any severance, redundancy, long service, notice or garden leave pay, or similar payments, contributions or benefits (collectively, Termination Expenses) that may become payable to any Business Employee arising out of or in connection with the transactions contemplated by this Agreement (whether or not such Business Employee becomes a Transferred Employee), including any Termination Expenses that are required to be paid by applicable Law, that may become payable to any Business Employee who does not become an employee of Purchaser or its Subsidiaries because Purchaser or its Subsidiaries fail to take all actions required by applicable Law to effectuate such Business Employees transfer, because such Business Employee rejects an offer of employment made in compliance with this Section 6.6, refuses to transfer employment, or otherwise challenges such transfer of employment; provided, however, that Seller Parent and its Affiliates shall retain any Termination Expenses that may become payable in connection with the Seller Internal Restructurings (collectively, the Seller Retained Severance Liabilities), which shall be Retained Liabilities for all purposes hereunder. If Purchaser or any of its Subsidiaries becomes liable for, or is legally required to make, severance, redundancy, long service, notice or garden leave pay, or similar payments, contributions or benefits to or on behalf of any Business Employee as a result of the transactions contemplated by this Agreement (whether or not such Business Employee becomes a Transferred Employee), all such payments and any related costs and expenses paid or incurred by Purchaser or its applicable Subsidiary, other than any Seller Retained Severance Liabilities, shall be Purchaser Assumed Employee Liabilities. Seller Parent and its Affiliates shall consult with Purchaser prior to paying or committing to pay severance to a Business Employee who rejects an offer of employment made in compliance with this Section 6.6, refuses to transfer employment, or otherwise challenges such transfer of employment.
(iii) Service Credit. For purposes of vesting, eligibility to participate and level of benefits (and for all other purposes to the extent required by applicable Law) under the employee benefit plans of Purchaser and its Affiliates providing benefits to any Transferred Employees after the Closing, each Transferred Employee shall be credited with his or her years of service with Seller Parent and its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) and their respective predecessors to the same extent and for the same purpose as such Transferred Employee was credited, before the Closing, under any similar Seller Group Plan or Foreign Seller Group Plan in which such Transferred Employee participated or was eligible to participate immediately prior to the Closing, provided that the foregoing shall not apply (A) to the extent that its application would result in a duplication of benefits (including accrual of severance or termination related entitlements where these have been paid out as a result of the transactions contemplated by this Agreement) or (B) for purposes of level of benefits under any defined benefit pension plan (other than under Purchaser Pension Plans with respect to the transfer of Liabilities from Seller Pension Plans as described in Section 6.6(e), or as required by applicable Law).
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(iv) Welfare Benefit Plan Obligations. Commencing as of 12:01 a.m. (local time wherever applicable) on the Closing Date, Purchaser shall, or shall cause its applicable Affiliates to, provide the Transferred Employees with welfare benefits under plans and arrangements maintained or sponsored by Purchaser and its Affiliates that satisfy the standards set forth in Section 6.6(c)(i). Purchaser shall, or shall cause its applicable Affiliates to, waive any waiting periods under their welfare benefit plans (including medical, dental, life insurance and short-term and long-term disability plans) and, with respect to any group health plans, shall waive any limitations for preexisting conditions, and, if applicable, shall ensure that such employees are given credit for any amounts paid toward deductibles, out-of-pocket limits or other fees on or prior to the Closing Date. Other than with respect to claims incurred under a Conveyed Subsidiary Plan, claims by a Transferred Employee for welfare benefit plan benefits or services rendered (A) as of or following 12:01 a.m. (local time wherever applicable) on the Closing Date shall be the responsibility of Purchaser and its Subsidiaries, and (B) prior to the Closing Date shall be the responsibility of Seller Parent and its Affiliates (other than a Conveyed Subsidiary or any Subsidiary thereof). Seller Parent and its Affiliates (other than a Conveyed Subsidiary or any Subsidiary thereof) will retain any obligations under Section 4980B of the Code or similar state Law (COBRA) with respect to Business Employees, Former Business Employees and any other qualified beneficiaries who are enrolled in COBRA continuation coverage under a Seller Group Plan that is not a Conveyed Subsidiary Plan as of the Closing or with respect to whom a COBRA qualifying event occurred prior to the Closing. This Section 6.6(c)(ii) does not apply to any Liabilities under a Conveyed Subsidiary Plan, regardless of whether the event giving rise to the cost occurred before, on or after the Closing Date, which Liabilities shall be retained or assumed by Purchaser in accordance with Section 6.6(a)(i)(A).
(v) Cash Incentive Compensation. Following the Closing, Purchaser shall, or shall cause its applicable Subsidiaries to pay awards under Seller Parent cash-based annual incentive plan (the Seller Cash Incentive Plan) in which Transferred Employees participate for the performance period in which the Closing occurs, prorated for the period elapsed as of immediately prior to the Closing Date, or with respect to any Delayed Transfer Employee, the date on which such Delayed Transferred Employee transfers employment (based upon actual performance as determined in good faith in the ordinary course of business consistent with past practice by Seller Parent or its applicable Affiliate), to each Transferred Employee who is eligible to receive such an award pursuant to the terms of the Seller Cash Incentive Plan, which awards shall be paid at such time and to the extent that the Transferred Employees would have otherwise become entitled to such bonuses under the Seller Cash Incentive Plan (such prorated bonus, the Seller Closing Bonus);
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provided, however, if Purchasers or its applicable Subsidiarys payment of the Seller Closing Bonus is prohibited under applicable Law, Purchaser and Seller Parent will agree to an alternative arrangement with respect to any such Seller Closing Bonus acting in good faith (which alternative arrangement shall preserve the division of Liabilities between Seller Parent and its Affiliates, on the one hand, and Purchaser and its Affiliates, on the other hand, generally contemplated by this Section 6.6(c)(v)). The aggregate amount of the Seller Closing Bonuses and any related employer-side Taxes (but less the amount of the Tax deduction that Seller Parent or its Affiliates would have realized had they paid the Seller Closing Bonuses) shall be reflected as a Liability in Business Working Capital. Without limiting the generality of Section 6.6(c)(i), effective as of the Closing, Purchaser shall cause the Transferred Employees to participate in the cash-based incentive plans of Purchaser and its Affiliates for the remainder of the performance period in which the Closing occurs, which plans shall provide (A) incentive compensation opportunities that are no less favorable than those provided to such Transferred Employees immediately prior to the Closing (provided that such opportunities may be prorated for the period from and including the Closing Date until the end of the applicable performance period and may be based on reasonable performance criteria established by Purchaser in the ordinary course of business) and (B) for payment of awards for the performance period in which the Closing occurs at the time prescribed by the Seller Cash Incentive Plan as in effect immediately prior to the Closing and in accordance with the historical past practices of Seller and its Affiliates, it being understood that this clause (B) shall not require Purchaser to pay such awards automatically upon the Closing.
(vi) Equity Incentive Compensation. Upon the Closing, each incentive award in respect of the common stock of Seller Parent (a Seller Parent Equity Award) held by a Transferred Employee shall become vested or eligible to vest (subject to the satisfaction of any applicable performance goals) in a prorated amount, determined based on the number of days in the applicable vesting period elapsed as of the Closing Date. Effective as of the Closing, Purchaser or its Affiliates shall grant to each Transferred Employee an equity- or cash-based incentive award (a Make-Whole Award) with a grant date fair value that is no less favorable than the value of the portion of the Seller Parent Equity Awards forfeited by the Transferred Employee in connection with the Closing (which forfeited amount shall be disclosed to Purchaser Parent no later than five (5) Business Days prior to the Closing), which Make-Whole Award shall have terms and conditions that are no less favorable than the terms and conditions (including vesting schedule and accelerated vesting terms) that were applicable to the corresponding Seller Parent Equity Award. In the event that the post-Closing transfer of a Delayed Transfer Employee results in a larger portion of the Seller Parent Equity Awards held by such Delayed Transfer Employee becoming vested upon such Delayed Transfer Employees transfer of employment than if the employment of such Delayed Transfer Employee had transferred upon the Closing, then the incremental cost of such additional vesting (which cost shall be measured based on the taxable income the Delayed Transfer Employee either realized or would have realized had such awards been settled or exercised upon such Delayed Transfer Employees transfer of employment to Purchaser or its Subsidiaries) shall be considered Purchaser Assumed Employee Liabilities.
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(vii) Accrued Time Off Entitlements. Subject to applicable Law and any required consents, from and after the Closing, with respect to each Business Employee, either (A) Purchaser shall, or shall cause its Affiliates to, assume and honor all accrued but unused vacation and other paid time off of Business Employees or (B) if Seller Parent or any of its Affiliates is required under applicable Law to make a payment in settlement of accrued vacation or paid time off of any Business Employee, such payments shall be considered Purchaser Assumed Employee Liabilities and such accruals under (A) shall not be assumed and/or honored by Purchaser or its Affiliates. Under no circumstance shall Purchaser or its Affiliates be responsible for satisfying both (A) and (B) with respect to the same Business Employee.
(d) Seller Benefit Plans. Except as otherwise provided in this Section 6.6, from and after the Closing, the Transferred Employees shall cease to be active participants in the Seller Group Plans and Foreign Seller Group Plans that are not Conveyed Subsidiary Plans.
(e) Foreign Defined Benefit Pension or Termination Benefit Plans.
(i) Effective as of the Closing, Purchaser shall establish or designate non-U.S. defined benefit pension or pension-like termination benefit plans or arrangements, as applicable (collectively, the Purchaser Pension Plans), for the benefit of the Transferred Employees (non-U.S.) who participate in the Foreign Seller Group Plans and other non-U.S. arrangements that provide for similar benefits, whether under a plan or pursuant to applicable Law or local practice set forth on Section 6.6(e) of the Seller Disclosure Letter (collectively, the Seller Pension Plans, and the Transferred Employees (non-U.S.) who participate in or accrue benefits pursuant to the Seller Pension Plans, the Transferred Pension Plan Employees). Each Purchaser Pension Plan shall provide, upon the transfer of assets referred to below (or, if there is no transfer of assets with respect to a particular plan because the plan is not funded, as of the Closing), that the accrued benefits for the Transferred Pension Plan Employees under such Purchaser Pension Plan shall in no event be less than their accrued benefits under the corresponding Seller Pension Plan as of the Closing. With respect to any Seller Pension Plan that is funded, Seller Parent shall cause to be transferred from the trusts or other funding vehicles under such Seller Pension Plan to the trusts or other funding vehicles under the corresponding Purchaser Pension Plan assets in the form of cash, cash equivalents, marketable securities or insurance contracts (to the extent allowable under the terms of such contracts and exclusively intended to cover plan benefits), the value of which shall be equal to: (x) the actuarial present value of accumulated benefits (that is, the accumulated benefit obligation as defined in Topic 715 in the FASBs Accounting Standards Codification, the ABO) under such Seller Pension Plan as of the Closing that are attributable to the Transferred Pension Plan Employees, divided by the ABO
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of all participants in such Seller Pension Plan as of the Closing, multiplied by the market value of the assets of such Seller Pension Plan at the Closing, provided that such transferred amount shall not, in any event, exceed the ABO under such Seller Pension Plan of all Transferred Pension Plan Employees as of the Closing Date or (y) such greater amount as is required by applicable Law.
(ii) The amounts determined in accordance with Section 6.6(e)(i) are collectively referred to as the Pension Transfer Amounts. The transfer of the Pension Transfer Amounts, and the assumption by Purchaser and its Subsidiaries of Liabilities with respect to or relating to the Transferred Pension Plan Employees under the applicable Seller Pension Plans, shall be subject to such consents, Approvals and other requirements as may apply under applicable Law. Purchaser shall use commercially reasonable efforts to cause the corresponding Purchaser Pension Plans to accept the Pension Transfer Amounts. Actuarial determinations shall be made in accordance with Section 6.6(e)(vi). If a Seller Pension Plan is not required to be funded by applicable Law, and is not funded, there shall be no transfer of assets by the Seller Pension Plan or by Seller Parent or its Affiliates.
(iii) As of the Closing, Seller Parent shall cause the Transferred Employees to cease further accrual of benefits under the Seller Pension Plans.
(iv) The Pension Transfer Amount, if any, from each Seller Pension Plan shall be equitably adjusted to take into account benefit payments made from the Seller Pension Plan to the Transferred Pension Plan Employees after the Closing but prior to the date of transfer and for any earnings and losses on such amount during such period. The Pension Transfer Amount, if any, shall be determined pursuant to Section 6.6(e)(vi).
(v) At the times of the transfers of the Pension Transfer Amounts (or if there is no transfer of assets with respect to a particular plan because the plan is not required to be funded under applicable Law and is not funded, from and after the Closing), Purchaser and the Purchaser Pension Plans shall assume all Liabilities for all accrued benefits, including all disability, part-time, early retirement and other ancillary benefits, under the corresponding Seller Pension Plans in respect of the Transferred Pension Plan Employees whose benefits are so transferred, and Seller Parent and its Affiliates and the corresponding Seller Pension Plans shall be relieved of all Liabilities to provide benefits under the Seller Pension Plans to the Transferred Pension Plan Employees whose benefits are so transferred. From and after the date of such applicable transfer of the Pension Transfer Amounts (or if there is no transfer of assets with respect to a particular plan because the plan is not required to be funded under applicable Law and is not funded, from and after the Closing), Purchaser agrees to indemnify and hold harmless Seller Parent and its Affiliates and its officers, directors, employees, and agents from and against any and all costs, damages, losses, expenses, or other Liabilities arising out of or related to the Transferred Pension Plan Employees benefits under the Seller Pension Plans that are transferred to Purchaser or Purchaser Pension Plans pursuant to this Section 6.6(e).
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(vi) For purposes of this Section 6.6(e), actuarial determinations shall be based upon the actuarial assumptions and methodologies used in preparing the most recent audited financial statements of Seller Parent as of the date of the determination. The applicable plan sponsor of the Seller Pension Plans shall cause the plan actuary or administrator to provide a report of its determination of such amount within ninety (90) days following the Closing Date and any back-up information reasonably required by Purchaser to confirm the accuracy of such determination. If Purchaser disputes the accuracy of the calculation, Purchaser and Seller Parent shall cooperate to identify the basis for such disagreement and act in good faith to resolve such dispute. To the extent that a dispute is unresolved after a forty-five (45)-day period following identification of such dispute, the calculations shall be verified by an independent third-party benefits consulting firm selected by the mutual agreement of Seller Parent and Purchaser. The decision of such consulting firm shall be final, binding and conclusive on Seller Parent and Purchaser. Notwithstanding Section 6.6(a)(i)(E), Seller Parent and Purchaser Parent shall share equally the costs of such consulting firm.
(vii) This Section 6.6(e) does not apply to any Liabilities under a Conveyed Subsidiary Plan, which Liabilities shall be retained or assumed by Purchaser in accordance with Section 6.6(a)(i)(A). For clarity, Seller Parent and its Affiliates shall retain all assets and Liabilities, including those related to Business Employees and Former Business Employees (and their service prior to Closing), in respect of Seller Group Plans and Foreign Seller Group Plans that are defined benefit pension plans or pension-like termination benefit plans or arrangements but not Conveyed Subsidiary Plans, or with respect to Transferred Employees (non-U.S.), Seller Pension Plans.
(f) Defined Contribution Plans (U.S.).
(i) Effective as of the Closing, Purchaser shall create or designate defined contribution pension plans (collectively, the Purchaser DC Plans (U.S.)) for the benefit of the Transferred Employees (U.S.) who participate in one or more of the defined contribution pension plans maintained by Seller Parent or its Affiliates (other than a Conveyed Subsidiary Plan) that are intended to be qualified under Section 401(a) of the Code immediately prior to the Closing or the corresponding provisions of the Puerto Rico Internal Revenue Code (collectively, the Seller DC Plans (U.S.), and the Transferred Employees who participate in the Seller DC Plans (U.S.), the DC Employees (U.S.)). The applicable Purchaser DC Plans (U.S.) shall be tax-qualified in the same manner as the corresponding Seller DC Plans (U.S.), and, prior to the Closing, Purchaser shall provide Seller Parent any determination letters or similar documentation evidencing such qualification.
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(ii) Each Purchaser DC Plan (U.S.) shall allow for the receipt in cash from the DC Employees (U.S.) of eligible rollover distributions (as such term is defined under Section 402 of the Code or any equivalent term under the Puerto Rico Internal Revenue Code), but also including notes corresponding to loans. Purchaser and Seller Parent shall work together in order to facilitate any such distribution or rollover and to effect an eligible rollover distribution for those DC Employees (U.S.) who elect to rollover their account balances, including notes, directly into a Purchaser DC Plan (U.S.).
(iii) Any DC Employee (U.S.) who has an unvested account balance under a Seller DC Plan (U.S.) as of the Closing Date shall become vested on the Closing Date in a prorated portion thereof, determined based on the number of days in the applicable vesting period elapsed as of the Closing Date. Any DC Employee (U.S.) who would be eligible for an employer contribution had he or she remained an active participant in the applicable Seller DC Plan (U.S.) until the next date on which such employer contribution would be made, shall receive a prorated employer contribution under the applicable Seller DC Plan (U.S.) on or as soon as reasonably practicable following the Closing Date, determined based on the number of days in the applicable service period elapsed as of the Closing Date. The contributions and vesting of benefits described in this Section 6.6(f)(iii) shall be Retained Liabilities.
(g) Defined Contribution Plans (non-U.S.).
(i) Effective as of the Closing, Purchaser shall establish or designate defined contribution plans or arrangements (collectively, the Purchaser DC Plans (non-U.S.)) for the benefit of the Transferred Employees (non-U.S.) who participate in one or more of the defined contribution plans maintained by Seller Parent or its Affiliates (other than a Conveyed Subsidiary Plan) or any other arrangement that provides for similar benefits pursuant to applicable Law or local practice (collectively, the Seller DC Plans (non-U.S.), and the Transferred Employees who participate in the Seller DC Plans (non-U.S.), the DC Employees (non-U.S.)). The applicable Purchaser DC Plans (non-U.S.) shall be tax-qualified in the same manner as the corresponding Seller DC Plans (non-U.S.), and, prior to the Closing, Purchaser shall provide Seller Parent any determination letters or similar documentation evidencing such qualification. To the extent permitted by applicable Law, each Purchaser DC Plan (non-U.S.) shall allow for the receipt in cash from the DC Employees (non-U.S.) of rollover distributions, but also including notes corresponding to loans. Purchaser and Seller Parent shall work together in order to facilitate any such distribution or rollover and to effect a rollover distribution for those DC Employees (non-U.S.) who elect to rollover their account balances, including notes, directly into a Purchaser DC Plan (non-U.S.).
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(ii) Notwithstanding Section 6.6(g)(i), if applicable Law requires Purchaser to assume the Liabilities of the DC Employees (non-U.S.) under a Seller DC Plan (non-U.S.), Seller Parent shall cause the transfer under each such Seller DC Plan (non-U.S.) to the corresponding Purchaser DC Plan (non-U.S.) of (A) the account balances of such DC Employees (non-U.S.) as of the Closing or cash, cash equivalents or other property equal to the actual account balances of the DC Employees (non-U.S.) under each such Seller DC Plan (non-U.S.) as of the Closing or such greater amount as is required by any applicable Governmental Authority having jurisdiction over the Seller DC Plan (non-U.S.) in order to obtain approval of such transfer, and (B) any notes corresponding to loans of the DC Employees (non-U.S.) (collectively, the DC Transfer Amounts). The transfer of the DC Transfer Amounts shall be subject to such consents, Approvals and other legal requirements as may apply under applicable Law. Purchaser shall use commercially reasonable efforts to cause the DC Transfer Amounts to be accepted by such plans. The DC Transfer Amounts to be transferred, if any, from the respective Seller DC Plans (non-U.S.) shall be equitably adjusted to take into account benefit payments made from the respective Seller DC Plans (non-U.S.) to the DC Employees (non-U.S.) after the Closing but prior to the date of transfer and for any earnings and losses on such amount during such period. The transfer of the DC Transfer Amounts, if any, shall take place within one hundred eighty (180) days after the Closing Date. At the times of the transfers of the DC Transfer Amounts, Purchaser and the Purchaser DC Plans (non-U.S.) shall assume all Liabilities with respect to the DC Transfer Amounts relating to Transferred Employees (non-U.S.) that were transferred from the applicable Seller DC Plan (non-U.S.), and Seller Parent and its Affiliates and the Seller DC Plans (non-U.S.) shall be relieved of all such Liabilities under such Seller DC Plan (non-U.S.) with respect to such Transferred Employees (non-U.S.). From and after the date of the transfer of the DC Transfer Amounts, Purchaser agrees to indemnify and hold harmless Seller Parent and its Affiliates and their respective officers, directors, employees and agents from and against any and all costs, damages, losses, expenses, or other Liabilities arising out of or related to the DC Transfer Amounts for Transferred Employees (non-U.S.) under the applicable Seller DC Plans (non-U.S.).
(iii) Any DC Employee (non-U.S.) who has an unvested account balance under a Seller DC Plan (non-U.S.) as of the Closing Date shall become vested on the Closing Date in a prorated portion thereof, determined based on the number of days in the applicable vesting period elapsed as of the Closing Date. Any DC Employee (non-U.S.) who would be eligible for an employer contribution had he or she remained an active participant in the applicable Seller DC Plan (non-U.S.) until the next date on which such employer contribution would be made, shall receive a prorated employer contribution under the applicable Seller DC Plan (non-U.S.) on or as soon as reasonably practicable following the Closing Date, determined based on the number of days in the applicable service period elapsed as of the Closing Date. The contributions and vesting of benefits described in this Section 6.6(g)(iii) shall be Retained Liabilities.
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(iv) This Section 6.6 does not apply to any Liabilities under a Conveyed Subsidiary Plan, which Liabilities shall be retained or assumed by Purchaser in accordance with Section 6.6(a)(i)(A).
(h) Retiree Medical Plans. Effective as of the Closing, each Transferred Employee who is eligible to become a participant upon termination of service in the Seller Retained Plans that provide retiree medical benefits set forth on Section 6.6(h) of the Seller Disclosure Letter (the Seller Retiree Medical Plans) as of the Closing (i) shall cease being eligible to become a participant, or accrue service towards eligibility, in the Seller Retiree Medical Plans, and Seller Parent and its Affiliates shall have no Liabilities in respect of the provision of post-retirement medical benefits to such Transferred Employee, and (ii) shall commence accruing service towards eligibility and level of benefits (taking into account the recognition of all prior service credit in accordance with Section 6.6(c)(iii)) in a retiree medical plan maintained by Purchaser or its Affiliates that provides benefits that are either (A) no less favorable than those provided under the applicable Seller Retiree Medical Plans, including with respect to an employer subsidy, or (B) the same as those provided to similarly situated Purchaser Business Employees (Purchaser Retiree Medical Plan), which Purchaser Retiree Medical Plan shall not be modified in a manner adverse to the Transferred Employees relative to other participants; provided, however, such plans shall have requirements for retirement-eligibility that are the same as those provided to other Purchaser Retiree Medical Plan participants or, if more favorable, during the Continuation Period, the same as the applicable Seller Retiree Medical Plan with respect to the Transferred Employees. Subject to continued employment, the Transferred Employees shall continue accruing service towards eligibility and levels of benefits thereunder, for at least the Continuation Period (or such longer period as required by applicable Law). This Section 6.6(h) shall not limit Purchasers obligations with respect to a Conveyed Subsidiary Plan or any other arrangement that provides for similar benefits as required by applicable Law, which shall be considered Purchaser Assumed Employee Liabilities, in accordance with Section 6.6(a)(i).
(i) Flexible Spending Accounts. Seller Parent and Purchaser shall take all actions necessary or appropriate so that, effective as of the Closing Date (i) the account balances (whether positive or negative) (the Transferred FSA Balances) under the applicable flexible spending plan of Seller Parent or its Affiliates (collectively, the Seller FSA Plan) of the Transferred Employees who are participants in the Seller FSA Plan shall be transferred to one or more comparable plans of Purchaser or its Affiliates (collectively, the Purchaser FSA Plan); (ii) the elections, contribution levels and coverage levels of such Transferred Employees shall apply under the Purchaser FSA Plan in the same manner as under the Seller FSA Plan; and (iii) such Transferred Employees shall be reimbursed from the Purchaser FSA Plan for claims incurred at any time during the plan year of the Seller FSA Plan in which the Closing Date occurs that are submitted to the Purchaser FSA Plan from and after the Closing Date on substantially the same basis and substantially the same terms and conditions as under the Seller FSA Plan. As soon as practicable after the Closing Date, and in any event within thirty (30) Business Days after the amount of the Transferred FSA Balances is determined, Seller Parent or its Affiliates shall pay to Purchaser or its Affiliates the net aggregate amount of the Transferred FSA Balances, if such amount is positive, and Purchaser or its Subsidiaries shall pay to Seller Parent or its Affiliates the net aggregate amount of the Transferred FSA Balances, if such amount is negative.
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(j) Employment Agreements. Except for any Liabilities related to transaction bonuses or retention awards granted prior to Closing to any Transferred Employee that are or were adopted without Purchaser Parents prior written approval (collectively, the Seller Retention Awards), any employment, severance, retention or other individual agreement between Seller Parent or its Affiliates and a Transferred Employee and the related Liabilities shall, effective as of the Closing, be assumed by Purchaser or its Subsidiaries, and shall be considered Purchaser Assumed Employee Liabilities in accordance with Section 6.6(a)(i). Seller Parent shall reimburse Purchaser or its applicable Affiliate, as soon as practicable but in any event within thirty (30) days of receipt of appropriate verification, for all costs and expenses paid or incurred by Purchaser or its applicable Affiliate after the Closing Date with respect to the Seller Retention Awards, including the employer side Taxes or other payments related thereto.
(k) Deferred Compensation. Seller Parent and its Affiliates shall retain all assets and Liabilities in respect of the Seller Group Plans and Foreign Seller Group Plans set forth on Section 6.6(k) of the Seller Disclosure Letter, which are nonqualified or non-approved retirement plans that are not Conveyed Subsidiary Plans. For purposes of any Seller Group Plan or Foreign Seller Group Plan that provides for nonqualified deferred compensation within the meaning of Section 409A of the Code, in accordance with Treasury Regulation § 1.409A-1(h)(4), Seller Parent and Purchaser agree that the transfer of a Transferred Employees employment in accordance with this Agreement shall not constitute a separation from service within the meaning of Section 409A of the Code, and, further, for any such Seller Group Plan or Foreign Seller Group Plan in respect of which Seller Parent or its Affiliates are retaining Liabilities related to a Transferred Employee, that Purchaser shall notify Seller Parent in writing of a Transferred Employees separation from service with Purchaser or its Affiliates within thirty (30) days thereafter.
(l) Labor and Employment Law Matters. Purchaser and Seller Parent shall, and shall cause their respective Affiliates to, cooperate to take all steps, on a timely basis, as are required under applicable Law (including the Transfer of Undertakings Laws) or any Collective Bargaining Agreement to notify, consult with, or negotiate the effect, impact, terms or timing of the transactions contemplated by this Agreement with each works council, union, labor board, employee group (or employees directly) or Governmental Authority related to the foregoing. Seller Parent shall regularly review with Purchaser the progress of the notifications, consultations and negotiations with each such works council, union, labor board, employee group (or employees directly) and Governmental Authority regarding the effect, impact or timing of the transactions contemplated by this Agreement. Purchaser and Seller Parent shall, and shall cause their respective Affiliates to, comply with all applicable Laws, directives and regulations relating to the Business Employees in connection with this Section 6.6(l). To the extent required by Law or Collective Bargaining Agreement (and within the time periods required by Law or Collective Bargaining Agreement), Purchaser shall or shall cause its applicable Affiliate to (i) become a party to any Collective Bargaining Agreement with respect to applicable Transferred Employees and shall be responsible for all Liabilities under any Collective Bargaining Agreement with respect to any Business Employee or Former Business Employee, regardless of whether arising prior to, on or after the Closing Date, and (ii) join any industrial, employer or similar association or federation. Purchaser shall indemnify Seller Parent and its Affiliates for any Liabilities incurred by Seller Parent and its Affiliates with respect to Purchaser or its Affiliates failure to comply with the obligations under this Section 6.6(l), which shall be considered Purchaser Assumed Employee Liabilities in accordance with Section 6.6(a)(i). Seller Parent shall indemnify Purchaser and its Affiliates for any Liabilities incurred by Purchaser and its Affiliates with respect to Seller Parents or its Affiliates failure to comply with the obligations under this Section 6.6(l).
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(m) Immigration. Purchaser and Seller Parent shall, or shall cause their respective Affiliates to, use commercially reasonable efforts to ensure that any foreign national, who requires a visa in order to work for Seller Parent or its Affiliate in his or her current position, may continue to work in such position as a Transferred Employee following the Closing Date, or, as applicable, such later date that such Business Employees employment transfers to Purchaser or its applicable Affiliate.
(n) Access to Independent Contractors and Service Providers. During the period prior to the Closing Date, Seller Parent shall use commercially reasonable efforts to make individual natural person independent contractors related to the Business and directly engaged by Seller Parent or its Affiliates available to Purchaser for the purpose of allowing Purchaser to interview each such contractor and determine the nature and extent of each such persons continuation with Purchaser, if any. Seller Parent shall provide to Purchaser contact information for third-party service providers providing contingent personnel to the Business and reasonably cooperate in identifying and facilitating Purchasers engagement of such contingent work force to the extent requested by Purchaser.
(o) Communications. Prior to the Closing, any employee notices or communication materials (including website postings) from Purchaser or its Affiliates to the Business Employees (including their representatives), including notices or communication materials with respect to employment, compensation or benefits matters addressed in this Agreement or related, directly or indirectly, to the transactions contemplated by this Agreement or employment thereafter, shall be subject to the prior review, comment and approval of Seller Parent (such approval not to be unreasonably withheld, conditioned or delayed). Prior to the Closing, any employee notices or communication materials (including website postings) from Seller Parent or its Affiliates to the Business Employees (or their representatives) with respect to employment with, or compensation or benefits to be provided by, Purchaser or its Affiliates following the Closing, shall be subject to the prior review, comment and approval of Purchaser (such approval not to be unreasonably withheld, conditioned or delayed). Further, prior to the Closing, Purchaser and its Affiliates shall not make broad-based unwritten communications to the Business Employees without Seller Parents prior approval (such approval not to be unreasonably withheld, conditioned or delayed). Seller Parent and Purchaser shall coordinate to establish a protocol for reviewing and approving forms of employee notices and communication materials, and employee notices and communication materials that are consistent with the agreed form shall not be subject to further review and approval.
(p) Taxes and Filings. With respect to each Transferred Employee (U.S.), the Parties shall, or shall cause their respective Affiliates to, (i) treat Purchaser or its applicable Affiliate as a successor employer and Seller Parent or its applicable Affiliate as a predecessor, within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, for purposes of Taxes imposed under the U.S. Federal Insurance Contributions Act, as amended (FICA), or the U.S. Federal
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Unemployment Tax Act, as amended (FUTA), (ii) cooperate with each other to avoid the restart of FICA and FUTA upon or following the Closing with respect to each such Transferred Employee for the year during which the Closing occurs, and (iii) implement the alternate procedure described in Section 5 of Revenue Procedure 2004-53, including with respect to the filing of all applicable forms (including Form 941). In addition, with respect to each Transferred Employee (U.S.), Purchaser shall be responsible for the filing of Form 1095-C in respect of the year in which the Closing occurs. In accordance with Section 6.5(c), Seller Parent and its Affiliates shall be entitled to any Tax deduction available in respect of all compensation and benefit-related Liabilities that it retains pursuant to this Section 6.6.
(q) Cooperation. Subject to applicable Law and Section 2.2 and Section 6.4, from the date of this Agreement until the Closing, Seller Parent, Purchaser, and their respective Affiliates will reasonably cooperate in all matters reasonably necessary to effect the transactions contemplated by this Section 6.6, including (i) exchanging information and data reasonably necessary for Seller Parent and Purchaser to comply with their respective obligations under this Section 6.6, (ii) making any and all required filings and notices, (iii) making any and all required communications with Business Employees, and (iv) obtaining any required approvals of a Governmental Authority.
(r) No Third Party Beneficiaries. This Section 6.6 is included for the sole benefit of the Parties and their respective permitted transferees and permitted assigns and does not and shall not create any right in any Person, including any current or former employee of Seller Parent or any of its Affiliates, any Business Employee, any Transferred Employee or beneficiary or dependent of the foregoing, who is not a Party. Nothing contained in this Agreement (express or implied) is intended to (a) create or amend any employee benefit plan or arrangement or (b) confer upon any individual any right to employment for any period of time, or any right to a particular term or condition of employment. No current or former employee of Seller Parent or any of its Affiliates, any Business Employee, Former Business Employee or any Transferred Employee, including any beneficiary or dependent thereof, or any other Person not a Party or permitted transferee or permitted assign thereof, shall be entitled to assert any claim against Purchaser, Seller Parent or any of their respective Affiliates under this Section 6.6.
Section 6.7 Intercompany Accounts and Arrangements.
(a) Seller Parent may take (or cause one or more of its Affiliates to take) such action as is necessary or advisable to settle, effective as of, or prior to, the Closing Date, all intercompany accounts that are in the nature of Funded Indebtedness between a Conveyed Subsidiary or any Subsidiary thereof, on the one hand, and Seller Parent or any of the Retained Subsidiaries, on the other hand, in such a manner as Seller Parent shall determine in its sole discretion without any further Liability or obligation therefor of any Person. Any intercompany accounts that are in the nature of Funded Indebtedness between a Conveyed Subsidiary or any Subsidiary thereof, on the one hand, and Seller Parent or any of the Retained Subsidiaries, on the other hand, that are settled after 12:01 a.m. (New York time) on the Closing Date but in connection with the Closing shall be deemed for purposes of this Agreement to have been settled as of 12:01 a.m. (New York time) on the Closing Date, and any intercompany accounts that are in the nature of Funded
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Indebtedness between a Conveyed Subsidiary (or any of its Subsidiaries), on the one hand, and Seller Parent or any of the Retained Subsidiaries, on the other hand, that remain outstanding following the Closing shall not be deemed Purchased Assets or Assumed Liabilities for purposes of this Agreement. Except for the Ancillary Agreements or the agreements set forth in Section 6.7 of the Seller Disclosure Letter or as otherwise expressly contemplated by this Agreement, all intercompany arrangements and agreements, that are in the nature of Funded Indebtedness whether written or oral, between Seller Parent or any of the Retained Subsidiaries, on the one hand, and any of the Conveyed Subsidiaries or their Subsidiaries, on the other hand, shall be terminated as of or prior to the Closing Date without any further Liability or obligation thereunder of any Person and shall be of no further force and effect after the Closing.
(b) Purchaser Parent may take (or cause one or more of its Affiliates to take) such action as is necessary or advisable to settle, effective as of, or prior to, the Closing Date, all intercompany accounts that are in the nature of Funded Indebtedness (other than intercompany accounts arising pursuant to a Purchaser Ancillary Agreement) between Purchaser or any Subsidiary of Purchaser, on the one hand, and Purchaser Parent or any Subsidiary of Purchaser Parent (other than Purchaser and its Subsidiaries), on the other hand, in such a manner as Purchaser Parent shall determine in its sole discretion without any further Liability or obligation therefor of any Person. Any such intercompany accounts that are in the nature of Funded Indebtedness between Purchaser or any Subsidiary of Purchaser, on the one hand, and Purchaser Parent or any Subsidiary of Purchaser Parent (other than Purchaser and its Subsidiaries), on the other hand, that are settled after 12:01 a.m. (New York time) on the Closing Date but in connection with the Closing shall be deemed for purposes of this Agreement to have been settled as of 12:01 a.m. (New York time) on the Closing Date, and any intercompany accounts that are in the nature of Funded Indebtedness between Purchaser or any Subsidiary of Purchaser, on the one hand, and Purchaser Parent or any Subsidiary of Purchaser Parent (other than Purchaser and its Subsidiaries), on the other hand (other than intercompany accounts arising pursuant to a Purchaser Ancillary Agreement), that remain outstanding following the Closing shall not be deemed an asset of Purchaser or a Purchaser Liability for purposes of this Agreement (including for purposes of calculating the Purchaser Working Capital), and Purchaser Parent shall cancel or otherwise transfer such intercompany account from Purchaser and its Subsidiaries for no consideration. All Liabilities related to or arising out of the intercompany loan between Setfirst Limited and Purchaser in respect of the acquisition by Purchaser or its applicable Affiliates of Novartis AGs interest in Purchaser and its applicable Affiliates shall be fully extinguished and cancelled, effective prior to the Closing Date, or shall otherwise be transferred to Purchaser Parent or its Affiliates (other than Purchaser and its Subsidiaries) prior to the Closing Date and shall constitute a Purchaser Parent Retained Liability for all purposes hereunder, in any case without any further Liability or obligation therefor for Purchaser or any of its Subsidiaries. Except for the Ancillary Agreements or the Purchaser Related Party Contracts set forth in Section 6.7 of the Purchaser Parent Disclosure Letter (the Purchaser Related Party Contracts set forth thereon, the Purchaser Ancillary Agreements) or as otherwise expressly contemplated by this Agreement, all Purchaser Related Party Contracts shall be terminated as of or prior to the Closing Date without any further Liability or obligation thereunder of any Person and shall be of no further force and effect after the Closing.
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(c) Except to the extent provided to the contrary in this Section 6.7 and for any rights or obligations pursuant to this Agreement or any Ancillary Agreement or any commercial or other matter unrelated to this Agreement, effective as of the Closing, each of Purchaser Parent and Purchaser, on behalf of itself and its respective Affiliates, including the Conveyed Subsidiaries and their Subsidiaries, hereby releases Seller Parent and each of its Subsidiaries and Affiliates (and their respective officers, directors and employees, acting in their capacity as such) from any Liability, obligation or responsibility to any of them for any and all past actions or failures to take action prior to the Closing directly or indirectly relating to or arising out of the Business, the Retained Businesses, the Purchaser Business or the operations of the Conveyed Subsidiaries (or their Subsidiaries) prior to the Closing, or relating to or arising out of Seller Parents or its Affiliates ownership of the Purchased Assets.
(d) Except to the extent provided to the contrary in this Section 6.7 and for any rights or obligations pursuant to this Agreement or any Ancillary Agreement, effective as of the Closing, Purchaser Parent, on behalf of itself and its respective Affiliates (other than Purchaser and its Subsidiaries) hereby releases Purchaser and each of its Subsidiaries (and their respective officers, directors and employees, acting in their capacity as such) from any Liability, obligation or responsibility to any of them for any and all past actions or failures to take action prior to the Closing directly or indirectly relating to or arising out of the Purchaser Business, the Purchaser Parent Retained Businesses or the operations of Purchaser and its Subsidiaries prior to the Closing, or relating to or arising out of the assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries.
(e) Except to the extent provided to the contrary in this Section 6.7 and for any rights or obligations pursuant to this Agreement or any Ancillary Agreement or, in the case of Purchaser Parent, Purchaser and each of its Subsidiaries and Affiliates (other than the Conveyed Subsidiaries and their Subsidiaries), any commercial or other matter unrelated to this Agreement, effective as of the Closing, Seller Parent, on behalf of itself and its Affiliates, hereby releases each of Purchaser Parent, Purchaser and each of its Subsidiaries and Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) (and their respective officers, directors and employees, acting in their capacity as such) from any Liability, obligation or responsibility to any of them for any and all past actions or failures to take action prior to the Closing directly or indirectly relating to or arising out of the Business, Purchaser Business, the Retained Businesses or the operations of the Conveyed Subsidiaries (or their Subsidiaries) prior to the Closing.
Section 6.8 Access to Records and Information.
(a) Each of Seller Parent and its Affiliates and each of Purchaser Parent, Purchaser and their Affiliates shall retain the books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers relating to the Business or the Purchaser Business in its possession for at least seven (7) years following the Closing Date or for such longer period as may be required by Law or any applicable Governmental Order. Each Party shall give reasonable written notice to the other Parties before ceasing to maintain any such materials, and shall deliver to the other Parties at the other Parties expense upon request any such materials that it has proposed no longer to maintain.
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(b) Following the Closing and subject to applicable Law, each Party shall, and shall cause its Affiliates (including, in the case of Purchaser Parent and Purchaser, the Conveyed Subsidiaries and their Subsidiaries) to, permit the other Parties and their Affiliates and Representatives reasonable access during normal business hours to such books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers and to personnel having knowledge of the whereabouts and/or contents of such books, records, documents, instruments, accounts, correspondence, writings, evidences of title and other papers, for legitimate business reasons, including in connection with financial statements, reporting obligations and compliance with applicable Laws, and to provide such other information relating to the Business or the Purchaser Business as may be reasonably requested by any such other Party for such purposes; provided that each Party may restrict the foregoing access or the provision of such information to the extent that, in the reasonable judgment of such Party, (i) applicable Law requires it or any of its Affiliates to restrict or prohibit such access or the provision of such information, (ii) providing such access would unreasonably interfere with the operation of its and its Subsidiaries respective businesses, (iii) providing such access or information would breach a confidentiality obligation to a third party, (iv) providing such access or information would result in disclosure of any information that is competitively or commercially sensitive, (v) in the case of Seller Parent, the information relates to the Strategic Process, or in the case of Purchaser Parent, the information relates to the review of strategic alternatives with respect to the Purchaser Business, and for clarity in each case (with respect to both Seller Parent and Purchaser Parent) pertaining to such review prior to the Closing, or (vi) providing such access or disclosure of any such information would reasonably be expected to result in the loss or waiver of the attorney-client or other applicable privilege or protection. In the event that a Party restricts access or withholds information on the basis of the foregoing clauses (i) through (vi), such Party shall, if permitted, inform the Party requesting such access or information as to the general nature of what is being restricted or withheld and the reason therefor, and such Parties shall each use their commercially reasonable efforts to make appropriate substitute arrangements to permit disclosure of the relevant information in a manner that does not suffer from such impediments. Each Party will hold in confidence all Confidential Information obtained from the other Parties or any of their Affiliates in accordance with Section 6.12. The Parties agree that, with respect to any matters that are the subject of this Section 6.8(b) and Section 6.5(i), the provisions of Section 6.5(i) (and not this Section 6.8(b)) shall control.
(c) Without limiting the foregoing in this Section 6.8, Purchaser Parent and Purchaser acknowledge and agree that Seller Parent and its Affiliates shall retain, after the Closing, access and use rights with respect to, and may retain copies of, the Registration Information (including in relation to pending applications for Product Registrations and Manufacturing Registrations) for Seller Parents and its Affiliates use for legal and regulatory compliance purposes.
Section 6.9 Mail and Other Communications. After the Closing Date, each Party and their respective Affiliates may receive mail and other communications properly belonging to the other Parties (or the other Parties Affiliates). Accordingly, at all times after the Closing Date, each Party authorizes each of the other Parties and their respective Affiliates to receive and open all mail and other communications received by it and not unambiguously intended for any other Party (or its Affiliates) or any other Partys (or its Affiliates) officers or directors, and to retain the same to the extent that they relate to the business of the receiving Party or, to the extent that they
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do not relate to the business of the receiving Party, the receiving Party shall promptly deliver such mail or other communications (or, in case the same relate to both businesses, copies thereof) to the Party for which such mail and communications are intended. The provisions of this Section 6.9 are not intended to, and shall not be deemed to, constitute an authorization by any Party to permit the other to accept service of process on its behalf and no Party is or shall be deemed to be the agent of any other for service of process purposes.
Section 6.10 Transfer of Business IP and Registrations. Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, Purchaser Parent shall be responsible for preparing and filing all instruments and documents necessary to effect the assignment of the Business IP that is owned by Seller Parent or its Subsidiaries, Product Registrations and Manufacturing Registrations to Purchaser and its Affiliates, including all costs and expenses of preparing and recording country-specific assignments and legalization of signatures (where required). Subject to Section 2.2 and Section 6.4, Seller Parent shall, and shall cause its Affiliates to, cooperate with the foregoing as set forth herein and in Section 6.4; provided that, notwithstanding anything to the contrary herein, such obligation of Seller Parent to cooperate shall expire twenty-four (24) months following the Closing Date (except with respect to Registered Business IP that is owned or purported to be owned by Seller Parent or its Subsidiaries or their predecessors with respect to which there are gaps in the chain of title and the record or beneficial title is, as of the Closing Date, not in the name of a Seller, which obligation shall continue until forty-eight (48) months following the Closing Date.
Section 6.11 No Solicitation. For a period of two (2) years after the Closing Date, (a) Seller Parent shall not, and shall cause its Affiliates not to, directly or indirectly, solicit for employment or hire any employee of Purchaser or its Subsidiaries with the title of vice-president or senior director or more senior and (b) Purchaser Parent shall not, and shall cause its Affiliates (other than Purchaser and its Subsidiaries) not to, solicit for employment or hire any employee of Purchaser or its Subsidiaries with the title of vice-president or senior director or more senior; provided, however, that the foregoing will not restrict Seller Parents, Purchaser Parents or their respective Affiliates ability to conduct generalized searches for officers or employees, including through search firms, bona fide public advertisements on websites or in periodicals of general circulation, so long as such searches are not targeted at any such employees (or hire any person as a result of such searches), or to solicit (or hire) any person whose employment has been terminated by Purchaser or any of its Affiliates at least six (6) months prior to any such solicitation.
Section 6.12 Confidentiality.
(a) For a period of five (5) years after the Closing Date (and for trade secrets, for so long as they remain trade secrets), each Party shall hold, and shall cause their respective Affiliates to hold, and shall cause their respective Representatives to hold, in confidence and not to disclose or release or use in any manner without the prior written consent of the other Parties any and all of the other Parties Confidential Information; provided that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective Affiliates or Representatives who have a need to know such information and are informed of their obligation to treat such information in the same manner as is applicable to the Parties and in respect of whose
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failure to comply with such obligations Seller Parent, Purchaser Parent or Purchaser, as the case may be, will be responsible, (ii) if the Parties or their respective Affiliates or Representatives are compelled to disclose, on the advice of legal counsel, any such Confidential Information by judicial or administrative process or by other requirements of Law or any securities exchange, market or automated quotation system to which such Person is subject or (iii) in connection with any Action to enforce such Partys rights under this Agreement or any Ancillary Agreement, or otherwise in the performance by such Party of this Agreement or any Ancillary Agreement in accordance with its terms. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made by a Party pursuant to clause (ii) above, such Party shall (x) to the extent legally permissible, promptly notify the other Parties of the existence of such request or demand and the disclosure that is expected to be made in respect thereto, in each case with sufficient specificity so that the other Parties may, at their expense, seek a protective order or other appropriate remedy or waive compliance with the provisions of this Section 6.12 and (y) if requested by another Party, assist such other Party, at such other Partys expense, in seeking a protective order or other appropriate remedy in respect of such request or demand; provided that a Party and its Affiliates and Representatives shall be permitted to disclose such Confidential Information without notice in response to a demand or request for disclosure of Confidential Information in connection with a routine examination or audit by a Governmental Authority that is not specifically directed at the transactions contemplated by this Agreement or such Confidential Information, provided that such disclosing Party and, if applicable, such Affiliate or Representative, exercise its and their reasonable best efforts to preserve the confidentiality of such Confidential Information, including by obtaining reasonable assurances that confidential treatment shall be accorded any Confidential Information so disclosed. If such a protective order or other remedy or the receipt of a waiver by another Party is not obtained and such disclosing Party or any of its Affiliates or Representatives is, nonetheless, following consultation with its legal counsel, required by such judicial or administrative process, Law or securities exchange, market or automated quotation system to disclose any Confidential Information, such disclosing Party (or such Affiliate or Representative) may, after compliance with the immediately preceding sentence of this Section 6.12(a), disclose only that portion of the Confidential Information which it has been advised by its legal counsel is required to be disclosed, provided that such disclosing Party and, if applicable, such Affiliate or Representative, exercise its and their reasonable best efforts to preserve the confidentiality of such Confidential Information, including by obtaining reasonable assurances that confidential treatment shall be accorded any Confidential Information so disclosed.
(b) As used in this Agreement, Confidential Information means all non-public proprietary, technical, economic, environmental, operational, financial or other business information or material, data, reports, interpretations, forecasts and business plans, in written, oral (including by recording), electronic or visual form, in the possession of, or which has been disclosed to, whether prior to or following the Closing Date, a Party or its Affiliates or Representatives by any other Party or its Affiliates or Representatives, including pursuant to the access provisions of this Agreement or any Ancillary Agreement, (i) related to the transactions contemplated by this Agreement or the Strategic Process, (ii) in the case of Seller Parent and its Affiliates and Representatives, to the extent relating to the Purchaser Parent Retained Businesses or the Purchaser Parent Retained Liabilities, and (iii) in the case of Purchaser Parent, Purchaser and their respective Affiliates and Representatives, to the extent relating to the Excluded Assets, the Retained Businesses
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or the Retained Liabilities (except, in each case, to the extent that such information can be shown to have been (A) in the public domain (other than as a result of a disclosure by such Party or its Affiliates or Representatives), (B) available after the date hereof to such Party or its Affiliates or Representatives on a non-confidential basis from a source other than the other Parties or their respective Affiliates or Representatives without, to such Partys knowledge after reasonable inquiry, being subject to any contractual or other obligation of confidentiality to the other Parties or their respective Affiliates or Representatives or (C) independently developed by or on behalf of such Party or its Affiliates or Representatives without use of, reference to or reliance upon any Confidential Information of the other Parties (as can be demonstrated by such Party by appropriate documentary evidence) and not, to such Partys knowledge after reasonable inquiry, subject to any contractual or other obligation of confidentiality to the other Parties or their respective Affiliates or Representatives).
(c) Notwithstanding anything to the contrary set forth herein, (i) Seller Parent and its Affiliates, on the one hand, and Purchaser Parent, Purchaser and their respective Affiliates, on the other hand, shall be deemed to have satisfied their obligations hereunder with respect to Confidential Information if they exercise the same degree of care (but no less than a reasonable degree of care) as they take to preserve confidentiality for their own similar information, materials or other documents and (ii) confidentiality obligations contained in any agreement between Seller Parent or any of its Affiliates, or Purchaser Parent, Purchaser or any of their respective Affiliates, on the one hand, and any employee of Seller Parent or any of its Affiliates, or Purchaser Parent, Purchaser or any of their respective Affiliates, on the other hand, shall remain in full force and effect.
(d) Notwithstanding the foregoing in this Section 6.12, to the extent that an Ancillary Agreement or another Contract pursuant to which a Party or any of its Affiliates is bound provides that certain Confidential Information shall be maintained confidential on a basis that is more protective of such Confidential Information or for a longer period of time than provided for in this Section 6.12, then the applicable provisions contained in such Ancillary Agreement or other Contract shall control with respect thereto. After the Closing Date, the Confidentiality Agreement shall be deemed to have been terminated by the parties thereto and shall no longer be in effect. Seller Parent shall enforce, or otherwise assign to Purchaser, its rights under any confidentiality agreements entered into by Seller Parent with other potential purchasers of the Business in connection with the Strategic Process with respect to the confidentiality, non-disclosure or use of Evaluation Material (as defined in such confidentiality agreements) to the extent related to the Business. Seller Parent shall, promptly after the date hereof, request the return or destruction of any such Evaluation Material provided to such other potential purchasers to the extent required to be returned or destroyed in accordance with and subject to the terms of such confidentiality agreements.
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Section 6.13 Guarantees; Letters of Credit.
(a) Without limiting Section 6.13(b) in any respect, Purchaser shall use its reasonable best efforts to cause itself, one of its Affiliates or the Conveyed Subsidiaries to be substituted in all respects for the Sellers and any of their respective Affiliates and for the Sellers and their respective Affiliates to be released, effective as of the Closing, in respect of all Liabilities and obligations of the Sellers and any of their respective Affiliates under or related to each of the Seller Parent Guarantees and Seller Parent LCs (other than to the extent related to the Retained Business, Excluded Assets or Retained Liabilities), and Purchaser Parent and the Sellers shall reasonably cooperate in Purchasers efforts. Subject to the parenthetical in the preceding sentence, for any Seller Parent Guarantee or Seller Parent LC for which Purchaser or any Conveyed Subsidiary, as applicable, is not substituted in all respects for the Sellers and their respective Affiliates (or for which the Sellers and their respective Affiliates (other than the Conveyed Subsidiaries) are not released), effective as of the Closing, Purchaser shall continue to use its reasonable best efforts, and shall cause the Conveyed Subsidiaries to use their reasonable best efforts, to effect such substitution and release after the Closing, and Purchaser Parent and the Sellers shall continue to reasonably cooperate in Purchasers efforts; provided that none of the Sellers, Purchaser Parent or any of their respective Affiliates (other than Purchaser and its Subsidiaries) shall have any obligation to make payments or incur any costs or expenses, grant any concession or incur any other Liability in connection with such cooperation pursuant to this Section 6.13 except to the extent Purchaser agrees to promptly reimburse Sellers, Purchaser Parent and their Affiliates (other than Purchaser and its Subsidiaries), as applicable, or agrees to fully indemnify the Sellers, Purchaser Parent and their Affiliates (other than Purchaser and its Subsidiaries), as applicable, for any such Liabilities to Seller Parents or Purchaser Parents reasonable satisfaction, as applicable. Without limiting the foregoing, neither Purchaser nor any of its Affiliates shall extend, renew, increase its obligations under or transfer to a third party any Contract containing or underlying a Seller Parent Guarantee or Seller Parent LC or any Contract to which any Seller Parent Guarantee or Seller Parent LC relates or pursuant to which any Seller Parent Guarantee or Seller Parent LC was issued or required to be issued unless, prior to or concurrently with such extension, renewal, increase or transfer, Purchaser or a Subsidiary of Purchaser is substituted in all respects for the Sellers and each of their respective Affiliates, and the Sellers and their respective Affiliates are released, in respect of all Liabilities and obligations of the Sellers and each of their respective Affiliates under or in respect of such Seller Parent Guarantee or Seller Parent LC. In no event shall Seller Parent or any of its Affiliates be obligated to pay any money to any Person to effect the substitutions described in this Section 6.13(a). The Parties agree that neither Seller Parent nor any of the Retained Subsidiaries will have any obligation to renew any Seller Parent LCs after the expiration of any such letter of credit. Neither the Seller Parent Guarantees nor the Seller Parent LCs shall be deemed Purchased Assets hereunder.
(b) Without limiting Section 6.13(a) in any respect, from and after the Closing, Purchaser and its Subsidiaries, including the Conveyed Subsidiaries (and their Subsidiaries), jointly and severally, shall indemnify and hold harmless the Seller Parent Indemnified Parties against any Liabilities that the Sellers or any of their respective Affiliates suffer, incur or are liable for following the Closing by reason of or arising out of or in consequence of (i) the Sellers or any of their respective Affiliates issuing, making payment under, being required to pay or reimburse the issuer of or any other Person in connection with, or being a party to, any Seller Parent Guarantee or Seller Parent LC, (ii) any claim or demand for payment made on the Sellers or any of their respective Affiliates with respect to any Seller Parent Guarantee or Seller Parent LC or (iii) any Action by any Person who is or claims to be entitled to the benefit of or claims to be entitled to payment, reimbursement or indemnity with respect to any Seller Parent Guarantee or Seller Parent LC.
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Section 6.14 Certain Ancillary Agreements.
(a) Prior to the date hereof, Purchaser Parent has delivered to Seller Parent true and complete copies of all Purchaser Ancillary Agreements currently in effect (and within forty-five (45) days following the date hereof shall provide Seller Parent with true and complete copies of any other material Purchaser Related Party Contracts to the extent not previously provided). Following the date hereof, the Parties will discuss, cooperate and negotiate reasonably and in good faith to cause to be prepared reasonably in advance of the Closing, and in any event to be finalized within one hundred and twenty (120) days following the date hereof, forms of each of the following: (i) a transition services agreement with respect to the provision of certain services on a transitional basis following the Closing by Seller Parent, or certain of its Affiliates, to Purchaser and its Subsidiaries (and, to the extent reasonably requested by Seller Parent, a reciprocal reverse transition services agreement with respect to the provision of services by Purchaser and its Subsidiaries to Seller Parent and its Affiliates relating to any Excluded Assets that are not transferred out of the Conveyed Subsidiaries or their Subsidiaries prior to the Closing, if any) (the Transition Services Agreement), (ii) a cross-license agreement with respect to the license of certain Intellectual Property related to and used in the Business to Purchaser and its Subsidiaries and certain Business IP related to and used in the Retained Businesses to Seller Parent and its Affiliates (the Intellectual Property License Agreement), (iii) a manufacturing and supply agreement with respect to the supply of certain Products manufactured at Retained Facilities by Seller Parent, or certain of its Affiliates, to Purchaser, or certain of its Subsidiaries (the Manufacturing and Supply Agreement (Seller Parent as Supplier)), (iv) a manufacturing and supply agreement with respect to the supply of certain products commercialized by the Retained Businesses that are manufactured at the Facilities by Purchaser, or certain of its Subsidiaries, to Seller Parent, or certain of its Affiliates (the Manufacturing and Supply Agreement (Purchaser as Supplier)), (v) Intellectual Property assignment agreements with respect to the assignment of Seller Parents and its Subsidiaries right, title and interest in the Business IP in accordance with this Agreement to Purchaser and its Subsidiaries (the IP Assignment Agreements), (vi) a transitional trademark license agreement with respect to the license of certain Trademarks on a transitional basis following the Closing by Seller Parent, or certain of its Affiliates, to Purchaser and its Subsidiaries (the Transitional Trademark License Agreement), (vii) a safety data exchange agreement to govern the provision and safeguarding of certain information provided pursuant to this Agreement in a manner compliant with applicable Law (the Safety Data Exchange Agreement), and (viii) the Local Implementing Agreements (the forms of each of the agreements described in the foregoing clauses (i) through (viii), collectively the Form Ancillary Agreements). The Parties agree that the Form Ancillary Agreements shall be prepared substantially based on the Form Ancillary Agreements previously provided by Seller Parent to Purchaser Parent appended hereto as Exhibit F and the Parties shall negotiate in good faith those terms that were not agreed to as reflected in Purchaser Parents responses to such, which are appended hereto as Exhibit G. The Manufacturing and Supply Agreement (Purchaser as Supplier) and the Manufacturing and Supply Agreement (Seller Parent as Supplier) shall be negotiated in accordance with the specific terms and principles set forth on Section 6.14 of the Seller Disclosure Letter. The terms of such Form Ancillary Agreements shall in each case be consistent with the terms of this Agreement.
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(b) At the Closing, Purchaser Parent, Purchaser and Seller Parent, as applicable, shall enter into, execute and deliver, or cause their applicable Affiliates to enter into, execute and deliver, each Form Ancillary Agreement, a shareholders agreement substantially in the form set forth in Exhibit C (the Purchaser Shareholders Agreement), and a Structuring Considerations Agreement substantially in the form set forth in Exhibit D (the Structuring Considerations Agreement).
(c) Promptly after the date hereof, Seller Parent and Purchaser Parent shall reasonably cooperate to discuss the service charges in the Support Services Agreement, dated as of March 2, 2015, by and between GlaxoSmithKline Services Unlimited and Purchaser, as amended, and to provide details on such charges to ensure a reasonable methodology is being applied.
(d) Promptly after the date here, the Seller Parent and Purchaser Parent shall negotiate a lease agreement and related documentation in accordance with the terms set forth on Section 6.14(d) of the Seller Disclosure Letter (the Lease Agreement).
Section 6.15 Retained and Transferred Names.
(a) Retained Names. (i) As soon as reasonably practicable, but in no event later than forty-five (45) days after the Closing, unless a longer period of time is necessary to comply with applicable Law (including to the extent a longer period of time is necessary to assign or update any Product Registrations, Manufacturing Registrations, or Governmental Authorizations or for legal or regulatory compliance purposes) (Compliance Requirements), and, in such event, as reasonably promptly as possible as allowed under applicable Law, Purchaser shall cause each Conveyed Subsidiary (and each Subsidiary thereof) to file to change its name and cause its certificate of incorporation (or equivalent organizational document), as applicable, to be amended to remove any and all references to (A) Pfizer, Wyeth or Pfizer Consumer Health, and (B) all other Retained Names set forth in Section 1.1(E) of the Seller Disclosure Letter or otherwise designated by Seller Parent in writing prior to the Closing (clauses (A) and (B), collectively, the Retained Brands); and (ii) notwithstanding anything to the contrary in this Agreement, in the event any name change of any Conveyed Subsidiary (or Subsidiary thereof) in accordance with this Section 6.15(a) would take effect during the term of the Transition Services Agreement, including any extensions thereof, Purchaser shall (a) at least thirty (30) days prior to such name change, consult with Seller Parent regarding the contemplated change and (b) upon Seller Parents request, refrain from making any such change if Seller Parent determines in good faith that such change would reasonably be expected to result in additional cost or operation burden to Seller Parent or any of its Affiliates in connection with one or more Services (as defined in the Transition Services Agreement) provided by Seller Parent or any of its Affiliates under the Transition Services Agreement, until such time as is as soon as reasonably practicable after the term of the applicable Service (or Services) is terminated or expires pursuant to the terms of the Transition Services Agreement (the date that Purchaser is required to cause each Conveyed Subsidiary to make such name change filing in accordance with clauses (i) and (ii), the Name Change Date). Except as authorized pursuant to an Ancillary Agreement, as soon as reasonably practicable after the later of (a) the Closing, but in no event later than forty-five (45) days after the Closing (or, if later, by the later of the Name Change Date or such other date as agreed between Purchaser and Seller Parent) and (b) any longer period of time necessary
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with respect to any Compliance Requirement, Purchaser shall, and shall cause its Affiliates to, remove, strike over or otherwise obliterate all Retained Brands from all assets and other materials owned by the Conveyed Subsidiaries (and Subsidiaries thereof), including any sales and product literature, vehicles, business cards, schedules, stationery, packaging materials, displays, signage, advertising, marketing, promotional and related materials, training materials, audio and visual materials, manuals, forms, websites, social media pages and accounts, e-mail and e-mail addresses, computer software and other materials and systems, and shall cease and discontinue any other use of the Retained Brands as of the Closing in the operation of their businesses. Notwithstanding the foregoing, nothing in this Agreement is intended to prohibit any use (or require any removal, striking over, or other obliteration) by Purchaser or any of its Affiliates of any Retained Brand (x) for historical references, including in regulatory filings and to describe the past ownership and affiliation of the Business, and (y) in any manner as is or would have been permitted by applicable Law with respect to Trademarks, including fair use, or nominal use, and other uses not prohibited by Law.
(b) Purchaser Names. As soon as reasonably practicable after the Closing, but in no event later than forty-five (45) days unless a longer period of time is necessary to comply with applicable Law, and, in such event, as reasonably promptly as possible as allowed under applicable Law, Seller Parent shall, and shall cause its Affiliates to, remove, strike over or otherwise obliterate all Business Trademark Rights, as applicable, from all assets and other materials owned by Seller Parent and its Affiliates and, to the extent applicable file to change its name and cause its certificate of incorporation (or equivalent organizational document), as applicable, to be amended to remove any and all references to any Business Trademark Rights, as applicable, including any sales and product literature, vehicles, business cards, schedules, stationery, packaging materials, displays, signage, advertising, marketing, promotional and related materials, training materials, audio and visual materials, manuals, forms, websites, social media pages and accounts, e-mail and e-mail addresses, computer software and other materials and systems, and shall cease and discontinue any other use of such Business Trademark Rights in the operation of their business.
Section 6.16 Compliance with WARN. Purchaser agrees to provide or cause to be provided any required notice under WARN, and otherwise to comply with WARN with respect to any plant closing or mass layoff or similar event affecting Transferred Employees and occurring on or after the Closing Date. Purchaser agrees to, and shall cause its Affiliates to, indemnify and hold harmless Seller Parent and the Retained Subsidiaries from and against any and all Losses which Seller Parent and the Retained Subsidiaries may incur in connection with any Action or claim of violation brought against Seller Parent and any of the Retained Subsidiaries under WARN (including with respect to any plant closing or mass layoff), which relate, in whole or in part, to actions taken by Purchaser or any of its Affiliates following the Closing with regard to any site of employment of the Conveyed Subsidiaries (or their Subsidiaries) or the Purchased Assets or any of their respective operating units within any site where a Transferred Employee is located. On or as soon as reasonably practicable following the Closing Date, Seller Parent shall provide, by termination date and work location, the name or employee identification number of each employee or former employee of Seller Parent or its Affiliates and the Conveyed Subsidiaries who has suffered an employment loss under WARN at any site of employment where a Business Employee is located within the ninety (90) days immediately preceding the Closing Date.
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Section 6.17 Litigation Support; Non-Indemnified Claims.
(a) Following the Closing, each Party and its respective Affiliates, shall cooperate with each other Party and its respective Affiliates in the mitigation, defense or settlement of any Liabilities or Actions involving the Business or Retained Businesses or the Purchaser Business or Purchaser Parent Retained Businesses for which such other Party has responsibility under this Agreement, including with respect to any Retained Liabilities, Purchaser Parent Retained Liabilities, Assumed Liabilities or Purchaser Liabilities, by providing such other Party and such other Partys legal counsel, upon reasonable advance notice in writing and during normal business hours, access to current and former employees, contractors, records, documents, data, equipment, facilities, products, parts, prototypes and other information as such other Party may reasonably request, to the extent maintained or under the possession or control of such Party and its Affiliates; provided that any Party may restrict the foregoing access or the provision of such information to the extent that, in the reasonable judgment of such Party, (i) applicable Law requires such Party or any of its Affiliates, as applicable, to restrict or prohibit such access or the provision of such information, (ii) providing such access would unreasonably interfere with the operation of its and its Subsidiaries respective businesses, (iii) providing such access or information would breach a confidentiality obligation to a third party, (iv) providing such access or information would result in disclosure of any information that is competitively or commercially sensitive, (v) in the case of Seller Parent, the information relates to the Strategic Process or, in the case of Purchaser Parent, the information relates to review of strategic alternatives with respect to the Purchaser Business, and for clarity in each case (with respect to both Seller Parent and Purchaser Parent) pertaining to such review prior to the Closing, or (vi) providing such access or disclosure of any such information would reasonably be expected to result in the loss or waiver of the attorney-client or other applicable privilege or protection. In the event that a Party restricts access or withholds information on the basis of the foregoing clauses (i) through (vi), such Party shall, if permitted, inform the requesting Party as to the general nature of what is being restricted or withheld and the reason therefor, and such Parties shall each use their commercially reasonable efforts to make appropriate substitute arrangements to permit disclosure of the relevant information in a manner that does not suffer from such impediments. The requesting Party shall reimburse the other Party for its reasonable out-of-pocket expenses paid to third parties in performing its obligations under this Section 6.17. The Parties agree that, with respect to any matters that are the subject of this Section 6.17 and Section 6.5(i), the provisions of Section 6.5(i) (and not this Section 6.17) shall control.
(b) From and after the Closing, (i) Purchaser shall promptly notify Seller Parent of any Action brought by or against a third party with respect to the Business that would reasonably be expected to affect any Retained Business, Excluded Asset or Retained Liability, (ii) Purchaser shall promptly notify Purchaser Parent of any Action brought by or against a third party with respect to the Purchaser Business that would reasonably be expected to affect any Purchaser Parent Retained Business or Purchaser Parent Retained Liability, (iii) Seller Parent shall promptly notify Purchaser and Purchaser Parent of any Action brought by or against a third party with respect to the Retained Businesses that would reasonably be expected to affect the Business or any Purchased Asset or Assumed Liability and (iv) Purchaser Parent shall promptly notify Purchaser and Seller Parent of any Action brought by or against a third party with respect to the Purchaser Parent Retained Businesses that would reasonably be expected to affect the Purchaser Business or any Purchaser
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Liability or any assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries. The provisions of Article VII shall apply to any Third Party Claim with respect to which any Indemnified Party is entitled to indemnification under Article VII. With respect to any other third party Action (Non-Indemnified Claims), if such Non-Indemnified Claim could reasonably be expected to (i) affect any Purchaser Parent Retained Businesses or Purchaser Parent Retained Liability, Purchaser Parent shall have the right but not the obligation, at its option and its own expense, to participate in the defense or settlement of such Non-Indemnified Claim and to employ counsel of its own choosing for such purpose, (ii) affect any Retained Business, Excluded Asset or Retained Liability, Seller Parent shall have the right but not the obligation, at its option and its own expense, to participate in the defense or settlement of such Non-Indemnified Claim and to employ counsel of its own choosing for such purpose or (iii) affect the Business, the Purchaser Business or any Purchased Asset or Assumed Liability or Purchaser Liability, or any other assets, properties or rights relating to the Purchaser Business or owned, used or held by Purchaser or any of its Subsidiaries, Purchaser shall have the right but not the obligation, at its option and its own expense, to participate in the defense or settlement of such Non-Indemnified Claim; provided, in each case, that such participation would not materially adversely affect the defense of such Non-Indemnified Claim and there is no material conflict of interest between the applicable Parties with respect to such Action.
(c) In furtherance of the foregoing, from and after the Closing Date, each Party shall, and shall cause its respective Affiliates to, (i) cooperate with each other Party and its respective Affiliates in the mitigation, defense or settlement of any Liabilities or Actions described in Section 6.17(b) and (ii) provide to each other, upon written request, reasonable access during normal business hours to their current and former officers, directors, employees, contractors, personnel and agents for fact finding, consultation and interviews and as witnesses in connection with any Action in which the requesting Party may from time to time be involved relating to the matters described in Section 6.17(b), in each case subject to Section 6.17(a). The requesting party agrees to reimburse the other for reasonable out-of-pocket expenses (other than officers or employees salaries) incurred in connection with providing individuals and witnesses pursuant to this Section 6.17(c).
Section 6.18 Insurance.
(a) From and after the Closing Date, the Conveyed Subsidiaries and their Subsidiaries shall cease to be insured by Seller Parents or its Affiliates insurance policies or by any of their self-insured programs. Seller Parent or any of its Affiliates may amend, effective at or prior to the Closing, any insurance policies in the manner it deems appropriate to give effect to this Section 6.18. From and after the Closing, Purchaser shall be responsible for securing all insurance it considers appropriate for its operation of the Conveyed Subsidiaries and their Subsidiaries and the Business. Seller Parent shall use reasonable best efforts to keep or cause its Affiliates to keep all insurance policies currently maintained with respect to the Business, or suitable replacements or renewals, in full force and effect through 12:01 a.m. (New York time) on the Closing Date.
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(b) With respect to any Assumed Liability arising out of events or circumstances pertaining to the Business or Purchased Assets that occurred or existed prior to the Closing and are covered under any occurrence-based unaffiliated third party automobile or general liability insurance policy of Seller Parent or its Subsidiaries (an Insurance Policy) in effect as of the Closing (such events or circumstances, an Insurance Matter), Purchaser may tender such Insurance Matter for submission by Seller Parent or one of its Subsidiaries to the applicable insurer under such Insurance Policy under which the Sellers or the Conveyed Subsidiaries (or any of their Subsidiaries) were insured as of the date of the applicable events or circumstances, in which case Seller Parent will use commercially reasonable efforts to submit a claim with respect to such Insurance Matter to the applicable insurer; provided that Purchaser and the Conveyed Subsidiaries (and their Subsidiaries) shall indemnify Seller Parent and its Affiliates for any reasonable direct costs and expenses (including reasonable costs of investigation of the underlying claim and of collection and any Taxes imposed in respect of such insurance proceeds) in connection with the foregoing and shall be solely responsible for (i) any per claim deductible or per claim self-insured retentions with respect to such Insurance Matter, (ii) any claims, costs and expenses (including attorneys fees) with respect to such Insurance Matter that are not covered under the relevant Insurance Policy, and (iii) any collateral requirements with respect to such Insurance Matter; provided, further that (A) Purchaser shall not, and shall cause its Affiliates not to, in connection with any Insurance Matter under any Insurance Policy, take any action that would be reasonably likely to result in the applicable insurer terminating or materially reducing coverage under such Insurance Policy, (B) if an Insurance Policy aggregate is exhausted, or believed likely to be exhausted, due to noticed claims, Purchaser, on the one hand, and Seller Parent, on the other hand, shall be responsible for their pro rata portion of the reinstatement premium, if any, based upon the amount of the claims submitted by each of them (or their respective Affiliates) thereunder and (C) Purchaser shall not be entitled to make any claims or receive any proceeds to the extent the related Liabilities are included in the calculation of Final Business Working Capital or Final Business Net Cash or such proceeds were otherwise credited to Purchaser at or prior to the Closing. Except as set forth in Section 2.1(o) and the immediately preceding sentence, from and after the Closing, none of Purchaser Parent, Purchaser or any of their respective Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) shall have any access, right, title or interest to or in any of Seller Parents or its Affiliates past or current insurance policies or any of their self-insured programs (including to all claims and rights to make claims and all rights to proceeds) to cover any assets of the Conveyed Subsidiaries or their Subsidiaries or any Assumed Liability or any other Liability arising from the operation of the Business or the ownership or use of any Purchased Asset before, on or after the Closing, and Purchaser shall not and shall cause its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) not to seek to assert or to exercise any rights or claims of any Conveyed Subsidiaries or their Subsidiaries or the Business under or in respect of any such past or current insurance policy, including under which any Conveyed Subsidiary or Affiliate thereof or the Business is a named insured, and without limiting the foregoing shall not seek to assert or exercise (w) any rights with respect to any self-insurance programs of Seller Parent or any of its Affiliates, (x) any rights under any fronting insurance programs or arrangements of Seller Parent or its Affiliates, (y) any rights under any claims-made insurance programs of Seller Parent or its Affiliates or (z) any rights to cause Seller Parent or any of its Affiliates to pay any deductible or self-insured retention amount with respect to any claim. Purchaser shall notify Seller Parent promptly of any such Insurance Matter for which it seeks coverage and Purchaser and Seller Parent shall keep each reasonably informed regarding the status of the Insurance Matter.
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Section 6.19 Trade Notification. Seller Parent and Purchaser Parent shall agree on the method and content of the notifications to partners, customers, suppliers, wholesalers and distributors of the Business and the Purchaser Business of the transactions contemplated by this Agreement prior to the Closing. Seller Parent and Purchaser agree that such notifications are to provide sufficient advance notice of the transactions contemplated hereby and the plans associated therewith, with the objective of minimizing any disruption of the Business and the Purchaser Business.
Section 6.20 Accounts; Products Received.
(a) All payments and reimbursements received by Seller Parent, Purchaser Parent or their Affiliates after the Closing that, consistent with the terms and conditions of this Agreement or any Ancillary Agreement, are the property of Purchaser or its Subsidiaries (including the Conveyed Subsidiaries and their Subsidiaries) shall be held by such Person in trust for the benefit of Purchaser and, promptly following receipt by such Person of any such payment or reimbursement, such Person shall pay over to Purchaser the amount of such payment or reimbursement without right of set-off. All payments and reimbursements received after the Closing by Purchaser Parent, Purchaser or their Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) that, consistent with the terms and conditions of this Agreement or any Ancillary Agreement, are the property of Seller Parent or any of its Affiliates, shall be held by such Person in trust for the benefit of Seller Parent and, promptly following receipt by such Person of any such payment or reimbursement, such Person shall pay over to Seller Parent the amount of such payment or reimbursement without right of set-off. All payments and reimbursements received after the Closing by (x) Seller Parent or its Affiliates or (y) Purchaser or its Subsidiaries that, consistent with the terms and conditions of this Agreement or any Ancillary Agreement, are the property of Purchaser Parent or any of its Affiliates (other than Purchaser and its Subsidiaries), shall be held by such Person in trust for the benefit of Purchaser Parent and, promptly following receipt by such Person of any such payment or reimbursement, such Person shall pay over to Purchaser Parent the amount of such payment or reimbursement without right of set-off.
(b) If Products or Purchaser Products are received by Seller Parent or its Affiliates or Purchaser Parent or its Affiliates (other than Purchaser and its Subsidiaries) after the Closing, Seller Parent or Purchaser Parent, as applicable, shall or shall cause such Affiliate to ship those Products or Purchaser Products to Purchaser, or Purchasers stated representative, at Purchasers sole cost and expense. Purchaser shall have sole responsibility for accepting and processing all returns following the Closing of Products and disbursing refunds and credits in respect thereof (whether such Products were sold prior to, on or after the Closing Date).
Section 6.21 Directors and Officers Indemnification.
(a) If the Closing occurs, Purchaser shall, and shall cause the Conveyed Subsidiaries and their Subsidiaries to, take any necessary actions to provide that all rights to indemnification and all limitations on liability existing in favor of any current or former officers, directors, partners, members, or managers of the Conveyed Subsidiaries or their Subsidiaries (or their respective predecessors) (collectively, the D&O Indemnitees), as provided in (i) the organizational documents of the Conveyed Subsidiaries and their Subsidiaries or (ii) any agreement
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providing for indemnification by the Conveyed Subsidiaries or their Subsidiaries of any of the D&O Indemnitees, which agreements are set forth in Section 6.21 of the Seller Disclosure Letter, shall survive the consummation of the transactions contemplated hereby and continue in full force and effect and be honored by the Conveyed Subsidiaries or their Subsidiaries after the Closing.
(b) In the event that any of the Conveyed Subsidiaries or their Subsidiaries or Purchaser or any of their respective successors or assigns (i) consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or a majority of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Conveyed Subsidiaries or their Subsidiaries or Purchaser, as the case may be, shall succeed to the obligations set forth in this Section 6.21.
(c) The obligations of Purchaser under this Section 6.21 shall not be terminated or modified in such a manner as to adversely affect any D&O Indemnitee without the express written consent of such affected D&O Indemnitee (it being expressly agreed that the D&O Indemnitees shall be third party beneficiaries of this Section 6.21).
Section 6.22 Return of Assets; Transfer of Purchased Assets.
(a) If, at any time after the Closing, any asset held by Purchaser or any of its Subsidiaries (including the Conveyed Subsidiaries and their Subsidiaries) is ultimately determined to be an Excluded Asset or an asset of the Purchaser Parent Retained Business, or Purchaser or any of its Subsidiaries is found subject to a Retained Liability, or Purchaser or any of its Subsidiaries is found subject to a Purchaser Parent Retained Liability, within thirty (30) days of such determination (i) Purchaser shall return or transfer and convey (without further consideration) to Seller Parent or the appropriate Affiliate of Seller Parent such Excluded Asset or Retained Liability, or to Purchaser Parent or the appropriate Affiliate of Purchaser Parent (other than Purchaser and its Subsidiaries) such asset of the Purchaser Parent Retained Business or such Purchaser Parent Retained Liability, as applicable; (ii) Seller Parent shall, or shall cause its appropriate Affiliate to, assume (without further consideration) such Retained Liability, or Purchaser Parent shall assume (without further consideration) such Purchaser Parent Retained Liability; and (iii) Seller Parent or Purchaser Parent, as applicable, and Purchaser shall, and shall cause their appropriate Affiliates to, execute such documents or instruments of conveyance or assumption and take such further acts, in each case consistent with the terms of this Agreement and the Ancillary Agreements, as are reasonably necessary or desirable to effect the transfer of such Excluded Asset or Retained Liability back to Seller Parent or its appropriate Affiliate or such asset of the Purchaser Parent Retained Business or Purchaser Parent Retained Liability back to Purchaser Parent, as applicable, in each case such that each Party is put into the same economic position as if such action had been taken on or prior to the Closing Date. In furtherance of the foregoing, Purchaser and its Affiliates shall, and shall cause the Conveyed Subsidiaries and their Subsidiaries to, promptly pay or deliver (1) to Seller Parent (or its designee) any monies or checks which have been sent to Purchaser or any of its Affiliates (including the Conveyed Subsidiaries and their Subsidiaries) to the extent they are not due to the Business and which should have been sent to Seller Parent or one of its Affiliates (including promptly forwarding invoices or similar documentation to Seller Parent) or (2) to Purchaser Parent
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(or its designee other than Purchaser and its Subsidiaries) any monies or checks which have been sent to Purchaser or any of its Subsidiaries to the extent they are not due to the Purchaser Business and which should have been sent to Purchaser Parent or one of its Affiliates (other than Purchaser and its Subsidiaries) (including promptly forwarding invoices or similar documentation to Purchaser Parent).
(b) Subject to Sections 2.1 and 2.2, if, at any time after the Closing, any asset held by Seller Parent or its Affiliates is ultimately determined to be a Purchased Asset or Seller Parent or any of its Affiliates is found to be subject to an Assumed Liability, within thirty (30) days of such determination, (i) Seller Parent shall return or transfer and convey (without further consideration) to Purchaser such Purchased Asset or Assumed Liability; (ii) Purchaser shall, or shall cause its appropriate Affiliate to, assume (without further consideration) such Assumed Liability; and (iii) Seller Parent and Purchaser shall, and shall cause their appropriate Affiliates to, execute such documents or instruments of conveyance or assumption and take such further acts, in each case consistent with the terms of this Agreement and the Ancillary Agreements, as are reasonably necessary or desirable to effect the transfer of such Purchased Asset or Assumed Liability back to Purchaser, in each case such that each Party is put into the same economic position as if such action had been taken on or prior to the Closing Date. In furtherance of the foregoing, Seller Parent shall promptly pay or deliver to Purchaser (or its designee) any monies or checks which have been sent to Seller Parent or any of its Affiliates to the extent they are due to the Business and which should have been sent to Purchaser or one of its Affiliates (including promptly forwarding invoices or similar documentation to Purchaser).
(c) If any asset, property or right held by Purchaser Parent or any of its Affiliates (other than Purchaser or its Subsidiaries) is determined to be an asset of the Purchaser Business or Purchaser Parent or any of its Affiliates (other than Purchaser and its Subsidiaries) is found subject to a Purchaser Liability, within thirty (30) days of such determination (i) Purchaser Parent shall (or shall cause its Affiliate to) transfer and convey (without consideration) to Purchaser or its appropriate Subsidiary such asset, property or right or Purchaser Liability; (ii) Purchaser shall, or shall cause its appropriate Subsidiary to, assume (without consideration) such Purchaser Liability; and (iii) Purchaser Parent and Purchaser shall, and shall cause their appropriate Subsidiaries to, in each case consistent with the terms of this Agreement and the Ancillary Agreements, execute such documents or instruments of conveyance or assumption and take such further acts as are reasonably necessary or desirable to effect such transfer of such asset, property or right or Purchaser Liability back to Purchaser or its appropriate Subsidiary, in each case such that each Party is put into the same economic position as if such action had been taken on or prior to the Closing Date. In furtherance of the foregoing, Purchaser Parent and its Affiliates (other than Purchaser or its Subsidiaries) shall promptly pay or deliver to Purchaser (or its designee) any monies or checks which have been sent to Purchaser Parent or any of its Affiliates to the extent they are due to the Business or the Purchaser Business and which should have been sent to Purchaser or one of its Subsidiaries (including promptly forwarding invoices or similar documentation to Purchaser).
Section 6.23 Bulk Transfer Laws. Purchaser Parent and Purchaser acknowledge that Seller Parent has not taken, and does not intend to take, any action required to comply with any applicable so-called bulk sale or bulk transfer Laws or similar Laws, and Purchaser Parent and Purchaser hereby waive, to the fullest extent permitted by applicable Law, compliance by Seller Parent and its Affiliates with the provisions of any such Laws of any jurisdiction in connection with the sale of the Purchased Assets.
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Section 6.24 Purchaser Parent Shareholder Meeting; Purchaser Parent Board Recommendation.
(a) Subject to Section 6.24(f) and Section 6.24(g), Purchaser Parent shall, and shall cause its Representatives to, (i) as soon as reasonably practicable, prepare and file with the UKLA the Purchaser Parent Shareholder Circular, which shall comply with the content requirements of the Listing Rules, including Chapter 11 thereof, and applicable Law, and include a notice of general meeting for the purpose of placing the Purchaser Parent Shareholder Approval Resolution before Purchaser Parents shareholders, and (ii) use reasonable best efforts to finalize the Purchaser Parent Shareholder Circular and have it approved by the UKLA as soon as reasonably practicable after such filing, including by taking all such actions (including supplying undertakings, executing documents and paying fees and expenses) as may be required by the UKLA. As promptly as practicable (and in any event within three (3) Business Days) after UKLA approval of the Purchaser Parent Shareholder Circular, Purchaser Parent shall publish the Purchaser Parent Shareholder Circular and send it to its shareholders and shall, subject to Section 6.24(f) and Section 6.24(g), cause a general meeting of the shareholders of Purchaser Parent for the purpose of obtaining the Purchaser Parent Shareholder Approval (together with any adjournment or postponement thereof, the Purchaser Parent Shareholder Meeting) to be convened and held on twenty-one (21) clear days notice (subject to the notice being deemed served in accordance with the Deposit Agreement to enable ADR voting), in each case in compliance with the Listing Rules and applicable Law and Purchaser Parents constitutional documents, and, subject to Section 6.24(f) and Section 6.24(g), shall propose the Purchaser Parent Shareholder Approval Resolution (without amendment) at the Purchaser Parent Shareholder Meeting.
(b) Seller Parent and its Representatives shall cooperate reasonably and in good faith with Purchaser Parent, and provide, at Purchasers sole cost and expense, all such information and documentation requested by Purchaser Parent or its Representatives, in each case to the extent reasonably necessary for the purposes of Purchaser Parents preparation of the Purchaser Parent Shareholder Circular and any supplementary circular thereto, including for the purposes of the preparation of pro forma financial information (and related reporting requirements), if applicable. Seller Parent and its Representatives shall be given a reasonable opportunity to review and comment upon the Purchaser Parent Shareholder Circular (and any supplementary circular thereto) before each such document is filed with the UKLA and is published, and Purchaser Parent shall give reasonable consideration to any additions, deletions or changes reasonably and timely suggested thereto by Seller Parent and its Representatives. In addition, Purchaser Parent shall provide Seller Parent and its Representatives with copies of any written comments, and shall inform them of any material or substantive oral comments, Purchaser Parent or its Representatives may receive from time to time from the UKLA or its staff with respect to the Purchaser Parent Shareholder Circular (and any supplementary circular thereto) promptly after receipt of such comments, and any written or oral responses thereto. Seller Parent and its Representatives shall be given a reasonable opportunity to review and comment upon any such written responses and Purchaser Parent shall
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give reasonable consideration to any additions, deletions or changes reasonably suggested thereto by Seller Parent and its Representatives. In the event that Purchaser Parent or its Representatives receives any comments from the UKLA or their staff with respect to the Purchaser Parent Shareholder Circular (or any amendment or supplement thereto), Purchaser Parent and its Representatives shall use reasonable best efforts to respond as promptly as practicable to such comments and shall take such other actions as may be reasonably necessary to resolve the issues raised therein as promptly as practicable, and Seller Parent and its Representatives shall cooperate reasonably and in good faith with Purchaser Parent and its Representatives to the extent reasonably necessary for the purposes of resolving such comments.
(c) Subject to Section 6.24(f) and Section 6.24(g), Purchaser Parent and the Board of Directors of Purchaser Parent shall (i) include the Purchaser Parent Board Recommendation in the Purchaser Parent Shareholder Circular, (ii) use its reasonable best efforts to obtain the Purchaser Parent Shareholder Approval as promptly as practicable, and to the extent any further Purchaser Parents shareholders resolution is required to approve the transactions contemplated hereby or by any of the Ancillary Agreements prior to Closing, use its reasonable best efforts to procure that such further shareholder resolution is passed by the requisite vote of Purchaser Parents shareholders, and (iii) ensure that the Purchaser Parent Shareholder Circular includes a statement that each Director of Purchaser Parent who holds shares in Purchaser Parent intends to vote his or her shares in favor of the Purchaser Parent Shareholder Approval Resolution. Subject to Section 6.24(f) and Section 6.24(g), Purchaser Parent shall not, without the prior written consent of Seller Parent, adjourn, postpone or otherwise delay the Purchaser Parent Shareholder Meeting; provided that Purchaser Parent may adjourn, postpone or otherwise delay the Purchaser Parent Shareholder Meeting (including an adjournment to allow reasonable additional time for the preparation and publication of any supplement or amendment to the Purchaser Parent Shareholder Circular) if required to comply with Purchaser Parents obligations under the Listing Rules or otherwise by applicable Law, and/or where, and to the extent that, the Board of Directors of Purchaser Parent shall have determined in good faith (after consultation with its legal counsel) that the failure to so adjourn, delay or postpone the Purchaser Parent Shareholder Meeting would be inconsistent with its fiduciary duties under applicable Law. After Purchaser Parent has established a record date for the Purchaser Parent Shareholder Meeting, Purchaser Parent shall not change such record date or establish a different record date for the Purchaser Parent Shareholder Meeting without the prior written consent of Seller Parent, unless (x) required to do so by applicable Law or Purchaser Parents constitutional documents or (y) as required in connection with any adjournment, postponement or delay of the Purchaser Parent Shareholder Meeting permitted by the immediately preceding sentence (it being understood that Purchaser Parent shall consult with and consider in good faith the reasonable views of Seller Parent in connection with setting such new record date). Without the prior written consent of Seller Parent, the Purchaser Parent Shareholder Approval Resolution shall be the only resolution (other than matters of procedure and matters required by applicable Law or Purchaser Parents constitutional documents to be voted on by Purchaser Parents shareholders in connection with the approval of the Sale and the transactions contemplated hereby) that Purchaser Parent shall propose to be acted on by Purchaser Parents shareholders at the Purchaser Parent Shareholder Meeting.
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(d) Purchaser Parent shall notify Seller Parent: (i) on a regular basis after publication of the Purchaser Parent Shareholder Circular and prior to the Purchaser Parent Shareholder Meeting of the proxy votes received in respect of the Purchaser Parent Shareholder Meeting; and (ii) promptly following the Purchaser Parent Shareholder Meeting, of the result of the vote on the resolutions proposed to the Purchaser Parents shareholders at the Purchaser Parent Shareholder Meeting.
(e) Except as expressly permitted by Section 6.24(f), Purchaser Parent and the Board of Directors of Purchaser Parent (and any committee or other subdivision thereof) shall not, and shall not permit its Representatives to, directly or indirectly, (i) fail to make, withdraw, withhold, change, amend, qualify or modify in a manner adverse to Seller Parent, or publicly propose to fail to make in the Purchaser Parent Shareholder Circular, withdraw, withhold, change, amend, qualify or modify in a manner adverse to Seller Parent, the Purchaser Parent Board Recommendation, (ii) make any public announcement or statement inconsistent with the Purchaser Parent Board Recommendation, (iii) fail to include the Purchaser Parent Board Recommendation in the Purchaser Parent Shareholder Circular (or any supplement or amendment thereto), (iv) recommend in favor of, or fail to recommend against, any matter that could reasonably be expected to result in a Purchaser Adverse Action or a Purchaser Material Adverse Effect or (v) publicly propose to do any of the foregoing (any of the foregoing in this sentence, a Purchaser Parent Adverse Recommendation Change).
(f) Notwithstanding any other provision of this Section 6.24, at any time prior to obtaining the Purchaser Parent Shareholder Approval, the Board of Directors of Purchaser Parent may effect a Purchaser Parent Adverse Recommendation Change if the Board of Directors of Purchaser Parent shall have determined in good faith (after consultation with its legal counsel) that the failure to effect a Purchaser Parent Adverse Recommendation Change would be inconsistent with its fiduciary duties under applicable Law. Subject always to applicable Law and the fiduciary duties of the Board of Directors of Purchaser Parent under applicable Law, Purchaser Parent shall promptly notify Seller Parent in the event that it intends to effect a Purchaser Parent Adverse Recommendation Change, describing in reasonable detail the underlying facts giving rise to, and the reasons for making, such Purchaser Parent Adverse Recommendation Change and shall provide Seller Parent with a reasonable opportunity to consult with Purchaser Parent in respect of the same.
(g) Notwithstanding anything to the contrary contained in this Agreement, a Purchaser Parent Adverse Recommendation Change pursuant to Section 6.24(f) shall relieve Purchaser Parent of its obligations to convene the Purchaser Parent Shareholder Meeting, to prepare and file the Purchaser Parent Shareholder Circular and have the Purchaser Parent Shareholder Circular approved by the UKLA and publish the Purchaser Parent Shareholder Circular and send it to its shareholders, and to submit the Purchaser Parent Shareholder Approval Resolution to a vote of the holders of ordinary shares of Purchaser Parent at the Purchaser Parent Shareholder Meeting and seek to obtain the Purchaser Parent Shareholder Approval for all purposes of this Agreement.
(h) As required by Listing Rule 11.1.7R(4), Seller Parent shall not, and shall use reasonable efforts to ensure that its associates (as defined in the Listing Rules) do not, vote on any resolution(s) proposed at the Purchaser Parent Shareholder Meeting relating to the Sale and/or other transactions contemplated by this Agreement, in each case to the extent that Seller Parent or any such associate either holds or acquires any shares or other securities in Purchaser Parent.
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Section 6.25 Resignations. Seller Parent shall use reasonable best efforts to deliver to Purchaser Parent, at or prior to the Closing, the resignations, effective as of the Closing, of all officers and directors of each Conveyed Subsidiary (and each Subsidiary thereof) who will be officers, directors or employees of Seller Parent or any of its Affiliates after the Closing Date from their positions with such Conveyed Subsidiary (or such Subsidiary thereof).
Section 6.26 Remedial Action Access. In respect of its indemnity obligations under Article VII of this Agreement, each Parent shall have the right, but not the obligation, to conduct and control any relevant Remedial Action. If a Parent opts to conduct a Remedial Action at any Real Property or Purchaser Real Property, the applicable Parent shall use reasonable best efforts to not unreasonably interfere with Purchasers operations, and the Purchaser Indemnified Parties shall, and shall cause their respective Representatives to, reasonably cooperate with the applicable Parent, including by timely filing any required documents with the appropriate Governmental Authorities, providing reasonable access to and reasonable use of the subject site, employees, documents and on-site structures, infrastructure and utility services (including electricity, underground piping or wastewater or sewer systems) and/or utilities as necessary to perform any required Remedial Action, including reasonable access to install, maintain, replace and operate wells and remove impacted soil and/or groundwater. To the extent required under any Environmental Law, the applicable Purchaser Indemnified Parties shall execute, record, obtain and maintain in good standing any authorization, permit or generator number as may be necessary for the proper storage, transportation and/or off-site disposal of any Hazardous Material generated in the course of the Remedial Action. The applicable Purchaser Indemnified Parties shall sign (with respect to the Owned Real Property or the Owned Purchaser Real Property) or use commercially reasonable efforts to cause to be signed (with respect to the Leased Real Property or the Leased Purchaser Real Property) and record (with respect to the Owned Real Property or the Owned Purchaser Real Property) or use commercially reasonable efforts to cause to be recorded (with respect to the Leased Real Property or the Leased Purchaser Real Property) any deed or other recordable real property instrument reasonably requested by the Parent conducting the Remedial Action which is necessary to permit the use of site specific corrective action remedies or remedies based on exposure controls as part of such Remedial Action; provided, however, that the instrument does not unreasonably interfere with the operation of the Facilities or the Purchaser Facilities or materially impact the value of the Real Property or Purchaser Real Property that are the subject of such Remedial Action. The applicable Purchaser Indemnified Parties agree not to use groundwater under any Real Property or Purchaser Real Property, as applicable, to the extent such restriction is necessary to permit the use of site specific corrective action remedies or remedies based on exposure controls as part of such Remedial Action. All reasonable and documented out-of-pocket costs incurred by the applicable Purchaser Indemnified Parties or their respective Representatives cooperating with or otherwise assisting the Parent conducting the Remedial Action pursuant to this Section 6.26 shall be promptly reimbursed by the Parent conducting the Remedial Action.
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Section 6.27 Acknowledgements. The Parties acknowledge and agree that certain of the Sellers and the Conveyed Subsidiaries (the New Subsidiaries) will be established, formed or incorporated, as applicable, following the date of this Agreement and prior to the Closing in connection with the Seller Internal Restructurings, and such New Subsidiaries are therefore not in existence as of the date of this Agreement. Accordingly, the Parties acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, Seller Parent makes no representations and warranties with respect to the organization, good standing, authority, capital structure, operations and Liabilities of any such New Subsidiary as of or prior to the date of each respective New Subsidiarys establishment, formation or incorporation. Seller Parent may at any time prior to the Closing supplement or amend the lists set forth in Section 4.3(b) or Section 4.3(c) of the Seller Disclosure Letter, solely to reflect any changes pursuant to the Seller Internal Restructurings (including any steps Seller Parent shall undertake to effect the Seller Internal Restructurings) made in accordance with (f)(i).
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification by Seller Parent and Purchaser Parent.
(a) Subject to the provisions of this Article VII, from and after the Closing, Seller Parent agrees to indemnify and hold harmless (x) Purchaser and its Subsidiaries (including the Conveyed Subsidiaries and their Subsidiaries) (collectively, the Purchaser Indemnified Parties) and (y) Purchaser Parent and its Subsidiaries (other than Purchaser and its Subsidiaries) (the Purchaser Parent Indemnified Parties) from and against any and all Losses (other than Taxes arising out of a Tax Claim, which are the subject of Section 6.5(d)) that any such Purchaser Indemnified Party or Purchaser Parent Indemnified Party suffers or incurs to the extent resulting from (b) any Retained Liability, (c) any breach by any Seller of any of its covenants or agreements contained in this Agreement or in any Ancillary Implementing Agreement or (d) any breach of any representation or warranty of Seller Parent contained in Article IV (other than Section 4.16) or in any Ancillary Implementing Agreement, in each case as of the Closing Date as though made on the Closing Date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date).
(e) Subject to the provisions of this Article VII, from and after the Closing, Purchaser Parent agrees to indemnify and hold harmless (x) the Purchaser Indemnified Parties and (y) Seller Parent and its Subsidiaries (collectively, the Seller Parent Indemnified Parties) from and against any and all Losses (other than Taxes arising out of a Tax Claim, which are the subject of Section 6.5(d)) that any such Purchaser Indemnified Party or Seller Parent Indemnified Party suffers or incurs to the extent resulting from (f) any Purchaser Parent Retained Liability, (g) any breach by Purchaser Parent or any of its Affiliates (which shall not include Purchaser or its Subsidiaries with respect to post-Closing covenants or agreements) of any of their respective covenants or agreements contained in this Agreement or in any Ancillary Implementing Agreement or (h) any breach of any representation or warranty of Purchaser Parent contained in Article V (other than Section 5.17) or in any Ancillary Implementing Agreement, in each case as of the Closing Date as though made on the Closing Date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date).
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(i) The Parties acknowledge and agree that indemnification shall not be available with respect to any Loss resulting from a breach of any representation or warranty contained in this Agreement or in any Ancillary Implementing Agreement to the extent (and only to the extent) the Loss (or related Liability) was accrued or reserved for in the Financial Statements or the Purchaser Financial Statements, as applicable, or actually taken into account in the Final Closing Statement or the calculation of the Final Business Working Capital, the Final Business Net Cash, the Final Purchaser Working Capital or the Final Purchaser Net Cash, as applicable.
Section 7.2 Indemnification by Purchaser. Subject to the provisions of this Article VII, from and after the Closing, Purchaser agrees to indemnify and hold harmless the Seller Parent Indemnified Parties and the Purchaser Parent Indemnified Parties (collectively, the Parent Indemnified Parties) (a) from and against any and all Losses (other than Taxes arising out of a Tax Claim, which are the subject of Section 6.5(d)) that any such Parent Indemnified Party suffers or incurs to the extent resulting from (i) any Assumed Liability or (ii) any Purchaser Liability and (b) from and against any and all Losses (other than Taxes arising out of a Tax Claim, which are the subject of Section 6.5(d)) any such Parent Indemnified Party suffers or incurs to the extent resulting from any breach following the Closing by Purchaser of any covenant or agreement expressly made by Purchaser in this Agreement or in any Ancillary Implementing Agreement, in its capacity as a Party hereto (and not in its capacity as an Affiliate or Subsidiary of Purchaser Parent), which covenant or agreement by its terms contemplates actions or imposes obligations following the Closing.
Section 7.3 Indemnification Procedures.
(a) Any Person entitled to be indemnified under this Article VII (the Indemnified Party) shall promptly give written notice to the Party from whom indemnification may be sought (the Indemnifying Party) and each other Party hereto of any pending or threatened Action against the Indemnified Party that has given or would reasonably be expected to give rise to such right of indemnification with respect to such Action (a Third Party Claim), indicating, with reasonable specificity, and based on the facts then known to the Indemnified Party, the nature of such Third Party Claim, the basis therefor, a copy of any documentation received from the third party, the amount and calculation of the Losses for which the Indemnified Party is entitled to indemnification under this Article VII (and a good faith estimate of any such future Losses relating thereto), and the provisions of this Agreement or any Ancillary Implementing Agreement in respect of which such Losses shall have occurred, and the Indemnified Party shall promptly deliver to the Indemnifying Party any information or documentation related to the foregoing reasonably requested by the Indemnifying Party. A failure by the Indemnified Party to give notice in a timely manner pursuant to this Section 7.3(a) shall not limit the obligations of the Indemnifying Party under this Article VII, except (i) to the extent such Indemnifying Party is actually prejudiced thereby and (ii) as provided by Section 7.4 (unless, with respect to indemnification pursuant to Section 7.1(b) or Section 7.2, in the case of the foregoing clauses (i) and (ii), Purchaser Parent has Intentionally Breached (or caused Purchaser to Intentionally Breach) its obligations pursuant to the immediately foregoing sentence).
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(b) With respect to any Third Party Claim, the Indemnifying Party under this Article VII shall have the right, but not the obligation, to assume the defense, at its own expense and by counsel of its own choosing, of such Third Party Claim and any Third Party Claims related to the same or a substantially similar set of facts; provided that the Indemnifying Party shall not be entitled to assume the defense of such Third Party Claim, and shall pay the reasonable fees and expenses of counsel retained by the Indemnified Party, if such Third Party Claim seeks an injunction or equitable relief against the Indemnified Party or is a criminal Action. If the Indemnifying Party so undertakes to defend any such Third Party Claim, it shall notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate fully with the Indemnifying Party and its counsel in the defense against, and settlement of, any such Third Party Claim; provided, however, that the Indemnifying Party shall not settle any such Third Party Claim without the written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed) unless such settlement does not involve any injunctive relief against or any finding or admission of any violation of Law or wrongdoing by the Indemnified Party, and any money damages are borne solely by the Indemnifying Party (other than solely with respect to the Deductible, to the extent such damages would constitute Losses to which such Deductible would be applicable); provided, further, that if the Indemnifying Party is Purchaser, Purchaser shall not settle any such Third Party Claim without the written consent of both Parents (not to be unreasonably withheld, conditioned or delayed). Subject to the foregoing, the Indemnified Party shall have the right to employ separate legal counsel and to participate in but not control the defense of such Action at its own cost and expense; provided that, subject to the provisions of this Article VII, the Indemnifying Party shall bear the reasonable fees of one firm of legal counsel (and one additional firm of legal counsel in each jurisdiction implicated in such Action) representing all Indemnified Parties in such Action and all related Actions, if, but only if, the defendants in such Action include both an Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have reasonably concluded, based on the advice of legal counsel, that there is a conflict of interest between the Indemnifying Party and the Indemnified Party with respect to such Action. In any event, the Indemnified Party shall cause its legal counsel to cooperate with the Indemnifying Party and its legal counsel. No Indemnified Party may settle any Third Party Claim without the written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed) and, if the Indemnified Party is Purchaser, the written consent of both Parents (not to be unreasonably withheld, conditioned or delayed). If the Indemnifying Party does not assume the defense of a Third Party Claim, it shall nevertheless be entitled to participate in the defense of such Action at its own cost and expense, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in the defense against, and settlement of, any such Third Party Claim.
(c) In the event that any Indemnified Party has or may have an indemnification claim against any Indemnifying Party under this Article VII that does not involve a Third Party Claim, the Indemnified Party shall promptly give written notice thereof to the Indemnifying Party indicating, with reasonable specificity, and based on the facts then known to the Indemnified Party, the nature of such claim, the basis therefor, the amount and calculation of the Losses for which the Indemnified Party is entitled to indemnification under this Article VII (and a good-faith estimate of any such future Losses relating thereto), and the provisions of this Agreement or any Ancillary Implementing Agreement in respect of which such Losses shall have occurred, and the Indemnified Party shall promptly deliver to the Indemnifying Party any information or documentation related to the foregoing reasonably requested by the Indemnifying Party. A failure by the Indemnified Party to give notice in a timely manner pursuant to this Section 7.3(c) shall not limit the obligations of
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the Indemnifying Party under this Article VII, except (i) to the extent such Indemnifying Party is actually prejudiced thereby and (ii) as provided by Section 7.4 (unless, with respect to indemnification pursuant to Section 7.1(b) or Section 7.2, in the case of the foregoing clauses (i) and (ii), Purchaser Parent has Intentionally Breached (or caused Purchaser to Intentionally Breach) its obligations pursuant to the immediately foregoing sentence). If the Indemnifying Party disputes its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations within thirty (30) days of the receipt of the notice of such indemnification claim by the Indemnifying Party, such dispute shall be resolved by litigation in the appropriate court of competent jurisdiction set forth in Section 10.10; provided that if the Indemnifying Party or the Indemnified Party is Purchaser, the Indemnifying Parties and the Indemnified Party shall not agree to settle or resolve any such claim with the written consent of both Parents (not to be unreasonably withheld, conditioned or delayed).
Section 7.4 Expiration. If the Closing has occurred, all covenants and agreements made herein or in any Ancillary Implementing Agreement which, in each case, by their terms contemplate actions or impose obligations following the Closing shall survive the Closing and remain in full force and effect in accordance with their terms; provided that, other than indemnification obligations in respect of Taxes (the survival of which shall be governed exclusively by Section 6.5(l)), (a) the obligations of Purchaser to assume, and to indemnify and hold harmless the Seller Parent Indemnified Parties and the Purchaser Parent Indemnified Parties for, the Assumed Liabilities and the Purchaser Liabilities, (b) the obligations of Seller Parent to retain, and indemnify and hold harmless the Purchaser Indemnified Parties and the Purchaser Parent Indemnified Parties for, the Retained Liabilities and (c) the obligations of Purchaser Parent to retain, and indemnify and hold harmless the Purchaser Indemnified Parties and the Seller Parent Indemnified Parties for, the Purchaser Parent Retained Liabilities, shall in each case survive the Closing indefinitely. All other covenants and agreements contained herein or in any Ancillary Implementing Agreement shall survive the Closing and shall terminate and expire on the twelve (12) month anniversary of the Closing Date (other than the covenants and agreements set forth therein which by their terms contemplate actions or impose obligations following the Closing, which shall survive the Closing and remain in full force and effect in accordance with their terms). All representations and warranties made herein or in any Ancillary Implementing Agreement, and all indemnification obligations under Section 7.1 with respect to any such representations or warranties, shall terminate and expire on the fifteen (15) month anniversary of the Closing Date; provided, however, that the Fundamental Seller Parent Representations and the Fundamental Purchaser Parent Representations shall terminate and expire on the three (3) year anniversary of the Closing Date. No Person shall be entitled to indemnification, and no Action seeking to recover Taxes, Losses or other relief shall be commenced or maintained, with respect to any breach of any covenants, agreements, representations or warranties contained in this Agreement or any Ancillary Implementing Agreement after the date on which such covenant, agreement, representation or warranty shall terminate pursuant to this Section 7.4 or Section 6.5(l), unless prior to such termination date a claim for indemnification with respect thereto has been made by written notice in accordance with Section 7.3 (in the case of Losses or other relief) or Section 6.5(d) (in the case of Taxes), in which case such claim for indemnification shall survive until finally resolved in accordance with this Agreement.
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Section 7.5 Certain Limitations.
(a) Notwithstanding the other provisions of this Agreement, neither Seller Parent nor Purchaser Parent, as applicable, shall have any indemnification obligations (i) under Section 7.1(a)(iii) or Section 7.1(b)(iii), as applicable, for any Loss (together with any and all other Losses resulting from the same facts or circumstances) that is less than $20,000,000 (the De Minimis Claim Threshold), or (ii) under Section 7.1(a)(iii) or Section 7.1(b)(iii) (except with respect to any breach of any Fundamental Seller Parent Representation or Fundamental Purchaser Parent Representation) for any Loss that is equal to or greater than the De Minimis Claim Threshold, unless the aggregate amount of all Losses for which indemnification is available under the applicable provision exceeds $200,000,000 (the Deductible), in which event the Indemnifying Party shall be required to pay only the amount of such Losses that exceeds the Deductible but only up to a maximum amount in respect of all such Losses (without giving effect to the Deductible) in the aggregate of $2,000,000,000.
Section 7.6 Losses Net of Insurance, Etc. The amount of any Tax or Loss for which indemnification is provided under Section 6.5(d), Section 7.1 or Section 7.2 shall be net of (i) any amounts recovered by the applicable Indemnified Party pursuant to any indemnification by or indemnification agreement with any third party, and (ii) any insurance proceeds or other cash receipts or sources of reimbursement received with respect to such Tax or Loss, and (iii) in the case of Purchaser Parent as the Indemnifying Party, any amounts recovered by the Purchaser pursuant to the Contribution Agreement, dated as of April 22, 2014, by and among Purchaser Parent, Purchaser and Novartis AG, as amended (the source of any such amounts referred to in clause (i) or (ii), a Collateral Source), in each case net of any Taxes imposed or reasonable out-of-pocket costs incurred in connection with the collection of such insurance proceeds, cash receipts or sources of reimbursement. The applicable Indemnified Party shall use its commercially reasonable efforts to seek recovery for such Taxes or Losses from all Collateral Sources. The Indemnifying Party may require an Indemnified Party to assign to the Indemnifying Party the rights to seek recovery from any Collateral Sources (to the extent such rights are capable of assignment); provided that the Indemnifying Party will then be responsible for pursuing such claim at its own expense; provided, further, that the Indemnified Party shall cooperate (at the Indemnifying Partys expense) with the Indemnifying Party to seek such recovery. If the amount to be netted hereunder from any payment required under Section 6.5(d) or this Article VII is determined after payment by the Indemnifying Party of any amount otherwise required to be paid to an Indemnified Party pursuant to Section 6.5(d) or this Article VII, the Indemnified Party shall repay to the Indemnifying Party, promptly after such determination, any amount that the Indemnifying Party would not have had to pay pursuant to Section 6.5(d) or this Article VII had such determination been made at the time of such payment.
Section 7.7 No Right of Set-Off. No Party shall have any right to set off any Taxes or Losses under Section 6.5(d) and this Article VII against any payments to be made by such Party pursuant to this Agreement or any other agreement among the Parties, including any Ancillary Agreement.
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Section 7.8 Materiality. For purposes of Tax Claims subject to Section 6.5 and of this Article VII, no effect shall be given to any qualification in the relevant representations and warranties as to material, materiality, Material Adverse Effect or Purchaser Material Adverse Effect for purposes of determining the amount of any Loss suffered or incurred by an Indemnified Party, but all such qualifications shall be given effect for purposes of determining whether there has been a breach or inaccuracy of any representation or warranty.
Section 7.9 Mitigation; Other Limitations.
(a) Each of Seller Parent, Purchaser Parent, Purchaser and each Indemnified Party shall take, and cause its Affiliates to take, all commercially reasonable steps to mitigate any Tax or Loss upon becoming aware of any event which would reasonably be expected to, or does, give rise thereto.
(b) Notwithstanding anything to the contrary contained in this Agreement, the obligations to indemnify under this Agreement, and the amount of any Loss for which indemnification is provided under Section 7.1, shall be subject to the following limitations:
(i) With respect to any Remedial Action, the applicable Indemnifying Party shall only be liable to the extent such Remedial Action is conducted in the Most Cost-Effective Manner. Regardless of whether any Indemnifying Party or any Indemnified Party conducts any such Remedial Action, the applicable Indemnifying Party shall not be responsible for any operation and maintenance with respect to any such institutional or engineering controls subsequent to completion of their initial installation at the applicable Real Property or Purchaser Real Property subject to such Remedial Action, and such post-installation costs shall not be subject to claims for indemnification or reimbursement under this Article VII.
(ii) With respect to any particular Environmental Liability, an Indemnifying Partys obligations for indemnification or reimbursement in respect of such Environmental Liability, shall be deemed satisfied, completed and fully discharged upon the relevant Remediation Completion Date, and the Indemnifying Party shall no longer be responsible for ongoing obligations and Liabilities with respect to such Environmental Liabilities to the extent related to the Real Property (or Facilities thereon) or Purchaser Real Property (or Purchaser Facilities thereon), including the operation and maintenance of any institutional and engineering controls.
(iii) An Indemnifying Party shall not have any indemnification obligations for Losses relating to any Environmental Liabilities to the extent such Losses relate to, result from, or arise out of any (1) exacerbation of an existing condition due to a negligent or intentional act or omission by or on behalf of the Indemnified Party or its Affiliates, (2) environmental investigation, drilling, sampling, testing or monitoring of any soil, surface water or groundwater, by or on behalf of the applicable Indemnified Party or its Affiliates, after the Closing Date (except to the extent required by Environmental Laws or Environmental Permits or a Governmental Authority; conducted in response to facts or conditions potentially indicating a material risk to health or the environment; conducted in connection with defending
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against or otherwise responding to a Third Party Claim; conducted to comply with the requirements of any Real Property Lease or Purchaser Real Property Lease; reasonably and independently requested in writing by a third party in connection with a sale, lease, sublease, financing, mortgage or other transaction involving any Real Property, Purchaser Real Property, Facility or Purchaser Facility as part of the third partys normal business practices; or conducted consistent with industry practice in connection with the ordinary course of business and the Indemnified Partys bona fide construction, renovation, demolition, removal, repair or expansion of improvements at any Real Property, Purchaser Real Property, Facility or Purchaser Facility); or (3) decommissioning, closure or voluntary shutdown of any Real Property, Purchaser Real Property, Facility or Purchaser Facility by or on behalf of the Indemnified Party or its Affiliates.
(c) Notwithstanding anything to the contrary contained in this Agreement, in no event shall any Party be entitled to duplicative recovery directly or indirectly for the same Loss, including, in the case of either Parent (or any of their respective Subsidiaries), in their respective capacities as direct or indirect equity holders of Purchaser post-Closing; it being understood that to the extent a Loss is suffered in the applicable Parents (or any of its respective Subsidiaries) capacity as direct or indirect equity holders of Purchaser post-Closing, the Purchaser Parent Indemnified Parties and the Seller Parent Indemnified Parties, as applicable, shall only be entitled to directly seek indemnification or recover for such Loss under Section 7.1(a)(ii) or Section 7.1(a)(iii) (in the case of the Purchaser Parent Indemnified Parties) or under Section 7.1(b)(ii) or Section 7.1(b)(iii) (in the case of the Seller Parent Indemnified Parties) to the extent such Loss cannot be remedied by means of an indemnification claim or recovery by Purchaser and its Subsidiaries under Section 7.1(a) or Section 7.1(b), respectively.
Section 7.10 Sole Remedy/Waiver. Except with respect to claims seeking specific performance or other equitable relief with respect to covenants or agreements to be performed after the Closing pursuant to this Agreement, and except in the case of fraud with respect to the representations, warranties, covenants and agreements contained in this Agreement, the Parties acknowledge and agree that the remedies provided for in Section 2.9, Section 6.5 and this Article VII shall be the Parties sole and exclusive remedy, from and after the Closing, with respect to the subject matter of this Agreement or any of the Ancillary Implementing Agreements (but not with respect to any claims under the other Ancillary Agreements, which shall be governed by the terms thereof). In furtherance of the foregoing, and except as set forth in the exceptions set forth in the preceding sentence and except as provided in Section 2.9, Section 6.5 and this Article VII, from and after the Closing, the Parties hereby waive, on behalf of themselves and their Affiliates, to the fullest extent permitted by applicable Law, any and all other rights, claims and causes of action (including rights of contribution, if any) known or unknown, foreseen or unforeseen, which exist or may arise in the future, that they may have against the Sellers or any of their Affiliates, or Purchaser Parent or any of its Affiliates (including Purchaser and its Subsidiaries), as the case may be, in connection with the transactions contemplated by this Agreement or any of the Ancillary Implementing Agreements (but not with respect to any rights, claims or causes of action under the other Ancillary Agreements which, in each case, shall be governed by the terms thereof), whether arising under or based upon breach of warranty or contract (including for breach of any representation, warranty, covenant or
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agreement), tortious conduct (including negligence), any Law (including any such Law relating to environmental matters (including Environmental Laws) or arising under or based upon any securities Law, common law or otherwise) or otherwise. Each Party shall cause its respective Affiliates party to an Ancillary Implementing Agreement not to assert any claims or causes of action under such Ancillary Implementing Agreement, and all such claims shall be asserted only under this Agreement. Without limiting the generality of the foregoing, in no event shall any Party, its Affiliates, successors or permitted assigns be entitled to claim or seek rescission of the transactions contemplated by this Agreement and the Ancillary Agreements.
Section 7.11 Indemnification Payments. A Party shall not be deemed to have suffered a Loss or Tax with respect to an item to the extent such Party was actually compensated therefor by reason of an increase in the amount otherwise paid to it or a reduction in the amount otherwise paid by it pursuant to Section 2.9.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to the Obligations of the Parties. The respective obligations of each of the Parties to consummate the Closing shall be subject to the satisfaction or written waiver (to the extent permitted by Law) by Purchaser Parent and Seller Parent, at or prior to the Closing, of each of the following conditions precedent:
(a) There shall not be any Governmental Order in effect issued by a Governmental Authority of competent jurisdiction that enjoins or otherwise prohibits the Closing.
(b) (i) The waiting period required under the HSR Act shall have expired or been terminated and any agreement between Purchaser Parent or Purchaser and a competent Governmental Antitrust Authority in a jurisdiction set forth on Annex C entered into in accordance with this Agreement to delay consummation of the Closing has expired or been terminated; and (i) all other Approvals under Antitrust Laws of the jurisdictions set forth on Annex C required to be obtained for the consummation of the Closing shall have been obtained.
(c) The Purchaser Parent Shareholder Approval shall have been obtained.
Section 8.2 Conditions to the Obligations of Purchaser and Purchaser Parent. The obligation of Purchaser Parent and Purchaser to consummate the Closing shall be subject to the satisfaction, or the written waiver (to the extent permitted by Law) by Purchaser Parent, at or prior to the Closing, of each of the following further conditions precedent:
(a) The representations and warranties of Seller Parent contained in Article IV (other than as set forth in the following two sentences) shall be true and correct (without giving effect to any material, materiality or Material Adverse Effect qualifications set forth therein) as of the Closing Date as though made on the Closing Date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date), except to the extent that failures to be true and correct would not, individually or in the aggregate, have a Material
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Adverse Effect. The Fundamental Seller Parent Representations shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date). The representation and warranty of Seller Parent set forth in Section 4.7(a) shall be true and correct in all respects as of the Closing Date as though made on the Closing Date.
(b) Seller Parent shall have performed and complied in all material respects with the agreements and covenants required by this Agreement to be performed or complied with by Seller Parent on or prior to the Closing Date.
(c) Seller Parent shall have delivered to Purchaser Parent a certificate signed by a duly authorized officer of Seller Parent to the effect that the conditions set forth in Sections 8.2(a) and 8.2(b) have been satisfied.
Section 8.3 Conditions to the Obligations of Seller Parent. The obligation of Seller Parent to consummate the Closing shall be subject to the satisfaction, or the written waiver (to the extent permitted by Law) by Seller Parent, at or prior to the Closing, of each of the following further conditions precedent:
(a) The representations and warranties of Purchaser Parent contained in Article V (other than as set forth in the following two sentences) shall be true and correct (without giving effect to any material, materiality or Purchaser Material Adverse Effect qualifications set forth therein) as of the Closing Date as though made on the Closing Date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date), except to the extent that failures to be true and correct would not, individually or in the aggregate, have a Purchaser Material Adverse Effect. The Fundamental Purchaser Parent Representations shall be true and correct in all material respects as of the Closing Date as though made on the Closing Date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date), other than the representations and warranties of Purchaser Parent contained in Section 5.3(a), which shall be true and correct in all respects, other than de minimis inaccuracies (that do not impact the issued share capital of Purchaser following the Closing), as of the Closing Date as though made on the Closing Date (or, in the case of representations and warranties that address matters only as of a particular date, as of such date). The representation and warranty of Purchaser Parent set forth in Section 5.7(a) shall be true and correct in all respects as of the Closing Date as though made on the Closing Date.
(b) Purchaser Parent and Purchaser shall have performed and complied in all material respects with the agreements and covenants required by this Agreement to be performed or complied with by Purchaser Parent or Purchaser on or prior to the Closing Date.
(c) Purchaser Parent shall have delivered to Seller Parent a certificate signed by a duly authorized officer of Purchaser Parent to the effect that the conditions set forth in Sections 8.3(a) and 8.3(b) have been satisfied.
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Section 8.4 Frustration of Closing Conditions. Without limiting Purchaser Parents rights under Section 6.24(f) and Section 6.24(g), no Party may rely as a basis for terminating this Agreement on the failure of any condition set forth in this Article VIII to be satisfied if such failure was caused by such Partys or its Affiliates failure to act in good faith or to use the efforts required under this Agreement to cause the Closing to occur, including as required in Section 6.3.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by written agreement of Purchaser Parent and Seller Parent;
(b) by either Purchaser Parent or Seller Parent, by giving written notice of such termination to the other Party, if the Closing shall not have occurred on or prior to the close of business (New York time) on September 30, 2019 (as it may be extended below, the Outside Date); provided that if the conditions set forth in Sections 8.1(a) (where the relevant Governmental Order arises from or relates to Antitrust Laws) or 8.1(b) shall not have been satisfied or waived by September 30, 2019, then either Purchaser Parent or Seller Parent may extend the Outside Date to the close of business (New York time) on December 31, 2019 by providing written notice thereof to the other Party prior to the initial Outside Date; provided, further, that following such extension if the conditions set forth in Sections 8.1(a) (where the relevant Governmental Order arises from or relates to Antitrust Laws) or 8.1(b) shall not have been satisfied or waived by December 31, 2019, then either Purchaser Parent or Seller Parent may extend the Outside Date to the close of business (New York time) on March 31, 2020 by providing written notice thereof to the other Party prior to the Outside Date as extended pursuant to the immediately preceding proviso; provided, however, that (without limiting Purchaser Parents rights under Section 6.24(f) and Section 6.24(g)) the right to terminate this Agreement pursuant to this Section 9.1(b) shall not be available to (i) any Party whose action or failure to fulfill any obligation under this Agreement, or, in the case of Purchaser Parent, if the action of Purchaser or failure by Purchaser to fulfill any obligation under this Agreement, has been the cause of, or resulted in, the failure of the Closing to occur on or before such date or (ii) any Party during the pendency of any Action by any other Party for specific performance of this Agreement;
(c) by Purchaser Parent upon written notice to Seller Parent, if there shall have been a material breach of any of the representations, warranties, agreements or covenants set forth in this Agreement on the part of Seller Parent which has rendered the satisfaction of the conditions set forth in Section 8.2(a) or Section 8.2(b) incapable of fulfillment and such breach is incapable of being cured prior to the Outside Date; provided that Purchaser Parent has given written notice to Seller Parent of such breach stating Purchaser Parents intention to terminate this Agreement pursuant to this Section 9.1(c) and the basis for such termination at least forty-five (45) days prior to such termination; provided, further, that the right to terminate this Agreement under this Section 9.1(c) shall not be available to Purchaser Parent if it or Purchaser has materially breached any representation, warranty, covenant or other agreement contained herein in a manner that has rendered the satisfaction of the conditions set forth in Section 8.3(a) or Section 8.3(b) incapable of fulfillment;
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(d) by Seller Parent upon written notice to Purchaser Parent, if there shall have been a material breach of any of the representations, warranties, agreements or covenants set forth in this Agreement on the part of Purchaser Parent or Purchaser which has rendered the satisfaction of the conditions set forth in Section 8.3(a) or Section 8.3(b) incapable of fulfillment and such breach is incapable of being cured prior to the Outside Date; provided that Seller Parent has given written notice to Purchaser Parent of such breach stating Seller Parents intention to terminate this Agreement pursuant to this Section 9.1(d) and the basis for such termination at least forty-five (45) days prior to such termination; provided, further, that the right to terminate this Agreement under this Section 9.1(d) shall not be available to Seller Parent if it has materially breached any representation, warranty, covenant or other agreement contained herein in a manner that has rendered the satisfaction of the conditions set forth in Section 8.2(a) or Section 8.2(b) incapable of fulfillment;
(e) by either Seller Parent or Purchaser Parent, by giving written notice of such termination to the other Party, if any Governmental Authority of competent jurisdiction shall have issued a Governmental Order permanently enjoining or otherwise prohibiting the Closing and such Governmental Order shall have become final and nonappealable; provided that the right to terminate this Agreement pursuant to this Section 9.1(e) shall not be available to any Party whose action or failure to fulfill any obligation under this Agreement, or, in the case of Purchaser Parent, if the action of Purchaser or failure by Purchaser to fulfill any obligation under this Agreement, has been the cause of, or resulted in, the issuance of such Governmental Order;
(f) by either Seller Parent or Purchaser Parent, by giving written notice of such termination to the other Party, if the Purchaser Parent Shareholder Approval shall not have been obtained at the Purchaser Parent Shareholder Meeting at which a vote on the Sale and the transactions contemplated by this Agreement is taken; or
(g) by Seller Parent upon written notice to Purchaser Parent if there shall have been a Purchaser Parent Adverse Recommendation Change.
Section 9.2 Effect of Termination.
(a) In the event of termination of this Agreement pursuant to Section 9.1, written notice thereof shall forthwith be given to the other Parties, and, except as set forth in this Section 9.2, this Agreement shall terminate and be void and have no effect and the transactions contemplated hereby shall be abandoned, without any liability or obligation on the part of any Party or its respective Affiliates, directors, officers or employees; provided that if such termination shall result from (i) the Intentional Breach by a Party of any representation, warranty, covenant, or agreement in this Agreement, or (ii) fraud with respect to the representations, warranties, covenants and agreements contained in this Agreement, such Party shall be fully liable to the other Parties for any and all damages, expenses (including reasonable attorneys fees and expenses), losses or liabilities of any nature and kind incurred or suffered by the other Parties or their Affiliates as a result of such Intentional Breach or fraud. Notwithstanding the foregoing, nothing shall relieve any Party from reimbursement of the costs and expenses (and, as applicable, indemnification obligations) of any other Party and its Affiliates pursuant to any provision of this Agreement that, by its express terms, requires reimbursement, indemnification or similar obligations by such Party. In the event of termination of this Agreement prior to the Closing pursuant to Section 9.1, the Parties shall, and shall cause their applicable Affiliates to, take all action necessary to terminate any Ancillary Agreements, including any Local Implementing Agreements, entered into as of or prior to such time.
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(b) Without limiting Section 9.2(a), in the event of a termination of this Agreement pursuant to (i) Section 9.1(b) (if and only if terminated at a time when the Purchaser Parent Shareholder Approval has not been obtained), (ii) Section 9.1(f) or (iii) Section 9.1(g), Purchaser Parent shall pay to Seller Parent, by way of compensation, $900,000,000 (the Purchaser Parent Termination Fee) within one (1) Business Day after the date of the termination of this Agreement by Seller Parent and, in the event of a termination by Purchaser Parent, concurrently with, and as a condition precedent to, the termination of this Agreement, by wire transfer of immediately available funds to an account designated in writing by Seller Parent; provided that Purchaser Parent shall not be required to pay the Purchaser Parent Termination Fee on more than one occasion. Purchaser Parent acknowledges that the agreements contained in this Section 9.2(b) are an integral part of the transactions contemplated by this Agreement and that, without these agreements, Seller Parent would not enter into this Agreement. Accordingly, if Purchaser Parent fails promptly to pay any amount due pursuant to this Section 9.2(b), Purchaser Parent shall also pay any reasonable and documented costs, fees and expenses incurred by Seller Parent (including reasonable attorneys fees) in connection with a legal action to enforce this Agreement that results in a judgment for such amount or any portion thereof against Purchaser Parent or its Affiliates. Any amount not paid when due pursuant to this Section 9.2(b) shall bear interest from the date such amount is due until the date paid at a rate equal to the prime rate as published in The Wall Street Journal, Eastern Edition, in effect on the date such amount is due, plus three percent (3%). Notwithstanding anything to the contrary in this Agreement, except in the event of (i) an Intentional Breach by Purchaser Parent or Purchaser of any representation, warranty, covenant, or agreement in this Agreement or (ii) Purchaser Parents or Purchasers fraud with respect to the representations, warranties, covenants and agreements contained in this Agreement, if this Agreement is terminated in circumstances requiring the payment of the Purchaser Parent Termination Fee to Seller Parent, the payment in full of the Purchaser Parent Termination Fee by Purchaser Parent to Seller Parent, together with any interest, costs, fees or expenses payable, in each case in accordance with this Section 9.2(b), shall be the sole and exclusive remedy of Seller Parent and all of its Affiliates against Purchaser Parent and its Affiliates, and upon such payment, except in the event of such an Intentional Breach or fraud, none of Purchaser Parent or any of its Affiliates shall have any further liability or obligation (whether at law or equity, in contract, in tort or otherwise) to Seller Parent or any of its Affiliates, and their respective directors, officers and employees or other Representatives, relating to or arising out of this Agreement, any Ancillary Agreement or any of the transactions contemplated hereby or thereby.
(c) Notwithstanding the termination of this Agreement, the following Sections of this Agreement shall remain in full force and effect: Section 6.1(b) (Information and Documents), Section 9.1 (Termination), Section 9.2 (Effect of Termination) and Article X (Miscellaneous).
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(d) If this Agreement is terminated in accordance with Section 9.1, the Confidentiality Agreement and Clean Team Agreement shall each remain in full force and effect for the term provided for therein; except that Seller Parent and Purchaser Parent agree that the term of the Confidentiality Agreement (including the employee non-solicitation prohibition therein) shall be extended (if a shorter term would otherwise remain) to a period of two (2) years from the date of such termination and this Agreement shall be the requisite mutual written consent amending such Confidentiality Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. All notices or other communications hereunder shall be deemed to have been duly given and made if in writing and (a) when served by personal delivery upon the Party for whom it is intended, (b) one (1) Business Day following the day sent by overnight courier, return receipt requested, (c) when sent by facsimile, provided that the facsimile is promptly confirmed, or (d) when sent by e-mail, provided that a copy of the same notice or other communication sent by e-mail is also sent by overnight courier, return receipt requested, personal delivery, or facsimile as provided herein, on the same day as such e-mail is sent, in each case to the Person at the address, facsimile number or e-mail address set forth below, or such other address, facsimile number or e-mail address as may be designated in writing hereafter, in the same manner, by such Person:
To any Seller:
Pfizer Inc.
235 East 42nd Street
New York, NY 10017
Attn: General Counsel
with a copy (which shall not constitute notice) to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Edward D. Herlihy
David K. Lam
Jacob A. Kling
E-mail: EDHerlihy@wlrk.com
DKLam@wlrk.com
JAKling@wlrk.com
Fax: (212) 403-2000
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To Purchaser Parent or Purchaser:
GlaxoSmithKline Plc
980 Great West Road
Brentford
Middlesex
TW8 9GS
United Kingdom
Attn: General Counsel Consumer Healthcare
with a copy (which shall not constitute notice) to:
Kirkland & Ellis LLP
601 Lexington Avenue
New York, NY 10022
Attn: Daniel E. Wolf
Eric L. Schiele, P.C.
Claire E. James
Patrick Jacobs
E-mail: daniel.wolf@kirkland.com
eric.schiele@kirkland.com
claire.james@kirkland.com
patrick.jacobs@kirkland.com
Fax: (212) 446-4900
Section 10.2 Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Parties hereto, or in the case of a waiver, by the Party against whom the waiver is to be effective. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
Section 10.3 Assignment. (a) No Party may assign any of its rights or obligations under this Agreement, including by sale of stock, operation of Law in connection with a merger or sale of all or substantially all of the assets of such Party, without the prior written consent of the other Parties.
(a) Notwithstanding the foregoing and subject to Section 6.5(f), Purchaser shall be entitled to designate one or more of its Affiliates that are directly or indirectly wholly owned by Purchaser (each, a Purchaser Designated Affiliate) to be the purchaser or transferee of some or all of the Shares or the other Purchased Assets and be the entity assuming some or all of the Assumed Liabilities (and to be a counterparty to one or more of the Ancillary Agreements), provided that no such designation (i) shall release Purchaser from its obligations under this Agreement or (ii) would reasonably be expected to restrict or delay consummation of the transactions contemplated hereby or by the Ancillary Agreements in any material respect. Purchaser shall be responsible for and shall pay or reimburse the Sellers for any Taxes and other reasonable out-of-pocket costs and expenses to the extent arising out of or resulting from the substitution of a Purchaser Designated Affiliate
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(other than a Purchaser Designated Affiliate organized under the Laws of or Tax resident in the United States or the United Kingdom) for Purchaser as the purchaser or transferee of any of the Shares or the other Purchased Assets, or as the entity assuming some or all of the Assumed Liabilities, or as a counterparty to one or more of the Ancillary Agreements, in accordance with this Section 10.3(b), in each case other than (1) any such Taxes, costs or expenses arising out of or resulting from a substitution requested by a Seller or required by applicable Law or (2) to the extent the applicable Seller is entitled to a refund, credit or offset in respect of such Taxes from any Taxing Authority.
Section 10.4 Entire Agreement. This Agreement (including the Seller Disclosure Letter, the Purchaser Parent Disclosure Letter and all Annexes and Exhibits) contains the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, except for (i) the Confidentiality Agreement and the Clean Team Agreement which shall each remain in full force and effect and (ii) the Ancillary Agreements and any other written agreement of the Parties that expressly provides that it is not superseded by this Agreement. In the event of a conflict between the terms of this Agreement and the terms of any Ancillary Agreement, the terms of this Agreement shall control except to the extent expressly provided otherwise in any Ancillary Agreement.
Section 10.5 Parties in Interest. Except with respect to (i) the Purchaser Indemnified Parties, the Purchaser Parent Indemnified Parties and the Seller Parent Indemnified Parties solely with respect to Article VII and (ii) the Persons entitled to indemnification under Section 6.5(d) solely with respect to Section 6.5(d) or, in each case, as expressly set forth herein (including Section 6.21), nothing in this Agreement, express or implied, is intended to confer upon any Person other than Purchaser Parent, Purchaser, the Sellers, or their permitted assigns, any rights or remedies under or by reason of this Agreement.
Section 10.6 Public Disclosure. Notwithstanding anything herein to the contrary, each Party agrees that, except (x) subject to Section 6.24(f) and Section 6.24(g), in making a Purchaser Parent Adverse Recommendation Change or (y) as may be required to comply with the requirements of any applicable Laws, and the rules and regulations of each stock exchange upon which the securities of either of the Parties are listed (in which case the disclosing Party will use its commercially reasonable efforts to (a) advise the other Party before making such disclosure and (b) provide such other Party a reasonable opportunity to review and comment on such release or announcement and consider in good faith any comments with respect thereto), no press release or similar public announcement or communication shall, if prior to the Closing, be made or caused to be made by the Parties or their Affiliates concerning the execution or performance of this Agreement unless the Parties shall have consulted in advance with respect thereto.
Section 10.7 Expenses. Except as otherwise expressly provided in this Agreement, whether or not the transactions contemplated by this Agreement are consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the Party incurring such costs and expenses.
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Section 10.8 Disclosure Letters; Disclosures Modifying Other Sections of Agreement. The Seller Disclosure Letter and the Purchaser Parent Disclosure Letter, and all schedules attached thereto, and all Annexes and Exhibits attached to this Agreement, shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. Any capitalized terms used in any Annex, Exhibit or Schedule or in the Seller Disclosure Letter or Purchaser Parent Disclosure Letter but not otherwise defined therein shall be defined as set forth in this Agreement. Any information, item or other disclosure set forth in any Section of the Seller Disclosure Letter or the Purchaser Parent Disclosure Letter, as the case may be, shall be deemed to be disclosed with respect to any other Section of this Agreement (or to have been set forth in any other Section of the Seller Disclosure Letter or the Purchaser Parent Disclosure Letter, as the case may be), if the relevance of such disclosure to such other Section is reasonably apparent on the face of such disclosure notwithstanding the omission of a reference or a cross-reference with respect thereto and notwithstanding any reference to a Section of the Seller Disclosure Letter or Purchaser Parent Disclosure Letter, as applicable, in such Section of this Agreement. The disclosure of any matter in any Section of the Seller Disclosure Letter or the Purchaser Parent Disclosure Letter shall expressly not be deemed to constitute an admission by any Party, or to otherwise imply, that any such matter is material for purposes of this Agreement.
Section 10.9 No Admission. Nothing in this Agreement, any Ancillary Agreement or in any Section of the Seller Disclosure Letter or the Purchaser Parent Disclosure Letter shall be deemed an admission by any Party or any of their respective Affiliates (including the Conveyed Subsidiaries and their Subsidiaries), in any Action by or on behalf of or with a Governmental Authority or other third party, that any such Party or any of their respective Affiliates, or that such third party or any of its respective Affiliates, is or is not violating or in contravention or breach of or default under, as applicable, any Law, Governmental Authorization, Contract or Intellectual Property of any other Person.
Section 10.10 Governing Law; Jurisdiction.
(a) This Agreement (and any claim or controversy arising out of or relating to this Agreement) shall be exclusively governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law rules of such state.
(b) Any Action relating to this Agreement, or the transactions contemplated hereby, shall be brought exclusively in the U.S. District Court for the Southern District of New York or, if for any reason the U.S. District Court for the Southern District of New York lacks subject matter jurisdiction, any New York State court sitting in New York City, and each Party irrevocably (i) agrees and consents to be subject to the jurisdiction of the U.S. District Court for the Southern District of New York or, if for any reason the U.S. District Court for the Southern District of New York lacks subject matter jurisdiction, any New York State court sitting in New York City and (ii) waives any objection which it may have at any time to the laying of venue of such Action brought in any such court, waives any claim that such Action has been brought in an inconvenient forum and further waives the right to object, with respect to such Action, that such court does not have any jurisdiction over such Party. Each of Purchaser Parent and Purchaser hereby irrevocably designates, appoints and empowers GSK plc, with offices located at 980 Great West Road, Brentford Middlesex TW8 9GS, England, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf service of any legal process, summons notices and documents
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which may be served in any such Action. If for any reason GSK plc is unable or unwilling to continue to act as such designee, appointee and agent, each of Purchaser Parent and Purchaser agrees to immediately appoint a successor designee, appointee and agent in New York City acceptable to Seller Parent. THE PARTIES HEREBY AGREE THAT MAILING OF PROCESS OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION IN THE MANNER PROVIDED IN SECTION 10.1, OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW, SHALL BE VALID AND SUFFICIENT SERVICE THEREOF AND HEREBY WAIVE ANY OBJECTIONS TO SERVICE ACCOMPLISHED IN THE MANNER HEREIN PROVIDED.
(c) THE PARTIES AGREE THAT THEY HEREBY IRREVOCABLY WAIVE AND AGREE TO CAUSE THEIR RESPECTIVE AFFILIATES TO WAIVE, THE RIGHT TO TRIAL BY JURY IN ANY ACTION TO ENFORCE OR INTERPRET THE PROVISIONS OF THIS AGREEMENT.
Section 10.11 Counterparts. This Agreement may be executed in counterparts (including by facsimile or electronic ..pdf submission), each of which shall be deemed an original, and all of which shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered (by telecopy or otherwise) to the other Parties, it being understood that all Parties need not sign the same counterpart.
Section 10.12 Headings. The heading references herein and the table of contents hereto are for convenience purposes only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
Section 10.13 Severability. The provisions of this Agreement shall be deemed severable and the invalidity, illegality or unenforceability of any provision shall not affect the validity, legality or enforceability of the other provisions hereof. If any term or other provision of this Agreement, or the application thereof to any Person or any circumstance, is invalid, illegal or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity, illegality or unenforceability, nor shall such invalidity, illegality or unenforceability affect the validity, legality or enforceability of such provision, or the application thereof, in any other jurisdiction.
Section 10.14 Rules of Construction. The Parties agree that they have been represented by counsel during the negotiation and execution of this Agreement and have participated jointly in the negotiation and drafting of this Agreement and, therefore, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
Section 10.15 Specific Performance. The Parties acknowledge and agree that irreparable harm would occur and that the Parties would not have any adequate remedy at Law (i) for any actual or threatened breach of the provisions of this Agreement or (ii) in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms.
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It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to specifically enforce the terms and provisions of this Agreement (including Section 6.3) and any other agreement or instrument executed in connection herewith, without proof of actual damages, and each Party further agrees to waive any requirement for the securing or posting of any bond in connection with such remedy. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that any other Party has an adequate remedy at Law or that any award of specific performance is not an appropriate remedy for any reason at Law or in equity. The Parties further agree that (x) by seeking the remedies provided for in this Section 10.15, a Party shall not in any respect waive its right to seek any other form of relief that may be available to a Party under this Agreement, including monetary damages (or the right to reimbursement of its costs and expenses relating to any enforcement actions hereunder) and (y) nothing contained in this Section 10.15 shall require any Party to institute any proceeding for (or limit any Partys right to institute any proceeding for) specific performance under this Section 10.15 before exercising any termination right under Section 9.1 (and pursuing damages after such termination) nor shall the commencement of any action pursuant to this Section 10.15 or anything contained in this Section 10.15 restrict or limit any Partys right to terminate this Agreement in accordance with the terms of Section 9.1 or pursue any other remedies under this Agreement that may be available then or thereafter. Notwithstanding the foregoing, under no circumstances shall any Seller be permitted to receive both (1) a grant of specific performance to require Purchaser or Purchaser Parent to consummate, and that results in the consummation of, the Closing and (2) payment of the Purchaser Parent Termination Fee.
Section 10.16 Affiliate Status. To the extent that a Party is required hereunder to take certain action with respect to entities designated in this Agreement as such Partys Affiliates, such obligation shall apply to such entities only during such period of time that such entities are Affiliates of such Party. To the extent that this Agreement or any Ancillary Agreement requires an Affiliate of any Party to take or omit to take any action, such agreement and obligation includes the obligation of such Party to cause such Affiliate to take or omit to take such action.
Section 10.17 Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege.
(a) Each of Purchaser Parent and Purchaser waives and will not assert, and agrees to cause its Affiliates, including, following the Closing, the Conveyed Subsidiaries and their Subsidiaries, to waive and not assert, any conflict of interest arising out of or relating to the representation, after the Closing (the Seller Post-Closing Representation), of Seller Parent or any of its Affiliates, or any shareholder, officer, employee or director of Seller Parent or any of its Affiliates (any such Person, a Seller Designated Person) in any matter involving this Agreement, the Ancillary Agreements or any other agreements or transactions contemplated hereby or thereby, by any legal counsel currently representing any Seller Designated Person in connection with this Agreement, the Ancillary Agreements or any other agreements or transactions contemplated hereby or thereby, including Wachtell, Lipton, Rosen & Katz (any such representation, the Seller Current Representation).
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(b) Seller Parent waives and will not assert, and agrees to cause its Affiliates to waive and not assert, any conflict of interest arising out of or relating to the representation, after the Closing (the Purchaser Post-Closing Representation), of Purchaser Parent or Purchaser or any of their Affiliates or any shareholder, officer, employee or director of Purchaser Parent, Purchaser or any of their Affiliates (any such Person, a Purchaser Designated Person) in any matter involving this Agreement, the Ancillary Agreements or any other agreements or transactions contemplated hereby or thereby, by any legal counsel currently representing any Purchaser Designated Person in connection with this Agreement, the Ancillary Agreements or any other agreements or transactions contemplated hereby or thereby, including Kirkland & Ellis LLP and Slaughter and May (any such representation, the Purchaser Current Representation).
(c) Each of Purchaser Parent and Purchaser waives and will not assert, and agrees to cause its Affiliates, including, following the Closing, the Conveyed Subsidiaries and their Subsidiaries, to waive and not assert, any attorney-client or other applicable legal privilege or protection with respect to any communication between any legal counsel and any Seller Designated Person occurring during the Seller Current Representation (the Seller Privileged Communications) or in connection with any Seller Post-Closing Representation, including in connection with a dispute with Purchaser Parent or Purchaser or its Affiliates (including, following the Closing, any Conveyed Subsidiary or any of their Subsidiaries), including in respect of any claim for indemnification hereunder by a Purchaser Indemnified Party or a Purchaser Parent Indemnified Party, it being the intention of the Parties that all such rights to such attorney-client and other applicable legal privilege or protection and to control such attorney-client and other applicable legal privilege or protection shall be retained by the Sellers and their Affiliates and that the Sellers, and not Purchaser Parent, Purchaser or their Affiliates or the Conveyed Subsidiaries and their Subsidiaries, shall have the sole right to decide whether or not to waive any attorney-client or other applicable legal privilege or protection. Accordingly, from and after Closing, none of Purchaser Parent, Purchaser or their Affiliates, including the Conveyed Subsidiaries and their Subsidiaries, shall have any access to any such communications or to the files of the Seller Current Representation, all of which shall be and remain the property of the Sellers and not of Purchaser Parent, Purchaser or their Affiliates, including the Conveyed Subsidiaries and their Subsidiaries, or to internal counsel relating to such engagement, and none of Purchaser Parent, Purchaser or their Affiliates, including, following the Closing, the Conveyed Subsidiaries and their Subsidiaries, or any Person acting or purporting to act on their behalf shall seek to obtain the same by any process on the grounds that the privilege and protection attaching to such communications and files belongs to Purchaser Parent, Purchaser or their Affiliates, including, following the Closing, the Conveyed Subsidiaries and their Subsidiaries, or does not belong to the Sellers. Notwithstanding the foregoing, in the event that a dispute arises between Purchaser Parent, Purchaser or their Affiliates, including, following the Closing, the Conveyed Subsidiaries and their Subsidiaries, on the one hand, and a third party other than the Sellers or their Affiliates, on the other hand, Sellers shall not disclose any such Seller Privileged Communications to such third party without the prior written consent of Purchaser unless required to do so by applicable Law or Governmental Order.
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(d) Seller Parent waives and will not assert, and agrees to cause its Affiliates, to waive and not assert, any attorney-client or other applicable legal privilege or protection with respect to any communication between any legal counsel and any Purchaser Designated Person occurring during the Purchaser Current Representation (the Purchaser Privileged Communications) or in connection with any Purchaser Post-Closing Representation, including in connection with a dispute with Seller Parent or its Affiliates, including in respect of any claim for indemnification hereunder by a Seller Parent Indemnified Party, it being the intention of the Parties that all such rights to such attorney-client and other applicable legal privilege or protection and to control such attorney-client and other applicable legal privilege or protection shall be retained by Purchaser Parent and its Affiliates (other than Purchaser) and that Purchaser Parent, and not Seller Parent or Purchaser, shall have the sole right to decide whether or not to waive any attorney-client or other applicable legal privilege or protection. Accordingly, from and after Closing, none of Seller Parent or Purchaser shall have any access to any such communications or to the files of the Purchaser Current Representation, all of which shall be and remain the property of Purchaser Parent and not of Seller Parent or its Affiliates or Purchaser or its Subsidiaries or to internal counsel relating to such engagement, and none of Seller Parent or its Affiliates or Purchaser or its Subsidiaries or any Person acting or purporting to act on their behalf shall seek to obtain the same by any process on the grounds that the privilege and protection attaching to such communications and files belongs to Seller Parent or its Affiliates or Purchaser or its Subsidiaries or does not belong to the Purchaser Parent. Notwithstanding the foregoing, in the event that a dispute arises between Seller Parent or its Affiliates, on the one hand, and a third party other than Purchaser Parent, Purchaser or their Affiliates, on the other hand, Purchaser Parent shall not disclose any such Purchaser Privileged Communications to such third party without the prior written consent of Seller Parent unless required to do so by applicable Law or Governmental Order.
Section 10.18 Translation of Currencies. Unless otherwise agreed in writing by Seller Parent and Purchaser Parent, all payments to be made under or pursuant to this Agreement shall be made in Pound sterling. Except with respect to the determinations set forth in the following sentence, and except to the extent otherwise provided in the Accounting Principles or Purchaser Accounting Principles with respect to the determinations of amounts included in the calculations of Business Working Capital, Business Net Cash, Purchaser Working Capital or Purchaser Net Cash, as applicable, in the event that the Parties need to convert currencies under this Agreement, the relevant exchange rate shall be determined based on the Bloomberg BFIX rate in effect as of 5:00 p.m. (New York time) two (2) Business Days preceding the applicable determination date as published on Bloomberg.com. In the event that any Person needs to convert currencies for purposes of calculating the amount of any claim under Section 6.5(d) or Article VII, the relevant exchange rate shall be determined based on the Bloomberg BFIX rate in effect as of 5:00 pm (New York time) two (2) Business Days preceding the date of the written notice given for such claim under Section 6.5(d) or under Section 7.3, as applicable, as published on Bloomberg.com.
[Signature page follows]
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IN WITNESS WHEREOF, the Parties have executed or caused this Agreement to be executed as of the date first written above.
PFIZER INC. | ||
By: |
/s/ Albert Bourla | |
Name: Albert Bourla | ||
Title: Chief Operating Officer | ||
GLAXOSMITHKLINE PLC | ||
By: |
/s/ Simon Dingemans | |
Name: Simon Dingemans | ||
Title: Chief Finance Officer | ||
GLAXOSMITHKLINE CONSUMER | ||
HEALTHCARE HOLDINGS LIMITED | ||
By: |
/s/ Simon Dingemans | |
Name: Simon Dingemans | ||
Title: Director |
[Signature Page to Stock and Asset Purchase Agreement]
Exhibit 12.1
Section 302 Certificate
Form of Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
I, Emma Walmsley, certify that:
1. | I have reviewed this annual report on Form 20-F of GlaxoSmithKline plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. | The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. | The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: March 15, 2019 |
/s/ Emma Walmsley | |||
Emma Walmsley | ||||
Chief Executive Officer |
Exhibit 12.2
Section 302 Certificate
Form of Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
I, Simon Dingemans, certify that:
1. | I have reviewed this annual report on Form 20-F of GlaxoSmithKline plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
4. | The companys other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the companys disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the companys internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting; and |
5. | The companys other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the companys auditors and the audit committee of the companys board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the companys ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the companys internal control over financial reporting. |
Date: March 15, 2019 |
/s/ Simon Dingemans | |
Mr Simon Dingemans | ||
Chief Financial Officer |
Exhibit 13.1
Section 906 Certificate
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of GlaxoSmithKline plc, a public limited company incorporated under English law (the company), does hereby certify, to such officers knowledge, that:
The Annual Report on Form 20-F for the year ended December 31, 2018 (the Form 20-F) of the company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the company.
Date: March 15, 2019 |
/s/ Emma Walmsley | |
Emma Walmsley | ||
Chief Executive Officer | ||
Date: March 15, 2019 |
/s/ Simon Dingemans | |
Mr Simon Dingemans | ||
Chief Financial Officer |
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Forms F-3 (Nos. 333-223982, 333-223982-01, 333-223982-02, 333-217125, 333-217125-01 and 333-217125-02) of GlaxoSmithKline plc, GlaxoSmithKline Capital Inc. and GlaxoSmithKline Capital plc and Forms S-8 (No. 333-88966, 333-100388 and 333-162702) of GlaxoSmithKline plc of our report dated 16 March 2018 relating to the financial statements, which appears in this Form 20-F.
/s/ PricewaterhouseCoopers LLP
London, United Kingdom
15 March 2019
Exhibit 15.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements Nos. 333-223982, 333-223982-01, 333-22982-02, 333-217125, 333-217125-01 and 333-217125-02 on Form F-3 of GlaxoSmithKline plc, GlaxoSmithKline Capital Inc. and GlaxoSmithKline Capital plc and Registration Statements Nos. 333-88966, 333-100388 and 333-162702 on Form S-8 of GlaxoSmithKline plc, of our reports dated 15 March 2019, relating to the consolidated financial statements of GlaxoSmithKline plc and subsidiaries as at December 31, 2018 and for the year then ended and the effectiveness of GlaxoSmithKline plc and subsidiaries internal control over financial reporting, appearing in this Annual Report on Form 20-F of GlaxoSmithKline plc for the year ended 31 December 2018.
/s/ Deloitte LLP
London, United Kingdom
15 March 2019
Exhibit 15.3
Annual Report
2018
GSK Annual Report 2018
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01 | 66 | Directors statement of | ||||||||||||||||||||||||||||
02 | 68 | responsibilities | 126 | |||||||||||||||||||||||||||
03 | 71 | 128 | ||||||||||||||||||||||||||||
04 | 72 | 140 | ||||||||||||||||||||||||||||
07 | 77 | 144 | ||||||||||||||||||||||||||||
08 | 79 | |||||||||||||||||||||||||||||
09 | 79 | GlaxoSmithKline plc prepared | ||||||||||||||||||||||||||||
11 | 89 | under UK GAAP | 219 | |||||||||||||||||||||||||||
12 | 91 |
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24 | 235 | |||||||||||||||||||||||||||||
34 | 96 | Product, competition and | ||||||||||||||||||||||||||||
37 | 98 | intellectual property | 238 | |||||||||||||||||||||||||||
120 | 241 | |||||||||||||||||||||||||||||
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Cautionary statement |
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See the inside back cover of this document for the cautionary statement |
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260 | ||||||||||||||||||||||||||||
regarding forward-looking statements. |
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271 | ||||||||||||||||||||||||||||
Non-financial information statement
The following aligns to the non-financial reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006.
Non-IFRS measures
We use a number of adjusted, non-IFRS, measures to report the performance of our business. Total reported results represent the Groups overall performance under IFRS. Adjusted results and other non-IFRS measures may be considered in addition to, but not as a substitute for or superior to, information presented in accordance with IFRS. Adjusted results and other non-IFRS measures are defined on pages 40 to 42 and reconciliations to the nearest IFRS measures are on pages 51 and 56.
We believe that Adjusted results, when considered together with Total results, provide investors, analysts and other stakeholders with helpful complementary information to understand better the financial performance and position of the Group from period to period, and allow the Groups performance to be more easily compared against the majority of its peer companies. These measures are also used by management for planning and reporting purposes. They may not be directly comparable with similarly described measures used by other companies.
01
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GSK Annual Report 2018 |
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Governance and remuneration
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Financial statements
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Investor information
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We are a science-led global healthcare company.
Our purpose is to help people do more, feel better,
live longer.
Pharmaceuticals
Our Pharmaceuticals business has a broad portfolio of innovative and established medicines, with leadership positions in respiratory and HIV. We are strengthening our pipeline through a focus on immunology, human genetics and advanced technologies to help us identify the most promising new medicines.
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Vaccines
We are the leading Vaccines company in the world, delivering over 2 million vaccine doses every day to people living in 158 countries. Our portfolio and pipeline help protect individuals throughout their lives. We have recently introduced breakthrough vaccines Shingrix for shingles and Bexsero, the first vaccine for meningitis B. |
Consumer Healthcare
Our Consumer Healthcare business develops and markets a portfolio of globally recognised consumer-preferred and expert-recommended brands in the oral health, pain relief, respiratory, skin health, nutrition and digestive health categories. These category-leading brands include Sensodyne, parodontax, Poligrip, Voltaren, Panadol, Otrivin and Theraflu. |
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Read more on page 13
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Read more on page 18
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Read more on page 21
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Turnover | £m | Turnover | £m | Turnover | £m | |||||||||||||||||||||||||||||||||
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Respiratory |
6,928 | Meningitis |
881 | Wellness |
3,940 | |||||||||||||||||||||||||||||||||
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HIV |
4,722 | Influenza |
523 | Oral health |
2,496 | |||||||||||||||||||||||||||||||||
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Immuno-inflammation |
472 | Shingles |
784 | Nutrition |
643 | |||||||||||||||||||||||||||||||||
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Established Pharmaceuticals |
5,147 | Established vaccines |
3,706 | Skin health |
579 | |||||||||||||||||||||||||||||||||
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Total | 17,269 | Total | 5,894 | Total | 7,658 | |||||||||||||||||||||||||||||||||
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02
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GSK Annual Report 2018
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I am pleased to report that 2018 was a year of good financial performance for GSK with improvements in sales, earnings and, particularly, cash flow generation. The delivery against operating targets was excellent, with notably successful launches of new products. It was also a year in which the strategic shape of GSK in the coming years has been redefined.
03
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GSK Annual Report 2018 |
Strategic report
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Governance and remuneration
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Financial statements
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Investor information
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In 2018, GSK made significant progress against our long-term priorities of Innovation, Performance and Trust, underpinned by a continuing shift in culture.
04
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GSK Annual Report 2018
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Total results
2018 | 2017 |
Growth |
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£m | % of turnover |
£m | % of turnover |
£% | CER% | |||||||||||||||||||
Turnover |
30,821 | 100 | 30,186 | 100 | 2 | 5 | ||||||||||||||||||
Cost of sales |
(10,241 | ) | (33.2 | ) | (10,342 | ) | (34.3 | ) | (1 | ) | | |||||||||||||
Gross profit |
20,580 | 66.8 | 19,844 | 65.7 | 4 | 7 | ||||||||||||||||||
Selling, general and administration |
(9,915 | ) | (32.2 | ) | (9,672 | ) | (32.0 | ) | 3 | 5 | ||||||||||||||
Research and development |
(3,893 | ) | (12.6 | ) | (4,476 | ) | (14.8 | ) | (13 | ) | (12 | ) | ||||||||||||
Royalty income |
299 | 1.0 | 356 | 1.1 | (16 | ) | (17 | ) | ||||||||||||||||
Other operating income/(expense) |
(1,588 | ) | (5.2 | ) | (1,965 | ) | (6.5 | ) | ||||||||||||||||
Operating profit |
5,483 | 17.8 | 4,087 | 13.5 | 34 | 43 | ||||||||||||||||||
Net finance costs |
(717 | ) | (669 | ) | ||||||||||||||||||||
Profit on disposal of interest in associates |
3 | 94 | ||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
31 | 13 | ||||||||||||||||||||||
Profit before taxation |
4,800 | 3,525 | 36 | 46 | ||||||||||||||||||||
Taxation |
(754 | ) | (1,356 | ) | ||||||||||||||||||||
Tax rate |
15.7 | % | 38.5 | % | ||||||||||||||||||||
Profit after taxation |
4,046 | 2,169 | 87 | 100 | ||||||||||||||||||||
Profit attributable to non-controlling interests |
423 | 637 | ||||||||||||||||||||||
Profit attributable to shareholders |
3,623 | 1,532 | ||||||||||||||||||||||
Earnings per share |
73.7 | p | 31.4 | p | >100 | >100 |
How we performed
05
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GSK Annual Report 2018 |
Strategic report
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Governance and remuneration
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Financial statements
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Investor information
|
Total and Adjusted results
Adjusting items
|
Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction -related £m |
Divestments, significant legal and other items £m |
Adjusted results £m |
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Turnover |
30,821 | 30,821 | ||||||||||||||||||||||||||
Cost of sales |
(10,241 | ) | 536 | 69 | 443 | 15 | | (9,178 | ) | |||||||||||||||||||
Gross profit |
20,580 | 536 | 69 | 443 | 15 | | 21,643 | |||||||||||||||||||||
Selling, general and administration |
(9,915 | ) | 2 | 315 | 98 | 38 | (9,462 | ) | ||||||||||||||||||||
Research and development |
(3,893 | ) | 44 | 45 | 49 | 20 | (3,735 | ) | ||||||||||||||||||||
Royalty income |
299 | 299 | ||||||||||||||||||||||||||
Other operating income/(expense) |
(1,588 | ) | 2 | 1,864 | (278 | ) | | |||||||||||||||||||||
Operating profit |
5,483 | 580 | 116 | 809 | 1,977 | (220 | ) | 8,745 | ||||||||||||||||||||
Net finance costs |
(717 | ) | 4 | (3 | ) | 18 | (698 | ) | ||||||||||||||||||||
Profit on disposal of associates |
3 | (3 | ) | | ||||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
31 | 31 | ||||||||||||||||||||||||||
Profit before taxation |
4,800 | 580 | 116 | 813 | 1,974 | (205 | ) | 8,078 | ||||||||||||||||||||
Taxation |
(754 | ) | (109 | ) | (19 | ) | (170 | ) | (239 | ) | (244 | ) | (1,535 | ) | ||||||||||||||
Tax rate |
15.7 | % | 19.0 | % | ||||||||||||||||||||||||
Profit after taxation |
4,046 | 471 | 97 | 643 | 1,735 | (449 | ) | 6,543 | ||||||||||||||||||||
Profit attributable to non-controlling interests |
423 | 251 | 674 | |||||||||||||||||||||||||
Profit attributable to shareholders |
3,623 | 471 | 97 | 643 | 1,484 | (449 | ) | 5,869 | ||||||||||||||||||||
Earnings per share |
73.7 | p | 9.6 | p | 2.0 | p | 13.1 | p | 30.2 | p | (9.2 | )p | 119.4 | p |
Adjusting items
06
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GSK Annual Report 2018
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Financial performance continued
Adjusted results
2018 | 2017 | Growth | ||||||||||||||||||||||
£m | % of turnover |
£m | % of turnover |
£% | CER% | |||||||||||||||||||
Turnover |
30,821 | 100 | 30,186 | 100 | 2 | 5 | ||||||||||||||||||
Cost of sales |
(9,178 | ) | (29.8 | ) | (8,771 | ) | (29.1 | ) | 5 | 6 | ||||||||||||||
Gross profit |
21,643 | 70.2 | 21,415 | 70.9 | 1 | 4 | ||||||||||||||||||
Selling, general and administration |
(9,462 | ) | (30.7 | ) | (9,341 | ) | (30.9 | ) | 1 | 4 | ||||||||||||||
Research and development |
(3,735 | ) | (12.1 | ) | (3,862 | ) | (12.8 | ) | (3 | ) | (2 | ) | ||||||||||||
Royalty income |
299 | 1.0 | 356 | 1.2 | (16 | ) | (17 | ) | ||||||||||||||||
Operating profit |
8,745 | 28.4 | 8,568 | 28.4 | 2 | 6 | ||||||||||||||||||
Net finance costs |
(698 | ) | (657 | ) | ||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
31 | 13 | ||||||||||||||||||||||
Profit before taxation |
8,078 | 7,924 | 2 | 6 | ||||||||||||||||||||
Taxation |
(1,535 | ) | (1,667 | ) | ||||||||||||||||||||
Tax rate |
19.0 | % | 21.0 | % | ||||||||||||||||||||
Profit after taxation |
6,543 | 6,257 | 5 | 9 | ||||||||||||||||||||
Profit attributable to non-controlling interests |
674 | 793 | ||||||||||||||||||||||
Profit attributable to shareholders |
5,869 | 5,464 | ||||||||||||||||||||||
Earnings per share |
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119.4
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p
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111.8
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p
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7 | 12 |
How we performed
07
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GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
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Financial statements
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Investor information
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Our long-term priorities apply to our three businesses
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Innovation
|
Performance
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Trust
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We invest in scientific and technical excellence to develop and launch a pipeline of new products that meet the needs of patients, payers and consumers. |
We deliver growth based performance by investing effectively in our business, developing our people and executing competitively. |
We are a responsible company and commit to use our science and technology to address health needs, make our products affordable and available and to be a modern employer. |
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2018 objectives
|
2018 objectives
|
2018 objectives
|
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Excellent execution of key launches: Trelegy Ellipta, Juluca, and Shingrix
Strengthen Pharmaceutical pipeline through greater focus, improved medicines development and business development |
Grow sales in priority therapy areas, categories and markets
Increase operating margins and deliver improved cash flow
Strengthen top talent profile in key roles |
Focus on supply service levels
Define new global health approach
Competitive employee engagement
|
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2018 progress
|
2018 progress
|
2018 progress
|
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Delivered industry-leading launches of Shingrix and Trelegy Ellipta, with strong start to sales of Juluca
New R&D approach to focus on science of the immune system, human genetics and advanced technologies
Strengthened pipeline through strategic business development with 23andMe and Tesaro and terminated or divested around 80 programmes to focus investment on most promising assets
Significant progress in reshaping Pharmaceuticals R&D portfolio, with 331 of 46 new medicines targeting modulation of the immune system
|
Group sales £30.8 billion, up 2% AER, 5% CER, with growth in new respiratory product sales and HIV
Total Group operating margin 17.8%, up 4.3 percentage points AER, up 5.0 percentage points CER. Adjusted Group operating margin 28.4%, flat AER, up 0.5 percentage points CER
Net cash flow from operations £8.4 billion, up from £6.9 billion. Free cash flow £5.7 billion, up from £3.5 billion
Announced transaction to create a world-leading Consumer Healthcare Joint Venture with Pfizer and bought out Novartis stake in GSK Consumer Healthcare
Key leadership appointments in place with 69% of top 125 leaders new in role |
Established new set of priorities and public commitments to build trust
Continued to simplify supply chain and improve supply performance
Received approval for tafenoquine, the first new treatment for P. vivax malaria in 60 years
Candidate TB vaccine showed positive results in phase IIb trial
Competitive employee engagement through focus on being a modern employer
All employees globally to have access to a preventive healthcare package |
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2019 objectives
|
2019 objectives
|
2019 objectives
|
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Deliver continued strong sales of Trelegy Ellipta, Nucala, HIV two-drug regimen and Shingrix
Continue to strengthen pipeline through execution of new R&D approach, accelerating priority assets and optimising recent strategic business development transactions
|
Continue to drive sales growth and operational performance
Successful integration of Tesaro
Deliver restructuring benefits and plan for the integration of Pfizers consumer healthcare business
Accelerate capability build in priority areas including digital data and analytics
|
Focus on supply service levels, execute portfolio and network simplification
Deliver progress on Trust commitments
Progress global health research in TB and HIV
Deliver modern employer programmes to empower employees to be themselves, feel good and keep growing at GSK
|
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Culture We are committed to building a new culture at GSK to accelerate delivery of our long-term priorities. In 2018, our focus was to establish a new set of expectations courage, accountability, development and teamwork alongside our values patient focus, transparency, respect and integrity and introduce a new approach to performance and reward. In 2019, we aim to continue to embed organisational understanding of how our values and expectations will support a change in culture, leading to improved culture scores, and further embed our new performance system.
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Principal risks Our Principal risks are patient safety: product quality; financial controls and reporting; anti-bribery and corruption; commercial practices; privacy; research practices; third party oversight; environment, health and safety, and sustainability; information security; and supply continuity. Our risk management framework is designed to support our long-term priorities. More detailed information can be found on pages 34 to 36 and 241 to 250.
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1 Includes M7824, the subject of the proposed alliance with Merck KGaA, Darmstadt, Germany, expected to close in Q1 2019.
08
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GSK Annual Report 2018
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Innovation | ||||||||||||||||||||
2018 £bn
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2018 growth | 2017 £bn
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2016 £bn
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£%
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CER%
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Innovation sales |
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Sales of Pharmaceuticals and Vaccines products launched in the last five years |
5.7 | 43 | 46 | 4.0 | a | 2.6 | a | |||||||||||||
For internal purposes we also measure pipeline value and progress |
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Performance
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2018 £bn
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2018 growth | 2017 £bn
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2016 £bn
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£%
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CER%
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Group turnover
|
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30.8
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2
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5
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30.2
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27.9
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Operating profit and margin |
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Total operating profit |
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5.5 |
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34 |
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43 |
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4.1 |
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2.6 |
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Adjusted operating profit
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8.7
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2
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6
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8.6
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|
7.7
|
| |||||
Total margin |
17.8 | % | 13.5 | % | 9.3 | % | ||||||||||||||
Adjusted margin |
|
28.4 |
% |
|
28.4 |
% |
|
27.5 |
% | |||||||||||
Free cash flow |
5.7 | 63 | 3.5 | b | 3.3 | b | ||||||||||||||
For internal purposes we also measure market share, and top talent in key roles. |
||||||||||||||||||||
Trust |
||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||
Employee engagement |
||||||||||||||||||||
Employee engagement scores from our global employee survey
|
|
78
|
%
|
|
79
|
%
|
For internal purposes we also measure supply service levels and corporate reputation.
Linked to Executive LTI awards and bonus, see pages 97, 101 and 103. |
a | Comparative information reflects sales of those products that meet the definition for 2018. |
b | Revised to include proceeds from the sale of intangible assets. |
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The healthcare industry is changing rapidly and has strong growth potential. Our strategy and long-term priorities, underpinned by our culture, are designed to put us in the best position to be able to respond to the opportunities and challenges that this presents.
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Industry trends continued
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Patients and consumers
|
Investors
|
|||||||||
|
|
|||||||||
Insights from patient organisations and consumers enable us to develop products and advocate for policies that better meet their needs.
Advisory boards and Patient Advocacy Leaders Summits provide patient insights
Engaging with and supporting patient groups (disclosed on gsk.com) and supporting initiatives that empower patients to get more involved in medicine development
Our market research and consumer sensory labs help us understand consumer needs
|
We maintain regular and constructive dialogue with investors to communicate our strategy and performance in order to promote investor confidence and ensure our continued access to capital.
One-to-one meetings between Board members, senior executives and institutional investors
Running investor roadshows; attending conferences and events
Annual General Meeting |
|||||||||
|
||||||||||
Healthcare professionals and medical experts
|
R&D partners and academia
|
|||||||||
|
|
|||||||||
We work with healthcare professionals (HCPs) and medical experts to understand patient needs and to ensure our products are being administered in the right way.
Advisory boards to gather insights related to scientific research and disease management
Collaboration on clinical trials and research
Peer-to-peer scientific dialogue to increase understanding of diseases and develop effective prevention
|
We partner with scientific institutions, business partners, and academia to further advance scientific discovery and development.
Establishing joint ventures to improve efficiency and strengthen and improve innovation
R&D collaborations such as our gene sequencing initiative with 23andMe and UK Biobank
Working with academic researchers to accelerate discovery and development of new medicines |
|||||||||
Governments and regulators
|
NGOs and multilateral organisations
|
|||||||||
|
|
|||||||||
We work with governments and regulators to advocate for policies that encourage innovation, promote efficient management of healthcare spending and give patients the support they need.
Engaging with regulatory bodies during drug development
Engaging with government health agencies to demonstrate the value of our products
Working with governments to build a strong operating environment for life sciences |
We work with partners to improve access to healthcare services and our products, and to advocate for the policy environment in which we can be successful.
Working with non-governmental organisations (NGOs) and partners to research and develop products to support global health
Partnering with NGOs and generic manufacturers to manufacture and supply our products to developing countries
Working with multilateral organisations to drive progress on key global health priority areas
|
|||||||||
Suppliers
|
Employees
|
|||||||||
|
|
|||||||||
We work with thousands of suppliers, large and small, who provide goods and services that support us in delivering high-quality, safe products for our patients and consumers.
Engaging with suppliers through our Third Party Oversight programme and external platforms to help monitor performance
Providing a platform for our suppliers to share best practices in environmental performance through our Supplier Exchange online community
Auditing our suppliers quality processes to ensure they comply with relevant regulations |
We involve and listen to employees to help us maintain strong employee engagement and retain talented people.
Conducting a twice-yearly global employee survey so we can act on employee feedback
Promoting informal dialogue and collaboration through our new internal tech platform
Lets Talk events with leaders and members of the Corporate Executive Team
Established a Board-level Workforce Engagement Director (Dr Vivienne Cox) (see page 90)
|
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We discover, develop and manufacture innovative pharmaceutical medicines, vaccines and consumer healthcare products. Our operations span the value chain, from identifying and researching ground-breaking discoveries, through development and testing to regulatory approval, manufacturing and commercialisation.
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Our Pharmaceuticals business has a broad portfolio of innovative and established medicines, with leadership positions in respiratory and HIV. We are strengthening our pipeline through a focus on immunology, human genetics and advanced technologies to help us identify the most promising new medicines.
Progress against our long-term priorities
| ||||
Innovation
|
Performance
|
Trust
| ||
New R&D approach with a focus on science related to the immune system, human genetics and advanced technologies
Strengthened pipeline with 331 of 46 medicines in development targeting modulation of the immune system
Accelerated our oncology pipeline by doubling the number of assets in clinical development via advancing key internal assets, e.g. GSK 916, and targeted business development, e.g. acquisition of Tesaro and the proposed alliance with Merck KGaA.
Launched Juluca, the first two-drug HIV regimen, and expanded indications for Trelegy Ellipta and Nucala
|
Total 2018 turnover £17.3 billion, flat AER, up 2% CER
New Respiratory product sales £2.6 billion, up 35% AER, 38% CER; HIV sales £4.7 billion, up 9% AER, 11% CER
Refined the priority markets in which we target our resources to accelerate growth
Simplified our Pharmaceuticals supply chain, separating it from Consumer Healthcare, to improve competitiveness |
Approval of tafenoquine, the first new treatment for P. vivax malaria in 60 years
Partnering to increase access to paediatric formulations of our HIV medicines
Trained over 15,000 healthcare professionals across 21 countries on the appropriate use of antibiotics |
Innovation
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Pharmaceuticals continued
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Pharmaceuticals continued
Pharmaceuticals pipeline overview
We have 46 assets in development, with 33 immunomodulators of which 16 are focused on oncology.
We expect a number of pivotal readouts in 2019.
Phase | Compound | Indication | ||
Pivotal/registration* |
Benlysta + Rituxan1 | SLE2 | ||
| ||||
cabotegravir2 LA + rilpivirine1 | LA HIV | |||
| ||||
D3, dolutegravir + lamivudine | HIV | |||
| ||||
1278863 (daprodustat HIF-PHI) | anaemia | |||
| ||||
3684934 (fostemsavir HIV AI) | HIV | |||
| ||||
Nucala | COPD/HES/nasal polyps | |||
| ||||
Trelegy Ellipta1 | asthma | |||
| ||||
Dectova1,4 IV | influenza | |||
| ||||
28579161 (BCMA ADC)1 | multiple myeloma | |||
| ||||
Zejula (PARP inhibitor)1 | first-line maintenance ovarian cancer2 | |||
| ||||
dostarlimab (PD-1 antagonist )1 | endometrial cancer | |||
Phase II |
31961651 (GM-CSF inhibitor) | RA | ||
| ||||
33894041/32288361 (HBV ASO) | HBV | |||
| ||||
33596091 (ICOS receptor agonist) | cancer | |||
| ||||
2982772 (RIP1k inhibitor) | pso/RA/UC | |||
| ||||
37728471 (IL33r antagonist) | severe asthma | |||
| ||||
33777941 (NY-ESO-1 TCR) | cancer | |||
| ||||
25868811 (rhACE2) | acute lung injury/PAH | |||
| ||||
2140944 (gepotidacin, topoisomerase IV inhibitor) | antibacterial | |||
| ||||
2330811 (OSM antagonist) | systemic sclerosis | |||
| ||||
2881078 (SARM) | COPD muscle weakness | |||
| ||||
2862277 (TNFR1 antagonist) | acute lung injury | |||
| ||||
31749981 (OX40 agonist) | cancer | |||
| ||||
525762 (BET inhibitor) | cancer | |||
| ||||
2330672 (IBAT inhibitor) | cholestatic pruritus | |||
| ||||
33265951 (PRMT5 inhibitor) | cancer | |||
| ||||
GR1216191 (oxytocin) | postpartum haemorrhage | |||
| ||||
TSR-022 (TIM-3 antagonist)1 | cancer | |||
| ||||
M78241,3 (TGFb trap/anti PD-L1 bispecific) | NSCLC2 | |||
Phase I |
28317811 (LAG3) | ulcerative colitis | ||
| ||||
33586991 (BET targeted inhibitor) | RA | |||
| ||||
38582791 (CCL17 antagonist) | OA | |||
| ||||
2636771 (PI3kb inhibitor) | cancer | |||
| ||||
2983559 (RIP2k inhibitor) | IBD | |||
| ||||
30366561 (leucyl t-RNA inhibitor) | TB | |||
| ||||
3640254 (HIV maturation inhibitor) | HIV | |||
| ||||
35112941 (IL5 LA antagonist) | asthma | |||
| ||||
2292767 (PI3kd inhibitor) | respiratory diseases | |||
| ||||
1795091 (TLR4 agonist) | cancer | |||
| ||||
38101091 (broadly neutralizing antibody) | HIV | |||
| ||||
35371421 (NYESO1 ImmTAC) | cancer | |||
| ||||
34391711 (HPGD2 inhibitor) | muscle repair | |||
| ||||
3145095 (RIP1k inhibitor) | pancreatic cancer | |||
| ||||
33687151 (PRMT1 inhibitor) | cancer | |||
| ||||
TSR-033 (LAG3)1 | cancer | |||
| ||||
2269557 (nemiralisib PI3Kd inhibitor) | APDS |
* | Includes programmes in pivotal phases of development or where pivotal data has reported and regulatory submissions are under consideration or under review. |
1 | In-licence or other alliance relationship with third party. |
2 | Additional indications also under investigation. |
3 | Pending closure of transaction with Merck, KGaA, Darmstadt, Germany. |
4 | Subject to regulatory approval. |
Note: for oncology where phase I studies are conducted in patients, the shift from phase I to phase II is defined when expansion cohorts are started.
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Performance
18
|
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||
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||
|
||
|
We are the leading vaccines company in the world, delivering over 2 million vaccine doses every day to people living in 158 countries. Our portfolio and pipeline help protect individuals throughout their lives. We have recently introduced breakthrough vaccines Shingrix for shingles and Bexsero, the first vaccine for meningitis B.
Progress against our long-term priorities
| ||||
Innovation
|
Performance
|
Trust
| ||
Shingrix launched successfully in the US and Canada.
23% of 2018 sales came from recent innovations, driven by Shingrix and Bexsero
We have 16 candidate vaccines across all R&D phases
Capabilities in science and new technologies continues to be differentiator
|
Total 2018 turnover £5.9 billion, up 14% AER, up 16% CER
Grew ahead of the market, strengthening our position as the leading vaccines company by value
In addition to Shingrix, key contributions from our influenza and hepatitis franchises, and Bexsero |
Over 120 million doses of vaccines delivered to Gavi, the Vaccine Alliance, to help prevent pneumococcal disease, rotavirus and cervical cancer
270 million doses of oral polio vaccine delivered to UNICEF for the Global Polio Eradication Initiative
Positive results from candidate TB vaccine in phase IIb trial |
Innovation
1 Source independent assessment from IQVIA.
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|
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|
Vaccines continued
Performance
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Our Consumer Healthcare business combines science and consumer insights to develop innovative everyday healthcare brands for oral health, pain relief, respiratory, skin health, nutrition and digestive health categories.
In 2018, we reached agreement with Pfizer to combine our consumer healthcare businesses into a new world-leading joint venture.
Progress against our long-term priorities
| ||||
Innovation
|
Performance
|
Trust
| ||
Worldwide rollout of Sensodyne Rapid Relief, Voltaren No Mess and parodontax/Corsodyl
Science-based innovations included Theraflu PowerPods and a Polident denture care range
New digital innovation hub established to accelerate innovations in self-care |
Total 2018 turnover £7.7 billion, down 1% AER, up 2% CER
Bought out Novartis 36.5% stake in Consumer Healthcare Joint Venture for £9.2 billion
Agreement with Pfizer to combine our consumer healthcare businesses into a new world-leading joint venture
Announced the sale of Horlicks and other consumer nutrition brands to Unilever |
Supply chain service levels continued to improve, achieving 98% on-time, in-full delivery performance
Five-year partnership with Smile Train launched to help more children access life-changing cleft lip and palate surgery
Continued our partnership with Allied Against Dengue in India and South East Asia to prevent outbreaks of dengue fever
Employee engagement score increased to 81%
|
Innovation
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|
Consumer Healthcare continued
Performance
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||
|
||
|
Operating responsibly to deliver on our purpose and ensure the greatest possible long-term impact in improving health around the world.
Our commitments on Trust
Our purpose is to help people do more, feel better and live longer
| ||||||||
Using our science and technology to address health needs |
Making our products affordable and available |
Being a modern | ||||||
New medical innovations
Develop differentiated, high-quality and needed medicines, vaccines and consumer healthcare products to improve health
Global health
Improve global health impact through R&D for infectious diseases that affect children and young people in developing countries focusing on HIV, malaria and TB
Health security
Help the world to better prepare for future disease outbreaks with pandemic potential, and tackle antimicrobial resistance
|
Pricing
Improve the health of millions of people each year by making our products available at responsible prices that are sustainable for our business
Product reach
Use access strategies to reach 800 million underserved people in developing countries with our products by 2025
Healthcare access
Partner to improve disease prevention, awareness and access to healthcare services by 12 million people by 2025 |
Engaged people
Achieve and maintain a competitive employee engagement score by 2022
Inclusion and diversity
Accelerate our progress on inclusion and diversity, aiming for over 37% female representation in senior roles and recognition in global LGBT+ indices, by 2022
Health, wellbeing and development
Be a leading company in how we support employee health, wellbeing and personal development
|
Being a responsible business
| ||||||
Reliable supply
Commit to quality, safety and reliable supply of our products for patients and consumers |
Ethics and values
Operate an ethical, values- driven culture, in which any issues are responded to swiftly and transparently
|
Data and engagement
Use data responsibly and transparently. Improve patient and scientific engagement |
Environment
Reduce our environmental impact by one quarter by 2030 |
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| ||
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|
Science and technology
26
|
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|
||
|
||
|
Trust continued
Affordability and availability
1 | Price after discounts, rebates or other allowances. |
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| ||
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|
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|
||
|
||
|
Trust continued
Modern employer
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| ||
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| ||
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|
Reliable supply
30
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||
|
||
|
Trust continued
Ethics and values
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| ||
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|
32
|
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||
|
||
|
||
|
Trust continued
Environment
1 2018 figures will be available from April 2019.
2 | Carbon emissions are calculated according to the Greenhouse Gas Protocol: |
A Corporate Accounting and Reporting Standard (revised edition). |
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| ||
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|
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||
|
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|
||
|
Risk
|
Assessment and mitigation activities | |||||||||
|
| |||||||||
Patient safety
|
The macro risk level has increased on a global scale due to an expanding, strict and diverse regulatory environment, which is going to evolve further, as exemplified in China. In general the macro environment in the established US and European markets remains unchanged with patient safety and Good Pharmacovigilance Practices (GVP) remaining consistent. Plans are in place to ensure that GSKs approach to patient safety is not compromised by Brexit.
The GSK risk exposure remains unchanged. We are providing strong oversight to mitigate risk during implementation of organisational improvements to the local and central Pharmacovigilance model. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Product quality
|
The macro risk level remained unchanged, with continuing industry-level regulatory scrutiny of data integrity, drug shortages caused by manufacturing issues, and the need for timely communication of issues with authorities.
The overall GSK exposure level remains unchanged; however, improvements in annual performance metrics reflect GSKs ongoing investment and improvement initiatives in facilities, operating systems and training. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Financial controls & reporting
|
The macro level remains unchanged, as there has been no material increase in financial reporting requirements.
The GSK exposure level has reduced as a result of the successful completion of the US and intercompany system migrations onto the new ERP platform. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Anti-bribery & corruption (ABAC)
|
The macro risk level remains unchanged with continued strict ABAC laws and scrutiny from government and regulators, and the high standards expected of corporations.
The GSK exposure level remains unchanged as we improved targeted training to those most exposed to bribery and corruption risks in their roles; revised and simplified applicable written standards; and continued to develop risk indicators intended to provide meaningful and useful data about the potential for corruption (e.g. financial crimes). We have reduced our exposure to ABAC risk through a business model change in some very high-risk markets and will continue to embed these changes into 2019. The SEC and DOJ investigations regarding third party advisers engaged by GSK in China are ongoing. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Commercial practices
|
The macro risk level has increased due to greater competitive pressure, increased regulatory enforcement and an expansion of digital engagement, where laws and regulations are still evolving.
The GSK exposure level remains unchanged as we continue to enhance and maintain control over evolving commercial practices, notably the shift in marketing and sales practices utilising data analytics and e-commerce channels. In October 2018, GSK announced changes to the way we will engage expert practitioners to improve sharing of new data on our innovative medicines and vaccines for a limited time among healthcare practitioners. New controls and training have been implemented to support these changes while ensuring appropriate oversight and assurance across the markets.
| |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
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ARC Report, see page 79 | Principal risks and uncertainties, see page 241 | |||||
|
Viability statement, see page 44
|
|
Internal Control Framework, see page 87
|
Risk
|
Assessment and mitigation activities | |||||||||
|
| |||||||||
Privacy
|
The macro risk level has increased due to new, more stringent data privacy legislation in multiple countries and the rise of enforcement by regulators.
The GSK exposure level remains unchanged following implementation of a new global privacy framework and operating model in the European Economic Area during 2018. This has resulted in the development of critical privacy expertise in compliance, legal, and business roles, along with the embedding of privacy controls within IT and third party oversight. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Research practices
|
The macro risk level is increasing, primarily driven by the high rate of change to regulations and external ethical standards and by increasing data use and technological complexity.
The GSK exposure level remains unchanged as we continue to establish appropriate controls and a culture of continuous improvement, overseen by an enterprise risk governance structure. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Third party oversight (TPO) | The macro environment remains unchanged as the industry continues to be vigilant about third-party risks in global sourcing and supply, and consumer and investor expectations mature.
The GSK exposure level remains unchanged. The TPO programme has been fully deployed. Due diligence for low-risk engagements is based on embedded process controls, relieving Business Owners of TPO activity without a significant change in risk appetite. High-risk engagements continue to require an engagement risk assessment and prescribed next steps. The risk-based approach proposed means that some low-risk issues may occur that will require a reactive response. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Environment, health & safety and sustainability (EHS&S)
|
The macro risk level has increased due to greater emphasis on environment controls from regulators, activists and stakeholders. Particular focus areas include antimicrobial resistance related to manufacturing releases, the wider issue of pharmaceuticals in the environment (PiE) and increasing emerging market regulation. External scrutiny of our external supply chain for active ingredients (both for existing and pipeline assets) has also increased significantly.
The GSK exposure level remains unchanged. Risks associated with restructuring of the site network are being proactively managed. Mitigation and improvement plans have been established and are progressing through implementation.
| |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Information security
|
The macro risk level continues to increase as the threat against the pharmaceutical business and industry generally become more sophisticated and targeted, as evidenced by the Wannacry and NotPetya global incidents.
Despite this, the GSK exposure level remains unchanged due to further development of our programme to safeguard against cyber-attacks and protect critical information and systems, and our ability to balance the demands of regulation with our digital transformation, which involves increased data collection and analysis. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
| |||||||||
Supply continuity
|
The macro risk level remains unchanged with ongoing stringent regulation, a continued US focus on contract manufacturers outside the UK/EU, and Brexit uncertainties.
The overall GSK risk exposure level is unchanged. We have improved risk management of our supplier portfolio; reduced the complexity of our internal and external networks; and improved our crisis and continuity management framework. However, we have seen an increase in complexity with the introduction of a major serialisation change programme for the EU Falsified Medicines Directive coinciding with Brexit preparations. | |||||||||
Macro environment | GSK exposure post mitigation | |||||||||
|
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|
||
|
Risk management continued
Risks associated with the proposed separation of GSKs
Consumer Healthcare business
Our approach to Brexit
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| ||||
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financial
review
In this section
|
|
|||||||||||
|
38 | |||||||||||
Reporting framework | 40 | |||||||||||
Approach to tax | 43 | |||||||||||
Viability statement | 44 | |||||||||||
Total results | 45 | |||||||||||
Adjusting items | 51 | |||||||||||
Adjusted results | 54 | |||||||||||
Cash generation and conversion | 56 | |||||||||||
Financial position and resources | 58 | |||||||||||
Treasury policies | 62 | |||||||||||
Critical accounting policies | 63 | |||||||||||
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||
|
||
|
We continued to make progress in delivering against our strategy and the financial goals we have set out in our financial architecture
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Group financial review
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Reporting framework continued
Historical record of Adjusting items
The reconcilations between Total and Adjusted operating profit over the last five years can be summarised as follows:
2018 £m |
2017 £m |
2016 £m |
2015 £m |
2014 £m |
||||||||||||||||
Total operating profit |
5,483 | 4,087 | 2,598 | 10,322 | 3,597 | |||||||||||||||
Intangible asset amortisation |
580 | 591 | 588 | 563 | 575 | |||||||||||||||
Intangible asset impairment |
116 | 688 | 20 | 206 | 150 | |||||||||||||||
Major restructuring |
809 | 1,056 | 970 | 1,891 | 750 | |||||||||||||||
Transaction-related items |
1,977 | 1,599 | 3,919 | 2,238 | 839 | |||||||||||||||
Divestments, significant legal and other items |
(220 | ) | (119 | ) | (424 | ) | (9,561 | ) | 545 | |||||||||||
US tax reform |
| 666 | | | | |||||||||||||||
Adjusted operating profit |
8,745 | 8,568 | 7,671 | 5,659 | 6,456 | |||||||||||||||
The analysis of the impact of transaction-related items on operating profit for each of the last five years is as follows: |
|
|||||||||||||||||||
2018 £m |
2017 £m |
2016 £m |
2015 £m |
2014 £m |
||||||||||||||||
Novartis Consumer Healthcare Joint Venture put option |
658 | 986 | 1,133 | 83 | | |||||||||||||||
Contingent consideration on former Shionogi-ViiV Healthcare JV (including Shionogi preferential dividends) |
1,188 | 556 | 2,162 | 1,874 | 768 | |||||||||||||||
ViiV Healthcare put options and Pfizer preferential dividends |
(58 | ) | (126 | ) | 577 | | | |||||||||||||
Contingent consideration on former Novartis Vaccines business |
58 | 101 | 69 | 108 | | |||||||||||||||
Other adjustments |
131 | 82 | (22 | ) | 173 | 71 | ||||||||||||||
Transaction-related items |
1,977 | 1,599 | 3,919 | 2,238 | 839 |
Full reconciliations between Total and Adjusted results for 20142018 are set out on pages 232 to 234.
Further explanations on the Adjusting items for 2018 are reported on page 51.
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Reporting framework continued
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|
Adjusted results reconciliation 31 December 2018 |
Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction £m |
Divestments, significant legal and other items £m |
Adjusted results £m |
|||||||||||||||||||||||||
Turnover |
30,821 | 30,821 | ||||||||||||||||||||||||||||||
Cost of sales |
(10,241 | ) | 536 | 69 | 443 | 15 | | (9,178 | ) | |||||||||||||||||||||||
Gross profit |
20,580 | 536 | 69 | 443 | 15 | | 21,643 | |||||||||||||||||||||||||
Selling, general and administration |
(9,915 | ) | 2 | 315 | 98 | 38 | (9,462 | ) | ||||||||||||||||||||||||
Research and development |
(3,893 | ) | 44 | 45 | 49 | 20 | (3,735 | ) | ||||||||||||||||||||||||
Royalty income |
299 | 299 | ||||||||||||||||||||||||||||||
Other operating income/(expense) |
|
(1,588
|
)
|
|
2
|
|
|
1,864
|
|
|
(278
|
)
|
|
|
|
|||||||||||||||||
Operating profit |
5,483 | 580 | 116 | 809 | 1,977 | (220 | ) | 8,745 | ||||||||||||||||||||||||
Net finance costs |
(717 | ) | 4 | (3 | ) | 18 | (698 | ) | ||||||||||||||||||||||||
Profit on disposal of associates |
3 | (3 | ) | | ||||||||||||||||||||||||||||
Share of after tax profits of associates and joint ventures
|
|
31
|
|
|
31
|
|
||||||||||||||||||||||||||
Profit before taxation |
4,800 | 580 | 116 | 813 | 1,974 | (205 | ) | 8,078 | ||||||||||||||||||||||||
Taxation |
(754 | ) | (109 | ) | (19 | ) | (170 | ) | (239 | ) | (244 | ) | (1,535 | ) | ||||||||||||||||||
Tax rate |
15.7% | 19.0% | ||||||||||||||||||||||||||||||
Profit after taxation |
4,046 | 471 | 97 | 643 | 1,735 | (449 | ) | 6,543 | ||||||||||||||||||||||||
Profit attributable to non-controlling interests |
423 | 251 | 674 | |||||||||||||||||||||||||||||
Profit attributable to shareholders
|
|
3,623
|
|
|
471
|
|
|
97
|
|
|
643
|
|
|
1,484
|
|
|
(449
|
)
|
|
5,869
|
|
|||||||||||
Earnings per share
|
|
73.7p
|
|
|
9.6p
|
|
|
2.0p
|
|
|
13.1p
|
|
|
30.2p
|
|
|
(9.2)
|
p
|
|
119.4p
|
|
|||||||||||
Weighted average number of shares (millions)
|
4,914
|
4,914 | ||||||||||||||||||||||||||||||
Adjusted results reconciliation 31 December 2017 | Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction £m |
Divestments, significant legal and other items £m |
US tax reform £m |
Adjusted results £m |
||||||||||||||||||||||||
Turnover |
30,186 | 30,186 | ||||||||||||||||||||||||||||||
Cost of sales
|
|
(10,342
|
)
|
|
546
|
|
|
400
|
|
|
545
|
|
|
80
|
|
|
|
|
|
(8,771
|
)
| |||||||||||
Gross profit |
19,844 | 546 | 400 | 545 | 80 | | 21,415 | |||||||||||||||||||||||||
Selling, general and administration |
(9,672 | ) | 248 | 83 | (9,341 | ) | ||||||||||||||||||||||||||
Research and development |
(4,476 | ) | 45 | 288 | 263 | 18 | (3,862 | ) | ||||||||||||||||||||||||
Royalty income |
356 | 356 | ||||||||||||||||||||||||||||||
Other operating income/(expense)
|
|
(1,965
|
)
|
|
1,519
|
|
|
(220
|
)
|
|
666
|
|
|
|
| |||||||||||||||||
Operating profit |
4,087 | 591 | 688 | 1,056 | 1,599 | (119 | ) | 666 | 8,568 | |||||||||||||||||||||||
Net finance costs |
(669 | ) | 4 | 8 | (657 | ) | ||||||||||||||||||||||||||
Profit on disposal of associates |
94 | (94 | ) | | ||||||||||||||||||||||||||||
Share of after tax profits of associates and joint ventures
|
|
13
|
|
|
13
|
| ||||||||||||||||||||||||||
Profit before taxation |
3,525 | 591 | 688 | 1,060 | 1,599 | (205 | ) | 666 | 7,924 | |||||||||||||||||||||||
Taxation |
(1,356 | ) | (134 | ) | (176 | ) | (209 | ) | (619 | ) | (251 | ) | 1,078 | (1,667 | ) | |||||||||||||||||
Tax rate |
38.5% | 21.0% | ||||||||||||||||||||||||||||||
Profit after taxation |
2,169 | 457 | 512 | 851 | 980 | (456 | ) | 1,744 | 6,257 | |||||||||||||||||||||||
Profit attributable to non-controlling interests |
637 | 42 | 114 | 793 | ||||||||||||||||||||||||||||
Profit attributable to shareholders
|
|
1,532
|
|
|
457
|
|
|
512
|
|
|
851
|
|
|
938
|
|
|
(456
|
)
|
|
1,630
|
|
|
5,464
|
| ||||||||
Earnings per share
|
|
31.4p
|
|
|
9.4p
|
|
|
10.5p
|
|
|
17.4p
|
|
|
19.2p
|
|
|
(9.4)
|
p
|
|
33.3p
|
|
|
111.8p
|
| ||||||||
Weighted average number of shares (millions)
|
4,886
|
4,886
|
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Adjusting items continued
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Cash generation and conversion
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Cash generation and conversion continued
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Financial position and resources
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Maturity profile of long-term debt
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Treasury policies continued
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65 |
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Governance
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Chairmans Governance statement
Our purpose and values have always been a source of great pride for the Board and our employees. It is a powerful force in attracting and retaining talented people who, as individuals, want to be part of a company that contributes meaningfully to society.
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Board composition
|
Gender diversity
|
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Composition |
|
Board | At date of publication |
Board | At close of AGM on 8 May 2019 | |||||||||
|
| |||||||||||||
Executive | 33.3% | Male | 58.3% | Male | 54.5% | |||||||||
Non-Executive | 66.7% | Female | 41.7% | Female | 45.5% | |||||||||
Tenure Non-Executive |
|
Executive | Executive | |||||||||||
|
| |||||||||||||
Up to 3 years | 25% | Male | 75% | Male | 66.7% | |||||||||
3-6 years | 50% | Female | 25% | Female | 33.3% | |||||||||
7-9 years | 25% |
Non-Executive |
Non-Executive | |||||||||||
|
| |||||||||||||
Male Female |
50% 50% |
Male Female |
50% 50% | |||||||||||
International experience
|
|
|||||||||||||
Global | 83% | |||||||||||||
US | 100% | |||||||||||||
Europe | 92% | |||||||||||||
EMAP
|
|
67%
|
|
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Our Board continued
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Corporate governance framework
The Board has established a corporate governance framework with clearly defined responsibilities and accountabilities. The framework is designed to safeguard and enhance long-term shareholder value and to provide a platform to realise the Groups strategy through GSKs long-term priorities of Innovation, Performance and Trust, that is consistent with its culture, values and expectations. Our internal control and risk management arrangements, described on pages 87 to 88 and 34 to 36, are an integral part of our governance framework.
For the Board to operate effectively and to give full consideration to key matters, Board Committees have been established as set out below.
Scheduled Board and Committee attendance during 2018
Board | Nominations | Audit & Risk | Remuneration | Science | Corporate Responsibility |
|||||||||||||||||||||||
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Total number of scheduled meetings |
6 | 6 | 6 | 5 | 3 | 5 | ||||||||||||||||||||||
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Members |
Attended | Attended | Attended | Attended | Attended | Attended | ||||||||||||||||||||||
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Philip Hampton |
6 | 6 | ||||||||||||||||||||||||||
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Emma Walmsley |
6 | |||||||||||||||||||||||||||
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Simon Dingemans |
6 | |||||||||||||||||||||||||||
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Dr Hal Barron |
6 | |||||||||||||||||||||||||||
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Vindi Banga |
6 | 6 | 6 | 5 | ||||||||||||||||||||||||
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Dr Vivienne Cox |
6 | 5 | 4 | |||||||||||||||||||||||||
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Lynn Elsenhans |
6 | 6 | 6 | 5 | ||||||||||||||||||||||||
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Dr Laurie Glimcher |
6 | 6 | 3 | |||||||||||||||||||||||||
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Dr Jesse Goodman |
6 | 3 | 5 | |||||||||||||||||||||||||
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Judy Lewent |
6 | 6 | 6 | 5 | 3 | |||||||||||||||||||||||
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Urs Rohner |
6 | 5 | ||||||||||||||||||||||||||
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Sir Patrick Vallance |
||||||||||||||||||||||||||||
Stepped down on 31 March 2018 |
2 (2 | ) | ||||||||||||||||||||||||||
|
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Professor Sir Roy Anderson |
||||||||||||||||||||||||||||
Retired on 3 May 2018 |
3 (3 | ) | 2 (2 | ) | 2 (2 | ) | ||||||||||||||||||||||
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||||||||||
Number of ad-hoc meetings |
37 | 3 | 6 | 6 | 3 | 1 | ||||||||||||||||||||||
|
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For Directors who served for part of the year, the numbers in brackets denote the number of meetings the Directors were eligible to attend.
|
See the Committee Reports for other attendees at Committee meetings, such as the Chairman, CEO and other Executive Directors, and the work of the Committees during the year. These reports are included later in the Corporate Governance Report.
|
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2018 Board programme
The Board is responsible for the long-term success of the company and has the authority, and is accountable to shareholders, for ensuring that the Group is appropriately managed and achieves the strategic objectives it sets. In the performance of these duties, it has regard to the interests of other key stakeholders and is cognisant of the potential impact of the decisions it makes. The Board discharges those responsibilities through an annual programme of meetings and during the year it focused on a number of specific areas outlined in the table, in line with its long-term IPT priorities. In addition, during the year the CEO met with Non-Executive Directors to discuss various matters, including the progress on the companys strategy, succession planning and continuing regulatory investigations.
Areas of focus | Long-term priorities link | |||||||||||||||||||
Strategy |
The Boards oversight of the execution of our strategy included: |
|||||||||||||||||||
| Receiving and discussing reports from our three principal businesses: Pharmaceuticals, Vaccines and Consumer Healthcare | |||||||||||||||||||
| Receiving IPT transformation programme | |||||||||||||||||||
| Scrutinising and approving new R&D strategy | |||||||||||||||||||
| Holding a joint Board and Corporate Executive Team strategy day to discuss IPTC priorities against external landscape changes, business performance, competitors and governance arrangements
|
|||||||||||||||||||
| Scrutinising and approving major Consumer deals with Novartis, Pfizer and Unilever | |||||||||||||||||||
| Scrutinising and approving an oncology deal to purchase Tesaro | |||||||||||||||||||
| Receiving and discussing reports on our pensions, insurance, tax and treasury strategies | |||||||||||||||||||
Performance |
The Boards focus on performance included:
|
|||||||||||||||||||
| Evaluating the CEOs 2017 performance and setting her 2018 objectives | |||||||||||||||||||
| Setting, reviewing and agreeing the annual budget and forward looking three year plan | |||||||||||||||||||
| Receiving reports from the CEO on our three principal businesses | |||||||||||||||||||
| Scrutinising the Groups financial performance | |||||||||||||||||||
| Approving a major Group restructuring plan | |||||||||||||||||||
| Reviewing our digital, data and analytics capabilities and opportunities | |||||||||||||||||||
Governance |
The Boards approach to discharging its corporate governance duties included: |
|||||||||||||||||||
| Receiving reports from Board Committees | |||||||||||||||||||
| Approving the 2017 Annual Report | |||||||||||||||||||
| Reviewing AGM preparation and approving the 2018 Notice of AGM and a General Meeting to approve the transaction with Novartis | |||||||||||||||||||
| Considering observations and agreeing actions from the independent external evaluation of the Boards performance
|
|||||||||||||||||||
| Receiving reports on corporate governance and regulatory developments | |||||||||||||||||||
| Approving appointment of new auditor | |||||||||||||||||||
| Undertaking training on GSKs Code of Conduct and Anti-bribery and corruption | |||||||||||||||||||
| Approving the appointment of a new Chief Financial Officer | |||||||||||||||||||
Cultural |
The Head of HR briefed the Board on: |
|||||||||||||||||||
| Aligning GSKs culture and values to support our strategy and long-term priorities | |||||||||||||||||||
Engagement |
The Boards regard for stakeholder impacts included: |
|||||||||||||||||||
| Reviewing and approving a new Trust framework that has been set in the context of external trends and stakeholder expectations
|
|||||||||||||||||||
| Receiving regular external stakeholder development reports | |||||||||||||||||||
| Approving the evolution of our approach and changes to medical engagement with key external experts | |||||||||||||||||||
| Designating Dr Vivienne Cox as Workforce Engagement Director to gather the views of the Groups workforce |
Link to long-term priorities Innovation Performance Trust Culture
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||
|
Leadership and effectiveness continued
Key Board roles and responsibilities | ||
Leadership
Chairman Philip Hampton
Leads and manages the business of the Board Provides direction and focus Ensures clear structure for effective operation of the Board and its Committees Sets Board agenda and ensures sufficient time is allocated to promote effective debate to support sound decision making Ensures the Board receives precise, timely and clear information Meets with each Non-Executive Director on an annual basis to discuss individual contributions and performance, together with training and development needs Shares peer feedback that is provided as part of the Board evaluation process Meets with all the Non-Executive Directors independently of the Executive Directors Maintains a dialogue with shareholders on the governance of the company.
The Chairmans role description is available on GSK.com
Chief Executive Officer Emma Walmsley
Is responsible for the management of the Group and its three businesses Develops the Groups strategic direction for consideration and approval by the Board Implements the agreed strategy Is supported by members of the Corporate Executive Team Maintains a continual and active dialogue with shareholders in respect of the companys performance.
The Chief Executive Officers role description is available on GSK.com |
Independent oversight and rigorous challenge
Non-Executive Directors
Provide a strong independent element to the Board Constructively support and challenge management and scrutinise their performance in meeting agreed deliverables Shape proposals on strategy and management Each has a letter of appointment setting out the terms and conditions of their directorship Devote such time as is necessary to the proper performance of their duties Are expected to attend all meetings as required.
Independence statement
The Board considers all of its Non-Executive Directors who are identified on pages 68 to 70 to be independent. They each demonstrate an appropriate degree of independence in character and judgement and are free from any business or other relationship which could materially interfere with the exercise of their judgement. The independence and commitment of Lynn Elsenhans and Judy Lewent, who have served on the Board for over six years, has been subjected to a rigorous review.
Senior Independent Non-Executive Director Vindi Banga
Acts as a sounding board for the Chairman and a trusted intermediary for other Directors Together with the Non-Executive Directors, leads the annual review of the Chairmans performance, taking into account views of the Executive Directors Discusses the results of the Chairmans effectiveness review with the Chairman Leads the search and appointment process and recommendation to the Board of a new Chairman Acts as an additional point of contact for shareholders In doing so, maintains an understanding of the issues and concerns of major shareholders through briefings from the Investor Relations team and the Company Secretary.
The Senior Independent Non-Executive Directors role description is available on GSK.com
|
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||
|
Leadership and effectiveness continued
Board performance action points for 2019
Further improvements
|
Areas of focus for 2019 | |
Succession planning for the Board |
The SID is running the search process for the next Chairman supported by a global executive search firm. Attendance at the Nominations Committee for this process has been expanded to include all Non-Executive Directors. Further details are set out on page 78.
The Nominations Committee has also been progressing the search for a successor for Judy Lewent, the Chair of the Audit & Risk Committee.
| |
| ||
Oversight of R&D and pipeline revival and key business development transactions, and the proposed Consumer Healthcare joint venture with Pfizer |
The Board will continue to monitor the performance of R&D and the pipeline and the integration and operation of the key business development transactions including: Tesaro, 23andMe, Merck KGaA, Darmstadt, Germany. It will also be reviewing and overseeing arrangements for the proposed joint venture with Pfizer Consumer Healthcare.
| |
| ||
Building Board relationships and culture in line with the CEOs culture work across the Group |
Continuing the evolution of the Boards culture and building relationships as the membership has changed is an important area of focus especially with the impending Chairman succession.
| |
| ||
Further enhancing the Boards decision making and ways of working |
Opportunities to further enhance the Boards decision-making and ways of working will continue to be considered to ensure that the Board can operate as effectively as possible.
| |
2018 Board performance
Progress against the conclusions of the 2017 Board evaluation review is set out below.
Areas of focus for 2018
|
Progress/Achievements | |
A review of R&D strategy following the appointment of the new Chief Scientific Officer and President, R&D |
The Board reviewed and approved Dr Hal Barrons new approach to R&D which was announced with the companys Q2 results. The new approach focused on science relating to the immune system, the use of genetics and investments in advanced technologies.
| |
| ||
Enhancing the Boards focus and decision making by agreeing its clear priorities to focus on each year
|
The Board agreed clear priorities for focus during 2018 and was pleased to have achieved them.
| |
| ||
Succession planning at senior executive and Board level |
The Board reviewed Executive and Non-Executive Director succession planning, and succession processes are ongoing to replace the Audit & Risk Committee Chair. Following the Chairmans decision to step down from the Board, the SID is leading the succession process for the Chairman, in collaboration with the Non-Executive Directors. Further details on Chairman succession are set out on page 78.
| |
| ||
Building Board relationships and culture in line with the CEOs culture work across the Group |
The Board was especially busy in 2018, but continues to build relationships and evolve its culture as its membership changes.
| |
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Investor information
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Leadership and effectiveness continued
Nominations Committee report continued
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Financial statements
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Investor information
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Accountability continued
Audit & Risk Committee report continued
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Financial statements
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Investor information
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Accountability continued
What the Committee did during 2018
Areas of Committee focus | Items discussed | Frequency | ||||
Financial reporting |
Reviewed integrity of draft financial statements, appropriateness of accounting policies and going concern assumptions |
|||||
Considered approval
process for confirming and recommending to the Board that the 2017 Annual Report is |
|
|||||
Reviewed and recommended to the Board approval of the 2017 Annual Report and Form 20-F | ||||||
Reviewed and approved Directors expenses | ||||||
Reviewed and recommended approval of quarterly and preliminary results announcements, dividends and earnings guidance |
||||||
Reviewed significant issues in relation to the quarterly and preliminary results | ||||||
Reviewed and recommended inclusion of the Viability Statement in the 2017 Annual Report | ||||||
Reviewed the financial reporting framework and disclosure arrangements | ||||||
Reviewed major restructuring reports | ||||||
Reviewed accounting developments and their impacts as well as key accounting issues
|
|
|
| |||
External auditor |
Canvassed observations of the outgoing Audit Partner on the company, the Committee and the Finance organisations |
|||||
Reviewed and approved audit/non-audit expenditure incurred during 2017 |
||||||
Considered the auditors report on the 2017 annual results | ||||||
Performed evidence-based assessment of external auditor and the effectiveness of 2017 external audit | ||||||
Considered qualifications, expertise and independence of the external auditor | ||||||
Recommended to the Board the appointment of Deloitte and for the Committee to agree auditors remuneration | ||||||
Approved the 2018 audit plan and fee proposal and set performance expectations for auditor for the year | ||||||
Considered non-audit services fees for 2018 and the 2019 audit budget | ||||||
Considered initial results of 2018 external audit | ||||||
Considered internal control over financial reporting
|
|
|
| |||
Global internal control & compliance |
Reviewed assurance reports from Global Pharmaceuticals (including R&D and ViiV Healthcare), Vaccines and Consumer Healthcare, as well as the Global Support functions |
|||||
Reviewed GSKs internal control framework and controls over financial reporting |
|
|
| |||
Reviewed Technology access controls and closely monitored plans to address control findings identified and the programme to validate mitigation |
||||||
Confirmed compliance with Sarbanes-Oxley Act | ||||||
Received independent external evaluation outcomes of Audit & Assurance | ||||||
Reviewed Audit & Assurance work during 2017 and approved the planned work for 2018 | ||||||
Reviewed the US Corporate Integrity Agreement | ||||||
Reviewed implementation of the enhancements to the Healthcare professional engagement policy | ||||||
Reviewed General Data Protection Regulation readiness and compliance | ||||||
Received litigation reports and updates | ||||||
Received reports on ongoing investigations and on Anti-bribery and corruption (ABAC) issues
|
|
|
| |||
Risk |
Reviewed risk management framework compliance |
|||||
Reviewed the risk elements of group treasury, pensions, risk and insurance and tax policies | ||||||
Agreed a new approach to enterprise risk management | ||||||
Received status reports on each of the companys 11 Enterprise Risks (these Risks are disclosed on pages 34 and 35) |
||||||
Received fraud, site security and cyber security risk assessment update | ||||||
Received updates on the implications and planning for Brexit | ||||||
Received Risk Oversight and Compliance Council (ROCC) meeting updates | ||||||
Considered emerging risks
|
|
|
| |||
Governance and other matters |
Confirmed compliance with the UK Corporate Governance Code |
|||||
Reviewed the Committees terms of reference and confirmed that they had been adhered to during 2018 |
|
|
| |||
Received corporate governance updates | ||||||
Reviewed the Committees performance and effectiveness | ||||||
Reviewed and approved the Groups Modern Slavery Act Statement | ||||||
Reviewed the companys gender pay gap disclosures | ||||||
Met privately and separately with the Heads of Global Ethics & Compliance, Audit & Assurance, and the General Counsel |
||||||
Met privately with the external auditor at the end of each meeting as appropriate | ||||||
Committee Activity Key Annually Quarterly Periodically Standing
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Financial statements
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Investor information
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Significant issues relating to the financial statements
In considering the quarterly financial results announcements and the financial results contained in the 2018 Annual Report, the Committee reviewed the significant issues and judgements made by management in determining those results. The Committee reviewed papers prepared by management setting out the key areas of risk, the actions undertaken to quantify the effects of the relevant issues and the judgements made by management on the appropriate accounting required to address those issues in the financial statements.
The significant issues considered in relation to the financial statements for the year ended 31 December 2018 are set out in the following table, together with a summary of the financial outcomes where appropriate. In addition, the Committee and the external auditor have discussed the significant issues addressed by the Committee during the year and the areas of particular audit focus, as described in the Independent Auditors Report on pages 128 to 139.
Significant issues considered by the Committee in relation to the financial statements
|
How the issue was addressed by the Committee
| |
Going concern basis for the preparation of the financial statements |
The Committee considered the outcome of managements half-yearly reviews of current and forecast net debt positions and the various financing facilities and options available to the Group. Following a review of the risk and potential impact of unforeseen events, the Committee confirmed that the application of the going concern basis for the preparation of the financial statements continued to be appropriate.
| |
Revenue recognition, including returns and rebates (RAR) accruals |
The Committee reviewed managements approach to the timing of recognition of revenue and accruals for customer returns and rebates. The US Pharmaceuticals and Vaccines accrual for returns and rebates was £4.4 billion at 31 December 2018 and the Committee reviewed the basis on which the accrual had been made and concurred with managements judgements on the amounts involved. A fuller description of the process operated in the US Pharmaceuticals and Vaccines business in determining the level of accrual necessary is set out in Critical accounting policies on page 63.
| |
Provisions for legal matters, including investigations into the Groups commercial practices |
The Committee received detailed reports on actual and potential litigation from both internal and external legal counsel, together with a number of detailed updates on investigations into the Groups commercial practices. Management outlined the levels of provision and corresponding disclosure considered necessary in respect of potential adverse litigation outcomes and also those areas where it was not yet possible to determine if a provision was necessary, or its amount. At 31 December 2018, the provision for legal matters was £0.2 billion, as set out in Note 29 to the financial statements, Other provisions.
| |
Provisions for uncertain tax positions |
The Committee considered current tax disputes and areas of potential risk and concurred with managements judgement on the levels of tax contingencies required. At 31 December 2018, a tax payable liability of £1.2 billion, including provisions for uncertain tax positions, was recognised on the Groups balance sheet.
| |
Impairments of intangible assets |
The Committee reviewed managements process for reviewing and testing goodwill and other intangible assets for potential impairment. The Committee accepted managements judgements on the intangible assets that required writing down and the resulting impairment charge of £134 million in 2018. See Note 19 to the financial statements, Other intangible assets for more details.
| |
Valuation of contingent consideration in relation to ViiV Healthcare |
The Committee considered managements judgement that following the further improved sales performance of Tivicay and Triumeq it was necessary to increase the liability to pay contingent consideration for the acquisition of the former Shionogi-ViiV Healthcare joint venture. At 31 December 2018, the Groups balance sheet included a contingent consideration liability of £5.9 billion in relation to ViiV Healthcare. See Note 39 to the financial statements, Contingent consideration liabilities for more details.
| |
ViiV Healthcare put option | The Committee reviewed and agreed the accounting for the Pfizer put option and concurred with managements judgement on the valuation of the put option of £1.2 billion at 31 December 2018.
|
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Accountability continued
Auditors appointment
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Strategic report
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Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Auditors appointment continued
The detailed criteria the Committee used for judging the effectiveness of Deloitte as the external auditor and their overriding responsibility to deliver a smooth-running, thorough and efficiently executed audit for 2018 are set out below:
Performance expectations for GSKs external auditors 2018
| ||
Audit approach and strategy | Leverage a centrally controlled audit approach, ensuring that GSKs group, joint ventures and local statutory entities were audited once and once only | |
Refine a consistent technology-led audit with enhanced risk assessment and analytical procedures, providing insights that combine data trend analysis, process cycle pathways, and the identification of audit risks, ensuring a well-informed and efficient audit | ||
Deliver a focused and consistent audit approach globally that reflects local risks and materiality
| ||
High quality independent audit |
Adhere to all independence policies (GSKs, FRCs 2016 Revised Ethical Standard and applicable SEC standards)
| |
Maintain a relentless focus on audit quality and Deloittes internal quality control procedures | ||
Provide timely clarity on assessments of accounting treatments and ensure consistency of advice at all levels | ||
Maintain a forward-thinking approach by raising potential issues or concerns as soon as identified | ||
Provide timely up-to-date knowledge of technical and governance issues, including evolving market practice on the viability statement requirements, ESMA/SEC guidelines and new IFRSs (i.e. IFRS 16) | ||
Serve as an industry resource, communicating best practice trends in reporting and integrated reporting | ||
Provide high quality and succession planning of key staff members of Deloitte and ensure their technical skillsets are continuously enhanced
| ||
Effective partnership |
Deliver a smooth running, thorough and efficiently executed audit by:
| |
Discussing approach and areas of focus in advance and early engagement on understanding the implications of the new operating model | ||
Ensuring SOX scope and additional procedures are discussed and endorsed by corporate management and communicated on a timely basis within GSK and Deloitte | ||
Avoiding surprises through timely reporting of issues at all levels within the Group | ||
Early engagement on and provision of impact assessments of key judgements | ||
Ensuring clarity of roles and responsibilities between local Deloitte and Finance Services | ||
Responding to any issues raised by corporate management on a timely basis | ||
Meeting agreed deadlines | ||
Providing sufficient time for management to consider draft auditor reports and respond to requests and queries | ||
Consistent and timely communication and engagement between local and central audit teams, and across all GSK stakeholder groups | ||
Liaise with Audit & Assurance to avoid duplication of work and Global Ethics and Compliance to ensure a common understanding of audit outcomes, adopting a collaborative approach to solving issues | ||
Ultimately provide a high-quality service to the Board, be scrupulous in their scrutiny of the Group and act with utmost integrity
| ||
Auditor transition | Ensure a seamless, effective, and efficient auditor transition from PwC to Deloitte by maximising the use of relevant information provided by PwC in respect of the 2016 and 2017 audits of the company and its subsidiaries in relation to the audit of the Groups consolidated accounts
| |
Value for money |
Work closely with management to agree on scope changes, overruns and efficiencies and set clear milestones for continuous monitoring
| |
Provide transparency of audit time and cost incurred analysis against budget, identifying areas that will enable reduction in audit hours without compromising audit quality and commensurately reducing audit fees
|
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|
||
|
Accountability continued
Non-audit services
Fair, balanced and understandable assessment
87
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Strategic report
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Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Internal control framework
88
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Accountability continued
Internal control framework continued
89
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Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
90
|
||
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||
|
||
|
||
|
Relations with stakeholders continued
Engagement activities continued
91
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Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
92
|
||
GSK Annual Report 2018
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||
|
||
|
||
|
Corporate Responsibility Committee report
93
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Corporate Responsibility Committee report continued
94
|
||
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|
||
|
||
|
95
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| |||
Governance and remuneration
| ||||
Financial statements
| ||||
Investor information
|
Remuneration
In this section
|
|
|||||||||||||||
|
|
96
|
|
|||||||||||||
|
|
98
|
|
|||||||||||||
2017 Remuneration policy summary | 120 | |||||||||||||||
|
96
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
2018 at a glance
97
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
98
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
2018 Total remuneration (audited)
|
The total remuneration for 2018 for each Executive Director is set out in the table below:
Emma Walmsley, CEO
|
Simon Dingemans,(1)
CFO |
Dr Hal Barron,(2) Chief Scientific Officer and President, R&D
|
Sir Patrick Vallance,(3) (Former President, R&D)
|
|||||||||||||||||||||||||||||||||||||||||||||
2018 £000 |
2017 £000 |
|
2018 £000 |
2017 £000 |
|
2018 $000 |
2017 $000 |
|
Jan-Mar 2018 £000 |
2017 £000 |
||||||||||||||||||||||||||||||||||||||
A. Fixed pay |
||||||||||||||||||||||||||||||||||||||||||||||||
Salary |
See page 99 | 1,028 | 965 | 773 | 754 | 1,700 | | 203 | 780 | |||||||||||||||||||||||||||||||||||||||
Benefits |
See page 99 | 234 | 266 | 141 | 142 | 807 | | 42 | 102 | |||||||||||||||||||||||||||||||||||||||
Pension |
See page 100 |
|
207
|
|
|
195
|
|
|
155
|
|
|
151
|
|
|
1,043
|
|
|
|
|
|
39
|
|
|
156
|
| |||||||||||||||||||||||
Total fixed pay
|
|
1,469
|
|
|
1,426
|
|
|
1,069
|
|
|
1,047
|
|
|
3,550
|
|
|
|
|
|
284
|
|
|
1,038
|
| ||||||||||||||||||||||||
B. Pay for performance |
||||||||||||||||||||||||||||||||||||||||||||||||
2018 Annual bonus(4) |
||||||||||||||||||||||||||||||||||||||||||||||||
See pages 101 and 102 |
1,912 | 1,540 | 1,368 | 1,090 | 3,009 | | | 1,127 | ||||||||||||||||||||||||||||||||||||||||
Vesting of LTI awards: |
||||||||||||||||||||||||||||||||||||||||||||||||
DABP matching awards(5) |
||||||||||||||||||||||||||||||||||||||||||||||||
See page 103 | 301 | 112 | 398 | 156 | | | | 182 | ||||||||||||||||||||||||||||||||||||||||
PSP(5)
|
See page 103
|
|
2,205
|
|
|
1,805
|
|
|
2,367
|
|
|
2,012
|
|
|
|
|
|
|
|
|
|
|
|
2,041
|
| |||||||||||||||||||||||
Total pay for performance
|
|
4,418
|
|
|
3,457
|
|
|
4,133
|
|
|
3,258
|
|
|
3,009
|
|
|
|
|
|
|
|
|
3,350
|
| ||||||||||||||||||||||||
A+B = Total remuneration
|
|
5,887
|
|
|
4,883
|
|
|
5,202
|
|
|
4,305
|
|
|
6,559
|
|
|
|
|
|
284
|
|
|
4,388
|
|
Notes:
(1) | Simon Dingemans vested PSP shares will be subject to a two-year holding period. Ms Walmsleys PSP shares are not subject to the same holding requirement as her grant was awarded before she was appointed an Executive Director. |
(2) | Dr Hal Barron was appointed to the Board with effect from 1 January 2018. |
(3) | Sir Patrick Vallance resigned from the company and the Board on 31 March 2018. Salary reflects the basic salary earned for the time worked from 1 January to 31 March 2018 plus payment in lieu of accrued holiday not taken, in accordance with GSKs standard UK holiday pay policy. |
(4) | Details of the mandatory bonus deferrals under the Deferred Annual Bonus Plan (DABP) are set out on page 114. Matching awards are no longer granted under the DABP. |
(5) | Further details in respect of the vesting of DABP matching awards and Performance Share Plan (PSP) awards for the three-year period to 31 December 2018 are provided on page 103. |
(6) | The Committee may in specific circumstances, and in line with stated principles, apply clawback/malus, as it determines appropriate. Following due consideration by the Committee, there has been no recovery of sums paid (clawback) or reduction of outstanding awards or vesting levels (malus) applied during 2018 in respect of any of the Executive Directors. |
Past Directors: Payments to past directors are set out on page 109. The PSP and DABP awards for Sir Andrew Witty and Dr Moncef Slaoui granted in 2015 and 2016 have now vested. The 2015 awards vested following the one-year anniversaries of their respective leaving dates in accordance with the terms of the Executive Recoupment Policy. The 2016 awards vested in accordance with the standard vesting policy. The 2015 and 2016 PSP awards are subject to an additional two-year holding period until February 2020 and February 2021 respectively. As disclosed on page 136 of the 2016 Annual Report they both left GSK by mutual agreement, neither received any termination payments and any outstanding incentive awards were treated in accordance with the 2014 Remuneration policy, approved by shareholders, under which they were granted.
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Strategic report
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Governance and remuneration
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Financial statements
| ||
Investor information
|
2018 Total remuneration (audited) continued
|
The following sections provide details of each element of Total remuneration, including how the Committee implemented the approved Remuneration policy in 2018.
Comparator groups for pay and TSR
The Committee used two pay comparator groups for all roles when considering executive pay for 2018. The primary group used for each Executive Director was as follows:
UK cross-industry comparator group
|
Global pharmaceutical comparator group
| |||||||||
Emma Walmsley Simon Dingemans |
AstraZeneca BHP Group BP British American Tobacco Diageo |
Reckitt Benckiser Rio Tinto Royal Dutch Shell Unilever Vodafone |
Dr Hal Barron |
France Sanofi
Switzerland Novartis Roche Holdings
UK AstraZeneca |
US AbbVie(1) Amgen(1) Bristol-Myers Squibb Eli Lilly Johnson & Johnson Merck & Co Pfizer
|
(1) | AbbVie and Amgen are included for remuneration benchmarking, but are not included in the TSR comparator group. |
When reviewing the CEOs remuneration, the Committee also references pay for a group of leading European companies whose selection is based on their size and complexity.
Fixed pay (audited)
|
100
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GSK Annual Report 2018
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||
|
||
|
Annual report on remuneration continued
Fixed pay (audited) continued
Pensions
Executive Director | Member since | Pension arrangements in 2018 | ||
Emma Walmsley |
2010 |
20% of base salary and matching contributions on the first £33,333 of salary;(1) 20% of base salary in lieu of pension on salary in excess of £33,333(2).
| ||
Simon Dingemans |
|
20% of base salary in lieu of pension(3)
| ||
Dr Hal Barron |
2018 |
Member of the US Cash Balance and the Supplemental Cash Balance pension plans, under which GSK makes annual contributions of 38% of base salary, in line with other US senior executives and members of GSKs Corporate Executive Team.
| ||
Dr Barron is also a member of the 401(k) plan open to all US employees and the Executive Supplemental Savings Plan (ESSP), a savings scheme open to US executives to accrue benefits above the 401(k) plan limits.
| ||||
Having completed one years service, from 1 January 2019, Dr Barron receives a combined contribution rate under the 401(k) and ESSP plans of 6% (2% core contributions plus a match of up to 4%) of total base salary and bonus, less the bonus deferred under the DABP.
| ||||
Sir Patrick Vallance |
|
20% of base salary in lieu of pension(3) |
(1) | As a member of the defined contribution plan, Emma Walmsley is eligible to receive a matching award of up to 5% on the first £33,333 of her salary in accordance with the terms of the plan. |
(2) | Emma Walmsley receives a cash payment in lieu of pension of 20% of base salary in excess of £33,333 in line with GSKs defined contribution pension plan rates. |
(3) | Simon Dingemans and Sir Patrick Vallance received cash payments in lieu of pension of 20% of base salary in line with GSKs defined contribution pension plan rates. |
The following table shows the breakdown of the pension values set out on page 98.
Emma Walmsley
|
Simon Dingemans
|
Dr Hal Barron
|
Sir Patrick Vallance
|
|||||||||||||||||||||||||||||||||||||||||
Pension remuneration values(1)
|
2018 £000 |
2017 £000 |
2018 £000 |
2017 £000 |
2018 $000 |
2017 $000 |
Jan-Mar £000 |
2017 £000 |
||||||||||||||||||||||||||||||||||||
UK defined contribution |
8 | 9 | | | | | | | ||||||||||||||||||||||||||||||||||||
US defined benefit |
| | | | 1,043 | | | | ||||||||||||||||||||||||||||||||||||
Employer cash contributions |
199 | 186 | 155 | 151 | | | 39 | 156 | ||||||||||||||||||||||||||||||||||||
Total pension remuneration value |
207 | 195 | 155 | 151 | 1,043 | | 39 | 156 |
(1) | The pension remuneration figures have been calculated in accordance with the methodology set out in The Large and Medium-sized Companies and Group (Accounts and Reports) (Amendment) Regulations 2013 (Remuneration Regulations). |
Further details regarding the 2018 pension values for Dr Hal Barron, are set out in the table below.
Accrued pension
|
||||||||||||||
Dr Hal Barron pension values(1)
|
31 December 2018 $000 |
31 December
2017 |
Pension remuneration value for 2018 $000
|
|||||||||||
US Unfunded |
52 | | 1,043 | |||||||||||
Total |
52 | | 1,043 |
(1) | Dr Hal Barron joined GSK on 1 January 2018. The pensions figures are disclosed for Dr Barron, who is a member of the US style defined benefit plans. In accordance with paragraph 10.e.ii of Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, as amended, the table shows the accrued benefit (ie the annual pension accrued to date). The pension remuneration in 2018 is calculated as the increase in the accrued benefit, adjusted for inflation and multiplied by 20 to reflect the fact that the benefit will be received for a number of years. |
101
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Governance and remuneration
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Financial statements
| ||
Investor information
|
Pay for performance (audited)
|
Annual bonus
2018 performance against targets
For 2018, the financial measures and weightings were as follows:
Weighting
|
2018 Adjusted Group PBIT performance
| |||||||||||||
Performance measure
|
Executive Directors
|
2018 target(1)
|
Outcome
|
Positioning
| ||||||||||
Adjusted Group PBIT |
70% | £8,423m | £8,754m | 104% | ||||||||||
Individual objectives |
30% |
(1) | Threshold and maximum performance targets were set at 95% and 105% of Target respectively. The target for 2018 was increased by £215 million to reduce the level of over performance attributable to the original timing assumption for the loss of Advair exclusivity. |
(2) | The Adjusted Group PBIT target and outcome for the purposes of the Annual bonus calculation differ from Adjusted Group PBIT disclosed elsewhere in this Annual Report, primarily because both the target and outcome numbers are calculated applying GSK budget exchange rates and not actual exchange rates. |
The following table shows actual bonuses earned compared to bonus opportunity for 2018:
2018 bonus opportunity
|
2018 bonus outcome
| |||||||||||||||||||||
Bonus
|
Target
|
Maximum
|
2018 Base salary
|
Financial
|
Individual
|
Total 2018 (% of salary)
|
Total 2018
| |||||||||||||||
Emma Walmsley |
£1,028,100 | 126 | 60 | 186 | £1,912 | |||||||||||||||||
Simon Dingemans |
100 | 200 | £772,800 | 126 | 51 | 177 | £1,368 | |||||||||||||||
Dr Hal Barron |
$1,700,000 | 126 | 51 | 177 | $3,009 |
The table below provides more detail on delivery against Adjusted Group PBIT:
Financial performance
|
| Group turnover was £30.8 billion, a 2% increase AER and 5% CER. |
| Adjusted operating profit was £8,745 million, 2% higher on an AER basis and 6% higher CER. |
| The Adjusted operating margin of 28.4% was flat on an AER basis compared with 2017 and 0.5 % higher CER. This reflected the benefit from sales growth across all three businesses on a CER basis and a more favourable mix, primarily in Vaccines and Consumer Healthcare. The margin also benefited from the prioritisation of R&D expenditure and the comparison with the impact of the Priority Review Voucher utilised and expensed in 2017, as well as continued tight control of ongoing costs across all three business. This was partly offset by continued pricing pressure, particularly in respiratory, increased input costs, the comparison with the benefit in 2017 of a settlement for lost third party supply volume in Vaccines, investments in promotional product support, particularly for new product launches, and a reduction in royalty income. |
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Pay for performance (audited) continued |
The following table summarises performance against the scorecard of individual objectives agreed by the Committee for each Executive Director:
Individual objectives
Emma Walmsley
|
Dr Hal Barron
|
Simon Dingemans
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Value earned from long-term incentives (LTIs)
The following tables set out the performance achieved by management against the targets set for the companys LTI plans and also includes an update on performance of outstanding awards.
In line with the Committees agreed principles, for each measure applicable to the LTI awards, actual performance against the targets is reviewed and adjustments made as appropriate to ensure that the vesting outcome reflects genuine underlying business performance. Further details on any adjustments made will be provided at the time of vesting.
2016 awards with a performance period ended 31 December 2018
The Committee reviewed the performance of the PSP awards and the DABP matching awards granted to Executive Directors against the targets set. The Committee decided to increase the Adjusted Free Cash Flow (AFCF) target and associated vesting scale for the 2016 PSP and DABP matching awards to reduce the level of outperformance attributable to the original timing assumption for the loss of Advair exclusivity. There are no changes to the targets set for the R&D New Product performance measure or the Relative TSR performance measure for the 2016 PSP awards and DABP matching awards.
The performance achieved in the three years to 31 December 2018 and the vesting levels are set out in the table below.
Outcome and vesting level
|
||||||||||||||||||||||||||||||
Performance measures and relative weighting
|
Performance targets
|
Outcome
|
% of
|
% of award
|
||||||||||||||||||||||||||
R&D new product performance (1/3rd) |
R&D new product sales performance measures aggregate three-year sales for new products launched in the three-year performance period and the preceding two years, i.e. 2014-18. |
£10.44bn | 100 | 33.33 | ||||||||||||||||||||||||||
Target | % vesting | |||||||||||||||||||||||||||||
Maximum |
£8.53bn | 100% | ||||||||||||||||||||||||||||
£7.76bn | 75% | |||||||||||||||||||||||||||||
£7.37bn | 50% | |||||||||||||||||||||||||||||
Threshold |
£6.98bn | 25% | ||||||||||||||||||||||||||||
Adjusted free cash flow performance (1/3rd) |
In line with the companys agreed principles, the AFCF figures included adjustments for a number of material distorting items, including legal settlements, exchange rate movements and special pension contributions. |
£13.18bn | 77 | 25.67 | ||||||||||||||||||||||||||
Original Target |
Revised Target |
% vesting | ||||||||||||||||||||||||||||
Maximum |
£13.46bn | £13.72bn | 100% | |||||||||||||||||||||||||||
£12.87bn | £13.12bn | 75% | ||||||||||||||||||||||||||||
£11.70bn | £11.93bn | 50% | ||||||||||||||||||||||||||||
Threshold |
£11.35bn | £11.57bn | 25% | |||||||||||||||||||||||||||
Relative
TSR performance (1/3rd) |
TSR ranking within comparator group(1) | % vesting | Ranked 6th | 0 | 0 | |||||||||||||||||||||||||
Maximum |
1st, 2nd, 3rd | 100% | ||||||||||||||||||||||||||||
4th | 72% | |||||||||||||||||||||||||||||
5th | 44% | |||||||||||||||||||||||||||||
Threshold(2) |
Median | 30% | ||||||||||||||||||||||||||||
6th to 10th | 0% | |||||||||||||||||||||||||||||
(1) TSR comparator group: AstraZeneca, Bristol-Myers Squibb, Eli Lilly, GSK, Johnson & Johnson, Merck & Co, Novartis, Pfizer, Roche Holdings and Sanofi.
|
||||||||||||||||||||||||||||||
(2) The vesting schedule is based on delivering 30% vesting for median performance. In a comparator group of ten companies, median falls between two companies.
|
||||||||||||||||||||||||||||||
Total vesting in respect of 2016 awards
|
|
59%
|
|
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Pay for performance (audited) continued
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Update on performance of ongoing LTI awards
The Committee also reviewed the performance of the PSP awards granted to Executive Directors in 2017 and 2018, and of the DABP matching awards granted to Executive Directors in 2017. The following charts provide an estimate of the vesting levels taking into account performance to 31 December 2018. Actual vesting levels will only be determined based on performance over the full three-year performance periods. The indications below should therefore not be regarded as predictions of the final vesting levels.
In addition to the adjustments made to the target and associated vesting scale for the 2016 PSP awards and the DABP matching awards, adjustments have been made to the AFCF targets and associated vesting scales for the 2017 and 2018 awards, as follows:
| The target for the 2017 PSP awards and the DABP matching awards have been decreased in aggregate by £557m to £11.26bn. This is to reflect: |
(i) | a reduction to the target due to the forecast impact of the Tesaro acquisition and the major restructuring programme announced with the Q2 2018 results; and |
(ii) | an increase to the target to reduce the level of Advair outperformance attributable to the delayed loss of exclusivity. The overall net impact is a reduction to the target. |
| The target for the 2018 PSP award has been similarly adjusted for the same factors applicable to the 2017 PSP. The net overall impact is a decrease to the target of £1.29bn to £10.79bn. The reduction is primarily driven by the impact of the restructuring programme and the Tesaro acquisition. The adjustment for the delayed loss of exclusivity results in an increase to target. |
There are no changes to the targets set for the R&D New Product performance measure or the TSR performance measure for the 2017 and 2018 awards.
For threshold performance, 25% of each award will vest in respect of R&D new product and AFCF measures and 30% for the TSR element. The TSR comparator group remains unchanged from that shown on page 103 in respect of the 2016 awards.
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2018 LTI awards
The levels of participation in the DABP in respect of 2017 bonus deferrals are shown in the table below. The table also shows the PSP award details for 2018.
DABP awards | PSP awards | |||||||||||||||||||||||||
2017 % of total bonus deferred |
2018 Number of shares |
2018 of award(1) |
2018 Award level as % of base salary |
2018 Number of shares |
2018 Face value of award(2) |
|||||||||||||||||||||
Emma Walmsley |
50% | 58,889 shares | £0.770m | 550% | 437,997 shares | £5.7m | ||||||||||||||||||||
Simon Dingemans |
50% | 41,674 shares | £0.545m | 400% | 239,442 shares | £3.1m | ||||||||||||||||||||
Dr Hal Barron(4) |
n/a | | | 500% | 233,132 ADS | $8.5m | ||||||||||||||||||||
Sir Patrick Vallance (5) |
50% | 43,111 shares | £0.563m | | | |
(1) | The face values of the DABP awards have been calculated based on a share price of £13.07, being the closing price on 28 February 2018. These are nil-cost options. No performance conditions are attached to the DABP awards, as they reflect the mandatory deferrals in respect of the 2017 annual bonus earned. |
(2) | The face values of the PSP awards have been calculated based on a share price of £12.91, and an ADS price of $36.46, being the closing prices on 13 February 2018. These are conditional shares, based on three equally weighted measures; (i) R&D New Product Performance; (ii) Adjusted free cash flow; and (iii) Relative TSR. The first two performance measures vest at 25% at threshold, and the third performance measure at 30% at threshold. |
(3) | The performance period for the PSP 2018 awards is from 1 January 2018 to 31 December 2020. |
(4) | Dr Hal Barron was appointed to the Board on 1 January 2018. |
(5) | Sir Patrick Vallances DABP award will vest as normal three years after the date it was granted. |
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CEO pay comparison
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Additional remuneration disclosures
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Implementation of Remuneration policy for 2019
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Implementation of Remuneration policy for 2019 continued
Payments to past Directors (audited)
As set out in our 2016 Annual Report, Sir Andrew Witty and Dr Moncef Slaoui left the Board on 31 March 2017 by mutual agreement.
In accordance with the Remuneration policy, approved by shareholders in 2014, their 2015 PSP awards and 2015 DABP awards vested following the one-year anniversary of their termination dates in 2018 under the terms of the Executive Financial Recoupment Policy.
Dr Moncef Slaoui | Sir Andrew Witty | |||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
Number of ADS awarded |
% vested in July 2018 |
ADS price $ |
Equating to $ |
Number of shares awarded |
% vested in April 2018 |
Share price £ |
Equating to £ |
|||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||
2015 PSP |
108,725 | 69 | 40.85 | 4,441,444 | 2015 PSP | 357,352 | 69 | 14.21 | 5,077,972 | |||||||||||||||||||||||||
2015 DABP |
9,937 | 69 | 40.85 | 405,929 | 2015 DABP | 25,122 | 69 | 14.21 | 356,984 | |||||||||||||||||||||||||
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Remuneration governance
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What the Committee did during 2018
Areas of Committee focus | Items discussed | |
Remuneration policy The Committee sets the broad structure for the Remuneration policy and determines the remuneration of the Executive Directors, the Chairman and other corporate officers for Board approval.
|
Remuneration impact of 2018 major Group restructuring
Engagement with shareholders
Employee consultation on setting policy and pay | |
Salary review The Committee periodically reviews and considers the remuneration environment of Executive Directors and CET, approving annual adjustments as necessary. |
Remuneration environment (including wider employee trends)
Executive Director and CET benchmarking, competitiveness and GSK comparator groups
Executive Director and CET salary recommendations and increases for 2019
Setting remuneration for Iain Mackay
| |
Annual bonus The Committee is responsible for setting specific performance measures for the Annual bonus.
|
CEO, Executive Director and CET 2017 bonus recommendations and 2018 bonus objectives | |
LTI plans The Committee is responsible for approving LTI plan rule changes, grants, assessments of performance, and the vesting of LTI awards for the Executive Directors, CET and below.
|
LTI performance outcomes and vesting of LTI awards for CET and below
LTI grants for CET and below | |
Governance and other areas of focus The Committee adheres to a robust remuneration governance framework, ensuring alignment between internal actions and external reporting/compliance requirements. |
Committee evaluation process
2017 Remuneration report
Remuneration considerations and committee programme for 2018
AGM and Remuneration report feedback, the external remuneration environment and performance target disclosure for incentive plans
Chairmans fees
2018 Remuneration report disclosures, including CEO pay ratio
Remuneration Committee external adviser tender process
Gender pay gap reporting
Recruitment policy briefing
|
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2018 Non-Executive Directors fees
The audited table below sets out the value of fees and benefits received by the Non-Executive Directors in the form of cash and shares or ADS. Further details of the Non-Executive Directors share allocation plan are set out on page 113. Non-Executive Directors fees that are paid in a currency other than Sterling are converted using an average exchange rate that is reviewed from time to time. Benefits comprise the grossed up cash value of travel and subsistence costs incurred in the normal course of business, in relation to attendance at Board and Committee meetings. For overseas-based Directors, this includes travel to meetings in the UK.
2018 | 2017 | |||||||||||||||||||||||||||||||
Non-Executive
Directors emoluments (000) (audited)
|
Fixed fees | Fixed fees | ||||||||||||||||||||||||||||||
Cash
|
Shares/ADS
|
Benefits
|
Total pay
|
Cash
|
Shares/ADS
|
Benefits
|
Total pay
|
|||||||||||||||||||||||||
Vindi Banga |
£65 | £50 | £3 | £118 | | £123 | £8 | £131 | ||||||||||||||||||||||||
Dr Vivienne Cox |
£64 | £21 | £11 | £96 | £69 | £23 | £14 | £106 | ||||||||||||||||||||||||
Lynn Elsenhans (1) |
$56 | $175 | $90 | $321 | £15 | £137 | £70 | £222 | ||||||||||||||||||||||||
Dr Laurie Glimcher |
| $231 | $73 | $304 | | $69 | $32 | $101 | ||||||||||||||||||||||||
Dr Jesse Goodman |
$208 | $69 | $115 | $392 | $216 | $72 | $140 | $428 | ||||||||||||||||||||||||
Philip Hampton |
£525 | £175 | £19 | £719 | £525 | £175 | £20 | £720 | ||||||||||||||||||||||||
Judy Lewent |
$230 | $77 | $130 | $437 | $239 | $80 | $157 | $476 | ||||||||||||||||||||||||
Urs Rohner |
£86 | £29 | £23 | £138 | £92 | £31 | £16 | £139 | ||||||||||||||||||||||||
Former directors: |
||||||||||||||||||||||||||||||||
Professor Sir Roy Anderson (2) |
£39 | £7 | £18 | £64 | £92 | £31 | £9 | £132 | ||||||||||||||||||||||||
Sir Deryck Maughan (3) |
| | £5 | £5 | ||||||||||||||||||||||||||||
Dr Daniel Podolsky (3) |
| | £7 | £7 | ||||||||||||||||||||||||||||
Hans Wijers (4) |
| | £8 | £8 | | | £6 | £6 |
(1) | Lynn Elsenhans elected to receive her Non-Executive Director fees in USD in 2018. |
(2) | Professor Sir Roy Anderson retired from the Board on 3 May 2018. |
(3) | Dr Daniel Podolsky and Sir Deryck Maughan retired from the Board on 5 May 2016. |
(4) | Hans Wijers retired from the Board on 7 May 2015. |
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Directors interests in shares (audited)
The interests of the Directors of the company in office during 2018 and their persons closely associated (PCA) are shown in the tables below.
Total share plan interests as at 31 December 2018 or date of retirement | ||||||||||||||||||||||||||||||||||||||||||||
Total directors interests as at |
Shares/ADS |
Options | ||||||||||||||||||||||||||||||||||||||||||
31 December | (a)Unvested | (a)Unvested | ||||||||||||||||||||||||||||||||||||||||||
2018 | and not | Unvested and | and not | Unvested and | ||||||||||||||||||||||||||||||||||||||||
1 March | or date of | 1 January | subject to | subject to | subject to | subject to | Vested but | Exercised in | ||||||||||||||||||||||||||||||||||||
2019 | leaving | 2018 | performance | performance | performance | performance | not exercised | the year | ||||||||||||||||||||||||||||||||||||
Executive Directors |
||||||||||||||||||||||||||||||||||||||||||||
Shares |
||||||||||||||||||||||||||||||||||||||||||||
Emma Walmsley(a,b,c,d,e,f) |
416,292 | 281,726 | 147,665 | | 1,073,823 | 129,348 | 67,255 | 137,040 | 21,096 | |||||||||||||||||||||||||||||||||||
Simon Dingemans(a,b,c,d,e,f) |
734,039 | 540,663 | 329,298 | 161,231 | 711,292 | 118,238 | 74,368 | 266 | 29,465 | |||||||||||||||||||||||||||||||||||
Sir Patrick Vallance(a,b,c,d,f) |
404,201 | 303,733 | | 539,829 | 98,955 | 55,844 | | 34,344 | ||||||||||||||||||||||||||||||||||||
ADS |
||||||||||||||||||||||||||||||||||||||||||||
Dr Hal Barron(a,c,e) |
38,764 | 1,644 | 1,644 | | 242,727 | | | | | |||||||||||||||||||||||||||||||||||
Share allocation plan for Non-Executive Directors |
||||||||||||||||||||||||||||||||||||||||||||
Total directors interests as at |
Number of shares or ADS |
|||||||||||||||||||||||||||||||||||||||||||
31 December | 1 January | Dividends | Dividends | |||||||||||||||||||||||||||||||||||||||||
2018 | 2018 | reinvested | reinvested | |||||||||||||||||||||||||||||||||||||||||
1 March | or date of | or date of | after year | 31 December | during the | Allocated | 31 December | |||||||||||||||||||||||||||||||||||||
2019 | leaving | appointment | end | 2018 | Paid out | year | & elected | 2017 | ||||||||||||||||||||||||||||||||||||
Non-Executive Directors Shares(g) | ||||||||||||||||||||||||||||||||||||||||||||
Professor Sir Roy Anderson(h) |
| 32,152 | 29,306 | | | 32,152 | 1,785 | 1,061 | 29,306 | |||||||||||||||||||||||||||||||||||
Vindi Banga |
58,326 | 56,753 | 50,802 | 1,091 | 21,553 | | 779 | 5,172 | 15,602 | |||||||||||||||||||||||||||||||||||
Dr Vivienne Cox |
3,857 | 3,352 | 1,804 | 150 | 3,352 | | 75 | 1,473 | 1,804 | |||||||||||||||||||||||||||||||||||
Philip Hampton |
56,208 | 51,157 | 37,398 | 2,125 | 44,239 | | 1,631 | 12,128 | 30,480 | |||||||||||||||||||||||||||||||||||
Urs Rohner |
8,748 | 7,785 | 5,591 | 382 | 7,885 | | 301 | 1,993 | 5,591 | |||||||||||||||||||||||||||||||||||
ADS(g) |
||||||||||||||||||||||||||||||||||||||||||||
Lynn Elsenhans |
33,134 | 30,587 | 24,398 | 1,497 | 29,587 | | 1,225 | 4,964 | 23,398 | |||||||||||||||||||||||||||||||||||
Dr Laurie Glimcher |
7,562 | 5,961 | 350 | 202 | 5,961 | | 5 | 5,606 | 350 | |||||||||||||||||||||||||||||||||||
Dr Jesse Goodman |
5,167 | 4,538 | 2,610 | 206 | 4,538 | | 89 | 1,839 | 2,610 | |||||||||||||||||||||||||||||||||||
Judy Lewent |
25,459 | 24,271 | 21,630 | 718 | 14,105 | | 609 | 2,033 | 11,463 |
a) | Unvested options not subject to performance of 129,348 for Emma Walmsley represent bonus deferrals of 128,604 and Share Save options of 744. |
Unvested shares not subject to performance of 161,231 for Simon Dingemans represent 100% of the shares awarded at the end of the three-year performance period for the 2015 PSP grant, together with subsequent re-invested dividends. These shares are subject to a further two-year holding period. Unvested options not subject to performance of 118,238 for Mr Dingemans represent bonus deferrals of 117,782 and Share Save options of 456. |
Unvested options not subject to performance of 98,955 for Sir Patrick Vallance represent bonus deferrals. |
b) | Total Directors interests includes shares purchased through the GlaxoSmithKline Share Reward Plan. During 2018, Emma Walmsley and Simon Dingemans were each awarded 103 shares under the plan. The total number of shares held within the plan are as follows: |
Share Reward Plan (Shares) | 1 March 2019 | 31 December 2018 | 1 January 2018 | |||||||||
Emma Walmsley |
1,546 | 1,496 | 1,219 | |||||||||
Simon Dingemans |
1,999 | 1,943 | 1,642 | |||||||||
Sir Patrick Vallance |
| | 3,263 |
Dr Hal Barron is a US employee and is not eligible to participate in the Share Reward Plan, as this is only open to UK employees. |
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Directors interests in shares (audited) continued
c) | Total directors interests includes options over shares or ADS resulting from the deferral of bonus (and the subsequent re-investment of dividends) under the DABP. The totals shown in the table below include bonus deferrals, but exclude any unvested matching awards which are subject to ongoing performance criteria. The amounts represent the gross share and ADS balances prior to the sale of any shares or ADS to satisfy tax liabilities. |
Deferred Annual Bonus Plan (Bonus deferrals) | 1 March 2019 | 31 December 2018 or date of retirement |
1 January 2018 | |||||||||||||
Emma Walmsley |
Shares | 159,409 | 128,604 | 75,959 | ||||||||||||
Simon Dingemans |
Shares | 120,406 | 117,782 | 87,575 | ||||||||||||
Dr Hal Barron |
ADS | 37,120 | | | ||||||||||||
Sir Patrick Vallance |
Shares | | 98,955 | 75,092 |
d) | Total directors interests at 1 March 2019 includes any shares or ADS which vested due to performance being met under elements of the DABP and PSP (2016-2018 awards), less those sold to satisfy tax liabilities on the vested amounts (see pages 115 to 118 for further details). |
e) | Share Save Plan |
For Emma Walmsley and Simon Dingemans the unvested options not subject to performance include holdings of 744 and 456 respectively in the Share Save Plan, in which Ms Walmsley and Mr Dingemans participate on the same terms as all other employees. Ms Walmsley was granted 744 options under the plan on 29 November 2018. |
f) | The following table sets out details of options (all nil-cost options under the DABP) exercised during 2018 by Executive Directors. |
Type of award | Date of grant | Number of shares under option |
Date of exercise |
Grant price | Market price at exercise |
Gain on exercise (000) |
||||||||||||||||||
Emma Walmsley |
||||||||||||||||||||||||
DABP deferral |
11.02.15 | 12,482 | 16.02.18 | | £13.16 | £164 | ||||||||||||||||||
DABP matching |
11.02.15 | 8,614 | 16.02.18 | | £13.16 | £113 | ||||||||||||||||||
21,096 | £277 | |||||||||||||||||||||||
Simon Dingemans |
||||||||||||||||||||||||
DABP deferral |
11.02.15 | 17,435 | 16.02.18 | | £13.12 | £229 | ||||||||||||||||||
DABP matching |
11.02.15 | 12,030 | 16.02.18 | | £13.12 | £158 | ||||||||||||||||||
29,465 | £387 | |||||||||||||||||||||||
Sir Patrick Vallance |
||||||||||||||||||||||||
DABP deferral |
11.02.15 | 20,322 | 19.02.18 | | £13.18 | £268 | ||||||||||||||||||
DABP matching |
11.02.15 | 14,022 | 19.02.18 | | £13.18 | £185 | ||||||||||||||||||
34,344 | £453 |
In respect of nil-cost options under the DABP, the bonus which is deferred by the Director is recorded as remuneration (under Annual bonus) for the year to which it relates. The gain recorded on exercise of the nil-cost option comprises this remuneration, the total of the amounts received in re-invested dividends prior to vesting and the gains or losses resulting from movements in the share price between the dates of grant and exercise for the initial bonus amount deferred and the dates of dividend reinvestment and exercise for the re-invested dividends.
For the matching element of the DABP, the remuneration of the Executive Director is recorded in the year that the performance period ends and represents the number of vested shares multiplied by the price at vesting. The gain recorded on exercise of the nil-cost option comprises the total of this remuneration and the gain or loss resulting from the movement in the share price between vesting and exercise.
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Directors interests in shares (audited) continued
For Emma Walmsley:
| The gain of £164,263 recorded following the exercise of the 12,482 nil-cost options relating to the deferral of bonus earned in respect of 2014 comprises remuneration of £159,715 recorded in 2014 as Annual bonus and a net gain of £4,548 relating to the re-investment of dividends prior to vesting and movements in the share price between grant and dividend re-investment dates and the exercise date. |
| The gain of £113,360 recorded following the exercise of the 8,614 nil-cost options relating to the DABP matching award comprises remuneration of £111,982 recorded in 2017 in relation to the DABP (see table below) and an investment gain of £1,378 relating to the movement in the share price between the vesting and exercise dates. |
For Simon Dingemans:
| The gain of £228,747 recorded following the exercise of the 17,435 nil-cost options relating to the deferral of bonus earned in respect of 2014 comprises remuneration of £223,065 recorded in 2014 as Annual bonus and a net gain of £5,682 relating to the re-investment of dividends prior to vesting and movements in the share price between grant and dividend re-investment dates and the exercise date. |
| The gain of £157,833 recorded following the exercise of the 12,030 nil-cost options relating to the DABP matching award comprises remuneration of £156,390 recorded in 2017 in relation to the DABP (see page 116) and an investment gain of £1,444 relating to the movement in the share price between the vesting and exercise dates. |
For Sir Patrick Vallance:
| The gain of £267,844 recorded following the exercise of the 20,322 nil-cost options relating to the deferral of bonus earned in respect of 2014 comprises remuneration of £260,015 recorded in 2014 as Annual bonus and a net gain of £7,829 relating to the re-investment of dividends prior to vesting and movements in the share price between grant and dividend re-investment dates and the exercise date. |
| The gain of £184,810 recorded following the exercise of the 14,022 nil-cost options relating to the DABP matching award comprises remuneration of £182,286 recorded in 2017 in relation to the DABP (see page 116) and an investment gain of £2,524 relating to the movement in the share price between the vesting and exercise dates. |
g) | For Non-Executive Directors, total interests include shares or ADS received as part or all of their fees under the Non-Executive Directors Share Allocation Plan. Note that dividends received on shares or ADS under the plan during 2018 and January 2019 were converted into shares or ADS as at 6 February 2019. |
h) | Professor Sir Roy Anderson retired from the Board on 3 May 2018. |
Deferred Annual Bonus Plan matching awards
The following tables provide details for each Executive Director in office during 2018 in respect of DABP matching awards. Market price at grant and at vesting represent the closing share prices from the business day prior to those dates.
Performance period | ||||||||||||
Emma Walmsley Shares
|
2015-2017 | 2016-2018 | 2017-2019 | |||||||||
Market price at grant |
£15.20 | £13.59 | £15.77 | |||||||||
Unvested at 31 December 2017 |
12,306 | 30,474 | 33,179 | |||||||||
Dividends reinvested |
176 | 1,724 | 1,878 | |||||||||
Vested |
(8,614 | ) | | | ||||||||
Lapsed |
(3,868 | ) | | | ||||||||
Unvested at 31 December 2018 |
| 32,198 | 35,057 | |||||||||
Dividends reinvested |
398 | 432 | ||||||||||
Vested |
(19,234 | ) | | |||||||||
Lapsed |
(13,362 | ) | | |||||||||
Unvested at 1 March 2019 |
| 35,489 | ||||||||||
Vested shares |
||||||||||||
Number of shares |
8,614 | 19,234 | ||||||||||
Market price at vesting |
£13.00 | £15.66 | ||||||||||
Gain: |
(000) | (000) | ||||||||||
Remuneration for 2017 |
£112 | | ||||||||||
Remuneration for 2018 |
| £301 |
116
|
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GSK Annual Report 2018
|
||
|
||
|
||
|
Annual report on remuneration continued
Directors interests in shares (audited) continued
Deferred Annual Bonus Plan matching awards continued
Performance period | ||||||||||||
Simon Dingemans Shares
|
2015-2017 | 2016-2018 | 2017-2019 | |||||||||
Market price at grant |
£15.20 | £13.59 | £15.77 | |||||||||
Unvested at 31 December 2017 |
17,188 | 40,244 | 30,143 | |||||||||
Dividends reinvested |
245 | 2,276 | 1,705 | |||||||||
Vested |
(12,030 | ) | | | ||||||||
Lapsed |
(5,403 | ) | | | ||||||||
Unvested at 31 December 2018 |
| 42,520 | 31,848 | |||||||||
Dividends reinvested |
524 | 392 | ||||||||||
Vested |
(25,398 | ) | | |||||||||
Lapsed |
(17,646 | ) | | |||||||||
Unvested at 1 March 2019 |
| 32,240 | ||||||||||
Vested shares |
||||||||||||
Number of shares |
12,030 | 25,398 | ||||||||||
Market price at vesting |
£13.00 | £15.66 | ||||||||||
Gain: |
(000) | (000) | ||||||||||
Remuneration for 2017 |
£156 | | ||||||||||
Remuneration for 2018 |
| £398 | ||||||||||
Performance period | ||||||||||||
Sir Patrick Vallance Shares
|
2015-2017 | 2016-2018 | 2017-2019 | |||||||||
Market price at grant |
£15.20 | £13.59 | £15.77 | |||||||||
Unvested at 31 December 2017 |
20,035 | 32,590 | 22,468 | |||||||||
Dividends reinvested |
286 | 997 | 687 | |||||||||
Vested |
(14,022 | ) | | | ||||||||
Lapsed |
(6,299 | ) | (33,587 | ) | (23,155 | ) | ||||||
Unvested at 31 December 2018 |
| | | |||||||||
Dividends reinvested |
||||||||||||
Vested |
||||||||||||
Lapsed |
||||||||||||
Unvested at 1 March 2019 |
| | | |||||||||
Vested shares |
||||||||||||
Number of shares |
14,022 | | ||||||||||
Market price at vesting |
£13.00 | | ||||||||||
Gain: |
(000) | (000) | ||||||||||
Remuneration for 2017 |
£182 | | ||||||||||
Remuneration for 2018 |
| |
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| ||
Financial statements
| ||
Investor information
|
Directors interests in shares (audited) continued
Performance Share Plan awards
The following tables provide details for each Executive Director in office during 2018 in respect of PSP awards.
Market price at grant and at vesting represent the closing share prices on those dates.
Performance period
|
||||||||||||||||||||||||
Emma Walmsley Shares
|
2015-2017
|
2015-2017
|
2016-2018
|
2017-2019
|
2018-2020
|
2019-2021
|
||||||||||||||||||
Market price at grant |
£15.20 | £14.01 | £13.59 | £15.46 | £12.91 | £15.12 | ||||||||||||||||||
Unvested at 31 December 2017 |
130,642 | 67,715 | 223,024 | 361,379 | | | ||||||||||||||||||
Granted |
| | | | 437,997 | | ||||||||||||||||||
Face value at grant (000) |
| | | | £5,655 | | ||||||||||||||||||
Dividends reinvested |
1,865 | 967 | 12,639 | 20,479 | 18,305 | | ||||||||||||||||||
Vested |
(91,430 | ) | (47,391 | ) | | | | | ||||||||||||||||
Lapsed
|
|
(41,077
|
)
|
|
(21,291
|
)
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unvested at 31 December 2018 |
| | 235,663 | 381,858 | 456,302 | | ||||||||||||||||||
Dividends reinvested |
2,915 | 4,723 | 5,645 | | ||||||||||||||||||||
Vested |
(140,762 | ) | | | | |||||||||||||||||||
Lapsed
|
|
(97,816
|
)
|
|
|
|
|
|
|
|
|
| ||||||||||||
Unvested at 1 March 2019 |
| 386,581 | 461,947 | | ||||||||||||||||||||
Granted |
| | | 404,592 | ||||||||||||||||||||
Face value at grant (000) |
| | | £6,117 | ||||||||||||||||||||
Unvested at 8 March 2019
|
| 386,581 | 461,947 | 404,592 | ||||||||||||||||||||
Vested shares |
||||||||||||||||||||||||
Number of shares |
91,430 | 47,391 | 140,762 | |||||||||||||||||||||
Market price at vesting |
£13.00 | £13.00 | £15.66 | |||||||||||||||||||||
Gain:
|
(000)
|
(000)
|
(000)
|
Total (000)
|
||||||||||||||||||||
Remuneration for 2017 |
£1,189 | £616 | | £1,805 | ||||||||||||||||||||
Remuneration for 2018 |
| | £2,204 | £2,204 | ||||||||||||||||||||
Performance period
|
||||||||||||||||||||||||
Simon Dingemans Shares
|
2015-2017
|
2016-2018
|
2017-2019
|
2018-2020
|
||||||||||||||||||||
Market price at grant |
£15.20 | £13.59 | £15.46 | £12.91 | ||||||||||||||||||||
Unvested at 31 December 2017 |
221,136 | 239,499 | 197,574 | | ||||||||||||||||||||
Granted |
| | | 239,442 | ||||||||||||||||||||
Face value at grant (000) |
| | | £3,091 | ||||||||||||||||||||
Dividends reinvested |
3,158 | 13,573 | 11,197 | 10,007 | ||||||||||||||||||||
Vested |
(154,763 | ) | | | | |||||||||||||||||||
Lapsed
|
|
(69,531
|
)
|
|
|
|
|
|
|
|
|
|
||||||||||||
Unvested at 31 December 2018 |
| 253,072 | 208,771 | 249,449 | ||||||||||||||||||||
Granted |
| | | |||||||||||||||||||||
Face value at grant (000) |
| | | |||||||||||||||||||||
Dividends reinvested |
3,130 | 2,582 | 3,086 | |||||||||||||||||||||
Vested |
(151,161 | ) | | | ||||||||||||||||||||
Lapsed
|
|
(105,041
|
)
|
|
|
|
|
|
|
|||||||||||||||
Unvested at 1 March 2019 |
| 211,353 | 252,535 | |||||||||||||||||||||
Vested shares |
||||||||||||||||||||||||
Number of shares |
154,763 | 151,161 | ||||||||||||||||||||||
Market price at vesting |
£13.00 | £15.66 | ||||||||||||||||||||||
Gain:
|
(000)
|
(000)
|
||||||||||||||||||||||
Remuneration for 2017 |
£2,012 | | ||||||||||||||||||||||
Remuneration for 2018 |
| £2,367 |
118
|
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||
|
||
|
||
|
Annual report on remuneration continued
Directors interests in shares (audited) continued
Performance Share Plan awards continued
Sir Patrick Vallance Shares
|
Performance period | |||||||||||
2015-2017 |
2016-2018 |
2017-2019 |
||||||||||
Market price at grant |
£15.20 | £13.59 | £15.46 | |||||||||
Unvested at 31 December 2017 |
224,309 | 276,745 | 255,484 | |||||||||
Granted |
| | | |||||||||
Dividends reinvested |
3,203 | 8,468 | 7,817 | |||||||||
Vested |
(156,984 | ) | | | ||||||||
Lapsed |
(70,528 | ) | (285,213 | ) | (263,301 | ) | ||||||
Unvested at 31 December 2018 |
| | | |||||||||
Vested shares: |
||||||||||||
Number of shares |
156,984 | |||||||||||
Market price at vesting |
£13.00 | |||||||||||
Gain: |
(000 | ) | ||||||||||
Remuneration for 2017 |
£2,041 |
Iain Mackay was appointed to the Board from 14 January 2019. The following table provides details of PSP awards granted to him on 11 March 2019:
Iain Mackay Shares
|
Performance period |
|||||||
2019-2021 | ||||||||
Market price at grant |
£15.12 | |||||||
Number of shares |
225,255 | |||||||
Face value at grant (000) |
£3,406 | |||||||
Unvested at 8 March 2019 |
225,255 | |||||||
Dr Hal Barron ADS
|
Performance period | |||||||
2018-2020 | 2019-2021 | |||||||
Market price at grant |
$36.46 | $40.12 | ||||||
Unvested at 31 December 2017 |
| | ||||||
Granted |
233,132 | | ||||||
Face value at grant (000) |
$8,500 | | ||||||
Dividends reinvested |
9,595 | | ||||||
Unvested at 31 December 2018 |
242,727 | | ||||||
Dividends reinvested |
2,953 | | ||||||
Unvested at 1 March 2019 |
245,680 | | ||||||
Granted |
| 217,161 | ||||||
Face value at grant (000) |
| $8,172 | ||||||
Unvested at 8 March 2019 |
245,680 | 217,161 |
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Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Directors and Senior Management
Further information is provided on compensation and interests of Directors and Senior Management as a group (the group). For this purpose, the group is defined as the Non-Executive and Executive Directors, other members of the CET and the Company Secretary. For the financial year 2018, the following table sets out aggregate remuneration for the group for the periods during which they served in that capacity.
Remuneration for 2018
|
(£)
|
|||
Total compensation paid |
29,142,577 | |||
Aggregate increase in accrued pension benefits (net of inflation) |
906,937 | |||
Aggregate payments to defined contribution schemes
|
|
363,756
|
|
During 2018, members of the group were awarded shares and ADS under the companys various executive share plans, as set out in the table below. To align the interests of Senior Management with those of shareholders, Directors and Senior Management are required to build and maintain significant holdings of shares in GSK over time. CET members are required to hold shares to an equivalent multiple of two times base salary, and are required to continue to satisfy these share ownership requirements for a minimum of 12 months after leaving GSK.
Awards
|
Dividend reinvestment awards
|
|||||||||||||||||
Awarded during 2018
|
Shares
|
ADS
|
Shares
|
ADS
|
||||||||||||||
Deferred Annual Bonus Plan |
| | 19,804 | 1,827 | ||||||||||||||
Performance Share Plan |
2,002,494 | 438,542 | 229,872 | 37,819 | ||||||||||||||
Deferred Investment Awards(a) (b) |
101,327 | 6,320 | 6,600 | 673 | ||||||||||||||
Share Value Plan(b) | 11,060 | | | | ||||||||||||||
At 1 March 2019, the group and their PCAs had the following interests in shares and ADS of the company. Interests awarded under the various executive share plans are described in Note 43 to the financial statements, Employee share schemes on page 212.
|
| |||||||||||||||||
Interests at 1 March 2019
|
|
Shares
|
|
|
ADS
|
|
||||||||||||
Owned |
|
1,382,607 |
|
|
141,889 |
|
||||||||||||
Unexercised options |
149,382 | 7,670 | ||||||||||||||||
Deferred Annual Bonus Plan |
646,472 | 81,555 | ||||||||||||||||
Performance Share Plan |
3,359,591 | 562,043 | ||||||||||||||||
Deferred Investment Awards(a) (b) |
120,454 | 13,021 | ||||||||||||||||
Share Value Plan(b) |
36,200 | 6,320 |
(a) | Notional shares and ADS. |
(b) | Executive Directors are not eligible to receive Deferred Investment Awards or participate in the Share Value Plan. |
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|
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|
||
|
||
|
2017 Remuneration policy summary
Executive Director Remuneration policy
The following is a summary of this policy.
Salary | To provide a core reward for the role. Set at a level appropriate to secure and retain high calibre individuals needed to deliver the Groups strategic priorities.
|
Operation | Opportunity | Performance measures | ||
Individuals role, experience and performance and independently sourced data for relevant comparator groups considered when determining salary levels. | There is no formal maximum limit and, ordinarily, salary increases will be broadly in line with the average increases for the wider GSK workforce.
However, increases may be higher to reflect a change in the scope of the individuals role, responsibilities or experience. Salary adjustments may also reflect wider market conditions in the geography in which the individual operates.
Details of current salary levels are set out in the Annual report on remuneration on pages 99 and 108. |
The overall performance of the individual is a key consideration when determining salary increases. |
Benefits | Levels are set to recruit and retain high calibre individuals to execute the business strategy.
|
Operation | Opportunity | Performance measures | ||
Executive Directors are generally eligible to receive benefits in line with the policy for other employees which may vary by location. These include travel allowances (including spouse/partner travel), healthcare, life assurance/death in service (where not provided as part of the individuals pension arrangements), personal financial advice and contractual post-retirement benefits. | There is no formal maximum limit as benefits costs can fluctuate depending on changes in provider cost and individual circumstances.
Details of current benefits and costs are set out in the Annual report on remuneration on page 99. |
None. |
Pension | Pension arrangements provide a competitive level of retirement income.
|
Operation |
Opportunity | Performance measures | ||||||
Pension arrangements are structured in accordance with the plans operated in the country in which the individual is likely to retire. Where the individual chooses not to become a member of the pension plan, cash in lieu of the relevant pension contribution is paid instead.
|
The policy for all current Executive Directors and new external recruits is: |
None. | ||||||
UK: | 20% of salary contribution to defined contribution plan and further 5% in matched contributions subject to any relevant cap and in line with implementation principles for other members of the plan; or |
|||||||
New Executive Directors in the UK will be entitled either to join the defined contribution pension plan or to receive a cash payment in lieu of pension contribution. Where an individual is a member of a GSK legacy defined benefit plan, a defined contribution plan or an alternative pension plan arrangement and is subsequently appointed to the Board, he or she may remain a member of that plan. | 20% of salary cash payment in lieu of pension contribution. |
|||||||
US: | Eligible for the same benefits as other US senior executives: | |||||||
Cash Balance Pension Plan and Supplemental Cash Balance Pension Plan, including Executive Pension Credit, provide maximum contribution of 38% of base salary across all pension plans. |
||||||||
GSK 401(k) plan (formerly the US Retirement Savings Plan) and the Executive Supplemental Savings Plan with core contributions of 2% of salary and bonus and matched contributions of 4% of salary and bonus. |
Annual bonus
|
To incentivise and recognise execution of the business strategy on an annual basis. Rewards the achievement of stretching annual financial and strategic business targets and delivery of personal objectives.
|
Operation | Opportunity | Performance measures | ||
Financial, operational and business targets are set at the start of the year by the Committee and bonus levels are determined by the Committee based on performance against those targets.
Individual objectives are set at the start of the year by the Committee and performance against objectives is assessed by the Committee.
Executive Directors are required to defer 50% of any bonus earned into shares, or ADS as appropriate, for three years. Deferred shares vest at the end of the three years. |
The maximum bonus opportunity for Executive Directors is 200% of salary. For threshold performance, the bonus pay-out will be nil.
For target performance, the bonus payout will be 50% of the maximum opportunity. |
Based on a combination of financial targets and individual/ strategic performance objectives, with the majority of the bonus assessed against the financial measures. The weighting between different measures will be determined each year according to business priorities. | ||
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|
Executive Director Remuneration policy continued
LTI awards | To incentivise and recognise delivery of the longer term business priorities, financial growth and increases in shareholder value compared to other pharmaceutical companies. To provide alignment with shareholder interests, a retention element, to encourage long-term shareholding and discourage excessive risk taking.
|
PSP | ||||||||
Operation | Opportunity | Performance measures | ||||||
Conditional awards are made annually with vesting dependent on the achievement of performance conditions over three years and are subject to an additional two-year holding period.
The Committee may adjust the formulaic vesting outcome (either up or down) to ensure that the overall outcome reflects underlying business performance over the vesting period.
|
The normal maximum award limits that may be granted under the PSP to an individual in any one year are set out in the table below:
|
|
Based on a combination of financial, share price related and strategic performance conditions which are aligned to the companys strategic plan. Up to 30% of awards will vest at threshold performance. | |||||
% of salary | ||||||||
|
||||||||
CEO |
650 | |||||||
|
||||||||
CFO |
400 | |||||||
|
||||||||
Other Executive Directors |
500 | |||||||
|
||||||||
| ||||||||
DABP (current)
Operation For bonus payments from 2018 onwards, Executive Directors are required to defer 50% of any bonus earned into shares for three years. |
||||||||
DABP (legacy, pre 2018) |
||||||||
Operation | Opportunity | Performance measures | ||||||
For bonus payments until 2017, Executive Directors were required to defer 25% of any bonus earned into shares for three years. They could also voluntarily defer up to an additional 25% of any bonus earned. | These deferred shares were matched up to a maximum of 1:1 subject to the achievement of performance conditions over three years. Matching awards were conditional shares or nil-cost options and eligible for dividend equivalents. |
|
Outstanding matching awards are subject to the same measures as awards made under the PSP in any given year. | |||||
Share Ownership Requirements (SOR) |
||
| ||
To align the interests of Executive Directors with those of shareholders, they are required to build and maintain significant holdings of shares in GSK over time. The SOR requirement for the CEO is 650% of salary, and the SOR requirement for other Executive Directors is 300% of salary.
|
Executive Directors are required to continue to satisfy these requirements for a minimum of 12 months following retirement from GSK. |
Clawback and malus |
||
| ||
In the event of a triggering event (e.g. significant misconduct by way of violation of regulation, law, or a significant GSK policy, such as the Code of Conduct), the company will have the ability to claw back up to three years annual and deferred bonuses as well as vested and unvested LTIs. In addition, if a participant in the new 2017 PSP or DABP, which shareholders approved at the 2017 AGM, is subject to an investigation, then the vesting of their awards may be delayed until the outcome of that investigation.
A separate Recoupment Committee has been established to investigate relevant claims of misconduct. The Recoupment Committee exercises this authority for the wider employee base. It comprises of senior executives with relevant oversight and appropriate experience, including the Senior Vice President, Global Ethics and Compliance, and the Senior Vice President & General Counsel. |
In respect of each financial year, the Remuneration Committee will disclose whether it (or the Recoupment Committee) has exercised clawback or malus. Disclosure will only be made when the matter has been subject to public reports of misconduct, where it has been fully resolved, where it is legally permissible to disclose and where it can be made without unduly prejudicing the company and therefore shareholders.
Additionally, where there has been continuity of responsibility between initiation of an adverse event and its emergence as a problem, the adverse event should be taken into account in assessing annual bonus awards and LTI vesting levels in the year the problem is identified and for future periods. The Remuneration Committee (or Recoupment Committee) may make appropriate adjustments to individual annual bonuses as well as grant and vesting levels of LTI awards to reflect this. |
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|
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|
||
|
2017 Remuneration policy summary continued
Scenarios for future total remuneration
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| ||
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| ||
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|
Non-Executive Director Remuneration policy
The companys Remuneration policy for Non-Executive Directors, set out below, was approved on 4 May 2017 at GSKs Annual General Meeting.
Chairmans fees
|
To provide an inclusive flat rate fee that is competitive with those paid by other companies of equivalent size and complexity subject to the limits contained in GSKs Articles of Association. |
Operation The Committee is responsible for evaluating and
making
Fees can be paid in a combination of cash and/or GSK shares |
Opportunity There is no formal maximum. However, fees are reviewed
Details of current fees are set out in the Annual report on |
Performance measures None |
Basic fees
|
As above |
Operation The Chairman and CEO are responsible for evaluating
and
A minimum of 25% is delivered in the form of GSK shares or |
Opportunity As with the Chairman, fees are reviewed annually and set by
Details of current fees are set out in the Annual report on |
Performance measures None |
Supplemental fees
|
To compensate Non-Executive Directors (other than the Chairman) for taking on additional Board responsibilities or undertaking intercontinental travel. |
Operation Additional fees for Committee Chairmen, the
Senior |
Opportunity Details of supplemental fees are set out in the Annual report |
Performance measures None |
Benefits
|
To facilitate execution of responsibilities and duties required by the role. |
Operation Travel and
subsistence costs for Non-Executive Directors are
|
Opportunity There is no formal maximum limit as benefit costs can
Details of current benefits and costs are set out
in the Annual |
Performance measures None |
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||
|
||
|
2017 Remuneration policy summary continued
Operation and scope of Remuneration policy
Basis of preparation
125 |
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| ||||
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| ||||
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statements
In this section
|
|
|||||||||||
|
126 | |||||||||||
Independent Auditors report | 128 | |||||||||||
Financial statements | 140 | |||||||||||
Notes to the financial statements | 144 | |||||||||||
Financial statements of GlaxoSmithKline plc prepared under UK GAAP | 219 | |||||||||||
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Directors statement of responsibilities
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for the year ended 31 December 2018
2018 |
2017 | 2016 | ||||||
Notes
|
£m
|
£m
|
£m
| |||||
Turnover | 6 | 30,821 | 30,186 | 27,889 | ||||
Cost of sales
|
(10,241)
|
(10,342)
|
(9,290)
| |||||
Gross profit | 20,580 | 19,844 | 18,599 | |||||
Selling, general and administration | (9,915) | (9,672) | (9,366) | |||||
Research and development | (3,893) | (4,476) | (3,628) | |||||
Royalty income | 299 | 356 | 398 | |||||
Other operating income/(expense)
|
7
|
(1,588)
|
(1,965)
|
(3,405)
| ||||
Operating profit | 8 | 5,483 | 4,087 | 2,598 | ||||
Finance income | 11 | 81 | 65 | 72 | ||||
Finance expense | 12 | (798) | (734) | (736) | ||||
Profit on disposal of interest in associates | 3 | 94 | | |||||
Share of after tax profits of associates and joint ventures
|
13
|
31
|
13
|
5
| ||||
Profit before taxation | 4,800 | 3,525 | 1,939 | |||||
Taxation
|
14
|
(754)
|
(1,356)
|
(877)
| ||||
Profit after taxation for the year
|
4,046
|
2,169
|
1,062
| |||||
Profit attributable to non-controlling interests | 423 | 637 | 150 | |||||
Profit attributable to shareholders
|
3,623
|
1,532
|
912
| |||||
4,046
|
2,169
|
1,062
| ||||||
Basic earnings per share (pence)
|
15
|
73.7p
|
31.4p
|
18.8p
| ||||
Diluted earnings per share (pence)
|
15
|
72.9p
|
31.0p
|
18.6p
| ||||
Consolidated statement of comprehensive income for the year ended 31 December 2018
| ||||||||
2018 |
2017 | 2016 | ||||||
£m
|
£m
|
£m
| ||||||
Profit for the year | 4,046 | 2,169 | 1,062 | |||||
Items that may be subsequently reclassified to income statement: | ||||||||
Exchange movements on overseas net assets and net investment hedges | 34 | (480) | 462 | 646 | ||||
Reclassification of exchange on liquidation or disposal of overseas subsidiaries | 34 | | 109 | | ||||
Fair value movements on equity investments | (14) | 251 | ||||||
Deferred tax on fair value movements on equity investments | 47 | | ||||||
Reclassification of fair value movements on equity investments | | (42) | (245) | |||||
Deferred tax reversed on reclassification of equity investments | | (18) | 51 | |||||
Fair value movements on cash flow hedges | 140 | (10) | 2 | |||||
Deferred tax on fair value movements on cash flow hedges | (22) | | 2 | |||||
Reclassification of cash flow hedges to income statement | (175) | | 1 | |||||
Deferred tax reversed on reclassification of cash flow hedges
|
20
|
|
| |||||
(517)
|
534
|
708
| ||||||
Items that will not be reclassified to income statement: | ||||||||
Exchange movements on overseas net assets of non-controlling interests | 34 | (1) | (149) | 603 | ||||
Fair value movements on equity investments | 180 | |||||||
Deferred tax on fair value movements on equity investments | 10 | |||||||
Remeasurement gains/(losses) on defined benefit plans | 728 | 549 | (475) | |||||
Tax on remeasurement of defined benefit plans
|
(146)
|
(221)
|
126
| |||||
771
|
179
|
254
| ||||||
Other comprehensive income for the year | 34
|
254
|
713
|
962
| ||||
Total comprehensive income for the year
|
4,300
|
2,882
|
2,024
| |||||
Total comprehensive income for the year attributable to: | ||||||||
Shareholders | 3,878 | 2,394 | 1,271 | |||||
Non-controlling interests
|
422
|
488
|
753
| |||||
Total comprehensive income for the year
|
4,300
|
2,882
|
2,024
|
141
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Consolidated balance sheet |
Investor information
|
as at 31 December 2018
Notes
|
2018 £m
|
2017 £m
|
||||||||||
Non-current assets |
||||||||||||
Property, plant and equipment |
17 | 11,058 | 10,860 | |||||||||
Goodwill |
18 | 5,789 | 5,734 | |||||||||
Other intangible assets |
19 | 17,202 | 17,562 | |||||||||
Investments in associates and joint ventures |
20 | 236 | 183 | |||||||||
Other investments |
21 | 1,322 | 918 | |||||||||
Deferred tax assets |
14 | 3,887 | 3,796 | |||||||||
Derivative financial instruments |
42 | 69 | 8 | |||||||||
Other non-current assets
|
22 | 1,576 | 1,413 | |||||||||
Total non-current assets |
41,139 | 40,474 | ||||||||||
Current assets |
||||||||||||
Inventories |
23 | 5,476 | 5,557 | |||||||||
Current tax recoverable |
14 | 229 | 258 | |||||||||
Trade and other receivables |
24 | 6,423 | 6,000 | |||||||||
Derivative financial instruments |
42 | 188 | 68 | |||||||||
Liquid investments |
31 | 84 | 78 | |||||||||
Cash and cash equivalents |
25 | 3,874 | 3,833 | |||||||||
Assets held for sale |
26 | 653 | 113 | |||||||||
Total current assets |
16,927 | 15,907 | ||||||||||
Total assets |
58,066 | 56,381 | ||||||||||
Current liabilities |
||||||||||||
Short-term borrowings |
31 | (5,793 | ) | (2,825 | ) | |||||||
Contingent consideration liabilities |
39 | (837 | ) | (1,076 | ) | |||||||
Trade and other payables |
27 | (14,037 | ) | (20,970 | ) | |||||||
Derivative financial instruments |
42 | (127 | ) | (74 | ) | |||||||
Current tax payable |
14 | (965 | ) | (995 | ) | |||||||
Short-term provisions
|
|
29
|
|
|
(732
|
)
|
|
(629
|
)
| |||
Total current liabilities
|
|
(22,491
|
)
|
|
(26,569
|
)
| ||||||
Non-current liabilities |
||||||||||||
Long-term borrowings |
31 | (20,271 | ) | (14,264 | ) | |||||||
Corporation tax payable |
14 | (272 | ) | (411 | ) | |||||||
Deferred tax liabilities |
14 | (1,156 | ) | (1,396 | ) | |||||||
Pensions and other post-employment benefits |
28 | (3,125 | ) | (3,539 | ) | |||||||
Other provisions |
29 | (691 | ) | (636 | ) | |||||||
Derivative financial instruments |
42 | (1 | ) | | ||||||||
Contingent consideration liabilities |
39 | (5,449 | ) | (5,096 | ) | |||||||
Other non-current liabilities
|
|
30
|
|
|
(938
|
)
|
|
(981
|
)
| |||
Total non-current liabilities
|
|
(31,903
|
)
|
|
(26,323
|
)
| ||||||
Total liabilities
|
|
(54,394
|
)
|
|
(52,892
|
)
| ||||||
Net assets
|
|
3,672
|
|
|
3,489
|
| ||||||
Equity |
||||||||||||
Share capital |
33 | 1,345 | 1,343 | |||||||||
Share premium account |
33 | 3,091 | 3,019 | |||||||||
Retained earnings |
34 | (2,137 | ) | (6,477 | ) | |||||||
Other reserves
|
|
34
|
|
|
2,061
|
|
|
2,047
|
| |||
Shareholders equity
|
|
4,360
|
|
|
(68
|
)
| ||||||
Non-controlling interests
|
|
(688
|
)
|
|
3,557
|
| ||||||
Total equity
|
|
3,672
|
|
|
3,489
|
|
The financial statements on pages 140 to 218 were approved by the Board on 11 March 2019 and signed on its behalf by
Philip Hampton
Chairman
142
|
||
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|
||
|
||
|
||
|
Consolidated statement of changes in equity
for the year ended 31 December 2018
Shareholders equity
|
||||||||||||||||||||||||||||
Share £m |
Share |
Retained |
Other |
Total £m |
Non-controlling £m |
Total £m |
||||||||||||||||||||||
At 1 January 2016 |
1,340 | 2,831 | (1,397 | ) | 2,340 | 5,114 | 3,764 | 8,878 | ||||||||||||||||||||
Profit for the year |
| | 912 | | 912 | 150 | 1,062 | |||||||||||||||||||||
Other comprehensive income for the year |
| | 284 | 75 | 359 | 603 | 962 | |||||||||||||||||||||
Total comprehensive income for the year |
| | 1,196 | 75 | 1,271 | 753 | 2,024 | |||||||||||||||||||||
Distributions to non-controlling interests |
| | | | | (534 | ) | (534 | ) | |||||||||||||||||||
Dividends to shareholders |
| | (4,850 | ) | | (4,850 | ) | | (4,850 | ) | ||||||||||||||||||
Recognition of liabilities with non-controlling interests |
| | (2,013 | ) | | (2,013 | ) | (159 | ) | (2,172 | ) | |||||||||||||||||
Derecognition of liabilities with non-controlling interests |
| | 1,244 | | 1,244 | | 1,244 | |||||||||||||||||||||
Changes in non-controlling interests |
| | 17 | | 17 | 15 | 32 | |||||||||||||||||||||
Shares issued |
2 | 87 | | | 89 | | 89 | |||||||||||||||||||||
Shares acquired by ESOP Trusts |
| 36 | 466 | (576 | ) | (74 | ) | | (74 | ) | ||||||||||||||||||
Write-down of shares held by ESOP Trusts |
| | (381 | ) | 381 | | | | ||||||||||||||||||||
Share-based incentive plans |
| | 319 | | 319 | | 319 | |||||||||||||||||||||
Tax on share-based incentive plans |
| | 7 | | 7 | | 7 | |||||||||||||||||||||
At 31 December 2016 |
1,342 | 2,954 | (5,392 | ) | 2,220 | 1,124 | 3,839 | 4,963 | ||||||||||||||||||||
Profit for the year |
| | 1,532 | | 1,532 | 637 | 2,169 | |||||||||||||||||||||
Other comprehensive income for the year
|
|
|
|
|
|
|
|
899
|
|
|
(37
|
)
|
|
862
|
|
|
(149
|
)
|
|
713
|
| |||||||
Total comprehensive income for the year
|
|
|
|
|
|
|
|
2,431
|
|
|
(37
|
)
|
|
2,394
|
|
|
488
|
|
|
2,882
|
| |||||||
Distributions to non-controlling interests |
| | | | | (789 | ) | (789 | ) | |||||||||||||||||||
Contribution from non-controlling interests |
| | | | | 21 | 21 | |||||||||||||||||||||
Dividends to shareholders |
| | (3,906 | ) | | (3,906 | ) | | (3,906 | ) | ||||||||||||||||||
Changes in non-controlling interests |
| | | | | (2 | ) | (2 | ) | |||||||||||||||||||
Shares issued |
1 | 55 | | | 56 | | 56 | |||||||||||||||||||||
Shares acquired by ESOP Trusts |
| 10 | 581 | (656 | ) | (65 | ) | | (65 | ) | ||||||||||||||||||
Write-down of shares held by ESOP Trusts |
| | (520 | ) | 520 | | | | ||||||||||||||||||||
Share-based incentive plans |
| | 333 | | 333 | | 333 | |||||||||||||||||||||
Tax on share-based incentive plans
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
(4
|
)
|
|
|
|
|
(4
|
)
| |||||||
At 31 December 2017 |
1,343 | 3,019 | (6,477 | ) | 2,047 | (68 | ) | 3,557 | 3,489 | |||||||||||||||||||
Implementation of IFRS 15 |
| | (4 | ) | | (4 | ) | | (4 | ) | ||||||||||||||||||
Implementation of IFRS 9
|
|
|
|
|
|
|
|
277
|
|
|
(288
|
)
|
|
(11
|
)
|
|
|
|
|
(11
|
)
| |||||||
At 31 December 2017, as adjusted |
1,343 | 3,019 | (6,204 | ) | 1,759 | (83 | ) | 3,557 | 3,474 | |||||||||||||||||||
Profit for the year |
| | 3,623 | | 3,623 | 423 | 4,046 | |||||||||||||||||||||
Other comprehensive income for the year
|
|
|
|
|
|
|
|
124
|
|
|
131
|
|
|
255
|
|
|
(1
|
)
|
|
254
|
| |||||||
Total comprehensive income for the year
|
|
|
|
|
|
|
|
3,747
|
|
|
131
|
|
|
3,878
|
|
|
422
|
|
|
4,300
|
| |||||||
Distributions to non-controlling interests |
| | | | | (570 | ) | (570 | ) | |||||||||||||||||||
Contribution from non-controlling interests |
| | | | | 21 | 21 | |||||||||||||||||||||
Derecognition of non-controlling interests in Consumer Healthcare Joint Venture |
| | 4,056 | | 4,056 | (4,118 | ) | (62 | ) | |||||||||||||||||||
Dividends to shareholders |
| | (3,927 | ) | | (3,927 | ) | | (3,927 | ) | ||||||||||||||||||
Realised profits on disposal of equity investments |
| | 56 | (56 | ) | | | | ||||||||||||||||||||
Share of associates and joint ventures realised profits on disposal of equity investments |
| | 38 | (38 | ) | | | | ||||||||||||||||||||
Shares issued |
2 | 72 | | | 74 | | 74 | |||||||||||||||||||||
Write-down of shares held by ESOP Trusts |
| | (265 | ) | 265 | | | | ||||||||||||||||||||
Share-based incentive plans |
| | 360 | | 360 | | 360 | |||||||||||||||||||||
Tax on share-based incentive plans |
| | 2 | | 2 | | 2 | |||||||||||||||||||||
At 31 December 2018
|
|
1,345
|
|
|
3,091
|
|
|
(2,137
|
)
|
|
2,061
|
|
|
4,360
|
|
|
(688
|
)
|
|
3,672
|
|
143
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Consolidated cash flow statement |
Investor information
|
for the year ended 31 December 2018
Notes
|
2018 £m
|
2017 £m
|
2016 £m
|
|||||||||||||
Cash flow from operating activities |
||||||||||||||||
Profit after taxation for the year |
4,046 | 2,169 | 1,062 | |||||||||||||
Adjustments reconciling profit after tax to operating cash flows |
36 | 5,701 | 6,089 | 7,044 | ||||||||||||
Cash generated from operations |
9,747 | 8,258 | 8,106 | |||||||||||||
Taxation paid
|
|
(1,326
|
)
|
|
(1,340
|
)
|
|
(1,609
|
)
| |||||||
Net cash inflow from operating activities |
8,421 | 6,918 | 6,497 | |||||||||||||
Cash flow from investing activities |
||||||||||||||||
Purchase of property, plant and equipment |
(1,344 | ) | (1,545 | ) | (1,543 | ) | ||||||||||
Proceeds from sale of property, plant and equipment |
168 | 281 | 98 | |||||||||||||
Purchase of intangible assets |
(452 | ) | (657 | ) | (809 | ) | ||||||||||
Proceeds from sale of intangible assets |
256 | 48 | 283 | |||||||||||||
Purchase of equity investments |
(309 | ) | (80 | ) | (96 | ) | ||||||||||
Proceeds from sale of equity investments |
151 | 64 | 683 | |||||||||||||
Contingent consideration paid |
(153 | ) | (91 | ) | (73 | ) | ||||||||||
Purchase of businesses, net of cash acquired |
38 | | | 17 | ||||||||||||
Disposal of businesses |
38 | 26 | 282 | 72 | ||||||||||||
Investments in associates and joint ventures |
20 | (10 | ) | (15 | ) | (11 | ) | |||||||||
Proceeds from disposal of interests in associates |
38 | 3 | 196 | | ||||||||||||
Decrease in liquid investments |
| 4 | | |||||||||||||
Interest received |
72 | 64 | 68 | |||||||||||||
Dividends from associates, joint ventures and equity investments |
39 | 6 | 42 | |||||||||||||
Net cash outflow from investing activities
|
|
(1,553
|
)
|
|
(1,443
|
)
|
|
(1,269
|
)
| |||||||
Cash flow from financing activities |
||||||||||||||||
Shares acquired by ESOP Trusts |
| (65 | ) | (74 | ) | |||||||||||
Issue of share capital |
33 | 74 | 56 | 89 | ||||||||||||
Purchase of non-controlling interests |
(9,320 | ) | (29 | ) | | |||||||||||
Increase in long-term loans |
10,138 | 2,233 | | |||||||||||||
Repayment of short-term Notes |
(2,067 | ) | (2,636 | ) | (865 | ) | ||||||||||
Increase in/(repayment of) other short-term loans |
81 | (564 | ) | 1,013 | ||||||||||||
Net repayment of obligations under finance leases |
(28 | ) | (23 | ) | (18 | ) | ||||||||||
Interest paid |
(766 | ) | (781 | ) | (732 | ) | ||||||||||
Dividends paid to shareholders |
(3,927 | ) | (3,906 | ) | (4,850 | ) | ||||||||||
Distributions to non-controlling interests |
(570 | ) | (779 | ) | (534 | ) | ||||||||||
Contributions from non-controlling interests |
21 | 21 | | |||||||||||||
Other financing cash flows
|
|
(25
|
)
|
|
93
|
|
|
(421
|
)
| |||||||
Net cash outflow from financing activities
|
|
(6,389
|
)
|
|
(6,380
|
)
|
|
(6,392
|
)
| |||||||
Increase/(decrease) in cash and bank overdrafts
|
|
37
|
|
|
479
|
|
|
(905
|
)
|
|
(1,164
|
)
| ||||
Cash and bank overdrafts at beginning of year |
3,600 | 4,605 | 5,486 | |||||||||||||
Exchange adjustments |
8 | (100 | ) | 283 | ||||||||||||
Increase/(decrease) in cash and bank overdrafts
|
|
479
|
|
|
(905
|
)
|
|
(1,164
|
)
| |||||||
Cash and bank overdrafts at end of year |
4,087 | 3,600 | 4,605 | |||||||||||||
Cash and bank overdrafts at end of year comprise: |
||||||||||||||||
Cash and cash equivalents |
3,874 | 3,833 | 4,897 | |||||||||||||
Cash and cash equivalents reported in assets held for sale |
485 | | | |||||||||||||
4,359 | 3,833 | 4,897 | ||||||||||||||
Overdrafts
|
|
(272
|
)
|
|
(233
|
)
|
|
(292
|
)
| |||||||
4,087 | 3,600 | 4,605 |
144
|
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GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements
1. Presentation of the financial statements
145
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
1. Presentation of the financial statements continued
146
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
2. Accounting principles and policies
147
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
2. Accounting principles and policies continued
148
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
149
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
150
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
2. Accounting principles and policies continued
151
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
3. Key accounting judgements and estimates
152
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
3. Key accounting judgements and estimates continued
4. New accounting requirements
153
| ||
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Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
5. Exchange rates
The Group uses the average of exchange rates prevailing during the period to translate the results and cash flows of overseas subsidiaries, joint ventures and associates into Sterling and period end rates to translate the net assets of those entities. The currencies which most influence these translations and the relevant exchange rates were:
6. Turnover and segment information
Operating segments are reported based on the financial information provided to the Chief Executive Officer and the responsibilities of the Corporate Executive Team (CET). GSK reports results under four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines and Consumer Healthcare, and individual members of the CET are responsible for each segment.
The Groups management reporting process allocates intra-Group profit on a product sale to the market in which that sale is recorded, and the profit analyses below have been presented on that basis.
Corporate and other unallocated costs included the costs of corporate functions.
Revenue recognised in the year from performance obligations satisfied in previous periods totalled £426 million and included £122 million reported in turnover arising from changes to prior year estimates of RAR accruals and £299 million of royalty income.
Turnover by segment
|
2018 £m |
2017 £m |
2016 £m |
|||||||||
Pharmaceuticals |
17,269 | 17,276 | 16,104 | |||||||||
Vaccines |
5,894 | 5,160 | 4,592 | |||||||||
Consumer Healthcare |
7,658 | 7,750 | 7,193 | |||||||||
30,821 | 30,186 | 27,889 | ||||||||||
Pharmaceuticals turnover by therapeutic area
|
2018 £m |
2017 £m |
2016 £m |
|||||||||
Respiratory |
6,928 | 6,991 | 6,510 | |||||||||
HIV |
4,722 | 4,350 | 3,556 | |||||||||
Immuno-inflammation |
472 | 377 | 340 | |||||||||
Established Pharmaceuticals |
5,147 | 5,558 | 5,698 | |||||||||
17,269 | 17,276 | 16,104 | ||||||||||
Vaccines turnover by category
|
2018 £m |
2017 £m |
2016 £m |
|||||||||
Meningitis |
881 | 890 | 662 | |||||||||
Influenza |
523 | 488 | 414 | |||||||||
Shingles |
784 | 22 | | |||||||||
Established Vaccines |
3,706 | 3,760 | 3,516 | |||||||||
5,894 | 5,160 | 4,592 |
During 2018, the US operations of the Pharmaceuticals and Vaccines businesses made sales to three wholesalers of approximately £2,709 million (2017 £2,449 million; 2016 £2,139 million), £2,962 million (2017 £3,043 million; 2016 £2,691 million) and £2,656 million (2017 £2,356 million; 2016 £2,129 million) respectively, after allocating final-customer discounts to the wholesalers.
Consumer Healthcare turnover by category
|
2018 £m |
2017 £m |
2016 £m |
|||||||||
Wellness |
3,940 | 4,001 | 3,726 | |||||||||
Oral care |
2,496 | 2,466 | 2,223 | |||||||||
Nutrition |
643 | 680 | 674 | |||||||||
Skin health |
579 | 603 | 570 | |||||||||
7,658 | 7,750 | 7,193 |
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|
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|
||
|
Notes to the financial statements continued
6. Turnover and segment information continued
Segment profit
|
2018 £m
|
2017 £m
|
2016 £m
|
|||||||||
Pharmaceuticals |
8,420 | 8,667 | 7,976 | |||||||||
Pharmaceuticals R&D
|
|
(2,676
|
)
|
|
(2,740
|
)
|
|
(2,488
|
)
| |||
Pharmaceuticals, including R&D |
5,744 | 5,927 | 5,488 | |||||||||
Vaccines |
1,943 | 1,644 | 1,429 | |||||||||
Consumer Healthcare |
1,517 | 1,373 | 1,116 | |||||||||
Segment profit |
9,204 | 8,944 | 8,033 | |||||||||
Corporate and other unallocated costs |
(459 | ) | (376 | ) | (362 | ) | ||||||
Other reconciling items between segment profit and operating profit
|
|
(3,262
|
)
|
|
(4,481
|
)
|
|
(5,073
|
)
| |||
Operating profit |
5,483 | 4,087 | 2,598 | |||||||||
Finance income |
81 | 65 | 72 | |||||||||
Finance costs |
(798 | ) | (734 | ) | (736 | ) | ||||||
Profit on disposal of interest in associates |
3 | 94 | | |||||||||
Share of after tax profits of associates and joint ventures |
31 | 13 | 5 | |||||||||
Profit before taxation |
4,800 | 3,525 | 1,939 | |||||||||
Taxation
|
|
(754
|
)
|
|
(1,356
|
)
|
|
(877
|
)
| |||
Profit after taxation for the year |
4,046 | 2,169 | 1,062 | |||||||||
Other reconciling items between segment profit and operating profit comprise items not specifically allocated to segment profit. These include impairment and amortisation of intangible assets; major restructuring costs, which include impairments of tangible assets and computer software; transaction-related adjustments related to significant acquisitions; proceeds and costs of disposals of associates, products and businesses, significant legal charges and expenses on the settlement of litigation and government investigations, other operating income other than royalty income and other items, and the pre-tax impact of the enactment of the US Tax Cuts and Jobs Act.
|
| |||||||||||
Depreciation and amortisation by segment
|
2018 £m
|
2017 £m
|
2016 £m
|
|||||||||
Pharmaceuticals |
506 | 551 | 440 | |||||||||
Pharmaceuticals R&D |
123 | 96 | 211 | |||||||||
Pharmaceuticals, including R&D |
629 | 647 | 651 | |||||||||
Vaccines |
395 | 405 | 315 | |||||||||
Consumer Healthcare |
146 | 135 | 126 | |||||||||
Segment depreciation and amortisation |
1,170 | 1,187 | 1,092 | |||||||||
Corporate and other unallocated depreciation and amortisation |
106 | 144 | 94 | |||||||||
Other reconciling items between segment
depreciation and amortisation and |
580 | 591 | 588 | |||||||||
Total depreciation and amortisation |
1,856 | 1,922 | 1,774 |
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6. Turnover and segment information continued
PP&E, intangible asset and goodwill impairment by segment
|
2018
|
2017 £m |
2016 £m |
|||||||||
Pharmaceuticals |
51 | 38 | 29 | |||||||||
Pharmaceuticals R&D |
15 | 10 | 88 | |||||||||
Pharmaceuticals, including R&D |
66 | 48 | 117 | |||||||||
Vaccines |
5 | 13 | 34 | |||||||||
Consumer Healthcare |
4 | 10 | 46 | |||||||||
Segment impairment |
75 | 71 | 197 | |||||||||
Corporate and other unallocated impairment |
14 | 3 | 24 | |||||||||
Other reconciling items between segment impairment and total impairment |
261 | 995 | 68 | |||||||||
Total impairment |
350 | 1,069 | 289 | |||||||||
PP&E and intangible asset impairment reversals by segment
|
||||||||||||
Pharmaceuticals |
(4 | ) | (13 | ) | (15 | ) | ||||||
Pharmaceuticals R&D
|
|
(1
|
)
|
|
(2
|
)
|
|
(10
|
)
| |||
Pharmaceuticals, including R&D |
(5 | ) | (15 | ) | (25 | ) | ||||||
Vaccines |
| | (19 | ) | ||||||||
Consumer Healthcare
|
|
|
|
|
(1
|
)
|
|
(8
|
)
| |||
Segment impairment reversals |
(5 | ) | (16 | ) | (52 | ) | ||||||
Corporate and other unallocated impairment reversals |
| | (26 | ) | ||||||||
Other reconciling items between segment impairment reversals and total impairment reversals
|
|
(8
|
)
|
|
(36
|
)
|
|
(9
|
)
| |||
Total impairment reversals
|
|
(13
|
)
|
|
(52
|
)
|
|
(87
|
)
| |||
|
|
|
||||||||||
Net assets by segment
|
2018
|
2017
|
||||||||||
Pharmaceuticals |
869 | 2,017 | ||||||||||
Pharmaceuticals R&D |
502 | 522 | ||||||||||
Pharmaceuticals, including R&D |
1,371 | 2,539 | ||||||||||
Vaccines |
9,966 | 9,707 | ||||||||||
Consumer Healthcare |
10,559 | 2,003 | ||||||||||
Segment net operating assets |
21,896 | 14,249 | ||||||||||
Corporate and other unallocated net operating assets |
1,141 | 868 | ||||||||||
Net operating assets |
23,037 | 15,117 | ||||||||||
Net debt |
(21,621 | ) | (13,178 | ) | ||||||||
Investments in associates and joint ventures |
236 | 183 | ||||||||||
Derivative financial instruments |
129 | 2 | ||||||||||
Current and deferred taxation |
1,723 | 1,252 | ||||||||||
Assets held for sale (excluding cash and cash equivalents) |
168 | 113 | ||||||||||
Net assets |
3,672 | 3,489 |
The Pharmaceuticals segment includes the Shionogi-ViiV Healthcare contingent consideration liability of £5,937 million (2017 £5,542 million) and the Pfizer put option of £1,240 million (2017 £1,304 million). The put option liability (2017 £8,606 million) related to the Consumer Healthcare segment was extinguished during 2018.
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Notes to the financial statements continued
6. Turnover and segment information continued
Geographical information
The UK is regarded as being the Groups country of domicile.
Turnover by location of customer
|
2018
|
2017 £m |
2016 £m |
|||||||||
UK |
923 | 940 | 1,056 | |||||||||
US |
11,982 | 11,263 | 10,197 | |||||||||
Rest of World |
17,916 | 17,983 | 16,636 | |||||||||
External turnover |
30,821 | 30,186 | 27,889 | |||||||||
Non-current assets by location of subsidiary
|
2018 |
2017 £m |
||||||||||
UK |
6,118 | 6,824 | ||||||||||
US |
7,540 | 6,841 | ||||||||||
Rest of World |
20,768 | 20,901 | ||||||||||
Non-current assets |
34,426 | 34,566 | ||||||||||
Non-current assets by location excludes amounts relating to other investments, deferred tax assets, derivative financial instruments, pension assets, amounts receivable under insurance contracts and certain other non-current receivables.
7. Other operating income/(expense)
|
| |||||||||||
2018
|
2017 £m |
2016 £m |
||||||||||
Fair value remeasurements of equity investments under IFRS 9 |
16 | |||||||||||
Disposal of businesses and assets |
258 | 195 | 283 | |||||||||
Fair value remeasurements on contingent consideration recognised in business combinations |
(1,252 | ) | (1,012 | ) | (2,205 | ) | ||||||
Remeasurement of ViiV Healthcare put option liabilities and preferential dividends |
58 | 13 | (577 | ) | ||||||||
Remeasurement of Consumer Healthcare put option liability |
(658 | ) | (1,186 | ) | (1,133 | ) | ||||||
Fair value adjustments on derivative financial instruments |
(3 | ) | 9 | (3 | ) | |||||||
Other (expense)/income |
(7 | ) | 9 | 23 | ||||||||
Impairment of available-for-sale equity investments under IAS 39 |
(30 | ) | (47 | ) | ||||||||
Disposal of available-for-sale equity investments under IAS 39 |
37 | 254 | ||||||||||
|
(1,588
|
)
|
|
(1,965
|
)
|
|
(3,405
|
)
|
Disposal of businesses and assets in 2018 included a profit of £119 million on the disposal of tapinarof to Dermavant Sciences, a profit of £33 million on the disposal of Consumer Healthcare tail brands in the US and a gain arising from the increase in value of the shares in Hindustan Unilever Limited to be received on the disposal of Horlicks and other Consumer Healthcare brands, which is expected to complete by the end of 2019, net of disposal costs.
Fair value remeasurements on contingent consideration recognised in business combinations included £1,188 million related to the acquisition of the former Shionogi-ViiV Healthcare joint venture and £56 million payable to Novartis related to the Vaccines acquisition and fair value movements on derivatives hedging foreign exchange exposure.
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Investor information
|
8. Operating profit
The following items have been included in operating profit:
|
2018 £m
|
2017
|
2016
|
|||||||||
Employee costs (Note 9) |
9,440 | 9,122 | 8,212 | |||||||||
Advertising |
1,376 | 1,351 | 1,265 | |||||||||
Distribution costs |
389 | 405 | 395 | |||||||||
Depreciation of property, plant and equipment |
954 | 988 | 978 | |||||||||
Impairment of property, plant and equipment, net of reversals |
203 | 327 | 180 | |||||||||
Amortisation of intangible assets |
902 | 934 | 796 | |||||||||
Impairment of intangible assets, net of reversals |
134 | 690 | 22 | |||||||||
Net foreign exchange losses |
81 | 215 | 53 | |||||||||
Inventories: |
||||||||||||
Cost of inventories included in cost of sales |
8,713 | 8,526 | 8,093 | |||||||||
Write-down of inventories |
695 | 701 | 533 | |||||||||
Reversal of prior year write-down of inventories |
(302 | ) | (352 | ) | (145 | ) | ||||||
Operating lease rentals: |
||||||||||||
Minimum lease payments |
188 | 110 | 91 | |||||||||
Contingent rents |
12 | 4 | 4 | |||||||||
Sub-lease payments |
5 | 5 | 4 | |||||||||
Fees payable to the companys auditor and its associates in relation to the Group (see below)
|
|
29.8
|
|
|
29.2
|
|
|
29.7
|
| |||
The reversals of prior year write-downs of inventories principally arise from the reassessment of usage or demand expectations prior to inventory expiration.
Net foreign exchange losses include a net loss of £nil (2017 £109 million; 2016 £nil) of exchange arising on the reclassification of exchange on liquidation or disposal of overseas subsidiaries.
Included within operating profit are major restructuring charges of £809 million (2017 £1,056 million; 2016 £970 million), see Note 10, Major restructuring costs.
|
| |||||||||||
Fees payable to the companys auditor and its associates:
|
2018 £m
|
2017
|
2016
|
|||||||||
Audit of parent company and consolidated financial statements |
6.7 | 7.0 | 5.8 | |||||||||
Audit of the companys subsidiaries |
12.9 | 16.2 | 16.4 | |||||||||
Attestation under s.404 of Sarbanes-Oxley Act 2002
|
|
6.6
|
|
|
4.5
|
|
|
4.4
|
| |||
Audit and audit-related services |
26.2 | 27.7 | 26.6 | |||||||||
Taxation compliance |
0.1 | 0.2 | 0.2 | |||||||||
Taxation advice |
| 0.1 | 1.8 | |||||||||
Other assurance services |
3.0 | 1.0 | 0.3 | |||||||||
All other services
|
|
0.5
|
|
|
0.2
|
|
|
0.8
|
| |||
|
29.8
|
|
|
29.2
|
|
|
29.7
|
| ||||
The other assurance services provided by the auditor relate to agreed upon procedures and other assurance services outside of statutory audit requirements. All other services provided by the auditor primarily related to advisory services for the year ended 31 December 2018.
In addition to the above, fees paid in respect of the GSK pension schemes were:
|
| |||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Audit |
0.3 | 0.3 | 0.4 | |||||||||
Other services
|
|
|
|
|
0.1
|
|
|
|
|
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|
||
|
||
|
Notes to the financial statements continued
9. Employee costs
2018 £m |
2017 £m |
2016 £m |
||||||||||
Wages and salaries |
7,203 | 7,116 | 6,391 | |||||||||
Social security costs |
795 | 802 | 733 | |||||||||
Pension and other post-employment costs, including augmentations (Note 28) |
586 | 616 | 541 | |||||||||
Cost of share-based incentive plans |
393 | 347 | 338 | |||||||||
Severance and other costs from integration and restructuring activities
|
463 | 241 | 209 | |||||||||
|
9,440
|
|
|
9,122
|
|
|
8,212
|
| ||||
The increase in wages and salaries included the impact of movements in exchange rates. The Group provides benefits to employees, commensurate with local practice in individual countries, including, in some markets, healthcare insurance, subsidised car schemes and personal life assurance.
The cost of share-based incentive plans is analysed as follows:
|
| |||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Share Value Plan |
304 | 276 | 271 | |||||||||
Performance Share Plan |
49 | 47 | 39 | |||||||||
Share option plans |
4 | 4 | 4 | |||||||||
Cash settled and other plans
|
36 | 20 | 24 | |||||||||
393 | 347 | 338 | ||||||||||
The average monthly number of persons employed by the Group (including Directors) during the year was:
|
| |||||||||||
2018
|
2017
|
2016
|
||||||||||
Manufacturing |
37,296 | 38,632 | 38,611 | |||||||||
Selling, general and administration |
47,887 | 49,141 | 49,961 | |||||||||
Research and development
|
|
11,668
|
|
|
11,576
|
|
|
11,255
|
| |||
|
96,851
|
|
|
99,349
|
|
|
99,827
|
| ||||
The average monthly number of Group employees excludes temporary and contract staff. The numbers of Group employees at the end of each financial year are given in the financial record on page 231. The monthly average number of persons employed by GlaxoSmithKline plc in 2018 was nil (2017 nil).
The compensation of the Directors and Senior Management (members of the CET) in aggregate, was as follows:
|
| |||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Wages and salaries |
29 | 26 | 25 | |||||||||
Social security costs |
3 | 4 | 4 | |||||||||
Pension and other post-employment costs |
3 | 3 | 2 | |||||||||
Cost of share-based incentive plans
|
|
20
|
|
|
22
|
|
|
15
|
| |||
55 | 55 | 46 |
Further information on the remuneration of the Directors is given in the Remuneration report on pages 96 to 124.
10. Major restructuring costs
Within the Pharmaceuticals sector, the highly regulated manufacturing operations and supply chains and long lifecycle of the business mean that restructuring programmes, particularly those that involve the rationalisation or closure of manufacturing or R&D sites, are likely to take several years to complete.
Major restructuring costs are those related to specific Board approved Major restructuring programmes, including integration costs following material acquisitions, which are structural and are of a significant scale where the costs of individual or related projects exceed £25 million.
The existing Combined restructuring and integration programme incorporates the previous Major Change programme, the Pharmaceuticals restructuring programme and the restructuring and integration programme following the Novartis transaction in 2015. In July 2018, the Board approved a new Major restructuring programme, which is designed to significantly improve the competitiveness and efficiency of the Groups cost base with savings delivered primarily through supply chain optimisation and reductions in administrative costs.
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10. Major restructuring costs continued
The total restructuring costs of £809 million in 2018 were incurred in a number of areas, including the following:
| Restructuring of the commercial operating model, including staff reductions in the US, Europe and International Pharmaceutical commercial operations and the US Respiratory field sales force |
| Manufacturing site restructuring, including the GSK steriles manufacturing facility at Ulverston, United Kingdom |
| Vaccines transformation and remediation |
| Restructuring of the Pharmaceutical and Consumer Healthcare supply chains leading to simplification of the operating model and improved resource allocation |
| Transformation of central functions, including GSK technology platforms and interfaces, to deliver greater digital synergies, simplification of applications and staff reductions. |
The analysis of the costs charged to operating profit under these programmes was as follows:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Increase in provision for Major restructuring programmes (see Note 29) |
450 | 259 | 163 | |||||||||
Amount of provision reversed unused (see Note 29) |
(99 | ) | (43 | ) | (140 | ) | ||||||
Impairment losses recognised |
130 | 278 | 158 | |||||||||
Other non-cash charges |
72 | 247 | 108 | |||||||||
Other cash costs |
256 | 315 | 681 | |||||||||
809 | 1,056 | 970 | ||||||||||
Asset impairments and other non-cash charges principally comprise fixed asset write-downs across support function, manufacturing and research facilities and accelerated depreciation where asset lives in R&D and manufacturing have been shortened as a result of the major restructuring programmes. All other charges have been or will be settled in cash and include the termination of leases, site closure costs and consultancy and project management fees.
The analysis of Major restructuring charges by income statement line was as follows:
|
| |||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Cost of sales |
443 | 545 | 297 | |||||||||
Selling, general and administration |
315 | 248 | 514 | |||||||||
Research and development |
49 | 263 | 159 | |||||||||
Other operating income/(expense)
|
|
2
|
|
|
|
|
|
|
| |||
809 | 1,056 | 970 | ||||||||||
11. Finance income
|
| |||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Year to 31 December 2018 under IFRS 9 |
||||||||||||
Finance income arising from: |
||||||||||||
Financial assets measured at amortised cost |
73 | |||||||||||
Financial assets measured at fair value through profit or loss |
1 | |||||||||||
Net gains arising from hedge ineffectiveness on net investment hedges |
7 | |||||||||||
Years to 31 December 2017 and 31 December 2016 under IAS 39 |
||||||||||||
Interest income arising from: |
||||||||||||
Cash and cash equivalents |
60 | 67 | ||||||||||
Available-for-sale investments |
2 | 1 | ||||||||||
Loans and receivables |
1 | 2 | ||||||||||
Fair value adjustments on derivatives at fair value through profit or loss
|
|
2
|
|
|
2
|
| ||||||
81 | 65 | 72 |
Interest income arising from financial assets measured at amortised cost in 2018 includes interest income arising from assets which would have been classified as available-for-sale investments and loans and receivables in prior years under IAS 39. This also includes interest income arising from certain cash and cash equivalents. Interest income arising from financial assets measured at fair value through profit or loss in 2018 includes interest income arising from other cash and cash equivalents.
Net gains arising from hedge ineffectiveness on net investment hedges were recorded in Fair value adjustments on derivatives at fair value through profit or loss in 2017 and 2016. All derivatives accounted for at fair value through profit or loss other than designated and effective hedging instruments (see Note 42, Financial instruments and related disclosures) are classified as held-for-trading financial instruments.
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||
|
||
|
||
|
Notes to the financial statements continued
12. Finance expense
2018 £m |
2017 £m |
2016 £m |
||||||||||
Finance expense arising on: |
||||||||||||
Financial liabilities at amortised cost |
(677 | ) | (698 | ) | (671 | ) | ||||||
Derivatives at fair value through profit or loss |
(38 | ) | (22 | ) | (30 | ) | ||||||
Net losses arising from: |
||||||||||||
Financial instruments mandatorily measured at fair value through profit or loss |
3 | (4 | ) | (3 | ) | |||||||
Reclassification of hedges from other comprehensive income |
(2 | ) | | (1 | ) | |||||||
Unwinding of discounts on provisions |
(15 | ) | (16 | ) | (16 | ) | ||||||
Other finance expense |
(69 | ) | 6 | (15 | ) | |||||||
|
(798
|
)
|
|
(734
|
)
|
|
(736
|
)
| ||||
All derivatives accounted for at fair value through profit or loss, other than designated and effective hedging instruments (see Note 42, Financial instruments and related disclosures), are classified as held-for-trading financial instruments. Interest expense arising on derivatives at fair value through profit or loss relates to swap interest expense. Other finance expense in 2018 includes a £39 million charge (2017 £24 million credit) for interest relating to historical income tax settlements.
13. Associates and joint ventures
The Groups share of after tax profits and losses of associates and joint ventures is set out below:
|
| |||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Share of after tax profits of associates |
28 | 16 | 9 | |||||||||
Share of after tax profits/(losses) of joint ventures |
3 | (3 | ) | (4 | ) | |||||||
31 | 13 | 5 | ||||||||||
At 31 December 2018, the Group held one significant associate, Innoviva, Inc.
Summarised income statement information in respect of Innoviva is set out below for the periods in which the Group accounted for its investment in Innoviva as an associate. The Groups 2018 share of after tax profits of associates and other comprehensive income includes a profit of £33 million and other comprehensive income of £nil in respect of Innoviva.
|
| |||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Turnover |
183 | 165 | 98 | |||||||||
Profit after taxation |
134 | 103 | 44 | |||||||||
Other comprehensive income |
| | | |||||||||
Total comprehensive income |
134 | 103 | 44 |
The results of Innoviva included in the summarised income statement information above represent the estimated earnings of Innoviva in the relevant periods, based on publicly available information. Innovivas turnover is from royalty income from GSK in relation to Relvar/Breo Ellipta, Anoro Ellipta and Trelegy Ellipta sales.
Aggregated financial information in respect of GSKs share of other associated undertakings and joint ventures is set out below:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Share of turnover |
242 | 252 | 133 | |||||||||
Share of after tax (losses)/profits |
(2 | ) | (5 | ) | (1 | ) | ||||||
Share of other comprehensive income |
| | | |||||||||
Share of total comprehensive (expense)/income
|
|
(2
|
)
|
|
(5
|
)
|
|
(1
|
)
|
The Groups sales to associates and joint ventures were £43 million in 2018 (2017 £41 million; 2016 £43 million).
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Governance and remuneration
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Financial statements
| ||
Investor information
|
14. Taxation
The Groups tax charge is the sum of the total current and deferred tax expense.
Taxation charge based on profits for the year | 2018 £m |
2017 £m |
2016 £m |
|||||||||
UK current year charge |
234 | 199 | 241 | |||||||||
Rest of World current year charge |
1,426 | 1,928 | 1,326 | |||||||||
Credit in respect of prior periods |
(492 | ) | (508 | ) | (149 | ) | ||||||
Total current taxation |
1,168 | 1,619 | 1,418 | |||||||||
Total deferred taxation |
(414 | ) | (263 | ) | (541 | ) | ||||||
Total tax |
754 | 1,356 | 877 |
In 2018, GSK made payments of £113 million in UK corporation tax to HMRC. These amounts are for UK corporation tax only, and do not include the various other business taxes borne in the UK by GSK each year.
The deferred tax credit in 2018 reflected the origination of current year tax losses, where offset against taxable profits in future periods is probable, as well as an uplift in the tax carrying value of certain Consumer Healthcare brands as a result of the acquisition of Novartis interest in the former Consumer Healthcare Joint Venture.
The deferred tax credit in 2017 reflected the revaluation of existing deferred tax liabilities to reflect a lower Swiss tax rate applicable following Swiss tax reform, and an increase in deferred tax assets related to intra-Group profit on inventory. The impact of these items was partly offset by the revaluation of existing deferred tax assets to reflect the lower US tax rate applicable following the enactment of US tax reform. In 2016, the net deferred tax credit was impacted to a greater extent by remeasurement of the contingent consideration in relation to the former Shionogi-ViiV Healthcare Joint Venture.
The following table reconciles the tax charge calculated at the UK statutory rate on the Group profit before tax with the actual tax charge for the year.
Reconciliation of taxation on Group profits | 2018 £m |
2018 % |
2017 £m |
2017 % |
2016 £m |
2016 % |
||||||||||||||||||
Profit before tax |
4,800 | 3,525 | 1,939 | |||||||||||||||||||||
UK statutory rate of taxation |
912 | 19.0 | 679 | 19.25 | 388 | 20.0 | ||||||||||||||||||
Differences in overseas taxation rates |
675 | 14.1 | 635 | 18.0 | 593 | 30.6 | ||||||||||||||||||
Benefit of intellectual property incentives |
(522 | ) | (10.9 | ) | (458 | ) | (13.0 | ) | (321 | ) | (16.5 | ) | ||||||||||||
R&D credits |
(73 | ) | (1.5 | ) | (75 | ) | (2.1 | ) | (93 | ) | (4.8 | ) | ||||||||||||
FV remeasurement of non-taxable put options |
221 | 4.6 | 227 | 6.4 | 340 | 17.5 | ||||||||||||||||||
Tax losses where no benefit is recognised |
24 | 0.5 | 28 | 0.8 | (15 | ) | (0.8 | ) | ||||||||||||||||
Permanent differences on disposals and acquisitions |
(7 | ) | (0.1 | ) | 4 | 0.1 | (21 | ) | (1.1 | ) | ||||||||||||||
Other permanent differences |
85 | 1.7 | 196 | 5.6 | 122 | 6.3 | ||||||||||||||||||
Re-assessments of prior year estimates |
(436 | ) | (9.1 | ) | (475 | ) | (13.5 | ) | (116 | ) | (6.0 | ) | ||||||||||||
US and Swiss Tax Reform |
(125 | ) | (2.6 | ) | 595 | 16.9 | ||||||||||||||||||
Tax charge/tax rate
|
|
754
|
|
|
15.7
|
|
|
1,356
|
|
|
38.5
|
|
|
877
|
|
|
45.2
|
|
GSK has a substantial business presence in many countries around the world. The impact of differences in overseas taxation rates arose from profits being earned in countries with tax rates higher than the UK statutory rate, the most significant of which in 2018 were the US, Belgium, India and Japan. The adverse impact was partly offset by the increased benefit of intellectual property incentives such as the UK Patent box and Belgian Patent income deduction regimes. Such regimes provide a reduced rate of corporate income tax on profits earned from qualifying patents.
The Groups 2018 tax rate of 15.7% has been influenced by the reassessment of open issues with tax authorities in various jurisdictions, together with the £125 million credit related to a reduced estimate of the 2017 impact of US Tax Reform following additional guidance being released by the US tax authorities and the transaction related charges arising on the Groups put option liabilities to ViiV Healthcare and the former Consumer Healthcare Joint Venture with Novartis.
Future tax charges, and therefore the Groups effective tax rate, may be affected by factors such as acquisitions, disposals, restructuring, the location of research and development activity, tax regime reforms and resolution of open matters as tax affairs are brought up to date around the world.
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|
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Notes to the financial statements continued
14. Taxation continued
Tax on items charged to equity and statement of comprehensive income | 2018 £m |
2017 £m |
2016 £m |
|||||||||
Current taxation |
||||||||||||
Share-based payments |
| | 7 | |||||||||
Defined benefit plans |
(2 | ) | 26 | 32 | ||||||||
(2 | ) | 26 | 39 | |||||||||
Deferred taxation |
||||||||||||
Share-based payments |
2 | (4 | ) | | ||||||||
Defined benefit plans |
(144 | ) | (247 | ) | 94 | |||||||
Fair value movements on cash flow hedges |
(2 | ) | | 2 | ||||||||
Fair value movements on equity investments |
10 | 29 | 51 | |||||||||
(134 | ) | (222 | ) | 147 | ||||||||
Total (charge)/credit to equity and statement of comprehensive income |
(136 | ) | (196 | ) | 186 |
All of the above items have been charged to the statement of comprehensive income except for tax on share-based payments.
Issues relating to taxation
The integrated nature of the Groups worldwide operations involves significant investment in research and strategic manufacture at a limited number of locations, with consequential cross-border supply routes into numerous end-markets. In line with current OECD guidelines GSK bases its transfer pricing policy on the arms length principle. However, different tax authorities may seek to attribute further profit to activities being undertaken in their jurisdiction potentially resulting in double taxation. The Group also has open items in several jurisdictions concerning such matters as the deductibility of particular expenses and the tax treatment of certain business transactions. GSK applies a risk-based approach to determine the transactions most likely to be subject to challenge and the probability that the Group would be able to obtain compensatory adjustments under international tax treaties.
The calculation of the Groups total tax charge therefore necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. At 31 December 2018 the Group had recognised provisions of £1,082 million in respect of such uncertain tax positions (2017 £1,175 million). The decrease in recognised provisions during 2018 was driven by the reassessment of estimates and the utilisation of provisions for uncertain tax positions following the settlement of a number of open issues with tax authorities in various jurisdictions. Whilst the ultimate liability for such matters may vary from the amounts provided and is dependent upon the outcome of agreements with the relevant tax authorities, or litigation where appropriate, the Group continues to believe that it has made appropriate provision for periods which are open and not yet agreed by the tax authorities. GSK does not currently anticipate any material changes to the amounts provided for transfer pricing or tax contingencies during the next 12 months.
A provision for deferred tax liabilities of £185 million as at 31 December 2018 (2017 £209 million) has been made in respect of withholding taxation that would be payable on the remittance of profits by certain overseas subsidiaries. Whilst the aggregate amount of unremitted profits at the balance sheet date was approximately £18 billion (2017 £17 billion), the majority of these unremitted profits would not be subject to tax (including withholding tax) on repatriation, as UK legislation relating to company distributions provides for exemption from tax for most overseas profits, subject to certain exceptions. Deferred tax is not provided on temporary differences of £231 million (2017 £nil) arising on unremitted profits as management has the ability to control any future reversal and does not consider such a reversal to be probable.
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14. Taxation continued
Movement in deferred tax assets and liabilities
Accelerated capital allowances £m |
Intangible assets £m |
Contingent consideration |
Intra-Group £m |
Pensions & £m |
Tax losses £m |
Share option and award schemes £m |
Other net |
Total £m |
||||||||||||||||||||||||||||
At 1 January 2017 |
(377 | ) | (2,324 | ) | 1,138 | 1,054 | 1,262 | 227 | 110 | 1,350 | 2,440 | |||||||||||||||||||||||||
Exchange adjustments |
(7 | ) | 75 | | (58 | ) | (48 | ) | (5 | ) | (4 | ) | (18 | ) | (65 | ) | ||||||||||||||||||||
Credit/(charge) to income statement |
62 | 330 | (52 | ) | 256 | 3 | 59 | (1 | ) | (88 | ) | 569 | ||||||||||||||||||||||||
Credit/(charge) to income statement associated with US tax reform |
5 | 116 | (218 | ) | (235 | ) | (210 | ) | (20 | ) | (27 | ) | (216 | ) | (805 | ) | ||||||||||||||||||||
Credit to income statement associated with Swiss tax reform |
| 483 | | | | | | | 483 | |||||||||||||||||||||||||||
(Charge)/credit to statement of comprehensive income and equity |
| | | | (247 | ) | | (4 | ) | 29 | (222 | ) | ||||||||||||||||||||||||
At 1 January 2018 |
(317 | ) | (1,320 | ) | 868 | 1,017 | 760 | 261 | 74 | 1,057 | 2,400 | |||||||||||||||||||||||||
Exchange adjustments |
(6 | ) | (4 | ) | | 43 | 38 | 2 | 2 | 9 | 84 | |||||||||||||||||||||||||
Credit/(charge) to income statement |
(12 | ) | 365 | (34 | ) | (31 | ) | 33 | 183 | (7 | ) | (101 | ) | 396 | ||||||||||||||||||||||
Credit/(charge) to statement of comprehensive income and equity |
| | | | (144 | ) | | 2 | 8 | (134 | ) | |||||||||||||||||||||||||
Reclassification on disposal |
| | | | 7 | 1 | | (23 | ) | (15 | ) | |||||||||||||||||||||||||
At 31 December 2018 |
(335 | ) | (959 | ) | 834 | 1,029 | 694 | 447 | 71 | 950 | 2,731 |
The net credit to the income statement of £396 million included an £18 million charge related to R&D incentives recognised within Operating profit (and not the taxation charge) in the income statement.
Deferred tax liabilities provided in relation to intangible assets predominately relate to temporary differences arising on assets and liabilities acquired as part of historic business combinations.
The Group continues to recognise deferred tax assets on future obligations in respect of contingent consideration amounts payable to minority shareholders. These payments are tax deductible at the point in time at which payment is made.
A deferred tax asset is recognised on intra-Group profits arising on inter-company inventory which are eliminated within the consolidated accounts. As intra-Group profits are not eliminated from the individual entities tax returns a temporary difference arises that will reverse at the point in time inventory is sold externally.
The deferred tax asset recognised on tax losses of £447 million (2017 £261 million) related to trading losses. Other net temporary differences included accrued expenses for which a tax deduction is only available on a paid basis, such as for pensions.
Deferred tax asset and liabilities are recognised on the balance sheet as follows:
2018 |
2017 £m |
|||||||
Deferred tax assets |
3,887 | 3,796 | ||||||
Deferred tax liabilities |
(1,156 | ) | (1,396 | ) | ||||
2,731 | 2,400 |
Deferred tax assets are recognised on US foreign tax credits only where it is probable that future taxable profits will be available. The net amount of foreign tax credits on which deferred tax has not been provided was £114 million at 31 December 2018 (2017 £151 million).
2018 | 2017 | |||||||||||||||
Unrecognised tax losses |
Tax losses £m |
Unrecognised £m |
Tax losses £m |
Unrecognised £m |
||||||||||||
Trading losses expiring: |
||||||||||||||||
Within 10 years |
678 | 148 | 802 | 187 | ||||||||||||
More than 10 years |
957 | 93 | 872 | 99 | ||||||||||||
Available indefinitely |
89 | 15 | 86 | 14 | ||||||||||||
At 31 December |
1,724 | 256 | 1,760 | 300 | ||||||||||||
Capital losses expiring: |
||||||||||||||||
Available indefinitely |
2,042 | 399 | 1,924 | 372 | ||||||||||||
At 31 December |
2,042 | 399 | 1,924 | 372 |
Deferred tax assets are only recognised where it is probable that future taxable profit will be available to utilise losses.
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|
||
|
||
|
Notes to the financial statements continued
15. Earnings per share
2018 pence |
2017 pence |
2016 pence |
||||||||||
Basic earnings per share |
73.7 | 31.4 | 18.8 | |||||||||
Diluted earnings per share |
72.9 | 31.0 | 18.6 |
Basic earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of shares in issue during the period after deducting shares held by the ESOP Trusts and Treasury shares. The trustees have waived their rights to dividends on the shares held by the ESOP Trusts.
Diluted earnings per share has been calculated after adjusting the weighted average number of shares used in the basic calculation to assume the conversion of all potentially dilutive shares. A potentially dilutive share forms part of the employee share schemes where its exercise price is below the average market price of GSK shares during the period and any performance conditions attaching to the scheme have been met at the balance sheet date.
The numbers of shares used in calculating basic and diluted earnings per share are reconciled below.
Weighted average number of shares in issue | 2018 |
2017 millions |
2016 millions | ||||||||||||
Basic |
4,914 | 4,886 | 4,860 | ||||||||||||
Dilution for share options and awards |
57 | 55 | 49 | ||||||||||||
Diluted
|
|
4,971
|
|
|
4,941
|
|
|
4,909
|
|
16. Dividends
2018 | 2017 | 2016 | ||||||||||||||||||||||||||||||||||
Paid/payable | Dividend per share (pence) |
Total dividend £m |
Paid | Dividend per share (pence) |
Total dividend £m |
Paid | Dividend per share (pence) |
Total dividend £m |
||||||||||||||||||||||||||||
First interim |
12 July 2018 | 19 | 934 | 13 July 2017 | 19 | 928 | 14 July 2016 | 19 | 923 | |||||||||||||||||||||||||||
Second interim |
11 October 2018 | 19 | 934 | 12 October 2017 | 19 | 929 | 13 October 2016 | 19 | 925 | |||||||||||||||||||||||||||
Third interim |
10 January 2019 | 19 | 935 | 11 January 2018 | 19 | 929 | 12 January 2017 | 19 | 925 | |||||||||||||||||||||||||||
Fourth interim |
11 April 2019 | 23 | 1,132 | 12 April 2018 | 23 | 1,130 | 13 April 2017 | 23 | 1,124 | |||||||||||||||||||||||||||
Total
|
|
80
|
|
|
3,935
|
|
|
80
|
|
|
3,916
|
|
|
80
|
|
|
3,897
|
|
Under IFRS, interim dividends are only recognised in the financial statements when paid and not when declared. GSK normally pays a dividend two quarters after the quarter to which it relates and one quarter after it is declared. The 2018 financial statements recognise those dividends paid in 2018, namely the third and fourth interim dividends for 2017, and the first and second interim dividends for 2018.
The amounts recognised in each year were as follows:
2018 £m |
2017 £m |
2016 £m | ||||||||||
Dividends to shareholders
|
|
3,927
|
|
|
3,906
|
|
|
4,850
|
|
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|
17. Property, plant and equipment
Land and buildings £m |
Plant, equipment and vehicles £m |
Assets in construction £m |
Total £m |
|||||||||||||
Cost at 1 January 2017 |
7,761 | 11,235 | 3,168 | 22,164 | ||||||||||||
Exchange adjustments |
(127 | ) | (62 | ) | (45 | ) | (234 | ) | ||||||||
Other additions |
69 | 296 | 1,219 | 1,584 | ||||||||||||
Capitalised borrowing costs |
| | 30 | 30 | ||||||||||||
Disposals and write-offs |
(376 | ) | (685 | ) | (31 | ) | (1,092 | ) | ||||||||
Reclassifications |
602 | 1,186 | (1,826 | ) | (38 | ) | ||||||||||
Transfer to assets held for sale |
(462 | ) | (219 | ) | (14 | ) | (695 | ) | ||||||||
Cost at 31 December 2017 |
7,467 | 11,751 | 2,501 | 21,719 | ||||||||||||
Exchange adjustments |
150 | 187 | 25 | 362 | ||||||||||||
Other additions |
33 | 190 | 1,135 | 1,358 | ||||||||||||
Capitalised borrowing costs |
| | 21 | 21 | ||||||||||||
Disposals and write-offs |
(90 | ) | (440 | ) | (53 | ) | (583 | ) | ||||||||
Reclassifications |
403 | 1,016 | (1,486 | ) | (67 | ) | ||||||||||
Transfer to assets held for sale |
(152 | ) | (167 | ) | (3 | ) | (322 | ) | ||||||||
Cost at 31 December 2018 |
7,811 | 12,537 | 2,140 | 22,488 | ||||||||||||
Depreciation at 1 January 2017 |
(3,259 | ) | (7,410 | ) | | (10,669 | ) | |||||||||
Exchange adjustments |
50 | 110 | | 160 | ||||||||||||
Charge for the year |
(299 | ) | (689 | ) | | (988 | ) | |||||||||
Disposals and write-offs |
158 | 539 | | 697 | ||||||||||||
Transfer to assets held for sale |
314 | 190 | | 504 | ||||||||||||
Depreciation at 31 December 2017 |
(3,036 | ) | (7,260 | ) | | (10,296 | ) | |||||||||
Exchange adjustments |
(61 | ) | (111 | ) | | (172 | ) | |||||||||
Charge for the year |
(268 | ) | (686 | ) | | (954 | ) | |||||||||
Disposals and write-offs |
77 | 401 | | 478 | ||||||||||||
Transfer to assets held for sale |
55 | 122 | | 177 | ||||||||||||
Depreciation at 31 December 2018 |
(3,233 | ) | (7,534 | ) | | (10,767 | ) | |||||||||
Impairment at 1 January 2017 |
(279 | ) | (344 | ) | (64 | ) | (687 | ) | ||||||||
Exchange adjustments |
8 | 2 | (2 | ) | 8 | |||||||||||
Disposals and write-offs |
210 | 104 | 28 | 342 | ||||||||||||
Impairment losses |
(194 | ) | (138 | ) | (17 | ) | (349 | ) | ||||||||
Reversal of impairments |
7 | 9 | 1 | 17 | ||||||||||||
Transfer to assets held for sale |
87 | 8 | 11 | 106 | ||||||||||||
Impairment at 31 December 2017 |
(161 | ) | (359 | ) | (43 | ) | (563 | ) | ||||||||
Exchange adjustments |
(8 | ) | (4 | ) | (1 | ) | (13 | ) | ||||||||
Disposals and write-offs |
10 | 59 | 22 | 91 | ||||||||||||
Impairment losses |
(16 | ) | (143 | ) | (46 | ) | (205 | ) | ||||||||
Reversal of impairments |
1 | 6 | | 7 | ||||||||||||
Transfer to assets held for sale |
| 20 | | 20 | ||||||||||||
Impairment at 31 December 2018 |
(174 | ) | (421 | ) | (68 | ) | (663 | ) | ||||||||
Total depreciation and impairment at 31 December 2017 |
|
(3,197 |
) |
|
(7,619 |
) |
|
(43 |
) |
|
(10,859 |
) | ||||
Total depreciation and impairment at 31 December 2018 |
(3,407 | ) | (7,955 | ) | (68 | ) | (11,430 | ) | ||||||||
Net book value at 1 January 2017 |
4,223 | 3,481 | 3,104 | 10,808 | ||||||||||||
Net book value at 31 December 2017 |
4,270 | 4,132 | 2,458 | 10,860 | ||||||||||||
Net book value at 31 December 2018 |
4,404 | 4,582 | 2,072 | 11,058 |
The weighted average interest rate for capitalised borrowing costs in the year was 3% (2017 4%). Disposals and write-offs in the year included a number of assets with nil net book value that are no longer in use in the business.
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|
||
|
Notes to the financial statements continued
17. Property, plant and equipment continued
The net book value at 31 December 2018 of the Groups land and buildings included £24 million (2017 £27 million) held under finance leases. In addition, the net book value of plant, equipment and vehicles held under finance lease at 31 December 2018 was £59 million (2017 £55 million).
The impairment losses principally arose from decisions to rationalise facilities and are calculated based on either fair value less costs of disposal or value in use. The fair value less costs of disposal valuation methodology uses significant inputs which are not based on observable market data, and therefore this valuation technique is classified as level 3 of the fair value hierarchy. These calculations determine the net present value of the projected risk-adjusted, post-tax cash flows of the relevant asset or cash generating unit, applying a discount rate of the Group post-tax weighted average cost of capital (WACC) of 7%, adjusted where appropriate for relevant specific risks. For value in use calculations, where an impairment is indicated and a pre-tax cash flow calculation is expected to give a materially different result, the test would be reperformed using pre-tax cash flows and a pre-tax discount rate. The Group WACC is equivalent to a pre-tax discount rate of approximately 9%. The net impairment losses have been charged to cost of sales £142 million (2017 £198 million), R&D £9 million (2017 £93 million) and SG&A £54 million (2017 £36 million), and included £138 million (2017 £278 million) arising from the major restructuring programmes.
Reversals of impairment arose from subsequent reviews of the impaired assets where the conditions which gave rise to the original impairments were deemed no longer to apply. All of the reversals have been credited to cost of sales.
The carrying value at 31 December 2018 of assets for which impairments have been charged or reversed in the year was £95 million (2017 £33 million).
During 2018, £67 million (2017 £38 million) of computer software was reclassified from assets in construction to intangible assets on becoming ready for use.
18. Goodwill
2018 £m |
2017 £m |
|||||||
Cost at 1 January |
5,734 | 5,965 | ||||||
Exchange adjustments |
199 | (228 | ) | |||||
Transfer to assets held for sale |
(144 | ) | (3 | ) | ||||
Cost at 31 December |
5,789 | 5,734 | ||||||
Net book value at 1 January |
5,734 | 5,965 | ||||||
Net book value at 31 December |
5,789 | 5,734 | ||||||
Goodwill is allocated to the Groups segments as follows: |
||||||||
2018 £m |
2017 £m |
|||||||
Pharmaceuticals |
3,273 | 3,172 | ||||||
Vaccines |
1,342 | 1,302 | ||||||
Consumer Healthcare |
1,174 | 1,260 | ||||||
Net book value at 31 December |
5,789 | 5,734 |
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18. Goodwill continued
The recoverable amounts of the cash generating units are assessed using a fair value less costs of disposal model. Fair value less costs of disposal is calculated using a discounted cash flow approach, with a post-tax discount rate applied to the projected risk-adjusted post-tax cash flows and terminal value.
The discount rate used is based on the Group WACC of 7%, as most cash generating units have integrated operations across large parts of the Group. The discount rate is adjusted where appropriate for specific segment, country and currency risks. The valuation methodology uses significant inputs which are not based on observable market data, therefore this valuation technique is classified as level 3 in the fair value hierarchy.
Details relating to the discounted cash flow models used in the impairment tests of the Pharmaceuticals, Vaccines and Consumer Healthcare cash generating units are as follows:
Valuation basis
|
Fair value less costs of disposal
|
|||||
Key assumptions |
Sales growth rates Profit margins Terminal growth rate Discount rate Taxation rate
| |||||
Determination of assumptions |
Growth rates are internal forecasts based on both internal and external market information. Margins reflect past experience, adjusted for expected changes. Terminal growth rates based on managements estimate of future long-term average growth rates. Discount rates based on Group WACC, adjusted where appropriate. Taxation rates based on appropriate rates for each region.
| |||||
Period of specific projected cash flows
|
Five years
|
|||||
Terminal growth rate and discount rate |
Terminal growth rate
|
Discount rate
| ||||
| ||||||
Pharmaceuticals |
1% p.a. |
7.5% | ||||
Vaccines | 1% p.a. | 7.5% | ||||
Consumer Healthcare
|
2% p.a.
|
6%
|
The terminal growth rates do not exceed the long-term projected growth rates for the relevant markets, reflect the impact of future generic competition and take account of new product launches.
In each case the valuations indicated sufficient headroom such that a reasonably possible change to key assumptions is unlikely to result in an impairment of the related goodwill. Goodwill is monitored at the segmental level.
The Pharmaceuticals cash generating unit comprises a collection of smaller cash generating units including assets with indefinite lives with a carrying value of £236 million (2017 £228 million). The Consumer Healthcare cash generating unit also comprises a collection of smaller cash generating units including brands with indefinite lives with a carrying value of £8.5 billion (2017 £8.5 billion).
Details of indefinite life brands are given in Note 19, Other intangible assets.
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|
||
|
Notes to the financial statements continued
19. Other intangible assets
Computer software £m |
Licences, patents, etc. £m |
Amortised brands £m |
Indefinite life £m |
Total £m |
||||||||||||||||
Cost at 1 January 2017 |
2,156 | 15,143 | 427 | 9,375 | 27,101 | |||||||||||||||
Exchange adjustments |
(37 | ) | (215 | ) | (4 | ) | (272 | ) | (528 | ) | ||||||||||
Capitalised development costs |
| 251 | | | 251 | |||||||||||||||
Capitalised borrowing costs |
2 | 3 | | | 5 | |||||||||||||||
Other additions |
233 | 221 | | | 454 | |||||||||||||||
Disposals and asset write-offs |
(217 | ) | (38 | ) | | | (255 | ) | ||||||||||||
Transfer to assets held for sale |
(1 | ) | (90 | ) | | (44 | ) | (135 | ) | |||||||||||
Reclassifications |
38 | | 66 | (66 | ) | 38 | ||||||||||||||
Cost at 31 December 2017 |
2,174 | 15,275 | 489 | 8,993 | 26,931 | |||||||||||||||
Exchange adjustments |
32 | 235 | 29 | 63 | 359 | |||||||||||||||
Capitalised development costs |
| 203 | | | 203 | |||||||||||||||
Capitalised borrowing costs |
1 | | | | 1 | |||||||||||||||
Other additions |
173 | 154 | | | 327 | |||||||||||||||
Disposals and asset write-offs |
(80 | ) | (129 | ) | | | (209 | ) | ||||||||||||
Transfer to assets held for sale |
(2 | ) | (81 | ) | (9 | ) | | (92 | ) | |||||||||||
Reclassifications |
67 | | | | 67 | |||||||||||||||
Cost at 31 December 2018 |
2,365 | 15,657 | 509 | 9,056 | 27,587 | |||||||||||||||
Amortisation at 1 January 2017 |
(1,184 | ) | (4,983 | ) | (224 | ) | | (6,391 | ) | |||||||||||
Exchange adjustments |
25 | 141 | | | 166 | |||||||||||||||
Charge for the year |
(163 | ) | (761 | ) | (10 | ) | | (934 | ) | |||||||||||
Disposals and asset write-offs |
210 | 25 | | | 235 | |||||||||||||||
Transfer to assets held for sale |
1 | 25 | | | 26 | |||||||||||||||
Amortisation at 31 December 2017 |
(1,111 | ) | (5,553 | ) | (234 | ) | | (6,898 | ) | |||||||||||
Exchange adjustments |
(24 | ) | (104 | ) | (3 | ) | | (131 | ) | |||||||||||
Charge for the year |
(240 | ) | (645 | ) | (17 | ) | | (902 | ) | |||||||||||
Disposals and asset write-offs |
67 | 124 | | | 191 | |||||||||||||||
Transfer to assets held for sale |
1 | 18 | 1 | | 20 | |||||||||||||||
Amortisation at 31 December 2018 |
(1,307 | ) | (6,160 | ) | (253 | ) | | (7,720 | ) | |||||||||||
Impairment at 1 January 2017 |
(9 | ) | (1,652 | ) | (143 | ) | (130 | ) | (1,934 | ) | ||||||||||
Exchange adjustments |
| 110 | | 3 | 113 | |||||||||||||||
Impairment losses |
(2 | ) | (546 | ) | | (132 | ) | (680 | ) | |||||||||||
Disposals and asset write-offs |
2 | 5 | | | 7 | |||||||||||||||
Transfer to assets held for sale |
| 19 | | 4 | 23 | |||||||||||||||
Impairment at 31 December 2017 |
(9 | ) | (2,064 | ) | (143 | ) | (255 | ) | (2,471 | ) | ||||||||||
Exchange adjustments |
| (69 | ) | (20 | ) | | (89 | ) | ||||||||||||
Impairment losses |
(17 | ) | (51 | ) | | (69 | ) | (137 | ) | |||||||||||
Reversal of impairments |
| 3 | | | 3 | |||||||||||||||
Disposals and asset write-offs |
14 | 4 | | | 18 | |||||||||||||||
Transfer to assets held for sale |
| 11 | | | 11 | |||||||||||||||
Impairment at 31 December 2018 |
(12 | ) | (2,166 | ) | (163 | ) | (324 | ) | (2,665 | ) | ||||||||||
Total amortisation and impairment at 31 December 2017 |
(1,120 | ) | (7,617 | ) | (377 | ) | (255 | ) | (9,369 | ) | ||||||||||
Total amortisation and impairment at 31 December 2018 |
(1,319 | ) | (8,326 | ) | (416 | ) | (324 | ) | (10,385 | ) | ||||||||||
Net book value at 1 January 2017 |
963 | 8,508 | 60 | 9,245 | 18,776 | |||||||||||||||
Net book value at 31 December 2017 |
1,054 | 7,658 | 112 | 8,738 | 17,562 | |||||||||||||||
Net book value at 31 December 2018 |
1,046 | 7,331 | 93 | 8,732 | 17,202 |
The weighted average interest rate for capitalised borrowing costs in the year was 3% (2017 4%).
The net book value of computer software included £578 million (2017 £669 million) of internally generated costs.
The carrying value at 31 December 2018 of intangible assets, for which impairments have been charged or reversed in the year, following those impairments or reversals, was £73 million (2017 £300 million).
The patent expiry dates of the Groups most significant assets, where relevant, are set out on pages 238 and 239.
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19. Other intangible assets continued
Amortisation and impairment losses, net of reversals, have been charged in the income statement as follows:
Amortisation | Net impairment losses | |||||||||||||||
2018 £m |
2017 £m |
2018 £m |
2017 £m |
|||||||||||||
Cost of sales |
593 | 578 | 69 | 400 | ||||||||||||
Selling, general and administration |
178 | 116 | 19 | 2 | ||||||||||||
Research and development |
131 | 240 | 46 | 278 | ||||||||||||
902 | 934 | 134 | 680 | |||||||||||||
Licences, patents, etc. includes a large number of acquired licences, patents, know-how agreements and marketing rights, which are either marketed or in use, or still in development. Note 38, Acquisitions and disposals gives details of additions through business combinations in the year. The book values of the largest individual items are as follows:
|
| |||||||||||||||
2018 £m |
2017 £m |
|||||||||||||||
Meningitis portfolio |
2,363 | 2,450 | ||||||||||||||
Dolutegravir |
1,319 | 1,389 | ||||||||||||||
Benlysta |
905 | 965 | ||||||||||||||
Fluarix/FluLaval |
274 | 321 | ||||||||||||||
HIV assets acquired from BMS |
277 | 277 | ||||||||||||||
Selzentry |
136 | 162 | ||||||||||||||
Okairos technology platform |
205 | 202 | ||||||||||||||
Others |
1,852 | 1,892 | ||||||||||||||
7,331 | 7,658 | |||||||||||||||
The Meningitis portfolio includes Menveo, Bexsero, Men ABCWY and Menjugate.
Indefinite life brands comprise a portfolio of Consumer Healthcare products primarily acquired with the acquisitions of Sterling Winthrop, Inc. in 1994, Block Drug Company, Inc. in 2001, CNS, Inc. in 2006 and the Novartis Consumer Healthcare business in 2015, together with a number of pharmaceutical brands from the acquisition of Stiefel Laboratories, Inc. in 2009. The book values of the major brands are as follows:
|
| |||||||||||||||
2018 £m |
2017 £m |
|||||||||||||||
Voltaren |
2,735 | 2,716 | ||||||||||||||
Otrivin |
1,385 | 1,380 | ||||||||||||||
Fenistil |
651 | 648 | ||||||||||||||
Theraflu |
449 | 441 | ||||||||||||||
Panadol |
388 | 386 | ||||||||||||||
Sensodyne |
265 | 265 | ||||||||||||||
Lamisil |
293 | 289 | ||||||||||||||
Breathe Right |
262 | 236 | ||||||||||||||
Stiefel trade name |
236 | 228 | ||||||||||||||
Excedrin |
193 | 185 | ||||||||||||||
Physiogel |
150 | 166 | ||||||||||||||
Polident |
112 | 112 | ||||||||||||||
Others |
1,613 | 1,686 | ||||||||||||||
8,732 | 8,738 |
Each of these brands is considered to have an indefinite life, given the strength and durability of the brand and the level of marketing support. The brands are in relatively similar stable and profitable market sectors, with similar risk profiles, and their size, diversification and market shares mean that the risk of market-related factors causing a reduction in the lives of the brands is considered to be relatively low. The Group is not aware of any material legal, regulatory, contractual, competitive, economic or other factors which could limit their useful lives. Accordingly, they are not amortised.
Each brand is tested annually for impairment and other amortised intangible assets are tested when indicators of impairment arise. This testing applies a fair value less costs of disposal methodology, generally using post-tax cash flow forecasts with a terminal value calculation and a discount rate equal to the Group post-tax WACC of 7%, adjusted where appropriate for specific segment, country and currency risks. This valuation methodology uses significant inputs which are not based on observable market data, and therefore this valuation technique is classified as level 3 of the fair value hierarchy. The main assumptions include future sales price and volume growth, product contribution, the future expenditure required to maintain the products marketability and registration in the relevant jurisdictions and exchange rates. These assumptions are based on past experience and are reviewed as part of managements budgeting and strategic planning cycle for changes in market conditions and sales erosion through competition. The terminal growth rates applied of between nil% and 3% are managements estimates of future long-term average growth rates of the relevant markets. In each case the valuations indicate sufficient headroom such that a reasonably possible change to key assumptions is unlikely to result in an impairment of these intangible assets.
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|
||
|
||
|
Notes to the financial statements continued
20. Investments in associates and joint ventures
Joint ventures £m |
Associates £m |
2018 £m |
Joint ventures £m |
Associates £m |
2017 £m |
|||||||||||||||||||
At 1 January
|
13 | 170 | 183 | 19 | 244 | 263 | ||||||||||||||||||
Exchange adjustments
|
1 | 11 | 12 | (2 | ) | (10 | ) | (12 | ) | |||||||||||||||
Additions
|
1 | 9 | 10 | | 15 | 15 | ||||||||||||||||||
Disposals
|
| | | | (92 | ) | (92 | ) | ||||||||||||||||
Distributions received
|
| (40 | ) | (40 | ) | (1 | ) | (1 | ) | (2 | ) | |||||||||||||
Other movements
|
1 | 39 | 40 | | (2 | ) | (2 | ) | ||||||||||||||||
Profit/(loss) after tax recognised in the consolidated income statement
|
|
3
|
|
|
28
|
|
|
31
|
|
|
(3
|
)
|
|
16
|
|
|
13
|
| ||||||
At 31 December |
19 | 217 | 236 | 13 | 170 | 183 |
The Group held one significant associate at 31 December 2018, Innoviva, Inc. At 31 December 2018, the Group owned 32 million shares or 31.7% of Innoviva, which is a biopharmaceutical company listed on NASDAQ. Innoviva partnered with GSK in the development of the long acting beta agonist vilanterol and currently receives royalty income from sales of products that contain this component, namely Relvar/Breo Ellipta and Anoro Ellipta. It also has a 15% economic interest in royalties paid by GSK on sales of Trelegy Ellipta. The remaining 85% of the economic interest in these royalties is held by Theravance Biopharma Inc., in which the Group holds 17.4% of the common stock. The investment in Innoviva had a market value of £440 million at 31 December 2018 (2017 £336 million).
Summarised balance sheet information, based on published information, in respect of Innoviva is set out below:
At 31 December £m |
At 31 December £m | |||
Non-current assets |
275 | 124 | ||
Current assets |
157 | 148 | ||
Current liabilities |
(4) | (26) | ||
Non-current liabilities |
(302) | (426) | ||
Net assets/(liabilities) |
126 | (180) | ||
2018 £m |
2017 £m | |||
Interest in associated undertaking |
40 | (57) | ||
Goodwill |
91 | 86 | ||
Fair value and other adjustments |
58 | 118 | ||
Carrying value at 31 December |
189 | 147 |
21. Other investments
Investments £m |
Investments £m |
2018 £m |
2017 £m |
|||||||||||||
At 1 January
|
869 | 49 | 918 | 985 | ||||||||||||
Exchange adjustments
|
48 | 4 | 52 | (64 | ) | |||||||||||
Additions
|
363 | 9 | 372 | 80 | ||||||||||||
Net fair value movements through Other comprehensive income
|
118 | | 118 | 11 | ||||||||||||
Net fair value movements through profit or loss
|
| 16 | 16 | | ||||||||||||
Impairment losses
|
| | | (30 | ) | |||||||||||
Disposals and settlements
|
(89 | ) | (6 | ) | (95 | ) | (64 | ) | ||||||||
Transfers to Assets held for sale
|
(59 | ) | | (59 | ) | | ||||||||||
At 31 December
|
|
1,250
|
|
|
72
|
|
|
1,322
|
|
|
918
|
|
Other investments comprise non-current equity investments which are recorded at fair value at each balance sheet date. For investments traded in an active market, the fair value is determined by reference to the relevant stock exchange quoted bid price. For other investments, the fair value is estimated by management with reference to relevant available information, including the current market value of similar instruments and discounted cash flows of the underlying net assets. Other investments include listed investments of £656 million (2017 £535 million).
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21. Other investments continued
GSK has elected to designate the majority of its equity investments as measured at fair value through other comprehensive income (FVTOCI). The most significant of these investments held at 31 December 2018 were in Theravance Biopharma, Inc. in which the Group holds 17.4% of the common stock, Orchard in which the group holds 14.5% and 23andMe in which the Group holds 14.5%. These investments had a fair value at 31 December 2018 of £194 million (2017 £199 million), £154 million and £229 million respectively. No other investment is individually material. The other investments include equity stakes in companies with which GSK has research collaborations and in companies which provide access to biotechnology developments of potential interest. Information on dividends received from investments measured at FVTOCI is provided in Note 7 Other operating income/(expense).
On disposal of equity investments measured at FVTOCI, the accumulated fair value movements are reclassified from the fair value reserve to retained earnings. Investments with a fair value of £148 million were disposed of during the year. The cumulative gain on these investments after tax was £56 million.
Certain other investments, such as investments in funds with limited lives, are measured at fair value through profit or loss (FVTPL). The cumulative gain/loss on investments measured at FVTPL which were disposed of during the year was £nil. The fair value of these investments on derecognition was £nil.
In 2017, prior to the Groups implementation of IFRS 9, the cumulative fair value movements, based on average cost for shares acquired at different times, for all other investments disposed of during the period were reclassified from the fair value reserve to the income statement.
The impairment losses recorded above for the prior year were recognised in the income statement within Other operating income, together with amounts reclassified from the fair value reserve on recognition of the impairments. These impairments resulted from prolonged or significant declines in the fair value of the equity investments below acquisition cost.
The carrying value at 31 December 2017 of Other investments which had been impaired was as follows:
2017
| ||
Original cost
|
475 | |
Cumulative impairments recognised in the income statement
|
(283) | |
Subsequent fair value increases
|
210
| |
Carrying value at 31 December 2017
|
402 |
Cumulative impairments on those Other investments designated as measured at FVTOCI under IFRS 9 were transferred from retained earnings to the fair value reserve on 1 January 2018 on adoption of IFRS 9.
22. Other non-current assets
2018 £m |
2017 £m |
|||||||
Amounts receivable under insurance contracts
|
675 | 648 | ||||||
Pension schemes in surplus
|
760 | 538 | ||||||
Other receivables
|
|
141
|
|
|
227
|
| ||
1,576 | 1,413 |
Amounts receivable under insurance contacts are held at fair value through profit or loss.
In regards to the other receivables of £141 million, £89 million is classified as financial assets of which £41 million is classified as fair value through profit or loss. Of the remaining balance of £48 million, the expected credit loss allowance was immaterial at 31 December 2018.
23. Inventories
2018 £m |
2017 £m |
|||||||
Raw materials and consumables
|
1,122 | 1,193 | ||||||
Work in progress
|
2,286 | 2,381 | ||||||
Finished goods
|
|
2,068
|
|
|
1,983
|
| ||
5,476 | 5,557 |
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|
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|
||
|
||
|
Notes to the financial statements continued
24. Trade and other receivables
2018 £m |
2017 £m |
|||||||
Trade receivables, net of loss allowance |
5,176 | 4,672 | ||||||
Accrued income |
9 | 21 | ||||||
Other prepayments |
330 | 308 | ||||||
Interest receivable |
4 | 10 | ||||||
Employee loans and advances |
14 | 19 | ||||||
Other receivables
|
|
890
|
|
|
970
|
| ||
|
6,423
|
|
|
6,000
|
|
Trade receivables included £15 million (2017 £11 million) due from associates and joint ventures. Other receivables included £nil (2017 £7 million) due from associates and joint ventures.
Loss allowance | 2018 £m |
2017 £m |
||||||
At 1 January |
140 | 207 | ||||||
Implementation of IFRS 9
|
|
15
|
|
|
|
| ||
At 1 January, as adjusted |
155 | | ||||||
Exchange adjustments |
| (4 | ) | |||||
Charge for the year |
7 | 31 | ||||||
Subsequent recoveries of amounts provided for |
(30 | ) | (79 | ) | ||||
Utilised
|
|
(4
|
)
|
|
(15
|
)
| ||
At 31 December
|
|
128
|
|
|
140
|
|
Of the total trade receivables balance, £71 million was considered credit impaired, against which a £7 million expected credit loss allowance has been applied. No amount was purchased or originated credit impaired.
Of the other receivables of £890 million, £376 million was classified as financial assets of which £41 million was classified as at fair value through profit and loss. On the remaining balance of £335 million, an expected credit loss allowance of £5 million was recognised at 31 December 2018 with no charge reported in profit or loss during the year.
For more discussion on credit risk practices, please refer to Note 42.
25. Cash and cash equivalents
2018 £m |
2017 £m |
|||||||
Cash at bank and in hand |
569 | 826 | ||||||
Short-term deposits
|
|
3,305
|
|
|
3,007
|
| ||
|
3,874
|
|
|
3,833
|
|
In addition, £485 million of cash and cash equivalents has been reported in Assets held for sale, see Note 26, Assets held for sale.
Cash and cash equivalents included £0.2 billion (2017 £0.8 billion) not available for general use due to restrictions applying in the subsidiaries where it is held. Restrictions include exchange controls and taxes on repatriation.
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26. Assets held for sale
2018 £m |
2017 £m |
|||||||
Property, plant and equipment |
109 | 57 | ||||||
Goodwill |
144 | | ||||||
Other intangibles |
1 | 49 | ||||||
Inventory |
50 | 7 | ||||||
Cash and cash equivalents |
485 | | ||||||
Other
|
|
(136
|
)
|
|
|
| ||
|
653
|
|
|
113
|
|
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 disposal and a sale is considered highly probable. They are held at the lower of carrying amount and fair value less costs to sell.
Assets held for sale primarily reflect the disposal group arising from GSKs agreement to divest Horlicks and other Consumer Healthcare nutritional brands to Unilever plc announced in December 2018, and which is expected to complete by the end of 2019. See Note 38, Acquisitions and disposals.
Included within assets held for sale are assets which were written down to fair value less costs to sell of £51 million (2017 £63 million). The valuation methodology used significant inputs which were not based on observable market data and therefore this valuation is classified as level 3 in the fair value hierarchy.
27. Trade and other payables
2018 £m |
2017 £m |
|||||||
Trade payables |
3,645 | 3,528 | ||||||
Wages and salaries |
1,355 | 1,228 | ||||||
Social security |
139 | 166 | ||||||
Consumer Healthcare put option |
| 8,606 | ||||||
ViiV Healthcare put option |
1,240 | 1,304 | ||||||
Other payables |
401 | 363 | ||||||
Deferred income |
216 | 240 | ||||||
Customer return and rebate accruals |
5,064 | 3,463 | ||||||
Other accruals
|
|
1,977
|
|
|
2,072
|
| ||
|
14,037
|
|
|
20,970
|
|
Trade and other payables included £64 million (2017 £53 million) due to associates and joint ventures. The Group provides limited supplier financing arrangements to certain customers. The amounts involved at 31 December 2018 were not material.
Revenue recognised in the year that was included in deferred income at 1 January 2018 was £66 million. Of the remaining balance, £64 million related to proceeds from a site disposal in India, which was expected to complete in 2018, but is now expected to complete in 2019.
Customer return and rebate accruals are provided for by the Group at the point of sale in respect of the estimated rebates, discounts or allowances payable to customers, and included £4,356 million (2017 £2,837 million) in respect of US Pharmaceuticals and Vaccines, as more fully described in the Group financial review on page 63. Accruals are made at the time of sale but the actual amounts paid are based on claims made some time after the initial recognition of the sale. As the amounts are estimated, they may not fully reflect the final outcome and are subject to change dependent upon, amongst other things, the types of buying group and product sales mix. The level of accrual is reviewed and adjusted quarterly in light of historical experience of actual amounts paid and any changes in arrangements. Future events could cause the assumptions on which the accruals are based to change, which could affect the future results of the Group.
Pfizers put option over its shareholding in ViiV Healthcare is currently exercisable. The amount of the liability recognised is derived from several valuation methodologies, including reference to market multiples of comparable companies. The table below shows on an indicative basis the income statement and balance sheet sensitivity of the Pfizer put option to reasonably possible changes in key assumptions.
Increase/(decrease) in financial liability and loss/(gain) in Income statement |
2018 £m |
|||||||
10% increase in sales forecasts |
140 | |||||||
10% decrease in sales forecasts |
(140 | ) | ||||||
10 cent appreciation of US Dollar |
75 | |||||||
10 cent depreciation of US Dollar |
(64 | ) | ||||||
10 cent appreciation of Euro |
44 | |||||||
10 cent depreciation of Euro
|
|
(37
|
)
|
An explanation of the accounting for ViiV Healthcare is set out on page 41.
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|
||
|
||
|
Notes to the financial statements continued
28. Pensions and other post-employment benefits
Pension and other post-employment costs | 2018 £m |
2017 £m |
2016 £m |
|||||||||
UK pension schemes |
246 | 198 | 205 | |||||||||
US pension schemes |
100 | 113 | 106 | |||||||||
Other overseas pension schemes |
190 | 218 | 140 | |||||||||
Unfunded post-retirement healthcare schemes
|
|
50
|
|
|
87
|
|
|
90
|
| |||
|
586
|
|
|
616
|
|
|
541
|
| ||||
Analysed as: |
||||||||||||
Funded defined benefit/hybrid pension schemes |
369 | 335 | 304 | |||||||||
Unfunded defined benefit pension schemes |
43 | 55 | 43 | |||||||||
Unfunded post-retirement healthcare schemes
|
|
50
|
|
|
87
|
|
|
90
|
| |||
Defined benefit schemes |
462 | 477 | 437 | |||||||||
Defined contribution pension schemes
|
|
124
|
|
|
139
|
|
|
104
|
| |||
|
586
|
|
|
616
|
|
|
541
|
|
The costs of the defined benefit pension and post-retirement healthcare schemes are charged in the income statement as follows:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Cost of sales |
160 | 162 | 135 | |||||||||
Selling, general and administration |
228 | 238 | 221 | |||||||||
Research and development
|
|
74
|
|
|
77
|
|
|
81
|
| |||
|
462
|
|
|
477
|
|
|
437
|
|
GSK entities operate pension arrangements which cover the Groups material obligations to provide pensions to retired employees. These arrangements have been developed in accordance with local practices in the countries concerned. Pension benefits can be provided by state schemes; by defined contribution schemes, whereby retirement benefits are determined by the value of funds arising from contributions paid in respect of each employee; or by defined benefit schemes, whereby retirement benefits are based on employee pensionable remuneration and length of service.
Pension costs of defined benefit schemes for accounting purposes have been calculated using the projected unit method. In certain countries pension benefits are provided on an unfunded basis, some administered by trustee companies. Formal, independent, actuarial valuations of the Groups main plans are undertaken regularly, normally at least every three years.
Actuarial movements in the year are recognised through the statement of comprehensive income. Discount rates are derived from AA rated corporate bond yields except in countries where there is no deep market in corporate bonds where government bond yields are used. Discount rates are selected to reflect the term of the expected benefit payments. Projected inflation rate and pension increases are long-term predictions based on the yield gap between long-term index-linked and fixed interest Gilts. In the UK, mortality rates are determined by adjusting the SAPS S2 standard mortality tables to reflect recent scheme experience. These rates are then projected to reflect improvements in life expectancy in line with the CMI 2017 projections with a long-term rate of improvement of 1.25% per year for both males and females. In the US, mortality rates are calculated using the RP2014 white collar table adjusted to reflect recent experience. These rates are projected using MP-2017 to allow for future improvements in life expectancy.
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28. Pensions and other post-employment benefits continued
The average life expectancy assumed now for an individual at the age of 60 and projected to apply in 2038 for an individual then at the age of 60 is as follows:
UK | US | |||||||||||||||
Male Years |
Female Years |
Male Years |
Female Years |
|||||||||||||
Current |
|
27.5 |
|
|
29.1 |
|
|
27.0 |
|
|
28.7 |
| ||||
Projected for 2038 |
29.0 | 30.6 | 28.7 | 30.3 |
The assets of funded schemes are generally held in separately administered trusts, either as specific assets or as a proportion of a general fund, or are insurance contracts. Assets are invested in different classes in order to maintain a balance between risk and return. Investments are diversified to limit the financial effect of the failure of any individual investment. The physical asset allocation strategy for three of the four UK plans remains unchanged, with 55% in return-seeking assets and 45% in liability-matching assets. The remaining plan has materially de-risked given its relative higher maturity as well as improved funding position. The asset allocation of the US plans is currently set at 55% return-seeking assets and 45% liability-matching assets.
The pension plans are exposed to risk that arises because the estimated market value of the plans assets might decline, the investment returns might reduce, or the estimated value of the plans liabilities might increase.
In line with the agreed mix of return-seeking assets to generate future returns and liability-matching assets to better match future pension obligations, the Group has defined an overall long-term investment strategy for the plans, with investments across a broad range of assets. The main market risks within the asset and hedging portfolio are against credit risk, interest rates, long-term inflation, equities, property, currency and bank counterparty risk.
The plan liabilities are a series of future cash flows with relatively long duration. On an IAS 19 basis, these cash flows are sensitive to changes in the expected long-term inflation rate and the discount rate (AA corporate bond yield curve) where an increase in long-term inflation corresponds with an increase in the liabilities, and an increase in the discount rate corresponds with a decrease in the liabilities.
The interest rate risk and credit rate risk in the US are partially hedged. The targets are based on an accounting measure of the plan liabilities.
For the UK plans, there is an interest rate and inflation hedging strategy in place. The targets are based on an economic measure of the plan liabilities. Furthermore, the plans also currently hedge a portion of their equity exposure with a staggered maturity profile.
In the UK, the defined benefit pension schemes operated for the benefit of former Glaxo Wellcome employees and former SmithKline Beecham employees remain separate. These schemes were closed to new entrants in 2001 and subsequent UK employees are entitled to join a defined contribution scheme. In addition, the Group operates a number of post-retirement healthcare schemes, the principal one of which is in the US.
The Group has applied the following financial assumptions in assessing the defined benefit liabilities:
UK | US | Rest of World | ||||||||||||||||||||||||||||||||||
2018 % pa |
2017 % pa |
2016 % pa |
2018 % pa |
2017 % pa |
2016 % pa |
2018 % pa |
2017 % pa |
2016 % pa |
||||||||||||||||||||||||||||
Rate of increase of future earnings |
|
2.00 |
|
|
2.00 |
|
|
2.00 |
|
|
4.00 |
|
|
4.00 |
|
|
4.00 |
|
|
2.70 |
|
|
2.80 |
|
|
2.70 |
| |||||||||
Discount rate |
2.90 | 2.50 | 2.70 | 4.20 | 3.60 | 3.90 | 1.80 | 1.60 | 1.60 | |||||||||||||||||||||||||||
Expected pension increases |
3.20 | 3.20 | 3.20 | n/a | n/a | n/a | 2.10 | 2.20 | 2.10 | |||||||||||||||||||||||||||
Cash balance credit/conversion rate |
n/a | n/a | n/a | 3.20 | 2.90 | 3.20 | 0.40 | 0.30 | 0.30 | |||||||||||||||||||||||||||
Inflation rate
|
|
3.20
|
|
|
3.20
|
|
|
3.20
|
|
|
2.25
|
|
|
2.25
|
|
|
2.25
|
|
|
1.50
|
|
|
1.70
|
|
|
1.50
|
|
Sensitivity analysis detailing the effect of changes in assumptions is provided on page 182. The analysis provided reflects the assumption changes which have the most material impact on the results of the Group.
176
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
28. Pensions and other post-employment benefits continued
The amounts recorded in the income statement and statement of comprehensive income for the three years ended 31 December 2018 in relation to the defined benefit pension and post-retirement healthcare schemes were as follows:
Pensions | Post-retirement benefits |
|||||||||||||||||||
2018 | UK £m |
US £m |
Rest of World £m |
Group £m |
Group £m |
|||||||||||||||
Amounts charged to operating profit |
||||||||||||||||||||
Current service cost |
75 | 72 | 134 | 281 | 29 | |||||||||||||||
Past service cost/(credit) |
93 | 1 | | 94 | (27 | ) | ||||||||||||||
Net interest (income)/cost |
(3 | ) | 20 | 19 | 36 | 49 | ||||||||||||||
Gains from settlements |
| | (14 | ) | (14 | ) | (1 | ) | ||||||||||||
Expenses
|
|
8
|
|
|
7
|
|
|
|
|
|
15
|
|
|
|
| |||||
|
173
|
|
|
100
|
|
|
139
|
|
|
412
|
|
|
50
|
| ||||||
Remeasurement gains/(losses) recorded in the statement of comprehensive income
|
|
495
|
|
|
(108
|
)
|
|
196
|
|
|
583
|
|
|
145
|
| |||||
Pensions | Post-retirement benefits |
|||||||||||||||||||
2017 | UK £m |
US £m |
Rest of World £m |
Group £m |
Group £m |
|||||||||||||||
Amounts charged to operating profit |
||||||||||||||||||||
Current service cost |
79 | 70 | 131 | 280 | 30 | |||||||||||||||
Past service cost/(credit) |
37 | | | 37 | (2 | ) | ||||||||||||||
Net interest cost |
7 | 31 | 16 | 54 | 59 | |||||||||||||||
Expenses
|
|
7
|
|
|
12
|
|
|
|
|
|
19
|
|
|
|
| |||||
|
130
|
|
|
113
|
|
|
147
|
|
|
390
|
|
|
87
|
| ||||||
Remeasurement gains/(losses) recorded in the statement of comprehensive income
|
|
259
|
|
|
240
|
|
|
(14
|
)
|
|
485
|
|
|
64
|
| |||||
Pensions | Post-retirement benefits |
|||||||||||||||||||
2016 | UK £m |
US £m |
Rest of World £m |
Group £m |
Group £m |
|||||||||||||||
Amounts charged to operating profit |
||||||||||||||||||||
Current service cost |
70 | 66 | 110 | 246 | 31 | |||||||||||||||
Past service cost |
52 | 1 | 1 | 54 | 3 | |||||||||||||||
Net interest cost |
9 | 27 | 20 | 56 | 56 | |||||||||||||||
Gains from settlements |
| | (28 | ) | (28 | ) | | |||||||||||||
Expenses
|
|
7
|
|
|
12
|
|
|
|
|
|
19
|
|
|
|
| |||||
|
138
|
|
|
106
|
|
|
103
|
|
|
347
|
|
|
90
|
| ||||||
Remeasurement losses recorded in the statement of comprehensive income
|
|
(165
|
)
|
|
(27
|
)
|
|
(224
|
)
|
|
(416
|
)
|
|
(59
|
)
|
The amounts included within past service costs in the UK include a charge of £40 million in relation to the estimated impact of GMP equalisation and £43 million (2017 £37 million; 2016 £52 million) of augmentation costs of which £21 million is arising from major restructuring programmes (see Note 29, Other provisions).
177
| ||
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Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
28. Pensions and other post-employment benefits continued
A summarised balance sheet presentation of the Group defined benefit pension schemes and other post-retirement benefits is set out in the table below:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Recognised in Other non-current assets: |
||||||||||||
Pension schemes in surplus |
760 | 538 | 313 | |||||||||
Recognised in Assets held for sale: |
||||||||||||
Post-retirement benefits |
(9 | ) | | | ||||||||
Recognised in Pensions and other post-employment benefits: |
||||||||||||
Pension schemes in deficit |
(1,755 | ) | (2,043 | ) | (2,397 | ) | ||||||
Post-retirement benefits |
(1,370 | ) | (1,496 | ) | (1,693 | ) | ||||||
(3,125 | ) | (3,539 | ) | (4,090 | ) |
In the event of a plan wind-up, GSK believes the UK pension scheme rules provide the company with the right to a refund of surplus assets following the full settlement of plan liabilities. As a result, the net surplus in the UK defined benefit pension schemes is recognised in full.
The fair values of the assets and liabilities of the UK and US defined benefit pension schemes, together with aggregated data for other defined benefit pension schemes in the Group are as follows:
At 31 December 2018 | UK £m |
US £m |
Rest of World £m |
Group £m |
||||||||||||||
Equities: |
listed |
3,257 | 1,280 | 518 | 5,055 | |||||||||||||
unlisted |
| | 7 | 7 | ||||||||||||||
Multi-asset funds |
2,997 | | | 2,997 | ||||||||||||||
Property: |
listed |
| | 33 | 33 | |||||||||||||
unlisted |
423 | 231 | 4 | 658 | ||||||||||||||
Corporate bonds: |
listed |
404 | 783 | 111 | 1,298 | |||||||||||||
unlisted |
306 | | 25 | 331 | ||||||||||||||
Government bonds: |
listed |
3,835 | 286 | 795 | 4,916 | |||||||||||||
Insurance contracts |
770 | | 831 | 1,601 | ||||||||||||||
Other assets |
589 | 228 | 66 | 883 | ||||||||||||||
Fair value of assets |
12,581 | 2,808 | 2,390 | 17,779 | ||||||||||||||
Present value of scheme obligations |
(12,087 | ) | (3,474 | ) | (3,213 | ) | (18,774 | ) | ||||||||||
Net surplus/(obligation) |
494 | (666 | ) | (823 | ) | (995 | ) | |||||||||||
Included in Other non-current assets |
711 | | 49 | 760 | ||||||||||||||
Included in Pensions and other post-employment benefits |
(217 | ) | (666 | ) | (872 | ) | (1,755 | ) | ||||||||||
494 | (666 | ) | (823 | ) | (995 | ) | ||||||||||||
Actual return on plan assets |
(88 | ) | (123 | ) | 55 | (156 | ) |
The multi-asset funds comprise investments in pooled investment vehicles that are invested across a range of asset classes, increasing diversification within the growth portfolio. The Other assets category comprises cash and mark to market values of derivative positions.
In previous years, index-linked gilts held as part of a UK repo programme were included in government bonds. The related loan was included within Other assets at a value of £(773) million at 31 December 2017 (2016 £(1,686) million). This programme was cancelled during 2018.
178
|
||
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|
||
|
||
|
||
|
Notes to the financial statements continued
28. Pensions and other post-employment benefits continued
At 31 December 2017 | UK £m |
US £m |
Rest of World £m |
Group £m |
||||||||||||||
Equities: |
listed |
4,902 | 1,448 | 544 | 6,894 | |||||||||||||
unlisted |
| | 13 | 13 | ||||||||||||||
Multi-asset funds |
2,517 | | | 2,517 | ||||||||||||||
Property: |
unlisted |
352 | 209 | 32 | 593 | |||||||||||||
Corporate bonds: |
listed |
297 | 820 | 103 | 1,220 | |||||||||||||
unlisted |
326 | | 20 | 346 | ||||||||||||||
Government bonds: |
listed |
5,127 | 239 | 762 | 6,128 | |||||||||||||
Insurance contracts |
849 | | 707 | 1,556 | ||||||||||||||
Other assets |
(1,216 | ) | 158 | 71 | (987 | ) | ||||||||||||
Fair value of assets |
13,154 | 2,874 | 2,252 | 18,280 | ||||||||||||||
Present value of scheme obligations |
(13,101 | ) | (3,445 | ) | (3,239 | ) | (19,785 | ) | ||||||||||
Net surplus/(obligation) |
53 | (571 | ) | (987 | ) | (1,505 | ) | |||||||||||
Included in Other non-current assets |
470 | | 68 | 538 | ||||||||||||||
Included in Pensions and other post-employment benefits |
(417 | ) | (571 | ) | (1,055 | ) | (2,043 | ) | ||||||||||
53 | (571 | ) | (987 | ) | (1,505 | ) | ||||||||||||
Actual return on plan assets |
893 | 394 | 82 | 1,369 | ||||||||||||||
At 31 December 2016 | UK £m |
US £m |
Rest of World £m |
Group £m |
||||||||||||||
Equities: |
listed |
5,357 | 1,358 | 486 | 7,201 | |||||||||||||
unlisted |
| | 14 | 14 | ||||||||||||||
Multi-asset funds |
1,545 | | | 1,545 | ||||||||||||||
Property: |
unlisted |
314 | 216 | 28 | 558 | |||||||||||||
Corporate bonds: |
listed |
292 | 213 | 96 | 601 | |||||||||||||
unlisted |
321 | | 24 | 345 | ||||||||||||||
Government bonds: |
listed |
6,165 | 815 | 739 | 7,719 | |||||||||||||
Insurance contracts |
856 | | 637 | 1,493 | ||||||||||||||
Other assets |
(2,267 | ) | 288 | 73 | (1,906 | ) | ||||||||||||
Fair value of assets |
12,583 | 2,890 | 2,097 | 17,570 | ||||||||||||||
Present value of scheme obligations |
(12,884 | ) | (3,752 | ) | (3,018 | ) | (19,654 | ) | ||||||||||
Net obligation |
(301 | ) | (862 | ) | (921 | ) | (2,084 | ) | ||||||||||
Included in Other non-current assets |
276 | | 37 | 313 | ||||||||||||||
Included in Pensions and other post-employment benefits |
(577 | ) | (862 | ) | (958 | ) | (2,397 | ) | ||||||||||
(301 | ) | (862 | ) | (921 | ) | (2,084 | ) | |||||||||||
Actual return on plan assets |
2,473 | 153 | 99 | 2,725 |
179
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
28. Pensions and other post-employment benefits continued
Pensions | Post-retirement benefits |
|||||||||||||||||||
Movements in fair values of assets |
UK £m |
US £m |
Rest of World |
Group £m |
Group £m |
|||||||||||||||
Assets at 1 January 2016 |
10,284 | 2,501 | 1,750 | 14,535 | | |||||||||||||||
Exchange adjustments |
| 459 | 305 | 764 | | |||||||||||||||
Interest income |
385 | 108 | 37 | 530 | | |||||||||||||||
Expenses |
(7 | ) | (12 | ) | | (19 | ) | | ||||||||||||
Settlements and curtailments |
| | (110 | ) | (110 | ) | | |||||||||||||
Remeasurement |
2,088 | 45 | 62 | 2,195 | | |||||||||||||||
Employer contributions |
319 | 31 | 131 | 481 | 91 | |||||||||||||||
Scheme participants contributions |
4 | | 14 | 18 | 17 | |||||||||||||||
Benefits paid |
(490 | ) | (242 | ) | (92 | ) | (824 | ) | (108 | ) | ||||||||||
Assets at 31 December 2016 |
12,583 | 2,890 | 2,097 | 17,570 | | |||||||||||||||
Exchange adjustments |
| (244 | ) | 24 | (220 | ) | | |||||||||||||
Interest income |
333 | 104 | 33 | 470 | | |||||||||||||||
Expenses |
(7 | ) | (12 | ) | | (19 | ) | | ||||||||||||
Settlements and curtailments |
| | (4 | ) | (4 | ) | | |||||||||||||
Remeasurement |
560 | 290 | 49 | 899 | | |||||||||||||||
Employer contributions |
225 | 103 | 116 | 444 | 101 | |||||||||||||||
Scheme participants contributions |
4 | | 17 | 21 | 17 | |||||||||||||||
Benefits paid |
(544 | ) | (257 | ) | (80 | ) | (881 | ) | (118 | ) | ||||||||||
Assets at 31 December 2017 |
13,154 | 2,874 | 2,252 | 18,280 | | |||||||||||||||
Exchange adjustments |
| 171 | 53 | 224 | | |||||||||||||||
Interest income |
323 | 102 | 29 | 454 | | |||||||||||||||
Expenses |
(8 | ) | (7 | ) | | (15 | ) | | ||||||||||||
Settlements and curtailments |
| | (14 | ) | (14 | ) | | |||||||||||||
Remeasurement |
(411 | ) | (225 | ) | 26 | (610 | ) | | ||||||||||||
Employer contributions |
119 | 150 | 117 | 386 | 93 | |||||||||||||||
Scheme participants contributions |
4 | | 16 | 20 | 16 | |||||||||||||||
Benefits paid |
(600 | ) | (257 | ) | (89 | ) | (946 | ) | (109 | ) | ||||||||||
Assets at 31 December 2018 |
12,581 | 2,808 | 2,390 | 17,779 | |
During 2018, the Group made no special funding contributions to the UK pension schemes (2017 £136 million; 2016 £191 million) but £125 million (2017 £78 million; 2016 £nil) to the US scheme. In 2018, GSK reached a revised agreement with the trustees of the UK pension schemes to make additional contributions to eliminate the pension deficits identified within the schemes at the 31 December 2017 actuarial funding valuation. Based on these funding agreements, the additional contributions to eliminate the pension deficit are expected to be £75 million in 2019. Further payments have been agreed for the years 2020 to 2022 and these are included within Note 41, Commitments on page 197. This funding commitment supersedes the previous agreement made in 2016. The contributions were based on a government bond yield curve approach to selecting the discount rate; the rate chosen included an allowance for expected investment returns which reflected the asset mix of the schemes.
Employer contributions for 2019, including special funding contributions, are estimated to be approximately £420 million in respect of defined benefit pension schemes and £100 million in respect of post-retirement benefits.
180
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
28. Pensions and other post-employment benefits continued
Pensions | Post-retirement benefits |
|||||||||||||||||||
Movements in defined benefit obligations |
UK £m |
US £m |
Rest of World |
Group £m |
Group £m |
|||||||||||||||
Obligations at 1 January 2016 |
(10,601 | ) | (3,134 | ) | (2,384 | ) | (16,119 | ) | (1,387 | ) | ||||||||||
Exchange adjustments |
| (586 | ) | (396 | ) | (982 | ) | (248 | ) | |||||||||||
Service cost |
(70 | ) | (66 | ) | (110 | ) | (246 | ) | (31 | ) | ||||||||||
Past service cost |
(52 | ) | (1 | ) | (1 | ) | (54 | ) | (3 | ) | ||||||||||
Interest cost |
(394 | ) | (135 | ) | (57 | ) | (586 | ) | (56 | ) | ||||||||||
Settlements and curtailments |
| | 138 | 138 | | |||||||||||||||
Remeasurement |
(2,253 | ) | (72 | ) | (286 | ) | (2,611 | ) | (59 | ) | ||||||||||
Scheme participants contributions |
(4 | ) | | (14 | ) | (18 | ) | (17 | ) | |||||||||||
Benefits paid |
490 | 242 | 92 | 824 | 108 | |||||||||||||||
Obligations at 31 December 2016 |
(12,884 | ) | (3,752 | ) | (3,018 | ) | (19,654 | ) | (1,693 | ) | ||||||||||
Exchange adjustments |
| 305 | (45 | ) | 260 | 119 | ||||||||||||||
Service cost |
(79 | ) | (70 | ) | (131 | ) | (280 | ) | (30 | ) | ||||||||||
Past service cost/(credit) |
(37 | ) | | | (37 | ) | 2 | |||||||||||||
Interest cost |
(340 | ) | (135 | ) | (49 | ) | (524 | ) | (59 | ) | ||||||||||
Settlements and curtailments |
| | 4 | 4 | | |||||||||||||||
Remeasurement |
(301 | ) | (50 | ) | (63 | ) | (414 | ) | 64 | |||||||||||
Scheme participants contributions |
(4 | ) | | (17 | ) | (21 | ) | (17 | ) | |||||||||||
Benefits paid |
544 | 257 | 80 | 881 | 118 | |||||||||||||||
Obligations at 31 December 2017 |
(13,101 | ) | (3,445 | ) | (3,239 | ) | (19,785 | ) | (1,496 | ) | ||||||||||
Exchange adjustments |
| (208 | ) | (63 | ) | (271 | ) | (71 | ) | |||||||||||
Service cost |
(75 | ) | (72 | ) | (134 | ) | (281 | ) | (29 | ) | ||||||||||
Past service cost |
(93 | ) | (1 | ) | | (94 | ) | 27 | ||||||||||||
Interest cost |
(320 | ) | (122 | ) | (48 | ) | (490 | ) | (49 | ) | ||||||||||
Settlements and curtailments |
| | 28 | 28 | 1 | |||||||||||||||
Remeasurement |
906 | 117 | 170 | 1,193 | 145 | |||||||||||||||
Scheme participants contributions |
(4 | ) | | (16 | ) | (20 | ) | (16 | ) | |||||||||||
Benefits paid |
600 | 257 | 89 | 946 | 109 | |||||||||||||||
Obligations at 31 December 2018 |
(12,087 | ) | (3,474 | ) | (3,213 | ) | (18,774 | ) | (1,379 | ) | ||||||||||
The defined benefit pension obligation is analysed as follows: | ||||||||||||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||||||||||
Funded |
(18,025 | ) | (19,052 | ) | (18,974 | ) | ||||||||||||||
Unfunded |
(749 | ) | (733 | ) | (680 | ) | ||||||||||||||
(18,774 | ) | (19,785 | ) | (19,654 | ) |
The liability for the US post-retirement healthcare scheme has been assessed using the same assumptions as for the US pension scheme, together with the assumption for future medical inflation of 6.50% (2017 6.75%), grading down to 5.0% in 2025 and thereafter. At 31 December 2018, the US post-retirement healthcare scheme obligation was £1,179 million (2017 £1,254 million; 2016 £1,463 million). Post-retirement benefits are unfunded.
181
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
28. Pensions and other post-employment benefits continued
The movement in the net defined benefit liability is as follows:
2018 £m |
2017 £m |
2016 £m |
||||||||||
At 1 January |
(1,505 | ) | (2,084 | ) | (1,584 | ) | ||||||
Exchange adjustments |
(47 | ) | 40 | (218 | ) | |||||||
Service cost |
(281 | ) | (280 | ) | (246 | ) | ||||||
Past service cost |
(94 | ) | (37 | ) | (54 | ) | ||||||
Interest cost |
(36 | ) | (54 | ) | (56 | ) | ||||||
Settlements and curtailments |
14 | | 28 | |||||||||
Remeasurements: |
||||||||||||
Return on plan assets, excluding amounts included in interest |
(610 | ) | 899 | 2,195 | ||||||||
Gain from change in demographic assumptions |
131 | 209 | 85 | |||||||||
Gain/(loss) from change in financial assumptions |
1,149 | (555 | ) | (2,770 | ) | |||||||
Experience (losses)/gains |
(87 | ) | (68 | ) | 74 | |||||||
Employer contributions |
386 | 444 | 481 | |||||||||
Expenses |
(15 | ) | (19 | ) | (19 | ) | ||||||
At 31 December |
(995 | ) | (1,505 | ) | (2,084 | ) | ||||||
The remeasurements included within post-retirement benefits are detailed below: |
||||||||||||
2018 £m | 2017 £m |
2016 £m |
||||||||||
Gain from change in demographic assumptions |
6 | 47 | | |||||||||
Gain/(loss) from change in financial assumptions |
100 | (1 | ) | (81 | ) | |||||||
Experience gains |
39 | 18 | 22 | |||||||||
145 | 64 | (59 | ) |
182
|
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GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
28. Pensions and other post-employment benefits continued
The defined benefit pension obligation analysed by membership category is as follows:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Active |
4,427 | 4,611 | 4,576 | |||||||||
Retired |
9,542 | 9,805 | 9,574 | |||||||||
Deferred |
4,805 | 5,369 | 5,504 | |||||||||
18,774 | 19,785 | 19,654 | ||||||||||
The post-retirement benefit obligation analysed by membership category is as follows:
|
||||||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Active |
499 | 514 | 594 | |||||||||
Retired |
879 | 981 | 1,099 | |||||||||
Deferred |
1 | 1 | | |||||||||
1,379 | 1,496 | 1,693 | ||||||||||
The weighted average duration of the defined benefit obligation is as follows:
|
||||||||||||
2018 years |
2017 years |
2016 years |
||||||||||
Pension benefits |
15 | 16 | 16 | |||||||||
Post-retirement benefits |
11 | 11 | 12 |
Sensitivity analysis
The effect of changes in assumptions used on the benefit obligations and on the 2019 annual defined benefit pension and post-retirement costs are detailed below. This information has been determined by taking into account the duration of the liabilities and the overall profile of the plan memberships.
£m | ||||
A 0.25% decrease in discount rate would have the following approximate effect: |
||||
Increase in annual pension cost |
28 | |||
Decrease in annual post-retirement benefits cost |
(1 | ) | ||
Increase in pension obligation |
707 | |||
Increase in post-retirement benefits obligation
|
34 | |||
A one-year increase in life expectancy would have the following approximate effect: |
||||
Increase in annual pension cost |
21 | |||
Increase in annual post-retirement benefits cost |
2 | |||
Increase in pension obligation |
592 | |||
Increase in post-retirement benefits obligation
|
33 | |||
A 1% increase in the rate of future healthcare inflation would have the following approximate effect: |
||||
Increase in annual post-retirement benefits cost |
1 | |||
Increase in post-retirement benefits obligation
|
38 | |||
A 0.25% increase in inflation would have the following approximate effect: |
||||
Increase in annual pension cost |
18 | |||
Increase in pension obligation
|
447 |
183
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Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
29. Other provisions
Legal and other disputes £m |
Major restructuring programmes £m |
Employee -related provisions £m |
Other provisions £m |
Total £m |
||||||||||||||||
At 1 January 2018 |
186 | 504 | 304 | 271 | 1,265 | |||||||||||||||
Exchange adjustments |
13 | 17 | 9 | 5 | 44 | |||||||||||||||
Charge for the year |
119 | 450 | 105 | 50 | 724 | |||||||||||||||
Reversed unused |
(2 | ) | (99 | ) | (25 | ) | (46 | ) | (172 | ) | ||||||||||
Unwinding of discount |
2 | 4 | | 9 | 15 | |||||||||||||||
Utilised |
(98 | ) | (226 | ) | (41 | ) | (79 | ) | (444 | ) | ||||||||||
Reclassifications and other movements |
(1 | ) | 12 | (2 | ) | 3 | 12 | |||||||||||||
Transfer to Pension obligations |
| (21 | ) | | | (21 | ) | |||||||||||||
At 31 December 2018 |
219 | 641 | 350 | 213 | 1,423 | |||||||||||||||
To be settled within one year |
156 | 362 | 145 | 69 | 732 | |||||||||||||||
To be settled after one year |
63 | 279 | 205 | 144 | 691 | |||||||||||||||
At 31 December 2018 |
219 | 641 | 350 | 213 | 1,423 |
184
|
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|
||
|
||
|
||
|
Notes to the financial statements continued
30. Other non-current liabilities
2018 £m |
2017 £m |
|||||||||
Accruals |
71 | 82 | ||||||||
Deferred Income |
19 | 22 | ||||||||
Other payables |
848 | 877 | ||||||||
938 | 981 | |||||||||
Other payables includes acquisition accounting market value lease adjustments and a number of employee-related liabilities. |
| |||||||||
31. Net debt
|
| |||||||||
Listing exchange | 2018 £m |
2017 £m |
||||||||
Current assets: |
||||||||||
Liquid investments |
84 | 78 | ||||||||
Cash and cash equivalents |
3,874 | 3,833 | ||||||||
Cash and cash equivalents reported in Assets held for sale | 485 | | ||||||||
4,443 | 3,911 | |||||||||
Short-term borrowings: |
||||||||||
Commercial paper |
(630 | ) | (529 | ) | ||||||
Bank loans and overdrafts |
(290 | ) | (236 | ) | ||||||
Obligations under finance leases |
(24 | ) | (23 | ) | ||||||
Drawn bank facility |
(3,500 | ) | | |||||||
5.650% US$ US Medium Term Note 2018 |
New York Stock Exchange | | (2,037 | ) | ||||||
0.625% European Medium Term Note 2019 |
London Stock Exchange |
(1,349 | ) | | ||||||
(5,793 | ) | (2,825 | ) | |||||||
Long-term borrowings: |
||||||||||
0.625% European Medium Term Note 2019 |
London Stock Exchange | | (1,324 | ) | ||||||
EURIBOR +0.20% European Medium Term Note 2020 |
London Stock Exchange | (677 | ) | | ||||||
0.000% European Medium Term Note 2020 |
London Stock Exchange | (1,079 | ) | (1,060 | ) | |||||
3.125% US$ US Medium Term Note 2021 |
New York Stock Exchange | (980 | ) | | ||||||
LIBOR +0.35% US$ US Medium Term Note 2021 |
New York Stock Exchange | (589 | ) | | ||||||
2.850% US$ US Medium Term Note 2022 |
New York Stock Exchange | (1,568 | ) | (1,474 | ) | |||||
2.800% US$ US Medium Term Note 2023 |
New York Stock Exchange | (978 | ) | (919 | ) | |||||
3.375% US$ US Medium Term Note 2023 |
New York Stock Exchange | (977 | ) | | ||||||
1.375% European Medium Term Note 2024 |
London Stock Exchange | (893 | ) | (876 | ) | |||||
4.000% European Medium Term Note 2025 |
London Stock Exchange | (670 | ) | (659 | ) | |||||
3.625% US$ US Medium Term Note 2025 |
New York Stock Exchange | (780 | ) | | ||||||
1.000% European Medium Term Note 2026 |
London Stock Exchange | (629 | ) | (617 | ) | |||||
1.250% European Medium Term Note 2026 |
London Stock Exchange | (897 | ) | | ||||||
3.375% £ European Medium Term Note 2027 |
London Stock Exchange | (593 | ) | (593 | ) | |||||
3.875% US$ US Medium Term Note 2028 |
New York Stock Exchange | (1,372 | ) | | ||||||
1.375% European Medium Term Note 2029 |
London Stock Exchange | (447 | ) | (439 | ) | |||||
1.750% European Medium Term Note 2030 |
London Stock Exchange | (673 | ) | | ||||||
5.250% £ European Medium Term Note 2033 |
London Stock Exchange | (982 | ) | (986 | ) | |||||
5.375% US$ US Medium Term Note 2034 |
New York Stock Exchange | (390 | ) | (368 | ) | |||||
6.375% US$ US Medium Term Note 2038 |
New York Stock Exchange | (2,143 | ) | (2,021 | ) | |||||
6.375% £ European Medium Term Note 2039 |
London Stock Exchange | (694 | ) | (695 | ) | |||||
5.250% £ European Medium Term Note 2042 |
London Stock Exchange | (986 | ) | (989 | ) | |||||
4.200% US$ US Medium Term Note 2043 |
New York Stock Exchange | (386 | ) | (363 | ) | |||||
4.250% £ European Medium Term Note 2045 |
London Stock Exchange | (788 | ) | (789 | ) | |||||
Obligations under finance leases |
(44 | ) | (43 | ) | ||||||
Other long-term borrowings |
(56 | ) | (49 | ) | ||||||
(20,271 | ) | (14,264 | ) | |||||||
Net debt |
(21,621 | ) | (13,178 | ) | ||||||
185
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Financial statements
| ||
Investor information
|
31. Net debt continued
Current assets
Liquid investments are classified as financial assets at amortised cost (previously available-for-sale investments in prior years). At 31 December 2018, they included US Treasury Notes and other government bonds. The effective interest rate on liquid investments at 31 December 2018 was approximately 1.0% (2017 approximately 1.0%). Liquid investment balances at 31 December 2018 earning interest at floating rates amount to £84 million (2017 £78 million). Liquid investment balances at 31 December 2018 earning interest at fixed rates amount to £nil (2017 £nil).
The effective interest rate on cash and cash equivalents at 31 December 2018 was approximately 1.9% (2017 approximately 1.3%). Cash and cash equivalents at 31 December 2018 earning interest at floating and fixed rates amount to £4,094 million and £2 million respectively (2017 £3,832 million and £1 million) and non-interest bearing holdings amount to £263 million.
GSKs policy regarding the credit quality of cash and cash equivalents is referred to in Note 42, Financial instruments and related disclosures.
Short-term borrowings
GSK has a $10 billion (£7.9 billion) US commercial paper programme, of which $0.8 billion (£0.6 billion) was in issue at 31 December 2018 (2017 $0.7 billion (£0.5 billion)). GSK has a £1.9 billion five-year committed facility and $2.5 billion (£2.0 billion) under a 364 day committed facility. The five-year committed facility was agreed in September 2015 and extended by one year to 2021 in September 2016. The 364 day committed facility was agreed in September 2018. Additional bank facilities were agreed in 2018 to support transactions and two remained active at 31 December 2018. In June 2018, £3.5 billion was drawn to support the acquisition from Novartis of the remaining stake in the Consumer Healthcare Joint Venture. In addition, a $5.0 billion bank facility was agreed in December 2018 to support the acquisition of Tesaro and was undrawn at 31 December 2018. Liquid investments, cash and cash equivalents were as shown in the table on page 184.
The weighted average interest rate on commercial paper borrowings at 31 December 2018 was 2.5% (2017 1.5%).
The weighted average interest rate on current bank loans and overdrafts at 31 December 2018 was 12.0% (2017 4.7%). At 31 December 2018, short-term loan rates of 60% in Argentina had a disproportionate effect on the weighted average interest rate. Excluding this impact the weighted average interest rate on current bank loans and overdrafts stands at 4.4%.
The average effective pre-swap interest rate of notes classified as short term at 31 December 2018 was 0.8% (2017 5.9%). The material decrease in the rate largely reflects the maturity of a 5.65% coupon note in May 2018 and the upcoming maturity of a 0.625% coupon note in December 2019.
Long-term borrowings
At the year-end, GSK had long-term borrowings of £20.3 billion (2017 £14.3 billion), of which £13.3 billion (2017 £10.3 billion) falls due in more than five years. The average effective pre-swap interest rate of all notes in issue at 31 December 2018 was approximately 4.4% (2017 approximately 3.6%).
Long-term borrowings repayable after five years carry interest at effective rates between 1.1% and 6.4%, with repayment dates ranging from 2024 to 2045.
Pledged assets
The Group held pledged investments in US Treasury Notes with a par value of $50 million (£39 million), (2017 $105 million (£78 million)) as security against irrevocable letters of credit issued on the Groups behalf in respect of the Groups self-insurance activity. Provisions in respect of self-insurance are included within the provisions for legal and other disputes discussed in Note 29, Other provisions. In addition, in 2017, £20 million of assets included in Note 22, Other non-current assets, which do not form part of Net debt, were pledged as collateral against future rental payments under operating lease arrangements which were previously entered into by Human Genome Sciences, Inc. prior to its acquisition by the Group, and terminated in 2018.
Finance lease obligations
2018 £m |
2017 £m |
|||||||
Rental payments due within one year |
29 | 25 | ||||||
Rental payments due between one and two years |
20 | 29 | ||||||
Rental payments due between two and three years |
13 | 9 | ||||||
Rental payments due between three and four years |
7 | 3 | ||||||
Rental payments due between four and five years |
4 | 2 | ||||||
Rental payments due after five years |
11 | 10 | ||||||
Total future rental payments |
84 | 78 | ||||||
Future finance charges |
(16 | ) | (12 | ) | ||||
Total finance lease obligations |
68 | 66 |
186
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GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
32. Contingent liabilities
At 31 December 2018, contingent liabilities, comprising guarantees, discounted bills and other items arising in the normal course of business, amounted to £93 million (2017 £434 million). At 31 December 2018, £nil (2017 £2 million) of financial assets were pledged as collateral for contingent liabilities. Provision is made for the outcome of tax, legal and other disputes where it is both probable that the Group will suffer an outflow of funds and it is possible to make a reliable estimate of that outflow. At 31 December 2018, other than for those disputes where provision has been made, it was not possible to make a reliable estimate of the potential outflow of funds that might be required to settle disputes where the possibility of there being an outflow was more than remote. Descriptions of the significant legal and other disputes to which the Group is a party are set out in Note 45, Legal proceedings.
33. Share capital and share premium account
Ordinary Shares of 25p each | Share premium |
|||||||||||
Number |
£m |
£m |
||||||||||
Share capital authorised |
||||||||||||
At 31 December 2016 |
10,000,000,000 | 2,500 | ||||||||||
At 31 December 2017 |
10,000,000,000 | 2,500 | ||||||||||
At 31 December 2018 |
10,000,000,000 | 2,500 | ||||||||||
Share capital issued and fully paid |
||||||||||||
At 1 January 2016 |
5,361,307,647 | 1,340 | 2,831 | |||||||||
Issued under employee share schemes |
7,008,415 | 2 | 87 | |||||||||
Ordinary shares acquired by ESOP Trusts |
| | 36 | |||||||||
At 31 December 2016 |
5,368,316,062 | 1,342 | 2,954 | |||||||||
Issued under employee share schemes |
4,237,758 | 1 | 55 | |||||||||
Ordinary shares acquired by ESOP Trusts |
| | 10 | |||||||||
At 31 December 2017 |
5,372,553,820 | 1,343 | 3,019 | |||||||||
Issued under employee share schemes |
6,513,804 | 2 | 72 | |||||||||
At 31 December 2018 |
5,379,067,624 | 1,345 | 3,091 | |||||||||
31 December 2018 000 |
31 December 2017 000 |
|||||||||||
Number of shares issuable under employee share schemes
|
56,723 | 38,647 | ||||||||||
Number of unissued shares not under option
|
4,564,209 | 4,588,799 |
At 31 December 2018, of the issued share capital, 41,530,909 shares were held in the ESOP Trusts, 414,605,950 shares were held as Treasury shares and 4,922,930,765 shares were in free issue. All issued shares are fully paid. The nominal, carrying and market values of the shares held in the ESOP Trusts are disclosed in Note 43, Employee share schemes.
187
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Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
34. Movements in equity
Retained losses and other reserves amounted to £76 million at 31 December 2018 (2017 £4,430 million loss; 2016 £3,172 million loss) of which £337 million (2017 £334 million; 2016 £329 million) relates to joint ventures and associated undertakings. The cumulative translation exchange in equity is as follows:
Net translation exchange included in:
|
||||||||||||||||
Retained £m |
Fair value £m |
Non- controlling £m |
Total translation exchange £m |
|||||||||||||
At 1 January 2016 |
(761 | ) | 10 | (109 | ) | (860 | ) | |||||||||
Exchange movements on overseas net assets
|
|
633
|
|
|
13
|
|
|
603
|
|
|
1,249
|
| ||||
At 31 December 2016 |
|
(128 |
) |
|
23 |
|
|
494 |
|
|
389 |
| ||||
Exchange movements on overseas net assets |
462 | | (149 | ) | 313 | |||||||||||
Reclassification of exchange on liquidation or disposal of overseas subsidiaries
|
|
109
|
|
|
|
|
|
|
|
|
109
|
| ||||
At 31 December 2017 |
|
443 |
|
|
23 |
|
|
345 |
|
|
811 |
| ||||
Exchange movements on overseas net assets
|
|
(458
|
)
|
|
(22
|
)
|
(1 | ) | (481 | ) | ||||||
At 31 December 2018
|
|
(15
|
)
|
|
1
|
|
|
344
|
|
|
330
|
| ||||
The analysis of other comprehensive income by equity category is as follows: |
||||||||||||||||
2018 | Retained £m |
Other £m |
Non- controlling £m |
Total £m |
||||||||||||
Items that may be subsequently reclassified to income statement: |
||||||||||||||||
Exchange movements on overseas net assets and net investment hedges |
(458 | ) | (22 | ) | | (480 | ) | |||||||||
Fair value movements on cash flow hedges |
| 140 | | 140 | ||||||||||||
Reclassification of cash flow hedges on income and expense |
| (175 | ) | | (175 | ) | ||||||||||
Deferred tax on fair value movements on cash flow hedges |
| (22 | ) | | (22 | ) | ||||||||||
Deferred tax reversed on reclassification of cash flow hedges |
| 20 | | 20 | ||||||||||||
Items that will not be reclassified to income statement: |
||||||||||||||||
Exchange movements on overseas net assets of non-controlling interests |
| | (1 | ) | (1 | ) | ||||||||||
Fair value movements on equity investments |
| 180 | | 180 | ||||||||||||
Deferred tax on fair value movements on equity investments |
| 10 | | 10 | ||||||||||||
Remeasurement gains on defined benefit plans |
728 | | | 728 | ||||||||||||
Tax on remeasurement gains in defined benefit plans
|
|
(146
|
)
|
|
|
|
|
|
|
|
(146
|
)
| ||||
Other comprehensive income/(expense) for the year
|
|
124
|
|
|
131
|
|
|
(1
|
)
|
|
254
|
| ||||
2017 | Retained earnings £m |
Other reserves £m |
Non- controlling interests £m |
Total £m |
||||||||||||
Items that may be subsequently reclassified to income statement: |
||||||||||||||||
Exchange movements on overseas net assets and net investment hedges |
462 | | | 462 | ||||||||||||
Reclassification of exchange on liquidation or disposal of overseas subsidiaries |
109 | | | 109 | ||||||||||||
Fair value movements on available-for-sale investments |
| (14 | ) | | (14 | ) | ||||||||||
Reclassification of fair value movements on available-for-sale investments |
| (42 | ) | | (42 | ) | ||||||||||
Deferred tax on fair value movements on available-for-sale investments |
| 47 | | 47 | ||||||||||||
Deferred tax reversed on reclassification of available-for-sale investments |
| (18 | ) | | (18 | ) | ||||||||||
Fair value movements on cash flow hedges |
| (10 | ) | | (10 | ) | ||||||||||
Items that will not be reclassified to income statement: |
||||||||||||||||
Exchange movements on overseas net assets of non-controlling interests |
| | (149 | ) | (149 | ) | ||||||||||
Remeasurement gains on defined benefit plans |
549 | | | 549 | ||||||||||||
Tax on remeasurement gains in defined benefit plans
|
|
(221
|
)
|
|
|
|
|
|
|
|
(221
|
)
| ||||
Other comprehensive income/(expense) for the year
|
|
899
|
|
|
(37
|
)
|
|
(149
|
)
|
|
713
|
|
188
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
34. Movements in equity continued
2016 | Retained earnings £m |
Other reserves £m |
Non- interests £m |
Total £m |
||||||||||||||||
Items that may be subsequently reclassified to income statement: |
||||||||||||||||||||
Exchange movements on overseas net assets and net investment hedges |
633 | 13 | | 646 | ||||||||||||||||
Fair value movements on available-for-sale investments |
| 251 | | 251 | ||||||||||||||||
Reclassification of fair value movements on available-for-sale investments |
| (245 | ) | | (245 | ) | ||||||||||||||
Deferred tax reversed on reclassification of available-for-sale investments |
| 51 | | 51 | ||||||||||||||||
Reclassification of cash flow hedges to income statement |
| 1 | | 1 | ||||||||||||||||
Fair value movements on cash flow hedges |
| 2 | | 2 | ||||||||||||||||
Deferred tax on fair value movements on cash flow hedges |
| 2 | | 2 | ||||||||||||||||
Items that will not be reclassified to income statement: |
||||||||||||||||||||
Exchange movements on overseas net assets of non-controlling interests |
| | 603 | 603 | ||||||||||||||||
Remeasurement losses on defined benefit plans |
(475 | ) | | | (475 | ) | ||||||||||||||
Tax on remeasurement losses in defined benefit plans |
126 | | | 126 | ||||||||||||||||
Other comprehensive income for the year
|
|
284
|
|
|
75
|
|
|
603
|
|
|
962
|
| ||||||||
The analysis of other reserves is as follows: | ||||||||||||||||||||
ESOP Trust £m |
Fair value reserve £m |
Cash flow hedge reserve £m |
Other reserves £m |
Total £m |
||||||||||||||||
At 1 January 2016 |
(75 | ) | 295 | (9 | ) | 2,129 | 2,340 | |||||||||||||
Exchange adjustments |
(16 | ) | | | | (16 | ) | |||||||||||||
Transferred to income and expense in the year on disposals |
| (268 | ) | | | (268 | ) | |||||||||||||
Transferred to income and expense in the year on impairments |
| 23 | | | 23 | |||||||||||||||
Net fair value movement in the year |
| 330 | 6 | | 336 | |||||||||||||||
Ordinary shares acquired by ESOP Trusts |
(576 | ) | | | | (576 | ) | |||||||||||||
Write-down of shares held by ESOP Trusts
|
|
381
|
|
|
|
|
|
|
|
|
|
|
|
381
|
| |||||
At 31 December 2016 |
(286 | ) | 380 | (3 | ) | 2,129 | 2,220 | |||||||||||||
Exchange adjustments |
22 | | | | 22 | |||||||||||||||
Transferred to income and expense in the year on disposals |
| (42 | ) | | | (42 | ) | |||||||||||||
Net fair value movement in the year |
| (9 | ) | (8 | ) | | (17 | ) | ||||||||||||
Ordinary shares acquired by ESOP Trusts |
(656 | ) | | | | (656 | ) | |||||||||||||
Write-down of shares held by ESOP Trusts
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
520
|
| |||||
At 31 December 2017 |
|
(400 |
) |
|
329 |
|
|
(11 |
) |
|
2,129 |
|
|
2,047 |
| |||||
Implementation of IFRS 9
|
|
|
|
|
(288
|
)
|
|
|
|
|
|
|
|
(288
|
)
| |||||
At 31 December, as adjusted |
(400 | ) | 41 | (11 | ) | 2,129 | 1,759 | |||||||||||||
Exchange adjustments |
(26 | ) | | | | (26 | ) | |||||||||||||
Transferred to Retained earnings in the year on disposal of equity investments |
| (94 | ) | | | (94 | ) | |||||||||||||
Net fair value movement in the year |
| 193 | (36 | ) | | 157 | ||||||||||||||
Write-down of shares held by ESOP Trusts
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
265
|
| |||||
At 31 December 2018
|
|
(161
|
)
|
|
140
|
|
|
(47
|
)
|
|
2,129
|
|
|
2,061
|
|
Other reserves include various non-distributable merger and pre-merger reserves amounting to £1,849 million at 31 December 2018 (2017 £1,849 million; 2016 £1,849 million). Other reserves also include the capital redemption reserve created as a result of the share buy-back programme amounting to £280 million at 31 December 2018 (2017 £280 million; 2016 £280 million).
189
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| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
35. Related party transactions
At 31 December 2018, GSK owned 32 million shares or 31.7% of Innoviva Inc. which is a biopharmaceutical company listed on NASDAQ. GSK began recognising Innoviva as an associate on 1 September 2015. The royalties due from GSK to Innoviva in the year were £209 million (2017 £173 million). At 31 December 2018, the balance payable by GSK to Innoviva was £64 million (2017 £53 million).
At 31 December 2018, GSK held a 50% interest in Japan Vaccine Co. Ltd (JVC) through its subsidiary GlaxoSmithKline K.K. This joint venture with Daiichi Sankyo Co., Ltd is primarily responsible for the development and marketing of certain prophylactic vaccines in Japan. During 2018, GSK sold £43 million (2017 £41 million) of its vaccine products into the joint venture. At 31 December 2018, the trading balance due to GSK from JVC was £15 million (2017 £11 million) and the balance payable by GSK to JVC was £nil (2017 £nil).
Loans of £5 million to Medicxi Ventures I LP and £6 million to Index Ventures Life VI (Jersey) LP remained due to GSK at 31 December 2018. In 2018, GSK increased the equity investment in the Kurma Biofund II, FCPR by £3 million, Apollo Therapeutics LLP by £2 million and Longwood Founders Fund LP by £0.2 million, and reduced a liability with Qura Therapeutics LLC by £3 million. As at 31 December 2018, the outstanding liability to Qura was £4 million.
The aggregate compensation of the Directors and CET is given in Note 9, Employee costs.
36. Adjustments reconciling profit after tax to operating cash flows
2018 £m |
2017 £m |
2016 £m |
||||||||||
Profit after tax |
4,046 | 2,169 | 1,062 | |||||||||
Tax on profits |
754 | 1,356 | 877 | |||||||||
Share of after tax profits of associates and joint ventures |
(31 | ) | (13 | ) | (5 | ) | ||||||
Finance expense net of finance income |
717 | 669 | 664 | |||||||||
Depreciation |
954 | 988 | 978 | |||||||||
Amortisation of intangible assets |
902 | 934 | 796 | |||||||||
Impairment and assets written off |
350 | 1,061 | 226 | |||||||||
Profit on sale of businesses |
(63 | ) | (157 | ) | (5 | ) | ||||||
Profit on sale of intangible assets |
(201 | ) | (46 | ) | (178 | ) | ||||||
Profit on sale of investments in associates |
(3 | ) | (94 | ) | | |||||||
Profit on sale of equity investments |
(4 | ) | (37 | ) | (254 | ) | ||||||
Gain on Consumer Healthcare Joint Venture put hedging |
(513 | ) | | | ||||||||
Business acquisition costs |
47 | | | |||||||||
Changes in working capital: |
||||||||||||
Decrease/(increase) in inventories |
51 | (461 | ) | 70 | ||||||||
Increase in trade receivables |
(429 | ) | (287 | ) | (188 | ) | ||||||
Increase in trade payables |
131 | 11 | 96 | |||||||||
Decrease in other receivables |
18 | 74 | 381 | |||||||||
Contingent consideration paid (see Note ) |
(984 | ) | (594 | ) | (358 | ) | ||||||
Other non-cash increase in contingent consideration liabilities |
1,250 | 961 | 2,281 | |||||||||
Increase in other payables |
2,362 | 1,741 | 1,989 | |||||||||
Increase/(decrease) in pension and other provisions |
102 | (255 | ) | (621 | ) | |||||||
Share-based incentive plans |
360 | 333 | 319 | |||||||||
Fair value adjustments |
(7 | ) | | (3 | ) | |||||||
Other
|
|
(62
|
)
|
|
(95
|
)
|
|
(21
|
)
| |||
|
5,701
|
|
|
6,089
|
|
|
7,044
|
| ||||
Cash generated from operations
|
|
9,747
|
|
|
8,258
|
|
|
8,106
|
|
190
|
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GSK Annual Report 2018
|
||
|
||
|
||
|
Notes to the financial statements continued
37. Reconciliation of net cash flow to movement in net debt
2018 £m |
2017 £m |
2016 £m |
||||||||||
Net debt at beginning of year |
(13,178 | ) | (13,804 | ) | (10,727 | ) | ||||||
Increase/(decrease) in cash and bank overdrafts |
479 | (905 | ) | (1,164 | ) | |||||||
Decrease in liquid investments |
| (4 | ) | | ||||||||
Net increase in long-term loans |
(10,138 | ) | (2,233 | ) | | |||||||
Repayment of short-term Notes |
2,067 | 2,636 | 865 | |||||||||
(Increase in)/repayment of other short-term loans |
(81 | ) | 564 | (1,013 | ) | |||||||
Net repayment of obligations under finance leases |
28 | 23 | 18 | |||||||||
Exchange adjustments |
(776 | ) | 585 | (1,781 | ) | |||||||
Other non-cash movements |
(22 | ) | (40 | ) | (2 | ) | ||||||
Movement in net debt
|
|
(8,443
|
)
|
|
626
|
|
|
(3,077
|
)
| |||
Net debt at end of year
|
|
(21,621
|
)
|
|
(13,178
|
)
|
|
(13,804
|
)
|
Analysis of changes in net debt | At 1 January £m |
Exchange £m |
Other £m |
Profit and loss £m |
Reclass- ifications £m |
Cash flow £m |
At 31 December £m |
|||||||||||||||||||||
Liquid investments |
78 | 5 | 1 | | | | 84 | |||||||||||||||||||||
Cash and cash equivalents |
3,833 | 4 | | | (485 | ) | 522 | 3,874 | ||||||||||||||||||||
Cash and cash equivalents AHFS |
| 485 | 485 | |||||||||||||||||||||||||
Overdrafts |
(233 | ) | 4 | | | | (43 | ) | (272 | ) | ||||||||||||||||||
3,600 | 8 | | | | 479 | 4,087 | ||||||||||||||||||||||
Debt due within one year: |
||||||||||||||||||||||||||||
Commercial paper |
(529 | ) | (36 | ) | | | | (65 | ) | (630 | ) | |||||||||||||||||
European/US Medium Term Notes and bank facilities |
(2,037 | ) | (55 | ) | | | (4,824 | ) | 2,067 | (4,849 | ) | |||||||||||||||||
Other |
(26 | ) | (1 | ) | (11 | ) | | (16 | ) | 12 | (42 | ) | ||||||||||||||||
(2,592 | ) | (92 | ) | (11 | ) | | (4,840 | ) | 2,014 | (5,521 | ) | |||||||||||||||||
Debt due after one year: |
||||||||||||||||||||||||||||
European/US Medium Term Notes and bank facilities |
(14,221 | ) | (696 | ) | | 4 | 4,824 | (10,138 | ) | (20,227 | ) | |||||||||||||||||
Other |
(43 | ) | (1 | ) | (16 | ) | | 16 | | (44 | ) | |||||||||||||||||
(14,264 | ) | (697 | ) | (16 | ) | 4 | 4,840 | (10,138 | ) | (20,271 | ) | |||||||||||||||||
Net debt |
(13,178 | ) | (776 | ) | (26 | ) | 4 | | (7,645 | ) | (21,621 | ) | ||||||||||||||||
Analysis of changes in liabilities from financing activities |
|
|||||||||||||||||||||||||||
Debt due within one year |
(2,592 | ) | (92 | ) | (11 | ) | | (4,840 | ) | 2,014 | (5,521 | ) | ||||||||||||||||
Debt due after one year |
(14,264 | ) | (697 | ) | (16 | ) | 4 | 4,840 | (10,138 | ) | (20,271 | ) | ||||||||||||||||
Hedge of borrowings: |
||||||||||||||||||||||||||||
Derivative financial instruments |
2 | 1 | 130 | (10 | ) | | 6 | 129 | ||||||||||||||||||||
Other financing items |
| (19 | ) | | | | 19 | | ||||||||||||||||||||
Interest payable |
(203 | ) | (2 | ) | 2 | (802 | ) | | 766 | (239 | ) | |||||||||||||||||
Total liabilities from financing activities
|
|
(17,057
|
)
|
|
(809
|
)
|
|
105
|
|
|
(808
|
)
|
|
|
|
|
(7,333
|
)
|
|
(25,902
|
)
|
For further information on significant changes in net debt see Note 31, Net debt.
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38. Acquisitions and disposals
Details of the acquisition and disposal of significant subsidiaries and associates, joint ventures and other businesses are given below:
2018
Business acquisitions
There were no business acquisitions during 2018.
Business disposals
GSK made a number of small business disposals during the year for a net cash consideration of £2 million.
Cash flows
Business disposals £m |
Associates and joint venture investments £m |
Associates and joint venture disposals £m |
||||||||||
Cash consideration |
2 | (10 | ) | 3 | ||||||||
Net deferred consideration received |
24 | | | |||||||||
Cash and cash equivalents divested
|
|
|
|
|
|
|
|
|
| |||
Cash inflow
|
|
26
|
|
|
(10
|
)
|
|
3
|
|
Transactions signed but not yet completed
In December 2018, GSK agreed to divest Horlicks and other Consumer Healthcare nutrition brands to Unilever plc and to merge GSK Consumer Healthcare Limited with Hindustan Unilever Limited for a total consideration valued at approximately £3.1 billion. GSK Consumer Healthcare Limited is a public company listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) in India, in which GSK holds a 72.5% stake. Hindustan Unilever Limited is a public company listed on the NSE and BSE. Following the merger, GSK will own approximately 5.7% of Hindustan Unilever Limited. The transaction is expected to complete by the end of 2019, subject to the fulfilment of certain conditions including the approval of the merger by the shareholders of GSK Consumer Healthcare Limited and Hindustan Unilever Limited.
The Group has entered into forward foreign exchange contracts which have been designated as a cash flow hedge of part of the foreign exchange exposure arising on the transaction. In addition, the exposure to share price movements in the forward purchase of shares in Hindustan Unilever Limited has been recognised as an embedded derivative. The embedded derivative was in an asset position and had a fair value of £100 million at 31 December 2018.
In December 2018, GSK agreed to acquire 100% of Tesaro, Inc., an oncology-focused biopharmaceutical company, for $5.1 billion
(£4.0 billion) in cash. This transaction completed on 22nd January 2019. The exercise to determine the acquisition fair values of assets and liabilities is not yet complete. Initial transaction costs were recognised in December 2018.
In December 2018, GSK agreed to form a new Consumer Healthcare Joint Venture by acquiring Pfizers consumer health business in an all-share transaction. Pfizer will hold 32% of the combined business which will be controlled by GSK. The new Consumer Healthcare Joint Venture is expected to be formed in the second half of 2019, subject to approvals. Initial transaction costs were recognised in December 2018.
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|
||
|
||
|
Notes to the financial statements continued
38. Acquisitions and disposals continued
2017
Business acquisitions
There were no business acquisitions during 2017.
Business disposals
GSK made a number of small business disposals during the year for a net cash consideration of £342 million, including contingent consideration receivable of £86 million. The profit on disposal was determined as follows:
Total £m |
||||
Consideration including currency forwards and purchase adjustments
|
|
342
|
| |
Net assets sold:
|
||||
Goodwill
|
|
(16
|
)
| |
Intangible assets
|
|
(21
|
)
| |
Property, plant and equipment
|
|
(18
|
)
| |
Inventory
|
|
(11
|
)
| |
Cash and cash equivalents
|
|
(6
|
)
| |
Other net assets
|
|
(5
|
)
| |
|
(77
|
)
| ||
Transaction costs
|
|
(8
|
)
| |
Reclassification of exchange from other comprehensive income
|
|
(100
|
)
| |
Profit on disposal
|
|
157
|
|
Investment in associates and joint ventures
During the year, GSK made cash investments of £15 million into associates and joint ventures. In addition, GSK sold its holdings in two associates for £198 million in cash.
Total £m |
||||
Cash consideration
|
|
198
|
| |
Net book value of shares
|
|
(92
|
)
| |
Reclassification of exchange from other comprehensive income
|
|
(7
|
)
| |
Transaction costs
|
|
(5
|
)
| |
Profit on disposal
|
|
94
|
|
Cash flows
Business disposals £m |
Associates and joint venture investments £m |
Associates and joint venture disposals £m |
||||||||||
Cash consideration
|
|
256
|
|
|
(15
|
)
|
|
198
|
| |||
Net deferred consideration received
|
|
39
|
|
|
|
|
|
|
| |||
Cash and cash equivalents divested
|
|
(6
|
)
|
|
|
|
|
|
| |||
Transaction costs paid
|
|
(7
|
)
|
|
|
|
|
(2
|
)
| |||
Cash inflow
|
|
282
|
|
|
(15
|
)
|
|
196
|
|
193
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| ||
Financial statements
| ||
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|
38. Acquisitions and disposals continued
2016
Business acquisitions
GSK completed two small business acquisitions during 2016.
Cash consideration of £24 million was paid in the year to acquire the HIV R&D preclinical and discovery stage portfolio from Bristol Myers Squibb. Further consideration, contingent on commercial milestones and future sales performance, may be due, and an initial estimate of £40 million was recognised for this contingent consideration. Intangible assets acquired were valued at £57 million and goodwill of £7 million was recognised.
GSK formed Galvani Bioelectronics Limited during the year and acquired intangible assets of £45 million and cash and cash equivalents of £41 million from Verily Life Sciences LLC in return for a 45% shareholding in Galvani Bioelectronics. The fair value of this shareholding was £47 million, and GSK also recognised a credit of £39 million in non-controlling interests representing Verilys share of the net assets it contributed.
Business disposals
GSK also made a number of small business disposals in the year for net cash consideration of £72 million. In addition, deferred consideration receivable of £43 million was recognised.
Cash flows
Business acquisitions £m |
Business disposals £m |
|||||||
Cash consideration (paid)/received after purchase adjustments
|
|
(24
|
)
|
|
72
|
| ||
Cash and cash equivalents acquired
|
|
41
|
|
|
|
| ||
Cash inflow
|
|
17
|
|
|
72
|
|
In addition, GSK made cash investments of £11 million into associates and joint ventures.
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|
||
|
||
|
||
|
Notes to the financial statements continued
39. Contingent consideration liabilities
The consideration for certain acquisitions includes amounts contingent on future events such as development milestones or sales performance. The Group has provided for the fair value of this contingent consideration as follows:
Shionogi- ViiV Healthcare £m |
Novartis Vaccines £m |
Other £m |
Total £m |
|||||||||||||
At 1 January 2016 |
3,409 | 405 | 41 | 3,855 | ||||||||||||
Additions through business combinations |
154 | | 40 | 194 | ||||||||||||
Remeasurement through income statement |
2,162 | 152 | (33 | ) | 2,281 | |||||||||||
Cash payments: operating cash flows |
(351 | ) | (5 | ) | (2 | ) | (358 | ) | ||||||||
Cash payments: investing activities |
(66 | ) | (7 | ) | | (73 | ) | |||||||||
Other movements |
(4 | ) | | 1 | (3 | ) | ||||||||||
At 31 December 2016 |
5,304 | 545 | 47 | 5,896 | ||||||||||||
Remeasurement through income statement |
909 | 53 | (1 | ) | 961 | |||||||||||
Cash payments: operating cash flows |
(587 | ) | (7 | ) | | (594 | ) | |||||||||
Cash payments: investing activities |
(84 | ) | (7 | ) | | (91 | ) | |||||||||
At 31 December 2017 |
5,542 | 584 | 46 | 6,172 | ||||||||||||
Remeasurement through income statement |
1,188 | 56 | 7 | 1,251 | ||||||||||||
Cash payments: operating cash flows |
(703 | ) | (281 | ) | | (984 | ) | |||||||||
Cash payments: investing activities |
(90 | ) | (63 | ) | | (153 | ) | |||||||||
At 31 December 2018 |
5,937 | 296 | 53 | 6,286 |
Of the contingent consideration payable at 31 December 2018, £837 million (2017 £1,076 million) is expected to be paid within one year. The contingent consideration payable in respect of the Novartis Vaccines business included a sales milestone of $450 million which was settled in January 2018.
The consideration payable for the acquisition of the Shionogi-ViiV Healthcare joint venture and the Novartis Vaccines business is expected to be paid over a number of years. As a result, the total estimated liabilities are discounted to their present values, shown above. The Shionogi-ViiV Healthcare contingent consideration liability is discounted at 8.5% and the Novartis Vaccines contingent consideration liability is discounted partly at 8% and partly at 9%.
The Shionogi-ViiV Healthcare and Novartis Vaccines contingent consideration liabilities are calculated principally based on the forecast sales performance of specified products over the lives of those products.
The table below shows on an indicative basis the income statement and balance sheet sensitivity to reasonably possible changes in key inputs to the valuations of the contingent consideration liabilities.
Increase/(decrease) in financial liability and loss/(gain) in Income statement | Shionogi- ViiV Healthcare £m |
Novartis Vaccines £m |
||||||
10% increase in sales forecasts |
569 | 62 | ||||||
10% decrease in sales forecasts |
(569 | ) | (62 | ) | ||||
1% increase in discount rate |
(238 | ) | (22 | ) | ||||
1% decrease in discount rate |
256 | 26 | ||||||
5% increase in probability of milestone success |
7 | |||||||
5% decrease in probability of milestone success |
(7 | ) | ||||||
10 cent appreciation of US Dollar |
367 | (13 | ) | |||||
10 cent depreciation of US Dollar |
(313 | ) | 11 | |||||
10 cent appreciation of Euro |
114 | 29 | ||||||
10 cent depreciation of Euro |
(95 | ) | (25 | ) |
An explanation of the accounting for ViiV Healthcare is set out on page 41.
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| ||
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| ||
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|
40. Non-controlling interests
ViiV Healthcare
The ViiV Healthcare subgroup has a material non-controlling interest. Summarised financial information in respect of the ViiV Healthcare group is as follows:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Turnover |
4,665 | 4,269 | 3,527 | |||||||||
Profit/(loss) after taxation |
560 | 825 | (1,249 | ) | ||||||||
Other comprehensive income |
19 | 20 | 36 | |||||||||
Total comprehensive income/(expense) |
579 | 845 | (1,213 | ) | ||||||||
2018 £m |
2017 £m |
|||||||||||
Non-current assets |
2,787 | 2,736 | ||||||||||
Current assets |
2,643 | 2,533 | ||||||||||
Total assets |
5,430 | 5,269 | ||||||||||
Current liabilities |
(2,638 | ) | (2,409 | ) | ||||||||
Non-current liabilities |
(8,895 | ) | (8,011 | ) | ||||||||
Total liabilities |
(11,533 | ) | (10,420 | ) | ||||||||
Net liabilities |
(6,103 | ) | (5,151 | ) | ||||||||
2018 £m |
2017 £m |
2016 £m |
||||||||||
Net cash inflow from operating activities |
2,212 | 2,132 | 1,750 | |||||||||
Net cash outflow from investing activities |
(237 | ) | (207 | ) | (326 | ) | ||||||
Net cash outflow from financing activities |
(1,982 | ) | (1,820 | ) | (1,023 | ) | ||||||
(Decrease)/increase in cash and bank overdrafts in the year |
(7 | ) | 105 | 401 |
The above financial information relates to the ViiV Healthcare group on a stand-alone basis, before the impact of Group-related adjustments, primarily related to the recognition of preferential dividends. The profit after taxation of £560 million (2017 profit after taxation of £825 million; 2016 loss after taxation of £1,249 million) is stated after charging preferential dividends payable to GSK, Shionogi and Pfizer and after a charge of £1,194 million (2017 £909 million; 2016 £2,186 million) for remeasurement of the contingent consideration payable for the acquisition of the former Shionogi-ViiV Healthcare joint venture. This consideration is expected to be paid over a number of years.
The following amounts attributable to the ViiV Healthcare group are included in GSKs Consolidated statement of comprehensive income, Consolidated statement of changes in equity and Consolidated balance sheet:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Total comprehensive income/(expense) for the year attributable to non-controlling interests |
254 | 187 | (83 | ) | ||||||||
Dividends paid to non-controlling interests |
332 | 316 | 152 | |||||||||
Non-controlling interests in the Consolidated balance sheet |
(543 | ) | (476 | ) |
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|
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|
||
|
||
|
||
|
Notes to the financial statements continued
40. Non-controlling interests continued
Consumer Healthcare Joint Venture
During 2018, the Group acquired Novartis interest in the Consumer Healthcare Joint Venture to obtain 100% ownership. The acquisition became unconditional on 3 May 2018 and completed on 1 June 2018. Summarised financial information in respect of the Consumer Healthcare Joint Venture is as follows:
Period ended 3 May 2018 £m |
2017 £m |
2016 £m |
||||||||||
Turnover |
2,306 | 7,003 | 6,530 | |||||||||
Profit after taxation |
7 | 1,211 | 660 | |||||||||
Other comprehensive (expense)/income |
(79 | ) | (387 | ) | 1,640 | |||||||
Total comprehensive (expense)/income |
(72 | ) | 824 | 2,300 | ||||||||
2017 £m |
||||||||||||
Non-current assets |
12,771 | |||||||||||
Current assets |
3,282 | |||||||||||
Total assets |
16,053 | |||||||||||
Current liabilities |
(2,675 | ) | ||||||||||
Non-current liabilities |
(1,537 | ) | ||||||||||
Total liabilities |
(4,212 | ) | ||||||||||
Net assets |
11,841 | |||||||||||
Period ended 3 May 2018 £m |
2017 £m |
2016 £m |
||||||||||
Net cash inflow from operating activities |
65 | 883 | 1,496 | |||||||||
Net cash inflow/(outflow) from investing activities |
442 | 270 | (537 | ) | ||||||||
Net cash outflow from financing activities |
(504 | ) | (1,194 | ) | (980 | ) | ||||||
Increase/(decrease) in cash and bank overdrafts in the year |
3 | (41 | ) | (21 | ) |
The above financial information relates to the Consumer Healthcare Joint Venture on a stand-alone basis, before the impact of Group-related adjustments but after major restructuring charges.
The following amounts attributable to the Consumer Healthcare Joint Venture are included in GSKs Consolidated statement of comprehensive income, Consolidated statement of changes in equity and Consolidated balance sheet:
2018 £m |
2017 £m |
2016 £m |
||||||||||
Total comprehensive income for the year attributable to non-controlling interests |
111 | 296 | 730 | |||||||||
Dividends paid to non-controlling interests |
183 | 420 | 346 | |||||||||
Non-controlling interests in the Consolidated balance sheet |
| 3,631 |
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| ||
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| ||
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|
41. Commitments
Contractual obligations and commitments | 2018 £m |
2017 £m |
||||||
Contracted for but not provided in the financial statements: |
||||||||
Intangible assets |
4,762 | 5,254 | ||||||
Property, plant and equipment |
665 | 584 | ||||||
Investments |
82 | 107 | ||||||
Purchase commitments |
561 | 346 | ||||||
Pensions |
238 | 738 | ||||||
Other commitments |
| 38 | ||||||
Interest on loans |
9,418 | 8,510 | ||||||
Finance lease charges |
16 | 12 | ||||||
15,742 | 15,589 | |||||||
The commitments related to intangible assets include milestone payments, which are dependent on successful clinical development or on meeting specified sales targets, and which represent the maximum that would be paid if all milestones, however unlikely, are achieved. The amounts are not risk-adjusted or discounted. The decrease in intangible commitments in 2018 is mainly attributable to the reduction in commitments to third parties such as Nkarta, Inc.
In 2018, GSK reached an agreement with the trustees of the UK pension schemes to make additional contributions to eliminate the pension deficit identified at the 31 December 2017 actuarial funding valuation. A payment of £75 million is due in both 2019 and 2020 and a payment of £44 million is due in both 2021 and 2022. The table above includes this commitment, but excludes the normal ongoing annual funding requirement in the UK of approximately £140 million.
The Group also has other commitments which principally relate to revenue payments to be made under licences and other alliances.
Commitments in respect of future interest payable on loans are disclosed before taking into account the effect of interest rate swaps.
Commitments under non-cancellable operating leases are disclosed below. £161 million (2017 £117 million) is provided against these commitments on the Groups balance sheet.
|
| |||||||
Commitments under non-cancellable operating leases | 2018 £m |
2017 £m |
||||||
Rental payments due within one year |
223 | 186 | ||||||
Rental payments due between one and two years |
173 | 149 | ||||||
Rental payments due between two and three years |
143 | 122 | ||||||
Rental payments due between three and four years |
123 | 107 | ||||||
Rental payments due between four and five years |
105 | 94 | ||||||
Rental payments due after five years |
371 | 387 | ||||||
Total commitments under non-cancellable operating leases |
1,138 | 1,045 |
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|
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|
||
|
||
|
Notes to the financial statements continued
42. Financial instruments and related disclosures
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| ||
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| ||
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|
42. Financial instruments and related disclosures continued
2018 | AAA/Aaa £m |
AA/Aa £m |
A/A £m |
BBB/Baa £m |
BB+/Ba1 and below /unrated £m |
Total £m |
||||||||||||||||||
Bank balances and deposits |
| 662 | 1,275 | 381 | 20 | 2,338 | ||||||||||||||||||
US Treasury and Treasury repo only money market funds |
449 | | | | | 449 | ||||||||||||||||||
Liquidity funds |
1,572 | | | | | 1,572 | ||||||||||||||||||
Government securities |
| 83 | | 1 | | 84 | ||||||||||||||||||
3rd party financial derivatives | | 19 | 127 | 4 | | 150 | ||||||||||||||||||
Total | 2,021 | 764 | 1,402 | 386 | 20 | 4,593 | ||||||||||||||||||
2017 | AAA/Aaa £m |
AA/Aa £m |
A/A £m |
BBB/Baa £m |
BB+/Ba1 and below /unrated £m |
Total £m |
||||||||||||||||||
Bank balances and deposits |
| 423 | 1,167 | 80 | 45 | 1,715 | ||||||||||||||||||
US Treasury and Treasury repo only money market funds |
1,715 | | | | | 1,715 | ||||||||||||||||||
Liquidity funds |
403 | | | | | 403 | ||||||||||||||||||
Government securities |
| 77 | | 1 | | 78 | ||||||||||||||||||
3rd party financial derivatives | | 26 | 42 | | | 68 | ||||||||||||||||||
Total | 2,118 | 526 | 1,209 | 81 | 45 | 3,979 |
Credit ratings are assigned by Standard and Poors and Moodys respectively. Where the opinions of the two rating agencies differ, GSK assigns the lower rating of the two to the counterparty. Where local rating agency or Fitch data is the only source available, the ratings are converted to global ratings equivalent to those of Standard and Poors or Moodys using published conversion tables. These credit ratings form the basis of the assessment of the expected credit loss on Treasury related balances held at amortised cost being bank balances and deposits and Government securities.
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|
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|
||
|
||
|
||
|
Notes to the financial statements continued
42. Financial instruments and related disclosures continued
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| ||
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|
42. Financial instruments and related disclosures continued
2018 | ||||||||||||||
Carrying | Fair | |||||||||||||
value | value | |||||||||||||
Notes | £m | £m | ||||||||||||
Financial assets measured at fair value through other comprehensive |
||||||||||||||
Other investments designated at FVTOCI |
a | 1,250 | 1,250 | |||||||||||
Trade and other receivables |
a,b | 1,687 | 1,687 | |||||||||||
Financial assets measured at amortised cost: |
||||||||||||||
Other non-current assets |
b | 49 | 49 | |||||||||||
Trade and other receivables |
b | 3,761 | 3,761 | |||||||||||
Liquid investments |
84 | 84 | ||||||||||||
Cash and cash equivalents |
2,338 | 2,338 | ||||||||||||
Other items in Assets held for sale |
b | 47 | 47 | |||||||||||
Financial assets mandatorily measured at fair value through profit or loss (FVTPL): |
||||||||||||||
Other investments |
a | 72 | 72 | |||||||||||
Other non-current assets |
a,b | 716 | 716 | |||||||||||
Trade and other receiveables |
a,b | 120 | 120 | |||||||||||
Derivatives designated and effective as hedging instruments |
a,d,e | 69 | 69 | |||||||||||
Held for trading derivatives that are not in a designated and |
a,d,e | 188 | 188 | |||||||||||
Cash and cash equivalents |
a | 2,021 | 2,021 | |||||||||||
Total financial assets |
12,402 | 12,402 | ||||||||||||
Financial liabilities measured at amortised cost: |
||||||||||||||
Borrowings excluding obligations under finance leases: |
||||||||||||||
bonds in a designated hedging relationship |
d | (8,213 | ) | (8,279 | ) | |||||||||
other bonds |
(13,307 | ) | (15,475 | ) | ||||||||||
bank loans and overdrafts |
(290 | ) | (290 | ) | ||||||||||
commercial paper |
(630 | ) | (630 | ) | ||||||||||
other borrowings |
(3,556 | ) | (3,556 | ) | ||||||||||
Total borrowings excluding obligations under finance leases |
f | (25,996 | ) | (28,230 | ) | |||||||||
Obligations under finance leases |
(68 | ) | (68 | ) | ||||||||||
Total borrowings |
(26,064 | ) | (28,298 | ) | ||||||||||
Trade and other payables |
c | (13,338 | ) | (13,338 | ) | |||||||||
Other provisions |
c | (58 | ) | (58 | ) | |||||||||
Other non-current liabilities |
c | (149 | ) | (149 | ) | |||||||||
Other items in Assets held for sale |
c | (167 | ) | (167 | ) | |||||||||
Financial liabilities mandatorily at fair value through profit or loss (FVTPL): |
||||||||||||||
Contingent consideration liabilities |
a,c | (6,286 | ) | (6,286 | ) | |||||||||
Derivatives designated and effective as hedging instruments |
a,d,e | (105 | ) | (105 | ) | |||||||||
Held for trading derivatives that are not in
a designated and |
a,d,e | (23 | ) | (23 | ) | |||||||||
Total financial liabilities
|
|
(46,190
|
)
|
|
(48,424
|
)
| ||||||||
Net financial assets and financial liabilities |
(33,788 | ) | (36,022 | ) |
The valuation methodology used to measure fair value in the above table and the table on page 202 is described and categorised on page 200.
Trade and other receivables, Other non-current assets, Trade and other payables, Other provisions, Other non-current liabilities, Contingent consideration liabilities and Other items in Assets held for sale are reconciled to the relevant Notes on pages 204 and 205.
Cash and cash equivalents in the table above include £485 million reported in Assets held for sale (see Note 26, Assets held for sale).
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|
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|
||
|
||
|
Notes to the financial statements continued
42. Financial instruments and related disclosures continued
2017 | ||||||||||||||
Notes | |
Carrying value £m |
|
|
Fair value £m |
| ||||||||
Available-for-sale investments: |
||||||||||||||
Liquid investments (Government bonds) |
a | 78 | 78 | |||||||||||
Other investments |
a | 918 | 918 | |||||||||||
Loans and receivables: |
||||||||||||||
Cash and cash equivalents |
3,833 | 3,833 | ||||||||||||
Trade and other receivables and Other
non-current |
b | 5,495 | 5,495 | |||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||
Trade and other receivables and Other
non-current |
a,b | 506 | 506 | |||||||||||
Derivatives designated as at fair value through profit or loss |
a,d,e | 5 | 5 | |||||||||||
Derivatives classified as held for trading under IAS 39 |
a,d,e | 71 | 71 | |||||||||||
Total financial assets |
10,906 | 10,906 | ||||||||||||
Financial liabilities measured at amortised cost: |
||||||||||||||
Borrowings excluding obligations under finance leases: |
||||||||||||||
bonds in a designated hedging relationship |
d | (4,315 | ) | (4,405 | ) | |||||||||
other bonds |
(11,894 | ) | (14,743 | ) | ||||||||||
bank loans and overdrafts |
(236 | ) | (236 | ) | ||||||||||
commercial paper |
(529 | ) | (529 | ) | ||||||||||
other borrowings
|
|
(49
|
)
|
|
(49
|
)
| ||||||||
Total borrowings excluding obligations under finance leases |
f | (17,023 | ) | (19,962 | ) | |||||||||
Obligations under finance leases
|
|
(66
|
)
|
|
(66
|
)
| ||||||||
Total borrowings |
(17,089 | ) | (20,028 | ) | ||||||||||
Trade and other payables, Other provisions and certain |
c | (20,325 | ) | (20,325 | ) | |||||||||
Financial liabilities at fair value through profit or loss: |
||||||||||||||
Contingent consideration liabilities |
a,c | (6,172 | ) | (6,172 | ) | |||||||||
Derivatives designated as at fair value through profit or loss |
a,d,e | (26 | ) | (26 | ) | |||||||||
Derivatives classified as held for trading under IAS 39
|
|
a,d,e
|
|
|
(48
|
)
|
|
(48
|
)
| |||||
Total financial liabilities
|
|
(43,660
|
)
|
|
(46,599
|
)
| ||||||||
Net financial assets and financial liabilities
|
|
(32,754
|
)
|
|
(35,693
|
)
|
Fair value of investments in GSK shares
At 31 December 2018, the Employee Share Ownership Plan (ESOP) Trusts held GSK shares with a carrying value of £161 million (2017 £400 million) and a market value of £619 million (2017 £882 million) based on quoted market price. The shares are held by the ESOP Trusts to satisfy future exercises of options and awards under employee incentive schemes. In 2018, the carrying value, which is the lower of cost or expected proceeds, of these shares has been recognised as a deduction from other reserves. At 31 December 2018, GSK held Treasury shares at a cost of £5,800 million (2017 £5,800 million) which has been deducted from retained earnings.
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Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
42. Financial instruments and related disclosures continued
(a) Financial instruments held at fair value
The following tables categorise the Groups financial assets and liabilities held at fair value by the valuation methodology applied in determining their fair value. Where possible, quoted prices in active markets are used (Level 1). Where such prices are not available, the asset or liability is classified as Level 2, provided all significant inputs to the valuation model used are based on observable market data. If one or more of the significant inputs to the valuation model is not based on observable market data, the instrument is classified as Level 3. Other investments classified as Level 3 in the tables below comprise equity investments in unlisted entities with which the Group has entered into research collaborations and also investments in emerging life science companies.
At 31 December 2018 |
|
Level 1 £m |
|
|
Level 2 £m |
|
|
Level 3 £m |
|
|
Total £m |
| ||||
Financial assets at fair value |
||||||||||||||||
Financial assets at fair value through other comprehensive income (FVTOCI): |
||||||||||||||||
Other investments designated at FVTOCI |
656 | | 594 | 1,250 | ||||||||||||
Trade and other receivables |
| 1,687 | | 1,687 | ||||||||||||
Financial assets mandatorily measured at fair value through profit or loss (FVTPL): |
||||||||||||||||
Other investments |
| | 72 | 72 | ||||||||||||
Other non-current assets |
| 675 | 41 | 716 | ||||||||||||
Trade and other receivables |
| 79 | 41 | 120 | ||||||||||||
Derivatives designated and effective as hedging instruments |
| 69 | | 69 | ||||||||||||
Held for trading derivatives that are not in a designated and effective hedging relationship |
| 182 | 6 | 188 | ||||||||||||
Cash and cash equivalents |
2,021 | | | 2,021 | ||||||||||||
2,677 | 2,692 | 754 | 6,123 | |||||||||||||
Financial liabilities at fair value |
||||||||||||||||
Financial liabilities mandatorily at fair value through profit or loss (FVTPL): |
||||||||||||||||
Contingent consideration liabilities |
| | (6,286 | ) | (6,286 | ) | ||||||||||
Derivatives designated and effective as hedging instruments |
| (105 | ) | | (105 | ) | ||||||||||
Held for trading derivatives that are not in a designated and effective hedging relationship |
| (23 | ) | | (23 | ) | ||||||||||
| (128 | ) | (6,286 | ) | (6,414 | ) | ||||||||||
At 31 December 2017 |
|
Level 1 £m |
|
|
Level 2 £m |
|
|
Level 3 £m |
|
|
Total £m |
| ||||
Financial assets at fair value |
||||||||||||||||
Available-for-sale financial assets: |
||||||||||||||||
Liquid investments |
77 | 1 | | 78 | ||||||||||||
Other investments |
535 | | 383 | 918 | ||||||||||||
Other non-current assets |
| | 38 | 38 | ||||||||||||
Financial assets at fair value through profit or loss: |
||||||||||||||||
Other non-current assets |
| 382 | 44 | 426 | ||||||||||||
Trade and other receivables |
| | 42 | 42 | ||||||||||||
Derivatives designated as at fair value through profit or loss |
| 5 | | 5 | ||||||||||||
Derivatives classified as held for trading under IAS 39 |
| 62 | 9 | 71 | ||||||||||||
612 | 450 | 516 | 1,578 | |||||||||||||
Financial liabilities at fair value |
||||||||||||||||
Financial liabilities at fair value through profit or loss: |
||||||||||||||||
Contingent consideration liabilities |
| | (6,172 | ) | (6,172 | ) | ||||||||||
Derivatives designated as at fair value through profit or loss |
| (26 | ) | | (26 | ) | ||||||||||
Derivatives classified as held for trading under IAS 39 |
| (47 | ) | (1 | ) | (48 | ) | |||||||||
| (73 | ) | (6,173 | ) | (6,246 | ) |
204
|
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|
||
|
||
|
||
|
Notes to the financial statements continued
42. Financial instruments and related disclosures continued
Movements in the year for financial instruments measured using Level 3 valuation methods are presented below:
2018 £m |
2017 £m |
|||||||
At 1 January |
(5,657 | ) | (5,486 | ) | ||||
Net losses recognised in the income statement |
(1,233 | ) | (970 | ) | ||||
Net gains recognised in other comprehensive income |
123 | 22 | ||||||
Contingent consideration for businesses divested/acquired during the year |
| 80 | ||||||
Payment of contingent consideration liabilities |
1,095 | 685 | ||||||
Additions |
381 | 117 | ||||||
Disposals and settlements |
(27 | ) | (52 | ) | ||||
Transfers from Level 3 |
(241 | ) | (24 | ) | ||||
Exchange adjustments |
27 | (29 | ) | |||||
At 31 December
|
|
(5,532
|
)
|
|
(5,657
|
)
|
The net losses of £1,233 million (2017 £970 million) attributable to Level 3 financial instruments which were recognised in the income statement were all attributable to financial instruments which were held at the end of the year. Losses of £1,233 million were reported in Other operating income (2017 £971 million losses in Other operating income and £1 million income in Finance income). £1,188 million (2017 £909 million) arose from remeasurement of the contingent consideration payable for the acquisition of the former Shionogi-ViiV Healthcare joint venture and £56 million (2017 £53 million) arose from remeasurement of the contingent consideration payable for the acquisition of the Novartis Vaccines business. Net gains of £123 million (2017 £22 million) attributable to Level 3 financial instruments reported in Other comprehensive income as Fair value movements on equity investments included net gains of £117 million (2017 net losses of £6 million) in respect of financial instruments held at the end of the year, of which net gains of £98 million (2017 net losses of £6 million) arose prior to transfer from Level 3 on equity investments which transferred to a Level 1 valuation methodology as a result of listing on a recognised stock exchange during the year.
Financial liabilities measured using Level 3 valuation methods at 31 December included £5,937 million (2017 £5,542 million) in respect of contingent consideration payable for the acquisition in 2012 of the former Shionogi-ViiV Healthcare joint venture. This consideration is expected to be paid over a number of years and will vary in line with the future performance of specified products and movements in certain foreign currencies. They also included £296 million (2017 £584 million) in respect of contingent consideration for the acquisition in 2015 of the Novartis Vaccines business. This consideration is expected to be paid over a number of years and will vary in line with the future performance of specified products, the achievement of certain milestone targets and movements in certain foreign currencies. Sensitivity analysis on these balances is provided in Note 39, Contingent consideration liabilities.
(b) Trade and other receivables, Other non-current assets and other items in Assets held for sale in scope of IFRS 9 (2017 IAS 39)
The following table reconciles financial instruments within Trade and other receivables, Other non-current assets and other items in Assets held for sale which fall within the scope of IFRS 9 (2017 - IAS 39) to the relevant balance sheet amounts. The financial assets are predominantly non-interest earning. Financial instruments within the Other non-current assets balance include company-owned life insurance policies. Non-financial instruments include tax receivables, pension surplus balances and prepayments, which are outside the scope of
IFRS 9 (2017 IAS 39).
2018 | 2017 | |||||||||||||||||||||||||||||||||||||||||||
At FVTPL £m |
At FVTOCI £m |
Amortised cost £m |
Financial instruments £m |
Non- financial instruments £m |
Total £m |
At FVTPL £m |
Loans and receivables £m |
Financial instruments £m |
Non- financial instruments £m |
Total £m |
||||||||||||||||||||||||||||||||||
Trade and other receivables (Note 24) |
120 | 1,687 | 3,761 | 5,568 | 855 | 6,423 | 42 | 5,148 | 5,190 | 810 | 6,000 | |||||||||||||||||||||||||||||||||
Other non-current assets (Note 22) |
716 | | 49 | 765 | 811 | 1,576 | 464 | 347 | 811 | 602 | 1,413 | |||||||||||||||||||||||||||||||||
Other items in Assets held for sale (Note 26) |
| | 47 | 47 | 37 | 84 | | | | | | |||||||||||||||||||||||||||||||||
836 | 1,687 | 3,857 | 6,380 | 1,703 | 8,083 | 506 | 5,495 | 6,001 | 1,412 | 7,413 |
The Group applied IFRS 9 Financial Instruments with effect from 1 January 2018 and therefore now accounts for expected credit losses on initial recognition of financial assets. The following table shows the ageing of financial assets which were past due at 31 December 2017 and for which no provision for bad or doubtful debts had been made at that date under IAS 39:
|
2017 £m |
| ||
Past due by 130 days |
142 | |||
Past due by 3190 days |
70 | |||
Past due by 91180 days |
64 | |||
Past due by 181365 days |
27 | |||
Past due by more than 365 days |
108 | |||
411 |
205
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
42. Financial instruments and related disclosures continued
(c) Trade and other payables, Other provisions, Other non-current liabilities, Contingent consideration liabilities and other items in Assets held for sale in scope of IFRS 9 (2017 - IAS 39)
The following table reconciles financial instruments within Trade and other payables, Other provisions, Other non-current liabilities, Contingent consideration liabilities and other items in Assets held for sale which fall within the scope of IFRS 9/IAS 39 to the relevant balance sheet amounts. The financial liabilities are predominantly non-interest bearing. Accrued wages and salaries are included within financial liabilities. Non-financial instruments includes payments on account, tax and social security payables and provisions which do not arise from contractual obligations to deliver cash or another financial asset, which are outside the scope of IFRS 9/IAS 39.
2018 | 2017 | |||||||||||||||||||||||||||||||||||||||
At FVTPL £m |
Amortised £m |
Financial instruments £m |
Non- financial instruments £m |
Total £m |
At FVTPL £m |
Amortised £m |
Financial instruments £m |
Non- financial instruments £m |
Total £m |
|||||||||||||||||||||||||||||||
Trade and other payables |
| (13,338 | ) | (13,338 | ) | (699 | ) | (14,037 | ) | | (20,129 | ) | (20,129 | ) | (841 | ) | (20,970 | ) | ||||||||||||||||||||||
Other
provisions |
| (58 | ) | (58 | ) | (1,365 | ) | (1,423 | ) | | (117 | ) | (117 | ) | (1,148 | ) | (1,265 | ) | ||||||||||||||||||||||
Other non-current liabilities |
| (149 | ) | (149 | ) | (789 | ) | (938 | ) | | (79 | ) | (79 | ) | (902 | ) | (981 | ) | ||||||||||||||||||||||
Contingent
consideration |
(6,286 | ) | | (6,286 | ) | | (6,286 | ) | (6,172 | ) | | (6,172 | ) | | (6,172 | ) | ||||||||||||||||||||||||
Other items in Assets held |
| (167 | ) | (167 | ) | (53 | ) | (220 | ) | | | | | | ||||||||||||||||||||||||||
(6,286 | ) | (13,712 | ) | (19,998 | ) | (2,906 | ) | (22,904 | ) | (6,172 | ) | (20,325 | ) | (26,497 | ) | (2,891 | ) | (29,388 | ) |
(d) Derivative financial instruments and hedging programmes
Derivatives are only used for economic hedging purposes and not as speculative investments and are classified as held for trading, other than designated and effective hedging instruments, and are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period, otherwise they are classified as non-current. The Group has the following derivative financial instruments:
2018 Fair value |
|
2017 Fair value |
||||||||||||||||
|
Assets £m |
|
|
Liabilities £m |
|
|
Assets £m |
|
|
Liabilities £m |
| |||||||
Non-current |
||||||||||||||||||
Cash flow hedges Interest rate swap contracts |
||||||||||||||||||
(principal amount £1,266 million (2017 £nil)) |
| (1 | ) | | | |||||||||||||
Net investment hedges Cross currency swaps |
||||||||||||||||||
(principal amount £1,575 million (2017 £nil))
|
|
64
|
|
|
|
|
|
|
|
|
|
| ||||||
Current |
||||||||||||||||||
Cash flow hedges Foreign exchange contracts |
||||||||||||||||||
(principal amount £1,809 million (2017 £38 million)) |
1 | (56 | ) | | (1 | ) | ||||||||||||
Net investment hedges Foreign exchange contracts |
||||||||||||||||||
(principal amount £7,316 million (2017 £6,333 million))
|
|
4
|
|
|
(48
|
)
|
|
5
|
|
|
(25
|
)
| ||||||
Derivatives designated and effective as hedging instruments |
69 | (105 | ) | 5 | (26 | ) | ||||||||||||
Non-current |
||||||||||||||||||
Embedded and other derivatives |
4 | | 8 | | ||||||||||||||
Current |
||||||||||||||||||
Foreign exchange contracts |
||||||||||||||||||
(principal amount £18,537 million (2017 £14,449 million)) |
82 | (23 | ) | 62 | (47 | ) | ||||||||||||
Embedded and other derivatives |
102 | | 1 | (1 | ) | |||||||||||||
Derivatives classified as held for trading |
188 | (23 | ) | 71 | (48 | ) | ||||||||||||
Total derivative instruments |
257 | (128 | ) | 76 | (74 | ) |
Fair value hedges
At 31 December 2018, the Group had no designated fair value hedges.
Net investment hedges
During the year, certain foreign exchange contracts were designated as net investment hedges in respect of the foreign currency translation risk arising on consolidation of the Groups net investment in its European (Euro) foreign operations as shown in the table above.
The carrying value of bonds on page 201 includes £8,213 million (2017 £4,315 million) that are designated as hedging instruments in net investment hedges.
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|
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|
||
|
||
|
||
|
Notes to the financial statements continued
42. Financial instruments and related disclosures continued
Cash flow hedges
During 2018, the Group entered into forward foreign exchange contracts which have been designated as cash flow hedges. These were entered into to hedge the foreign exchange exposure arising on cash flows from Euro denominated coupon payments relating to notes issued under the Groups European Medium Term Note programme, on the buyout of Novartis non-controlling interest in the Consumer Healthcare Joint Venture in 2018 and on the planned divestment of Horlicks and other nutrition brands in 2019.
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. In addition, the Group carries a balance in reserves that arose from pre-hedging fluctuations in long-term interest rates when pricing bonds issued in prior years. The balance is reclassified to finance costs over the life of these bonds.
Foreign exchange forward contracts and swaps
In the current year, the Group has designated certain foreign exchange forward contracts and swaps as cash flow and net investment hedges. The following tables detail the foreign exchange forward contracts and swaps outstanding at the end of the reporting period, as well as information on the related hedged items. Foreign exchange derivative financial assets and liabilities are presented in the line Derivative financial instruments (either as assets or liabilities) on the Consolidated balance sheet. The notional value of foreign exchange forward contracts and swaps is the absolute total of outstanding positions at the balance sheet date.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness.
The main source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the Groups own credit risk on the fair value of the foreign exchange forward contracts and swaps, which is not reflected in the fair value of the hedged item attributable to changes in foreign exchange rates. No other sources of ineffectiveness emerged from these hedging relationships. Consequently, there was no ineffectiveness to be recorded from cash flow hedges and net investments in foreign entity hedges.
2018 | ||||||||||||||
Hedging instruments | Average exchange rate |
Foreign currency |
Notional £m |
Fair value £m |
||||||||||
Cash flow hedges |
||||||||||||||
Foreign exchange contracts |
||||||||||||||
Buy foreign currency: |
||||||||||||||
Less than 3 months |
| | | | ||||||||||
3 to 6 months |
1.13 | Euro | 26 | 1 | ||||||||||
Over 6 months |
| | | | ||||||||||
Sell foreign currency: |
||||||||||||||
Less than 3 months |
| | | | ||||||||||
3 to 6 months |
| | | | ||||||||||
Over 6 months |
96.40 | Indian Rupee | 1,783 | (56 | ) | |||||||||
1,809 | (55 | ) | ||||||||||||
Net investment hedges |
||||||||||||||
Foreign exchange contracts |
||||||||||||||
Sell foreign currency: |
||||||||||||||
Less than 3 months |
1.11 | Euro | 6,933 | (40 | ) | |||||||||
3 to 6 months |
| | | | ||||||||||
Over 6 months |
1.11 | Euro | 383 | (4 | ) | |||||||||
7,316 | (44 | ) |
2018 | ||||||||
Hedged items |
Change in value for calculating £m |
Balance in cash flow hedge £m |
||||||
Cash flow hedges |
||||||||
Variability in cash flows from a highly probable forecast transaction |
56 | (49 | ) | |||||
Variability in cash flows from foreign exchange exposure arising on |
||||||||
Euro denominated coupon payments relating to debt issued |
(1 | ) | 1 | |||||
Net investment hedges |
||||||||
Investment in European foreign operations |
50 | 286 |
207
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GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
42. Financial instruments and related disclosures continued
The following table details the effectiveness of the hedging relationships and the amounts reclassified from the hedging reserve to profit or loss:
2018 | ||||||||||||||||||||||||
Amount reclassified to profit or loss | ||||||||||||||||||||||||
Hedging £m |
Amount of hedge ineffectiveness recognised in profit or loss £m |
Line item in profit or loss in which hedge |
Hedged no longer £m |
As hedged item affects profit or loss £m |
Line item in which is included |
|||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Variability in cash flows from a highly probable forecast transaction |
127 | | |
Other operating income/ (expense |
) |
| (176 | ) | |
Other operating income/ (expense |
) | |||||||||||||
Variability in cash flows from foreign exchange exposure arising on Euro denominated coupon payments relating to debt issued |
1 | | |
Finance income/ (expense |
) |
| | |
Finance income/ (expense |
) | ||||||||||||||
Net investment hedges |
||||||||||||||||||||||||
Net investment in European foreign operations |
286 | 7 | |
Finance income/ (expense |
) |
| | |
Finance income/ (expense |
) |
Interest rate swap contracts
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps, where at quarterly intervals the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts are exchanged.
The interest rate swap contracts, exchanging floating rate interest for fixed interest, have been designated as cash flow hedges to hedge the variability of the interest cash flows associated with floating rate debt relating to notes issued under the Groups European Medium Term Note programme. The interest rate swaps and the interest payments on the loan occur simultaneously and the amount accumulated in equity is reclassified to profit or loss over the period that the floating rate interest payments affect profit or loss.
The critical terms of the interest rate swap contracts and their corresponding hedged items are the same. A qualitative assessment of effectiveness is performed and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged items will systematically change in opposite directions in response to movements in the underlying interest rates. The main source of ineffectiveness in these hedge relationships are the effects of currency basis risk, the counterpartys and the Groups own credit risk on the fair value of the interest rate swap contracts, which is not reflected in the fair value of the hedged item attributable to the change in interest rates. No other sources of ineffectiveness emerged from these hedging relationships.
The following tables provide information regarding interest rate swap contracts outstanding and the related hedged items at 31 December 2018. Interest rate swap contract assets and liabilities are presented in the line Derivative financial instruments (either as assets or liabilities) on the Consolidated balance sheet.
2018 | ||||||||||||||||
Hedging instruments |
Average % |
Notional principal value £m |
Change in fair value for |
Fair
value £m |
||||||||||||
Less than 1 year |
| | | | ||||||||||||
1 to 2 years |
0.11 | 676 | | (1 | ) | |||||||||||
2 to 5 years |
0.16 | 591 | | 23 | ||||||||||||
Over 5 years |
| | | | ||||||||||||
2018 | ||||||||||||||||
Hedged items | Change in value used for calculating hedge ineffectiveness £m |
Balance in cash £m |
||||||||||||||
Variable rate borrowings |
3 | (3 | ) |
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Notes to the financial statements continued
42. Financial instruments and related disclosures continued
The following table details the effectiveness of the hedging relationships and the amounts reclassified from the hedging reserve to profit or loss:
2018 | ||||||||||||||||||||||||
Amount reclassified to profit or loss | ||||||||||||||||||||||||
Hedging £m |
Amount of hedge |
Line item in profit or loss in which hedge |
Hedged no longer £m |
As hedged item affects profit or loss £m |
Line item in which |
|||||||||||||||||||
Cash flow hedges |
||||||||||||||||||||||||
Variability in cash flows |
(3 | ) | | |
Finance income/ (expense |
) |
| (2 | ) | |
Finance income/ (expense |
) | ||||||||||||
Pre-hedging of long-term interest rates |
15 | | |
Finance income/ (expense |
) |
| 3 | |
Finance income/ (expense |
) |
(e) Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there is a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. There are also arrangements that do not meet the criteria for offsetting but still allow for the related amounts to be offset in certain circumstances, such as bankruptcy or the termination of a contract.
The following tables set out the financial assets and liabilities that are offset, or subject to enforceable master netting arrangements and other similar agreements but not offset, as at 31 December 2018 and 31 December 2017. The column Net amount shows the impact on the Groups balance sheet if all offset rights were exercised.
At 31 December 2018 | Gross financial assets/ (liabilities) £m |
Financial £m |
Net financial assets/ (liabilities) £m |
Related £m |
Net amount £m |
|||||||||||||||
Financial assets |
||||||||||||||||||||
Trade and other receivables |
5,568 | | 5,568 | (37 | ) | 5,531 | ||||||||||||||
Derivative financial instruments |
257 | | 257 | (62 | ) | 195 | ||||||||||||||
Financial liabilities |
||||||||||||||||||||
Trade and other payables |
(13,338 | ) | | (13,338 | ) | 37 | (13,301 | ) | ||||||||||||
Derivative financial instruments |
(128 | ) | | (128 | ) | 62 | (66 | ) | ||||||||||||
At 31 December 2017 | Gross financial assets/ (liabilities) £m |
Financial £m |
Net financial assets/ (liabilities) £m |
Related £m |
Net balance £m |
|||||||||||||||
Financial assets |
||||||||||||||||||||
Trade and other receivables |
5,191 | (1 | ) | 5,190 | (31 | ) | 5,159 | |||||||||||||
Derivative financial instruments |
76 | | 76 | (64 | ) | 12 | ||||||||||||||
Financial liabilities |
||||||||||||||||||||
Trade and other payables |
(20,130 | ) | 1 | (20,129 | ) | 31 | (20,098 | ) | ||||||||||||
Derivative financial instruments |
(74 | ) | | (74 | ) | 64 | (10 | ) |
Amounts which do not meet the criteria for offsetting on the balance sheet but could be settled net in certain circumstances principally relate to derivative transactions under ISDA (International Swaps and Derivatives Association) agreements where each party has the option to settle amounts on a net basis in the event of default of the other party. As there is presently not a legally enforceable right of offset, these amounts have not been offset in the balance sheet, but have been presented separately in the table above.
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42. Financial instruments and related disclosures continued
(f) Debt interest rate repricing table
The following table sets out the exposure of the Group to interest rates on debt, including commercial paper. The maturity analysis of fixed rate debt is stated by contractual maturity and of floating rate debt by interest rate repricing dates. For the purpose of this table, debt is defined as all classes of borrowings other than obligations under finance leases.
|
| |||||||
2018 | 2017 | |||||||
Total debt £m |
Total £m |
|||||||
Floating and fixed rate debt less than one year |
(5,769) | (2,802 | ) | |||||
Between one and two years |
(1,757) | (1,340 | ) | |||||
Between two and three years |
(1,570) | (1,076 | ) | |||||
Between three and four years |
(1,568) | (16 | ) | |||||
Between four and five years |
(2,010) | (1,475 | ) | |||||
Between five and ten years |
(5,833) | (3,664 | ) | |||||
Greater than ten years |
(7,489) | (6,650 | ) | |||||
Total |
(25,996) | (17,023 | ) | |||||
Original issuance profile: |
||||||||
Fixed rate interest |
(20,322) | (16,209 | ) | |||||
Floating rate interest |
(5,635) | (765 | ) | |||||
Total interest bearing |
(25,957) | (16,974 | ) | |||||
Non-interest bearing |
(39) | (49 | ) | |||||
(25,996) | (17,023 | ) | ||||||
(g) Sensitivity analysis
The tables below illustrate the estimated impact on the income statement and equity as a result of hypothetical market movements in foreign exchange and interest rates in relation to the Groups financial instruments. The range of variables chosen for the sensitivity analysis reflects managements view of changes which are reasonably possible over a one-year period.
Foreign exchange sensitivity
The Group operates internationally and is primarily exposed to foreign exchange risk in relation to Sterling against movements in US Dollar, Euro and Japanese Yen. Foreign exchange risk arises from the translation of financial assets and liabilities which are not in the functional currency of the entity that holds them. Based on the Groups net financial assets and liabilities as at 31 December, a weakening and strengthening of Sterling against these currencies, with all other variables held constant, is illustrated in the tables below. The tables exclude financial instruments that expose the Group to foreign exchange risk where this risk is fully hedged with another financial instrument.
|
| |||||||
2018 |
2017 | |||||||
Income statement impact of non-functional currency foreign exchange exposures |
Increase/(decrease) in £m |
Increase/(decrease) in £m |
||||||
10 cent appreciation of the US Dollar |
36 | 76 | ||||||
10 cent appreciation of the Euro |
(7 | ) | (5 | ) | ||||
10 yen appreciation of the Yen |
15 | 9 | ||||||
2018 | 2017 | |||||||
Income statement impact of non-functional currency foreign exchange exposures | Increase/(decrease)
in £m |
Increase/(decrease) in £m |
||||||
10 cent depreciation of the US Dollar |
(30 | ) | (66 | ) | ||||
10 cent depreciation of the Euro |
6 | 4 | ||||||
10 yen depreciation of the Yen |
(13 | ) | (8 | ) |
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|
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Notes to the financial statements continued
42. Financial instruments and related disclosures continued
The equity impact, shown below, for foreign exchange sensitivity relates to derivative and non-derivative financial instruments hedging the Groups net investments in its European (Euro) foreign operations and cash flow hedges of its foreign exchange exposure arising on Euro denominated coupon payments relating to notes issued under the Groups European Medium Term Note programme.
|
| |||||||
2018 |
2017 | |||||||
Equity impact of non-functional currency foreign exchange exposures |
Increase/(decrease) £m |
Increase/(decrease) £m |
||||||
10 cent appreciation of the US Dollar |
| 1 | ||||||
10 cent appreciation of the Euro |
(1,307 | ) | (1,028 | ) | ||||
2018 | 2017 | |||||||
Equity impact of non-functional currency foreign exchange exposures |
Increase/(decrease) £m |
Increase/(decrease) £m |
||||||
10 cent depreciation of the US Dollar |
| (1 | ) | |||||
10 cent depreciation of the Euro |
1,091 | 861 | ||||||
The tables below present the Groups sensitivity to a weakening and strengthening of Sterling against the relevant currency based on the composition of net debt as shown in Note 31 adjusted for the effects of foreign exchange derivatives that are not part of net debt but affect future foreign currency cash flows.
|
| |||||||
2018 |
2017 | |||||||
Impact of foreign exchange movements on net debt |
(Increase)/decrease £m |
(Increase)/decrease £m |
||||||
10 cent appreciation of the US Dollar |
(714 | ) | (637 | ) | ||||
10 cent appreciation of the Euro |
(60 | ) | 197 | |||||
10 yen appreciation of the Yen |
15 | (4 | ) | |||||
2018 | 2017 | |||||||
Impact of foreign exchange movements on net debt | (Increase)/decrease £m |
(Increase)/decrease £m |
||||||
10 cent depreciation of the US Dollar |
610 | 549 | ||||||
10 cent depreciation of the Euro |
50 | (165 | ) | |||||
10 yen depreciation of the Yen |
(13 | ) | 4 | |||||
Interest rate sensitivity
The Group is exposed to interest rate risk on its outstanding borrowings and investments where any changes in interest rates will affect future cash flows or the fair values of financial instruments.
The majority of debt is issued at fixed interest rates and changes in the floating rates of interest do not significantly affect the Groups net interest charge, although the majority of cash and liquid investments earn floating rates of interest.
The table below hypothetically shows the Groups sensitivity to changes in interest rates in relation to Sterling, US Dollar and Euro floating rate financial assets and liabilities. If the interest rates applicable to floating rate financial assets and liabilities were to have increased by 1% (100 basis points), and assuming other variables had remained constant, it is estimated that the Groups finance income for 2018 would have decreased by approximately £13 million (2017 £5 million increase). A 1% (100 basis points) movement in interest rates is not deemed to have a material effect on equity.
|
| |||||||
2018 |
2017 | |||||||
Income statement impact of interest rate movements |
Increase/(decrease) £m |
Increase/(decrease) £m |
||||||
1% (100 basis points) increase in Sterling interest rates |
(2 | ) | 24 | |||||
1% (100 basis points) increase in US Dollar interest rates |
1 | (24 | ) | |||||
1% (100 basis points) increase in Euro interest rates |
(12 | ) | 5 |
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|
42. Financial instruments and related disclosures continued
(h) Contractual cash flows for non-derivative financial liabilities and derivative instruments
The following tables provide an analysis of the anticipated contractual cash flows including interest payable for the Groups non-derivative financial liabilities on an undiscounted basis. For the purpose of this table, debt is defined as all classes of borrowings except for obligations under finance leases. Interest is calculated based on debt held at 31 December without taking account of future issuance. Floating rate interest is estimated using the prevailing interest rate at the balance sheet date. Cash flows in foreign currencies are translated using spot rates at 31 December. Contractual cash flows in respect of operating lease vacant space provisions are excluded from the table below as they are included in the Commitments under non-cancellable operating leases table in Note 41, Commitments.
At 31 December 2018 | Debt £m |
Interest on debt £m |
Obligations £m |
Finance charge £m |
Trade payables in net debt £m |
Total £m |
||||||||||||||||||
Due in less than one year |
(5,771) | (714 | ) | (24 | ) | (5 | ) | (14,278 | ) | (20,792 | ) | |||||||||||||
Between one and two years |
(1,775) | (708 | ) | (18 | ) | (2 | ) | (1,107 | ) | (3,610 | ) | |||||||||||||
Between two and three years |
(1,592) | (675 | ) | (11 | ) | (2 | ) | (902 | ) | (3,182 | ) | |||||||||||||
Between three and four years |
(1,592) | (620 | ) | (6 | ) | (1 | ) | (851 | ) | (3,070 | ) | |||||||||||||
Between four and five years |
(1,970) | (567 | ) | (3 | ) | (1 | ) | (826 | ) | (3,367 | ) | |||||||||||||
Between five and ten years |
(5,875) | (2,370 | ) | (6 | ) | (5 | ) | (3,748 | ) | (12,004 | ) | |||||||||||||
Greater than ten years |
(7,579) | (3,764 | ) | | | (1,468 | ) | (12,811 | ) | |||||||||||||||
Gross contractual cash flows |
(26,154) | (9,418 | ) | (68 | ) | (16 | ) | (23,180 | ) | (58,836 | ) | |||||||||||||
At 31 December 2017 | Debt £m |
Interest on debt £m |
Obligations £m |
Finance charge £m |
Trade payables in net debt £m |
Total £m |
||||||||||||||||||
Due in less than one year |
(2,802) | (555 | ) | (23 | ) | (2 | ) | (21,521 | ) | (24,903 | ) | |||||||||||||
Between one and two years |
(1,344) | (497 | ) | (27 | ) | (2 | ) | (853 | ) | (2,723 | ) | |||||||||||||
Between two and three years |
(1,078) | (488 | ) | (8 | ) | (1 | ) | (813 | ) | (2,388 | ) | |||||||||||||
Between three and four years |
(16) | (488 | ) | (2 | ) | (1 | ) | (784 | ) | (1,291 | ) | |||||||||||||
Between four and five years |
(1,483) | (468 | ) | (1 | ) | (1 | ) | (752 | ) | (2,705 | ) | |||||||||||||
Between five and ten years |
(3,694) | (2,018 | ) | (5 | ) | (5 | ) | (3,609 | ) | (9,331 | ) | |||||||||||||
Greater than ten years |
(6,720) | (3,996 | ) | | | (1,471 | ) | (12,187 | ) | |||||||||||||||
Gross contractual cash flows |
(17,137) | (8,510 | ) | (66 | ) | (12 | ) | (29,803 | ) | (55,528 | ) |
Anticipated contractual cash flows for the repayment of debt and debt interest have increased by £9.9 billion over the year due to funding of the buyout of Novartis 36.5% stake in the Consumer Healthcare Joint Venture, an increase in the issuance of commercial paper and unfavourable exchange impacts from the translation of non-Sterling denominated debt.
The table below provides an analysis of the anticipated contractual cash flows for the Groups derivative instruments excluding equity options which do not give rise to cash flows, and other embedded derivatives, which are not material, using undiscounted cash flows. Cash flows in foreign currencies are translated using spot rates at 31 December. The gross cash flows of foreign exchange contracts are presented for the purpose of this table although, in practice, the Group uses standard settlement arrangements to reduce its liquidity requirements on these instruments.
2018 |
2017 | |||||||||||||||||||||||||||||||||||||||||
Receivables |
Payables | Receivables | Payables | |||||||||||||||||||||||||||||||||||||||
Interest rate swaps |
Foreign exchange forward contracts and swaps £m |
Interest rate swaps £m |
Foreign exchange forward contracts and swaps £m |
Interest rate swaps £m |
Foreign exchange forward contracts and swaps £m |
Interest rate swaps £m |
Foreign exchange forward contracts and swaps £m |
|||||||||||||||||||||||||||||||||||
Due in less than one year |
49 | 26,680 | (3 | ) | (26,802 | ) | | 20,319 | | (20,326 | ) | |||||||||||||||||||||||||||||||
Between one and two years |
48 | 1,575 | (3 | ) | (1,513 | ) | | | | | ||||||||||||||||||||||||||||||||
Between two and three years |
24 | | (2 | ) | | | | | | |||||||||||||||||||||||||||||||||
Gross contractual cash flows |
121 | 28,255 | (8 | ) | (28,315 | ) | | 20,319 | | (20,326 | ) |
The amounts receivable and payable in less than one year have increased compared with 31 December 2017 predominantly from hedging of the buyout of Novartis 36.5% stake in the Consumer Healthcare Joint Venture and the divestment of Horlicks and other nutrition brands to Unilever.
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|
||
|
||
|
Notes to the financial statements continued
43. Employee share schemes
GSK operates several employee share schemes, including the Share Value Plan, whereby awards are granted to employees to acquire shares or ADS in GlaxoSmithKline plc at no cost after a three year vesting period and the Performance Share Plan, whereby awards are granted to employees to acquire shares or ADS in GlaxoSmithKline plc at no cost, subject to the achievement by the Group of specified performance targets. The granting of these restricted share awards has replaced the granting of options to employees as the cost of the schemes more readily equates to the potential gain to be made by the employee. The Group also operates savings related share option schemes, whereby options are granted to employees to acquire shares in GlaxoSmithKline plc at a discounted price.
Grants of restricted share awards are normally exercisable at the end of the three-year vesting or performance period. Awards are normally granted to employees to acquire shares or ADS in GlaxoSmithKline plc but in some circumstances may be settled in cash. Grants under savings-related share option schemes are normally exercisable after three years saving. In accordance with UK practice, the majority of options under the savings-related share option schemes are granted at a price 20% below the market price ruling at the date of grant. Options under historical share option schemes were granted at the market price ruling at the date of grant.
The total charge for share-based incentive plans in 2018 was £393 million (2017 £347 million; 2016 £338 million). Of this amount, £304 million (2017 £276 million; 2016 £271 million) arose from the Share Value Plan. See Note 9, Employee Costs for further details.
GlaxoSmithKline share award schemes
Share Value Plan
Under the Share Value Plan, share awards are granted to certain employees at no cost. The awards vest after two and a half to three years and there are no performance criteria attached. The fair value of these awards is determined based on the closing share price on the day of grant, after deducting the expected future dividend yield of 4.8% (2017 4.8%; 2016 4.5%) over the duration of the award.
Number of shares and ADS issuable
|
Shares
|
Weighted
|
ADS
|
Weighted
|
||||||||||||
At 1 January 2016 |
32,577 | 17,520 | ||||||||||||||
Awards granted |
12,983 | £14.97 | 6,589 | $39.18 | ||||||||||||
Awards exercised |
(11,198 | ) | (6,214 | ) | ||||||||||||
Awards cancelled
|
|
(1,507
|
)
|
|
(812
|
)
|
||||||||||
At 31 December 2016 |
32,855 | 17,083 | ||||||||||||||
Awards granted |
13,018 | £13.68 | 6,610 | $35.63 | ||||||||||||
Awards exercised |
(10,596 | ) | (5,674 | ) | ||||||||||||
Awards cancelled
|
|
(1,352
|
)
|
|
(627
|
)
|
||||||||||
At 31 December 2017 |
33,925 | 17,392 | ||||||||||||||
Awards granted |
12,751 | £13.74 | 6,503 | $35.28 | ||||||||||||
Awards exercised |
(11,089 | ) | (5,583 | ) | ||||||||||||
Awards cancelled
|
|
(1,519
|
)
|
|
(925
|
)
|
||||||||||
At 31 December 2018
|
|
34,068
|
|
|
17,387
|
|
Performance Share Plan
Under the Performance Share Plan, share awards are granted to Directors and senior executives at no cost. The percentage of each award that vests is based upon the performance of the Group over a defined measurement period with dividends reinvested during the same period. For awards granted from 2015, the performance conditions are based on three equally weighted measures over a three-year performance period. These are adjusted free cash flow, TSR and R&D new product performance.
The fair value of the awards is determined based on the closing share price on the day of grant. For TSR performance elements, this is adjusted by the likelihood of that condition being met, as assessed at the time of grant.
During 2018, awards were made of 4.7 million shares at a weighted fair value of £10.46 and 1.3 million ADS at a weighted fair value of $29.43. At 31 December 2018, there were outstanding awards over 13.1 million shares and 3.4 million ADS.
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43. Employee share schemes continued
Share options and savings-related options
For the purposes of valuing savings-related options to arrive at the share-based payment charge, a Black-Scholes option pricing model has been used. The assumptions used in the model are as follows:
2018 Grant
|
2017 Grant | 2016 Grant | ||||||||||||||||||||||
Risk-free interest rate |
0.76% | 0.54% | 0.32% | |||||||||||||||||||||
Dividend yield |
5.3% | 5.9% | 4.9% | |||||||||||||||||||||
Volatility |
21% | 23% | 23% | |||||||||||||||||||||
Expected life |
3 years | 3 years | 3 years | |||||||||||||||||||||
Savings-related options grant price (including 20% discount)
|
|
£12.09
|
|
|
£10.86
|
|
|
£12.95
|
| |||||||||||||||
Options outstanding | Share option schemes shares |
Share option schemes ADS |
Savings-related share option schemes |
|||||||||||||||||||||
Number
|
Weighted price
|
Number
|
Weighted price
|
Number
|
Weighted price
|
|||||||||||||||||||
At 31 December 2018
|
1,796
|
£11.96
|
1,216
|
$36.19
|
5,929
|
£11.70
|
||||||||||||||||||
Range of exercise prices on options outstanding at year end
|
£11.60
|
£12.21
|
$33.42
|
$38.14
|
£10.13
|
£12.95
|
||||||||||||||||||
Weighted average market price on exercise during year
|
£14.43
|
$39.77
|
£15.13
|
|||||||||||||||||||||
Weighted average remaining contractual life
|
|
0.9 years
|
|
|
0.9 years
|
|
|
2.6 years
|
|
Options over 2.9 million shares were granted during the year under the savings-related share option scheme at a weighted average fair value of £2.40. At 31 December 2018, 5.5 million of the savings-related share options were not exercisable. All of the other share options and ADS options are currently exercisable and all will expire if not exercised on or before 22 July 2020.
There has been no change in the effective exercise price of any outstanding options during the year.
Employee Share Ownership Plan Trusts
The Group sponsors Employee Share Ownership Plan (ESOP) Trusts to acquire and hold shares in GlaxoSmithKline plc to satisfy awards made under employee incentive plans and options granted under employee share option schemes. The trustees of the ESOP Trusts purchase shares with finance provided by the Group by way of loans or contributions. The costs of running the ESOP Trusts are charged to the income statement. Shares held by the ESOP Trusts are deducted from other reserves and amortised down to the value of proceeds, if any, receivable from employees on exercise by a transfer to retained earnings. The trustees have waived their rights to dividends on the shares held by the ESOP Trusts.
Shares held for share award schemes
|
2018
|
2017
|
||||||
Number of shares (000)
|
41,391
|
66,558
|
||||||
£m | £m | |||||||
Nominal value |
10 | 17 | ||||||
Carrying value |
160 | 399 | ||||||
Market value |
617 | 880 | ||||||
Shares held for share option schemes
|
2018
|
2017
|
||||||
Number of shares (000)
|
139
|
139
|
||||||
£m | £m | |||||||
Nominal value |
| | ||||||
Carrying value |
1 | 1 | ||||||
Market value |
2 | 2 |
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Notes to the financial statements continued
44. Principal Group companies
The following represent the principal subsidiaries and their countries of incorporation of the Group at 31 December 2018. The equity share capital of these entities is wholly owned by the Group except where its percentage interest is shown otherwise. All companies are incorporated in their principal country of operation except where stated.
England
|
US
| |
Glaxo Group Limited |
Block Drug Company, Inc. | |
Glaxo Operations UK Limited | Corixa Corporation | |
GlaxoSmithKline Capital plc | GlaxoSmithKline Capital Inc. | |
GlaxoSmithKline Consumer Healthcare Holdings Limited | GlaxoSmithKline Consumer Healthcare Holdings (US) LLC | |
GlaxoSmithKline Consumer Healthcare (UK) Trading Limited | GlaxoSmithKline Consumer Healthcare, L.P. (88%) | |
GlaxoSmithKline Consumer Trading Services Limited | GlaxoSmithKline Holdings (Americas) Inc. | |
GlaxoSmithKline Export Limited | GlaxoSmithKline LLC | |
GlaxoSmithKline Finance plc | Human Genome Sciences, Inc. | |
GlaxoSmithKline Holdings Limited * | GSK Consumer Health, Inc. (formerly Novartis Consumer Health, Inc.) | |
GlaxoSmithKline Research & Development Limited | S.R. One, Limited | |
GlaxoSmithKline Services Unlimited * | Stiefel Laboratories, Inc. | |
GlaxoSmithKline UK Limited | ViiV Healthcare Company (78.3%) | |
Setfirst Limited | ||
SmithKline Beecham Limited | ||
ViiV Healthcare Limited (78.3%) | ||
ViiV Healthcare UK Limited (78.3%) | ||
Europe
|
Others
| |
GlaxoSmithKline Biologicals SA (Belgium) |
GlaxoSmithKline Argentina S.A. (Argentina) | |
GlaxoSmithKline Pharmaceuticals SA (Belgium) | GlaxoSmithKline Australia Pty Ltd (Australia) | |
GlaxoSmithKline Biologicals S.A.S. (France) | GlaxoSmithKline Consumer Healthcare Australia Pty Ltd (Australia) | |
GlaxoSmithKline Sante Grand Public SAS (France) | GlaxoSmithKline Brasil Limitada (Brazil) | |
Laboratoire GlaxoSmithKline (France) | GlaxoSmithKline Consumer Healthcare Inc. (Canada) | |
ViiV Healthcare SAS (France) (78.3%) | GlaxoSmithKline Inc. (Canada) | |
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG (Germany) | ID Biomedical Corporation of Quebec (Canada) | |
GlaxoSmithKline GmbH & Co. KG (Germany) | GlaxoSmithKline Limited (China (Hong Kong)) | |
GSK Vaccines GmbH (Germany) | GlaxoSmithKline (Tianjin) Co. Ltd (China) (90%) | |
GlaxoSmithKline Consumer Healthcare S.p.A. (Italy) | Sino-American Tianjin Smith Kline & French Laboratories Ltd (China) (55%) | |
GlaxoSmithKline S.p.A. (Italy) | GlaxoSmithKline Consumer Healthcare Limited (India) (72.5%) | |
GSK Vaccines S.r.l. (Italy) | GlaxoSmithKline Pharmaceuticals Limited (India) (75%) | |
GlaxoSmithKline B.V. (Netherlands) | GlaxoSmithKline Consumer Healthcare Japan K.K. (Japan) | |
GlaxoSmithKline Consumer Healthcare Sp.z.o.o. (Poland) | GlaxoSmithKline K.K. (Japan) | |
GSK Services Sp z o.o. (Poland) | ViiV Healthcare Kabushiki Kaisha (Japan) (78.3%) | |
GlaxoSmithKline Trading Services Limited (Republic of Ireland) (i) | GlaxoSmithKline Pakistan Limited (Pakistan) (82.6%) | |
GlaxoSmithKline Healthcare AO (Russia) | Glaxo Wellcome Manufacturing Pte Ltd. (Singapore) | |
GlaxoSmithKline S.A. (Spain) | GlaxoSmithKline Korea Limited (Republic of Korea) | |
Laboratorios ViiV Healthcare, S.L. (Spain) (78.3%) | GlaxoSmithKline llaclari Sanayi ve Ticaret A.S. (Turkey) | |
GSK Consumer Healthcare S.A. (Switzerland)
|
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(i) | Exempt from the provisions of section 347 and 348 of the Companies Act 2014 (Ireland), in accordance with the exemptions noted in Section 357 of that Act. Further subsidiaries, as disclosed on pages 260 to 270, are exempt from these provisions as they are also consolidated in the group financial statements. |
* | Directly held wholly owned subsidiary of GlaxoSmithKline plc. |
The subsidiaries and associates listed above principally affect the figures in the Groups financial statements. Each of GlaxoSmithKline Capital Inc., GlaxoSmithKline Capital plc and GlaxoSmithKline LLC, is a wholly-owned finance subsidiary of the company, and the company has fully and unconditionally guaranteed the securities issued by each of GlaxoSmithKline Capital Inc., GlaxoSmithKline Capital plc and GlaxoSmithKline LLC.
See pages 260 to 270 for a complete list of subsidiary undertakings, associates and joint ventures, which form part of these financial statements.
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45. Legal proceedings continued
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45. Legal proceedings continued
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45. Legal proceedings continued
46. Post balance sheet events
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Company balance sheet UK GAAP
(including FRS 101 Reduced Disclosure Framework) as at 31 December 2018
Notes | 2018 £m |
2018 £m |
2017 £m |
2017 £m |
||||||||||||||||
Fixed assets investments |
F | 19,987 | 20,275 | |||||||||||||||||
Current assets: |
||||||||||||||||||||
Trade and other receivables |
G | 8,394 | 8,715 | |||||||||||||||||
Cash at bank |
12 | 15 | ||||||||||||||||||
Total current assets |
8,406 | 8,730 | ||||||||||||||||||
Bank overdrafts |
(12 | ) | (15 | ) | ||||||||||||||||
Short term borrowings |
H | (3,500 | ) | | ||||||||||||||||
Trade and other payables |
I | (610 | ) | (837 | ) | |||||||||||||||
Total current liabilities |
(4,122 | ) | (852 | ) | ||||||||||||||||
Net current assets |
4,284 | 7,878 | ||||||||||||||||||
Total assets less current liabilities |
24,271 | 28,153 | ||||||||||||||||||
Provisions for liabilities |
J | (16 | ) | (27 | ) | |||||||||||||||
Other non-current liabilities |
K | (282 | ) | (238 | ) | |||||||||||||||
Net assets |
23,973 | 27,888 | ||||||||||||||||||
Capital and reserves |
||||||||||||||||||||
Share capital |
L | 1,345 | 1,343 | |||||||||||||||||
Share premium account |
L | 3,091 | 3,019 | |||||||||||||||||
Other reserves |
1,420 | 1,420 | ||||||||||||||||||
Retained earnings: |
||||||||||||||||||||
At 1 January |
22,106 | 15,538 | ||||||||||||||||||
(Loss)/profit for the year |
(62 | ) | 9,893 | |||||||||||||||||
Other changes in retained earnings |
(3,927 | ) | (3,325 | ) | ||||||||||||||||
M | 18,117 | 22,106 | ||||||||||||||||||
Equity shareholders funds |
23,973 | 27,888 |
The financial statements on pages 219 to 222 were approved by the Board on 11 March 2019 and signed on its behalf by
Philip Hampton
Chairman
GlaxoSmithKline plc
Registered number: 3888792
Company statement of changes in equity
for the year ended 31 December 2018
Share capital £m |
Share premium account £m |
Other reserves £m |
Retained earnings £m |
Total equity £m |
||||||||||||||||
At 1 January 2017 |
1,342 | 2,954 | 1,420 | 15,538 | 21,254 | |||||||||||||||
Profit and Total comprehensive income attributable to shareholders |
| | | 9,893 | 9,893 | |||||||||||||||
Dividends to shareholders |
| | | (3,906 | ) | (3,906 | ) | |||||||||||||
Shares issued under employee share schemes |
1 | 55 | | | 56 | |||||||||||||||
Treasury shares transferred to the ESOP Trust |
| 10 | | 581 | 591 | |||||||||||||||
At 31 December 2017 |
1,343 | 3,019 | 1,420 | 22,106 | 27,888 | |||||||||||||||
Loss and Total comprehensive expense attributable to shareholders |
| | | (62 | ) | (62 | ) | |||||||||||||
Dividends to shareholders |
| | | (3,927 | ) | (3,927 | ) | |||||||||||||
Shares issued under employee share schemes |
2 | 72 | | | 74 | |||||||||||||||
At 31 December 2018 | 1,345 | 3,091 | 1,420 | 18,117 | 23,973 | |||||||||||||||
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(including FRS 101 Reduced Disclosure Framework)
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F) Fixed assets investments
2018 £m |
2017 £m |
|||||||
Shares in GlaxoSmithKline Services Unlimited |
613 | 613 | ||||||
Shares in GlaxoSmithKline Holdings (One) Limited |
18 | 18 | ||||||
Shares in GlaxoSmithKline Holdings Limited |
17,888 | 17,888 | ||||||
Shares in GlaxoSmithKline Mercury Limited |
33 | 33 | ||||||
18,552 | 18,552 | |||||||
Capital contribution relating to share-based payments |
1,139 | 1,139 | ||||||
Contribution relating to contingent consideration |
296 | 584 | ||||||
19,987 | 20,275 | |||||||
G) Trade and other receivables
|
| |||||||
2018 £m |
2017 £m |
|||||||
Amounts due within one year: |
||||||||
UK Corporation tax recoverable |
10 | 31 | ||||||
Other receivables |
| 1 | ||||||
Amounts owed by Group undertakings |
7,889 | 8,299 | ||||||
7,899 | 8,331 | |||||||
Amounts due after more than one year: |
||||||||
Amounts owed by Group undertakings |
495 | 384 | ||||||
8,394 | 8,715 | |||||||
H) Short-term borrowings
The £3.5 billion borrowing relates to a facility taken out in June 2018 as part of the financing of the buyout of the non-controlling interest in the Consumer Healthcare Joint Venture held by Novartis. The facility has a maturity date of 1 December 2019.
I) Trade and other payables
|
| |||||||
2018 £m |
2017 £m |
|||||||
Amounts due within one year: |
||||||||
Other creditors |
567 | 438 | ||||||
Contingent consideration payable |
14 | 346 | ||||||
Amounts owed to Group undertakings |
29 | 53 | ||||||
610 | 837 |
The company has guaranteed debt issued by its subsidiary companies from two of which it receives fees. In aggregate, the company has outstanding guarantees over £22.2 billion of debt instruments (2017 £16.7 billion). The amounts due from the subsidiary company in relation to these guarantee fees will be recovered over the life of the bonds and are disclosed within Trade and other receivables (see Note G).
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(including FRS 101 Reduced Disclosure Framework) continued
J) Provisions for liabilities
2018 £m |
2017 £m |
|||||||||||
At 1 January
|
27 | 23 | ||||||||||
Exchange adjustments
|
2 | (3 | ) | |||||||||
Charge for the year
|
16 | 52 | ||||||||||
Utilised |
(29 | ) | (45 | ) | ||||||||
At 31 December |
16 | 27 | ||||||||||
The provisions relate to a number of legal and other disputes in which the company is currently involved.
K) Other non-current liabilities
|
| |||||||||||
2018 £m |
2017 £m |
|||||||||||
Contingent consideration payable
|
282 | 238 | ||||||||||
282 | 238 | |||||||||||
The contingent consideration relates to
the amount payable for the acquisition in 2015 of the Novartis Vaccines portfolio. The current year
L) Share capital and share premium account
|
||||||||||||
Ordinary Shares of 25p each | Share premium account |
|||||||||||
Number | £m | £m | ||||||||||
Share capital authorised
|
||||||||||||
At 31 December 2017
|
10,000,000,000 | 2,500 | ||||||||||
At 31 December 2018 |
10,000,000,000 | 2,500 | ||||||||||
Share capital issued and fully paid
|
||||||||||||
At 1 January 2017
|
5,368,316,062 | 1,342 | 2,954 | |||||||||
Issued under employee share schemes
|
4,237,758 | 1 | 55 | |||||||||
Treasury shares transferred to the ESOP Trust |
| | 10 | |||||||||
At 31 December 2017
|
5,372,553,820 | 1,343 | 3,019 | |||||||||
Issued under employee share schemes |
6,513,804 | 2 | 72 | |||||||||
At 31 December 2018 |
5,379,067,624 | 1,345 | 3,091 | |||||||||
31 December 000 |
31 December 000 |
|||||||||||
Number of shares issuable under employee share schemes
|
56,723 | 38,647 | ||||||||||
Number of unissued shares not under option |
4,564,209 | 4,588,799 |
At 31 December 2018, of the issued share capital, 41,530,909 shares were held in the ESOP Trusts, 414,605,950 shares were held as Treasury shares and 4,922,930,765 shares were in free issue. All issued shares are fully paid. The nominal, carrying and market values of the shares held in the ESOP Trusts are disclosed in Note 43, Employee share schemes.
M) Retained earnings
The loss of GlaxoSmithKline plc for the year was £62 million (2017 £9,893 million profit), which after dividends of £3,927 million (2017 £3,906 million), gave a retained loss of £3,989 million (2017 profit of £5,987 milion). After the effect of £nil Treasury shares transferred to a subsidiary company (2017 £581 million), retained earnings at 31 December 2018 stood at £18,117 million (2017 £22,106 million), of which £4,096 million was unrealised (2017 £4,096 million).
N) Group companies
See pages 260 to 270 for a complete list of subsidiaries, associates and joint ventures, which forms part of these financial statements.
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Financial record
An unaudited analysis of the Group results is provided by quarter in Sterling for the financial year 2018.
Income statement Total
12 months 2018 | Q4 2018 | |||||||||||||||||||||||||||||||
Reported |
Reported |
|||||||||||||||||||||||||||||||
|
£m |
£% |
CER% |
£m |
£% |
CER% |
||||||||||||||||||||||||||
Turnover |
||||||||||||||||||||||||||||||||
Pharmaceuticals |
17,269 | | 2 | 4,810 | 6 | 4 | ||||||||||||||||||||||||||
Vaccines |
5,894 | 14 | 16 | 1,479 | 22 | 18 | ||||||||||||||||||||||||||
Consumer Healthcare |
7,658 | (1 | ) | 2 | 1,908 | 1 | 1 | |||||||||||||||||||||||||
Total turnover |
30,821 | 2 | 5 | 8,197 | 7 | 5 | ||||||||||||||||||||||||||
Cost of sales |
(10,241 | ) | (1 | ) | | (2,904 | ) | 14 | 13 | |||||||||||||||||||||||
Selling, general and administration |
(9,915 | ) | 3 | 5 | (2,620 | ) | 3 | 1 | ||||||||||||||||||||||||
Research and development |
(3,893 | ) | (13 | ) | (12 | ) | (1,076 | ) | (11 | ) | (14 | ) | ||||||||||||||||||||
Royalty income |
299 | (16 | ) | (17 | ) | 79 | 14 | 6 | ||||||||||||||||||||||||
Other operating income/(expense) |
(1,588 | ) | (122 | ) | ||||||||||||||||||||||||||||
Operating profit |
5,483 | 34 | 43 | 1,554 | >100 | >100 | ||||||||||||||||||||||||||
Net finance costs |
(717 | ) | (185 | ) | ||||||||||||||||||||||||||||
Profit on disposal of associates |
3 | | ||||||||||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
31 | 5 | ||||||||||||||||||||||||||||||
Profit before taxation |
4,800 | 36 | 46 | 1,374 | >100 | >100 | ||||||||||||||||||||||||||
Taxation |
(754 | ) | (74 | ) | ||||||||||||||||||||||||||||
Tax rate % |
15.7 | % | 5.4 | % | ||||||||||||||||||||||||||||
Profit after taxation for the period |
4,046 | 87 | 100 | 1,300 | >100 | >100 | ||||||||||||||||||||||||||
Profit attributable to non-controlling interests |
423 | 85 | ||||||||||||||||||||||||||||||
Profit attributable to shareholders |
3,623 | 1,215 | ||||||||||||||||||||||||||||||
Basic earnings per share (pence) |
73.7 | p | >100 | >100 | 24.7 | p | >100 | >100 | ||||||||||||||||||||||||
Diluted earnings per share (pence) |
72.9 | p | 24.4 | p | ||||||||||||||||||||||||||||
Income statement Adjusted
|
||||||||||||||||||||||||||||||||
Total turnover |
30,821 | 2 | 5 | 8,197 | 7 | 5 | ||||||||||||||||||||||||||
Cost of sales |
(9,178 | ) | 5 | 6 | (2,532 | ) | 12 | 12 | ||||||||||||||||||||||||
Selling, general and administration |
(9,462 | ) | 1 | 4 | (2,529 | ) | 5 | 3 | ||||||||||||||||||||||||
Research and development |
(3,735 | ) | (3 | ) | (2 | ) | (1,019 | ) | 3 | (1 | ) | |||||||||||||||||||||
Royalty income |
299 | (16 | ) | (17 | ) | 79 | 14 | 6 | ||||||||||||||||||||||||
Operating profit |
8,745 | 2 | 6 | 2,196 | 8 | 4 | ||||||||||||||||||||||||||
Net finance costs |
(698 | ) | (173 | ) | ||||||||||||||||||||||||||||
Share of after tax profits of
associates |
31 | 5 | ||||||||||||||||||||||||||||||
Profit before taxation |
8,078 | 2 | 6 | 2,028 | 6 | 2 | ||||||||||||||||||||||||||
Taxation |
(1,535 | ) | (355 | ) | ||||||||||||||||||||||||||||
Tax rate % |
19.0 | % | 17.5 | % | ||||||||||||||||||||||||||||
Profit after taxation for the period |
6,543 | 5 | 9 | 1,673 | 10 | 6 | ||||||||||||||||||||||||||
Profit attributable to non-controlling interests |
674 | 139 | ||||||||||||||||||||||||||||||
Profit attributable to shareholders |
5,869 | 1,534 | ||||||||||||||||||||||||||||||
Adjusted earnings per share (pence) |
119.4 | p | 7 | 12 | 31.2 | p | 14 | 10 |
The calculation of Adjusted results is described on page 40. |
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Quarterly trend continued
Q3 2018 | Q2 2018 | Q1 2018 | ||||||||||||||||||||||||||||||||||||
Reported |
Reported | Reported | ||||||||||||||||||||||||||||||||||||
£m |
£% |
CER% |
£m |
£% |
CER% |
£m | £% | CER% | ||||||||||||||||||||||||||||||
4,221 | 1 | 3 | 4,229 | (3 | ) | 1 | 4,009 | (4 | ) | 2 | ||||||||||||||||||||||||||||
1,924 | 14 | 17 | 1,253 | 13 | 16 | 1,238 | 7 | 13 | ||||||||||||||||||||||||||||||
1,947 | (1 | ) | 3 | 1,828 | (1 | ) | 3 | 1,975 | (3 | ) | 2 | |||||||||||||||||||||||||||
8,092 | 3 | 6 | 7,310 | | 4 | 7,222 | (2 | ) | 4 | |||||||||||||||||||||||||||||
(2,636 | ) | (1 | ) | | (2,310 | ) | (12 | ) | (10 | ) | (2,391 | ) | (5 | ) | (3 | ) | ||||||||||||||||||||||
(2,527 | ) | 9 | 12 | (2,457 | ) | 3 | 8 | (2,311 | ) | (6 | ) | (2 | ) | |||||||||||||||||||||||||
(988 | ) | (6 | ) | (5 | ) | (925 | ) | (27 | ) | (25 | ) | (904 | ) | (6 | ) | (1 | ) | |||||||||||||||||||||
94 | (12 | ) | (13 | ) | 73 | (26 | ) | (23 | ) | 53 | (35 | ) | (34 | ) | ||||||||||||||||||||||||
(125 | ) | (912 | ) | (429 | ) | |||||||||||||||||||||||||||||||||
1,910 | 2 | 7 | 779 | >100 | >100 | 1,240 | (28 | ) | (15 | ) | ||||||||||||||||||||||||||||
(223 | ) | (167 | ) | (142 | ) | |||||||||||||||||||||||||||||||||
3 | | | ||||||||||||||||||||||||||||||||||||
15 | 2 | 9 | ||||||||||||||||||||||||||||||||||||
1,705 | | 5 | 614 | >100 | >100 | 1,107 | (29 | ) | (15 | ) | ||||||||||||||||||||||||||||
(193 | ) | (139 | ) | (348 | ) | |||||||||||||||||||||||||||||||||
11.3 | % | 22.6 | % | 31.4 | % | |||||||||||||||||||||||||||||||||
1,512 | 8 | 14 | 475 | >100 | >100 | 759 | (38 | ) | (24 | ) | ||||||||||||||||||||||||||||
94 | 34 | 210 | ||||||||||||||||||||||||||||||||||||
1,418 | 441 | 549 | ||||||||||||||||||||||||||||||||||||
28.8 | p | 16 | 23 | 9.0 | p | >100 | >100 | 11.2 | p | (48 | ) | (33 | ) | |||||||||||||||||||||||||
28.5 | p | 8.9 | p | 11.1 | p | |||||||||||||||||||||||||||||||||
8,092 | 3 | 6 | 7,310 | | 4 | 7,222 | (2 | ) | 4 | |||||||||||||||||||||||||||||
(2,388 | ) | 4 | 5 | (2,079 | ) | 5 | 7 | (2,179 | ) | (2 | ) | | ||||||||||||||||||||||||||
(2,313 | ) | 1 | 4 | (2,334 | ) | 2 | 6 | (2,286 | ) | (3 | ) | 2 | ||||||||||||||||||||||||||
(961 | ) | 7 | 8 | (868 | ) | (18 | ) | (15 | ) | (887 | ) | (3 | ) | 2 | ||||||||||||||||||||||||
94 | (12 | ) | (13 | ) | 73 | (26 | ) | (23 | ) | 53 | (35 | ) | (34 | ) | ||||||||||||||||||||||||
2,524 | 2 | 6 | 2,102 | 1 | 7 | 1,923 | (3 | ) | 9 | |||||||||||||||||||||||||||||
(221 | ) | (165 | ) | (139 | ) | |||||||||||||||||||||||||||||||||
15 | 2 | 9 | ||||||||||||||||||||||||||||||||||||
2,318 | 1 | 5 | 1,939 | 2 | 8 | 1,793 | (1 | ) | 11 | |||||||||||||||||||||||||||||
(430 | ) | (388 | ) | (362 | ) | |||||||||||||||||||||||||||||||||
18.6 | % | 20.0 | % | 20.2 | % | |||||||||||||||||||||||||||||||||
1,888 | 4 | 8 | 1,551 | 3 | 10 | 1,431 | 1 | 13 | ||||||||||||||||||||||||||||||
141 | 170 | 224 | ||||||||||||||||||||||||||||||||||||
1,747 | 1,381 | 1,207 | ||||||||||||||||||||||||||||||||||||
35.5 | p | 10 | 14 | 28.1 | p | 3 | 10 | 24.6 | p | (2 | ) | 11 |
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Financial record continued
Pharmaceutical turnover by therapeutic area 2018
Total | US | Europe | International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 2017 | Growth | 2018 | Growth | 2018 | Growth | 2018 | Growth | ||||||||||||||||||||||||||||||||||||||||||||||||||
Therapeutic area/major products | £m | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |||||||||||||||||||||||||||||||||||||||||||||
Respiratory |
6,928 | 6,991 | (1 | ) | 1 | 3,368 | (5 | ) | (3 | ) | 1,533 | 5 | 4 | 2,027 | 3 | 7 | ||||||||||||||||||||||||||||||||||||||||||
Seretide/Advair |
2,422 | 3,130 | (23 | ) | (21 | ) | 1,097 | (32 | ) | (30 | ) | 599 | (19 | ) | (20 | ) | 726 | (7 | ) | (4 | ) | |||||||||||||||||||||||||||||||||||||
Ellipta products |
2,049 | 1,586 | 29 | 32 | 1,245 | 24 | 27 | 457 | 42 | 41 | 347 | 33 | 38 | |||||||||||||||||||||||||||||||||||||||||||||
Anoro Ellipta |
476 | 342 | 39 | 42 | 318 | 36 | 39 | 101 | 46 | 45 | 57 | 46 | 54 | |||||||||||||||||||||||||||||||||||||||||||||
Arnuity Ellipta |
44 | 35 | 26 | 29 | 39 | 22 | 25 | - | - | - | 5 | 67 | 67 | |||||||||||||||||||||||||||||||||||||||||||||
Incruse Ellipta |
284 | 201 | 41 | 44 | 186 | 39 | 42 | 74 | 45 | 45 | 24 | 50 | 56 | |||||||||||||||||||||||||||||||||||||||||||||
Relvar/Breo Ellipta |
1,089 | 1,006 | 8 | 10 | 581 | (3 | ) | (1 | ) | 253 | 25 | 24 | 255 | 26 | 31 | |||||||||||||||||||||||||||||||||||||||||||
Trelegy Ellipta |
156 | 2 | >100 | >100 | 121 | >100 | >100 | 29 | >100 | >100 | 6 | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Nucala/Mepolizumab |
563 | 344 | 64 | 66 | 341 | 44 | 48 | 152 | >100 | >100 | 70 | 84 | 89 | |||||||||||||||||||||||||||||||||||||||||||||
Avamys/Veramyst |
300 | 281 | 7 | 10 | - | - | - | 74 | (3 | ) | (4 | ) | 226 | 11 | 16 | |||||||||||||||||||||||||||||||||||||||||||
Flixotide/Flovent |
595 | 596 | - | 3 | 333 | 3 | 6 | 93 | (2 | ) | (3 | ) | 169 | (5 | ) | 1 | ||||||||||||||||||||||||||||||||||||||||||
Ventolin |
737 | 767 | (4 | ) | (1 | ) | 352 | (7 | ) | (5 | ) | 130 | (2 | ) | (2 | ) | 255 | - | 7 | |||||||||||||||||||||||||||||||||||||||
Other
|
|
262
|
|
|
287
|
|
|
(9
|
)
|
|
(7
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
28
|
|
|
4
|
|
|
-
|
|
|
234
|
|
|
(9
|
)
|
|
(7
|
)
| |||||||||||||||||||
HIV |
4,722 | 4,350 | 9 | 11 | 2,913 | 8 | 10 | 1,194 | 7 | 6 | 615 | 14 | 20 | |||||||||||||||||||||||||||||||||||||||||||||
Dolutegravir products |
4,420 | 3,870 | 14 | 16 | 2,830 | 11 | 13 | 1,091 | 18 | 17 | 499 | 28 | 35 | |||||||||||||||||||||||||||||||||||||||||||||
Tivicay |
1,639 | 1,404 | 17 | 19 | 1,036 | 12 | 15 | 377 | 20 | 18 | 226 | 37 | 47 | |||||||||||||||||||||||||||||||||||||||||||||
Triumeq |
2,648 | 2,461 | 8 | 9 | 1,670 | 2 | 5 | 706 | 17 | 15 | 272 | 21 | 25 | |||||||||||||||||||||||||||||||||||||||||||||
Juluca |
133 | 5 | >100 | >100 | 124 | >100 | >100 | 8 | - | - | 1 | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Epzicom/Kivexa |
117 | 234 | (50 | ) | (48 | ) | 7 | (74 | ) | (74 | ) | 44 | (61 | ) | (61 | ) | 66 | (28 | ) | (24 | ) | |||||||||||||||||||||||||||||||||||||
Selzentry |
115 | 128 | (10 | ) | (9 | ) | 58 | (12 | ) | (11 | ) | 35 | (17 | ) | (17 | ) | 22 | 10 | 15 | |||||||||||||||||||||||||||||||||||||||
Other
|
|
70
|
|
|
118
|
|
|
(41
|
)
|
|
(40
|
)
|
|
18
|
|
|
(59
|
)
|
|
(59
|
)
|
|
24
|
|
|
(35
|
)
|
|
(38
|
)
|
|
28
|
|
|
(26
|
)
|
|
(21
|
)
| |||||||||||||||||||
Immuno-inflammation |
472 | 377 | 25 | 28 | 420 | 24 | 27 | 36 | 33 | 33 | 16 | 45 | 64 | |||||||||||||||||||||||||||||||||||||||||||||
Benlysta
|
|
473
|
|
|
375
|
|
|
26
|
|
|
29
|
|
|
420
|
|
|
24
|
|
|
27
|
|
|
37
|
|
|
37
|
|
|
33
|
|
|
16
|
|
|
60
|
|
|
80
|
| |||||||||||||||||||
Established pharmaceuticals |
5,147 | 5,558 | (7 | ) | (4 | ) | 752 | (23 | ) | (21 | ) | 1,309 | (5 | ) | (7 | ) | 3,086 | (4 | ) | 2 | ||||||||||||||||||||||||||||||||||||||
Dermatology |
435 | 456 | (4 | ) | - | 3 | (57 | ) | (57 | ) | 161 | (1 | ) | (2 | ) | 271 | (5 | ) | 2 | |||||||||||||||||||||||||||||||||||||||
Augmentin |
570 | 587 | (3 | ) | 2 | - | - | - | 181 | (1 | ) | (2 | ) | 389 | (4 | ) | 3 | |||||||||||||||||||||||||||||||||||||||||
Avodart |
572 | 613 | (7 | ) | (5 | ) | 12 | (20 | ) | (20 | ) | 240 | (19 | ) | (20 | ) | 320 | 6 | 11 | |||||||||||||||||||||||||||||||||||||||
Coreg |
50 | 134 | (63 | ) | (63 | ) | 50 | (63 | ) | (63 | ) | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
Eperzan/Tanzeum |
31 | 87 | (64 | ) | (64 | ) | 30 | (64 | ) | (63 | ) | 1 | (60 | ) | (61 | ) | - | - | - | |||||||||||||||||||||||||||||||||||||||
Imigran/Imitrex |
141 | 168 | (16 | ) | (16 | ) | 58 | (25 | ) | (23 | ) | 57 | (12 | ) | (14 | ) | 26 | - | - | |||||||||||||||||||||||||||||||||||||||
Lamictal |
617 | 650 | (5 | ) | (3 | ) | 310 | (7 | ) | (5 | ) | 113 | 6 | 5 | 194 | (8 | ) | (4 | ) | |||||||||||||||||||||||||||||||||||||||
Requip |
85 | 110 | (23 | ) | (21 | ) | 5 | (58 | ) | (58 | ) | 28 | (3 | ) | (7 | ) | 52 | (25 | ) | (20 | ) | |||||||||||||||||||||||||||||||||||||
Serevent |
82 | 96 | (15 | ) | (14 | ) | 43 | (17 | ) | (15 | ) | 30 | (9 | ) | (9 | ) | 9 | (18 | ) | (18 | ) | |||||||||||||||||||||||||||||||||||||
Seroxat/Paxil |
170 | 184 | (8 | ) | (5 | ) | - | - | - | 39 | - | - | 131 | (10 | ) | (7 | ) | |||||||||||||||||||||||||||||||||||||||||
Valtrex |
123 | 128 | (4 | ) | (1 | ) | 21 | 5 | 5 | 30 | 3 | 3 | 72 | (9 | ) | (4 | ) | |||||||||||||||||||||||||||||||||||||||||
Zeffix |
69 | 89 | (22 | ) | (22 | ) | 1 | - | - | 5 | (17 | ) | (17 | ) | 63 | (23 | ) | (23 | ) | |||||||||||||||||||||||||||||||||||||||
Other |
2,202 | 2,256 | (2 | ) | 1 | 219 | (10 | ) | (6 | ) | 424 | (2 | ) | (3 | ) | 1,559 | (1 | ) | 4 | |||||||||||||||||||||||||||||||||||||||
Pharmaceuticals
|
|
17,269
|
|
|
17,276
|
|
|
-
|
|
|
2
|
|
|
7,453
|
|
|
(2
|
)
|
|
1
|
|
|
4,072
|
|
|
2
|
|
|
1
|
|
5,744 |
|
-
|
|
|
5
|
|
227
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Pharmaceutical turnover by therapeutic area 2017
Total | US | Europe | International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | Growth | 2017 | Growth | 2017 | Growth | 2017 | Growth | ||||||||||||||||||||||||||||||||||||||||||||||||||
Therapeutic area/major products | £m | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |||||||||||||||||||||||||||||||||||||||||||||
Respiratory |
6,991 | 6,510 | 7 | 3 | 3,556 | 8 | 3 | 1,458 | 5 | | 1,977 | 9 | 5 | |||||||||||||||||||||||||||||||||||||||||||||
Seretide/Advair |
3,130 | 3,485 | (10 | ) | (14 | ) | 1,610 | (12 | ) | (16 | ) | 736 | (12 | ) | (17 | ) | 784 | (5 | ) | (8 | ) | |||||||||||||||||||||||||||||||||||||
Ellipta products |
1,586 | 950 | 67 | 59 | 1,004 | 72 | 65 | 322 | 59 | 51 | 260 | 58 | 50 | |||||||||||||||||||||||||||||||||||||||||||||
Anoro Ellipta |
342 | 201 | 70 | 63 | 234 | 68 | 61 | 69 | 77 | 67 | 39 | 70 | 65 | |||||||||||||||||||||||||||||||||||||||||||||
Arnuity Ellipta |
35 | 15 | >100 | >100 | 32 | >100 | >100 | | | | 3 | >100 | >100 | |||||||||||||||||||||||||||||||||||||||||||||
Incruse Ellipta |
201 | 114 | 76 | 68 | 134 | 56 | 49 | 51 | >100 | >100 | 16 | >100 | >100 | |||||||||||||||||||||||||||||||||||||||||||||
Relvar/Breo Ellipta |
1,006 | 620 | 62 | 55 | 602 | 75 | 67 | 202 | 44 | 36 | 202 | 49 | 42 | |||||||||||||||||||||||||||||||||||||||||||||
Trelegy Ellipta |
2 | | | | 2 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Nucala/Mepolizumab |
344 | 102 | >100 | >100 | 236 | >100 | >100 | 70 | >100 | >100 | 38 | >100 | >100 | |||||||||||||||||||||||||||||||||||||||||||||
Avamys/Veramyst |
281 | 277 | 1 | (4 | ) | 1 | (96 | ) | (96 | ) | 76 | 3 | (3 | ) | 204 | 15 | 9 | |||||||||||||||||||||||||||||||||||||||||
Flixotide/Flovent |
596 | 637 | (6 | ) | (10 | ) | 323 | (15 | ) | (18 | ) | 95 | 1 | (5 | ) | 178 | 8 | 5 | ||||||||||||||||||||||||||||||||||||||||
Ventolin |
767 | 785 | (2 | ) | (6 | ) | 380 | (10 | ) | (14 | ) | 132 | 4 | (2 | ) | 255 | 8 | 5 | ||||||||||||||||||||||||||||||||||||||||
Other |
287 | 274 | 5 | 3 | 2 | >(100 | ) | 3 | 27 | (4 | ) | (4 | ) | 258 | 4 | 3 | ||||||||||||||||||||||||||||||||||||||||||
HIV |
4,350 | 3,556 | 22 | 16 | 2,697 | 26 | 21 | 1,114 | 10 | 3 | 539 | 33 | 26 | |||||||||||||||||||||||||||||||||||||||||||||
Dolutegravir products |
3,870 | 2,688 | 44 | 37 | 2,560 | 42 | 35 | 921 | 39 | 31 | 389 | 77 | 70 | |||||||||||||||||||||||||||||||||||||||||||||
Tivicay |
1,404 | 953 | 47 | 40 | 923 | 44 | 38 | 315 | 39 | 30 | 166 | 95 | 88 | |||||||||||||||||||||||||||||||||||||||||||||
Triumeq |
2,461 | 1,735 | 42 | 35 | 1,632 | 40 | 34 | 606 | 39 | 31 | 223 | 66 | 58 | |||||||||||||||||||||||||||||||||||||||||||||
Juluca |
5 | | | | 5 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Epzicom/Kivexa |
234 | 568 | (59 | ) | (61 | ) | 27 | (86 | ) | (87 | ) | 114 | (54 | ) | (57 | ) | 93 | (22 | ) | (25 | ) | |||||||||||||||||||||||||||||||||||||
Selzentry |
128 | 125 | 2 | (2 | ) | 66 | | (5 | ) | 42 | 1 | (4 | ) | 20 | 15 | 11 | ||||||||||||||||||||||||||||||||||||||||||
Other |
118 | 175 | (32 | ) | (37 | ) | 44 | (28 | ) | (31 | ) | 37 | (41 | ) | (44 | ) | 37 | (28 | ) | (35 | ) | |||||||||||||||||||||||||||||||||||||
Immuno-inflammation |
377 | 340 | 11 | 6 | 339 | 9 | 5 | 27 | 29 | 24 | 11 | 37 | | |||||||||||||||||||||||||||||||||||||||||||||
Benlysta |
375 | 306 | 23 | 17 | 338 | 22 | 17 | 27 | 29 | 19 | 10 | 26 | 26 | |||||||||||||||||||||||||||||||||||||||||||||
Established pharmaceuticals |
5,558 | 5,698 | (2 | ) | (5 | ) | 976 | (10 | ) | (14 | ) | 1,384 | (5 | ) | (11 | ) | 3,198 | 2 | | |||||||||||||||||||||||||||||||||||||||
Dermatology |
456 | 393 | 16 | 11 | 7 | (56 | ) | (56 | ) | 162 | 11 | 5 | 287 | 24 | 20 | |||||||||||||||||||||||||||||||||||||||||||
Augmentin |
587 | 563 | 4 | 2 | | | | 182 | 3 | (4 | ) | 405 | 5 | 5 | ||||||||||||||||||||||||||||||||||||||||||||
Avodart |
613 | 635 | (3 | ) | (9 | ) | 15 | (79 | ) | (79 | ) | 297 | (6 | ) | (12 | ) | 301 | 21 | 16 | |||||||||||||||||||||||||||||||||||||||
Coreg |
134 | 131 | 2 | (2 | ) | 134 | 2 | (2 | ) | | | | | | | |||||||||||||||||||||||||||||||||||||||||||
Eperzan/Tanzeum |
87 | 121 | (28 | ) | (31 | ) | 83 | (30 | ) | (32 | ) | 3 | | | 1 | >(100 | ) | (100 | ) | |||||||||||||||||||||||||||||||||||||||
Imigran/Imitrex |
168 | 177 | (5 | ) | (8 | ) | 77 | (9 | ) | (12 | ) | 65 | 5 | | 26 | (13 | ) | (17 | ) | |||||||||||||||||||||||||||||||||||||||
Lamictal |
650 | 614 | 6 | 1 | 332 | 6 | 1 | 107 | 1 | (5 | ) | 211 | 8 | 5 | ||||||||||||||||||||||||||||||||||||||||||||
Requip |
110 | 116 | (5 | ) | (9 | ) | 12 | (8 | ) | (15 | ) | 29 | (3 | ) | (13 | ) | 69 | (5 | ) | (5 | ) | |||||||||||||||||||||||||||||||||||||
Serevent |
96 | 96 | | (4 | ) | 52 | 6 | 2 | 33 | (6 | ) | (11 | ) | 11 | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||||||||||||
Seroxat/Paxil |
184 | 206 | (11 | ) | (14 | ) | | | | 39 | (3 | ) | (8 | ) | 145 | (4 | ) | (7 | ) | |||||||||||||||||||||||||||||||||||||||
Valtrex |
128 | 118 | 8 | 3 | 20 | 25 | 19 | 29 | 16 | 12 | 79 | 3 | (3 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Zeffix |
89 | 111 | (20 | ) | (22 | ) | 1 | (50 | ) | (50 | ) | 6 | (14 | ) | (29 | ) | 82 | (20 | ) | (21 | ) | |||||||||||||||||||||||||||||||||||||
Other |
2,256 | 2,417 | (7 | ) | (8 | ) | 243 | (7 | ) | (11 | ) | 432 | (16 | ) | (21 | ) | 1,581 | (4 | ) | (4 | ) | |||||||||||||||||||||||||||||||||||||
Pharmaceuticals |
17,276 | 16,104 | 7 | 3 | 7,568 | 11 | 6 | 3,983 | 3 | (3 | ) | 5,725 | 6 | 4 |
228
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Financial record continued
Total | US | Europe | International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 2017 | Growth | 2018 | Growth | 2018 | Growth | 2018 | Growth | ||||||||||||||||||||||||||||||||||||||||||||||||||
Major products | £m | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |||||||||||||||||||||||||||||||||||||||||||||
Meningitis |
881 | 890 | (1 | ) | 2 | 374 | 10 | 13 | 336 | (14 | ) | (15 | ) | 171 | 7 | 22 | ||||||||||||||||||||||||||||||||||||||||||
Bexsero |
584 | 556 | 5 | 9 | 200 | 32 | 34 | 311 | (9 | ) | (11 | ) | 73 | 18 | 52 | |||||||||||||||||||||||||||||||||||||||||||
Menveo |
232 | 274 | (15 | ) | (12 | ) | 174 | (7 | ) | (5 | ) | 17 | (50 | ) | (50 | ) | 41 | (23 | ) | (15 | ) | |||||||||||||||||||||||||||||||||||||
Other |
65 | 60 | 8 | 7 | | | | 8 | (47 | ) | (47 | ) | 57 | 27 | 24 | |||||||||||||||||||||||||||||||||||||||||||
Influenza |
523 | 488 | 7 | 10 | 385 | 7 | 9 | 66 | 35 | 33 | 72 | (8 | ) | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||
Fluarix, FluLaval |
523 | 488 | 7 | 10 | 385 | 7 | 9 | 66 | 35 | 33 | 72 | (8 | ) | (1 | ) | |||||||||||||||||||||||||||||||||||||||||||
Shingles |
784 | 22 | >100 | >100 | 733 | >100 | >100 | 2 | | | 49 | | | |||||||||||||||||||||||||||||||||||||||||||||
Shingrix |
784 | 22 | >100 | >100 | 733 | >100 | >100 | 2 | | | 49 | | | |||||||||||||||||||||||||||||||||||||||||||||
Established vaccines |
3,706 | 3,760 | (1 | ) | | 1,209 | 5 | 8 | 1,157 | | (1 | ) | 1,340 | (8 | ) | (6 | ) | |||||||||||||||||||||||||||||||||||||||||
Infanrix, Pediarix |
680 | 743 | (8 | ) | (7 | ) | 296 | (10 | ) | (8 | ) | 266 | (16 | ) | (17 | ) | 118 | 20 | 28 | |||||||||||||||||||||||||||||||||||||||
Boostrix |
517 | 560 | (8 | ) | (7 | ) | 265 | 1 | 3 | 162 | (12 | ) | (14 | ) | 90 | (20 | ) | (19 | ) | |||||||||||||||||||||||||||||||||||||||
Hepatitis |
808 | 693 | 17 | 19 | 458 | 21 | 24 | 245 | 22 | 21 | 105 | (7 | ) | | ||||||||||||||||||||||||||||||||||||||||||||
Rotarix |
521 | 524 | (1 | ) | 1 | 126 | (5 | ) | (2 | ) | 110 | 16 | 15 | 285 | (4 | ) | (2 | ) | ||||||||||||||||||||||||||||||||||||||||
Synflorix |
424 | 509 | (17 | ) | (17 | ) | | | | 58 | (13 | ) | (13 | ) | 366 | (17 | ) | (18 | ) | |||||||||||||||||||||||||||||||||||||||
Priorix, Priorix Tetra, Varilrix |
305 | 301 | 1 | 2 | | | | 159 | (3 | ) | (4 | ) | 146 | 6 | 9 | |||||||||||||||||||||||||||||||||||||||||||
Cervarix |
138 | 134 | 3 | 2 | | | | 20 | (31 | ) | (34 | ) | 118 | 12 | 12 | |||||||||||||||||||||||||||||||||||||||||||
Other |
313 | 296 | 6 | 6 | 64 | 45 | 49 | 137 | 32 | 30 | 112 | (24 | ) | (25 | ) | |||||||||||||||||||||||||||||||||||||||||||
Vaccines |
5,894 | 5,160 | 14 | 16 | 2,701 | 45 | 48 | 1,561 | (2 | ) | (4 | ) | 1,632 | (3 | ) | | ||||||||||||||||||||||||||||||||||||||||||
£% represents growth at actual exchange rates. CER% represents growth at constant exchange rates.
Vaccines turnover 2017
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | US | Europe | International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | Growth | 2017 | Growth | 2017 | Growth | 2017 | Growth | ||||||||||||||||||||||||||||||||||||||||||||||||||
Major products | £m | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |||||||||||||||||||||||||||||||||||||||||||||
Meningitis |
890 | 662 | 34 | 27 | 339 | 40 | 34 | 391 | 40 | 31 | 160 | 15 | 6 | |||||||||||||||||||||||||||||||||||||||||||||
Bexsero |
556 | 390 | 43 | 34 | 152 | 25 | 20 | 342 | 45 | 36 | 62 | 94 | 75 | |||||||||||||||||||||||||||||||||||||||||||||
Menveo |
274 | 202 | 36 | 29 | 187 | 55 | 48 | 34 | 26 | 19 | 53 | (2 | ) | (7 | ) | |||||||||||||||||||||||||||||||||||||||||||
Other |
60 | 70 | (14 | ) | (20 | ) | | | | 15 | (12 | ) | (18 | ) | 45 | (15 | ) | (21 | ) | |||||||||||||||||||||||||||||||||||||||
Influenza |
488 | 414 | 18 | 12 | 361 | 15 | 10 | 49 | 53 | 44 | 78 | 16 | 9 | |||||||||||||||||||||||||||||||||||||||||||||
Fluarix, FluLaval |
488 | 414 | 18 | 12 | 361 | 15 | 10 | 49 | 53 | 44 | 78 | 16 | 9 | |||||||||||||||||||||||||||||||||||||||||||||
Shingles |
22 | | | | 22 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Shingrix |
22 | | | | 22 | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Established vaccines |
3,760 | 3,516 | 7 | 1 | 1,147 | 10 | 5 | 1,160 | 4 | (2 | ) | 1,453 | 7 | 1 | ||||||||||||||||||||||||||||||||||||||||||||
Infanrix, Pediarix |
743 | 769 | (3 | ) | (8 | ) | 330 | (2 | ) | (7 | ) | 315 | (6 | ) | (11 | ) | 98 | 2 | (4 | ) | ||||||||||||||||||||||||||||||||||||||
Boostrix |
560 | 470 | 19 | 13 | 262 | 10 | 5 | 185 | 33 | 24 | 113 | 22 | 14 | |||||||||||||||||||||||||||||||||||||||||||||
Hepatitis |
693 | 602 | 15 | 10 | 379 | 29 | 23 | 201 | 2 | (4 | ) | 113 | 2 | (2 | ) | |||||||||||||||||||||||||||||||||||||||||||
Rotarix |
524 | 469 | 12 | 6 | 132 | 2 | (2 | ) | 95 | 27 | 19 | 297 | 12 | 6 | ||||||||||||||||||||||||||||||||||||||||||||
Synflorix |
509 | 504 | 1 | (6 | ) | | | | 67 | (1 | ) | (7 | ) | 442 | 1 | (5 | ) | |||||||||||||||||||||||||||||||||||||||||
Priorix, Priorix Tetra, Varilrix |
301 | 300 | | (5 | ) | | | | 164 | 8 | 1 | 137 | (8 | ) | (12 | ) | ||||||||||||||||||||||||||||||||||||||||||
Cervarix |
134 | 81 | 65 | 57 | | | | 29 | (12 | ) | (18 | ) | 105 | >100 | >100 | |||||||||||||||||||||||||||||||||||||||||||
Other |
296 | 321 | (8 | ) | (13 | ) | 44 | 8 | | 104 | (7 | ) | (11 | ) | 148 | (12 | ) | (17 | ) | |||||||||||||||||||||||||||||||||||||||
Vaccines |
5,160 | 4,592 | 12 | 6 | 1,869 | 17 | 12 | 1,600 | 12 | 6 | 1,691 | 8 | 1 |
£% represents growth at actual exchange rates. CER% represents growth at constant exchange rates.
229
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
A record of financial performance is provided, analysed in accordance with current reporting practice. The information included in the Five year record is prepared in accordance with IFRS as adopted by the European Union and also with IFRS as issued by the International Accounting Standards Board.
Group turnover by geographic region | 2018 £m |
2017 £m |
2016 £m |
2015 £m |
2014 £m |
|||||||||||||||
US |
11,982 | 11,263 | 10,197 | 8,222 | 7,409 | |||||||||||||||
Europe |
7,973 | 7,943 | 7,476 | 6,435 | 6,284 | |||||||||||||||
International |
10,866 | 10,980 | 10,216 | 9,266 | 9,313 | |||||||||||||||
30,821 | 30,186 | 27,889 | 23,923 | 23,006 | ||||||||||||||||
Group turnover by segment | 2018 £m |
2017 £m |
2016 £m |
2015 £m |
2014 £m |
|||||||||||||||
Pharmaceuticals |
17,269 | 17,276 | 16,104 | 14,157 | 15,438 | |||||||||||||||
Vaccines |
5,894 | 5,160 | 4,592 | 3,656 | 3,159 | |||||||||||||||
Consumer Healthcare |
7,658 | 7,750 | 7,193 | 6,038 | 4,322 | |||||||||||||||
Segment turnover |
30,821 | 30,186 | 27,889 | 23,851 | 22,919 | |||||||||||||||
Corporate and other unallocated turnover |
| | | 72 | 87 | |||||||||||||||
30,821 | 30,186 | 27,889 | 23,923 | 23,006 | ||||||||||||||||
Pharmaceuticals turnover | ||||||||||||||||||||
Respiratory |
6,928 | 6,991 | 6,510 | 5,741 | 6,168 | |||||||||||||||
HIV |
4,722 | 4,350 | 3,556 | 2,322 | 1,498 | |||||||||||||||
Immuno-inflammation |
472 | 377 | 340 | 263 | 214 | |||||||||||||||
Established Pharmaceuticals |
5,147 | 5,558 | 5,698 | 5,831 | 7,558 | |||||||||||||||
17,269 | 17,276 | 16,104 | 14,157 | 15,438 | ||||||||||||||||
Vaccines turnover | ||||||||||||||||||||
Meningitis |
881 | 890 | 662 | 326 | | |||||||||||||||
Influenza |
523 | 488 | 414 | 268 | 215 | |||||||||||||||
Shingles |
784 | 22 | | | | |||||||||||||||
Established Vaccines |
3,706 | 3,760 | 3,516 | 3,062 | 2,944 | |||||||||||||||
5,894 | 5,160 | 4,592 | 3,656 | 3,159 | ||||||||||||||||
Consumer Healthcare turnover | ||||||||||||||||||||
Wellness |
3,940 | 4,001 | 3,726 | 2,970 | 1,565 | |||||||||||||||
Oral care |
2,496 | 2,466 | 2,223 | 1,875 | 1,806 | |||||||||||||||
Nutrition |
643 | 680 | 674 | 684 | 633 | |||||||||||||||
Skin health |
579 | 603 | 570 | 509 | 318 | |||||||||||||||
7,658 | 7,750 | 7,193 | 6,038 | 4,322 |
230
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|
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|
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|
Financial record continued
Five year record continued
Financial results Total | 2018 £m |
2017 £m |
2016 £m |
2015 £m |
2014 £m |
|||||||||||||||
Turnover |
30,821 | 30,186 | 27,889 | 23,923 | 23,006 | |||||||||||||||
Operating profit |
5,483 | 4,087 | 2,598 | 10,322 | 3,597 | |||||||||||||||
Profit before taxation |
4,800 | 3,525 | 1,939 | 10,526 | 2,968 | |||||||||||||||
Profit after taxation |
4,046 | 2,169 | 1,062 | 8,372 | 2,831 | |||||||||||||||
pence | pence | pence | pence | pence | ||||||||||||||||
Basic earnings per share |
73.7 | 31.4 | 18.8 | 174.3 | 57.3 | |||||||||||||||
Diluted earnings per share |
72.9 | 31.0 | 18.6 | 172.3 | 56.7 | |||||||||||||||
2018 millions |
2017 millions |
2016 millions |
2015 millions |
2014 millions |
||||||||||||||||
Weighted average number of shares in issue: |
||||||||||||||||||||
Basic |
4,914 | 4,886 | 4,860 | 4,831 | 4,808 | |||||||||||||||
Diluted |
4,971 | 4,941 | 4,909 | 4,888 | 4,865 | |||||||||||||||
Financial results Adjusted | 2018 £m |
2017 £m |
2016 £m |
2015 £m |
2014 £m |
|||||||||||||||
Turnover |
30,821 | 30,186 | 27,889 | 23,923 | 23,006 | |||||||||||||||
Operating profit |
8,745 | 8,568 | 7,671 | 5,659 | 6,456 | |||||||||||||||
Profit before taxation |
8,078 | 7,924 | 7,024 | 5,021 | 5,840 | |||||||||||||||
Profit after taxation |
6,543 | 6,257 | 5,526 | 4,045 | 4,675 | |||||||||||||||
pence | pence | pence | pence | pence | ||||||||||||||||
Adjusted earnings per share |
119.4 | 111.8 | 100.6 | 74.6 | 92.7 | |||||||||||||||
% | % | % | % | % | ||||||||||||||||
Return on capital employed |
134.0 | 83.4 | 28.0 | 152.4 | 46.6 |
Return on capital employed is calculated as total profit before taxation as a percentage of average net assets over the year.
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Financial statements
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Investor information
|
Five year record continued
Balance sheet | 2018 £m |
2017 £m |
2016 £m |
2015 £m |
2014 £m |
|||||||||||||||||||||||
Non-current assets |
41,139 | 40,474 | 42,370 | 36,859 | 25,973 | |||||||||||||||||||||||
Current assets |
16,927 | 15,907 | 16,711 | 16,587 | 15,059 | |||||||||||||||||||||||
Total assets |
58,066 | 56,381 | 59,081 | 53,446 | 41,032 | |||||||||||||||||||||||
Current liabilities |
(22,491 | ) | (26,569 | ) | (19,001 | ) | (13,417 | ) | (13,676 | ) | ||||||||||||||||||
Non-current liabilities |
(31,903 | ) | (26,323 | ) | (35,117 | ) | (31,151 | ) | (22,420 | ) | ||||||||||||||||||
Total liabilities |
(54,394 | ) | (52,892 | ) | (54,118 | ) | (44,568 | ) | (36,096 | ) | ||||||||||||||||||
Net assets |
3,672 | 3,489 | 4,963 | 8,878 | 4,936 | |||||||||||||||||||||||
Shareholders equity |
4,360 | (68 | ) | 1,124 | 5,114 | 4,263 | ||||||||||||||||||||||
Non-controlling interests |
(688 | ) | 3,557 | 3,839 | 3,764 | 673 | ||||||||||||||||||||||
Total equity |
3,672 | 3,489 | 4,963 | 8,878 | 4,936 | |||||||||||||||||||||||
Number of employees | ||||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||||
US |
13,804 | 14,526 | 14,491 | 14,696 | 16,579 | |||||||||||||||||||||||
Europe |
41,943 | 43,002 | 42,330 | 43,538 | 37,899 | |||||||||||||||||||||||
International |
39,743 | 40,934 | 42,479 | 43,021 | 43,443 | |||||||||||||||||||||||
95,490 | 98,462 | 99,300 | 101,255 | 97,921 | ||||||||||||||||||||||||
Manufacturing |
36,527 | 38,245 | 38,372 | 38,855 | 32,171 | |||||||||||||||||||||||
Selling |
36,351 | 37,374 | 38,158 | 39,549 | 42,785 | |||||||||||||||||||||||
Administration |
10,768 | 11,307 | 11,244 | 11,140 | 10,630 | |||||||||||||||||||||||
Research and development |
11,844 | 11,536 | 11,526 | 11,711 | 12,335 | |||||||||||||||||||||||
95,490 | 98,462 | 99,300 | 101,255 | 97,921 | ||||||||||||||||||||||||
The geographic distribution of employees in the table above is based on the location of GSKs subsidiary companies. The number of employees is the number of permanent employed staff at the end of the financial period. It excludes those employees who are employed and managed by GSK on a contract basis.
Exchange rates As a guide to holders of ADS, the following tables set out, for the periods indicated, information on the exchange rate of US Dollars for Sterling as reported by the Bank of England (4pm buying rate).
The average rate for the year is calculated as the average of the 4pm buying rates for each day of the year.
|
| |||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||||||||||
Average |
1.34 | 1.29 | 1.35 | 1.53 | 1.65 | |||||||||||||||||||||||
|
2019 Mar |
|
|
2019 Feb |
|
|
2019 Jan |
|
|
2018 Dec |
|
|
2018 Nov |
|
|
2018 Oct |
|
|
2018 Sep |
| ||||||||
High |
1.32 | 1.33 | 1.32 | 1.28 | 1.31 | 1.32 | 1.33 | |||||||||||||||||||||
Low |
1.32 | 1.28 | 1.26 | 1.25 | 1.27 | 1.27 | 1.28 |
The 4pm buying rate on 1 March 2019 was £1= US$1.32.
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|
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|
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|
Financial record continued
Five year record continued
Adjusted results reconciliation 31 December 2018 |
Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction -related £m |
Divestments, significant legal and other items £m |
Adjusted results £m |
|||||||||||||||||||||||||
Turnover |
30,821 | 30,821 | ||||||||||||||||||||||||||||||
Cost of sales |
(10,241 | ) | 536 | 69 | 443 | 15 | | (9,178 | ) | |||||||||||||||||||||||
Gross profit |
20,580 | 536 | 69 | 443 | 15 | | 21,643 | |||||||||||||||||||||||||
Selling, general and administration |
(9,915 | ) | 2 | 315 | 98 | 38 | (9,462 | ) | ||||||||||||||||||||||||
Research and development |
(3,893 | ) | 44 | 45 | 49 | 20 | (3,735 | ) | ||||||||||||||||||||||||
Royalty income |
299 | 299 | ||||||||||||||||||||||||||||||
Other operating income/(expense) |
(1,588 | ) | 2 | 1,864 | (278 | ) | | |||||||||||||||||||||||||
Operating profit |
5,483 | 580 | 116 | 809 | 1,977 | (220 | ) | 8,745 | ||||||||||||||||||||||||
Net finance costs |
(717 | ) | 4 | (3 | ) | 18 | (698 | ) | ||||||||||||||||||||||||
Profit on disposal of associates |
3 | (3 | ) | | ||||||||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
31 | 31 | ||||||||||||||||||||||||||||||
Profit before taxation |
4,800 | 580 | 116 | 813 | 1,974 | (205 | ) | 8,078 | ||||||||||||||||||||||||
Taxation |
(754 | ) | (109 | ) | (19 | ) | (170 | ) | (239 | ) | (244 | ) | (1,535 | ) | ||||||||||||||||||
Tax rate |
15.7% | 19.0% | ||||||||||||||||||||||||||||||
Profit after taxation |
4,046 | 471 | 97 | 643 | 1,735 | (449 | ) | 6,543 | ||||||||||||||||||||||||
Profit attributable to non-controlling interests |
423 | 251 | 674 | |||||||||||||||||||||||||||||
Profit attributable to shareholders |
3,623 | 471 | 97 | 643 | 1,484 | (449 | ) | 5,869 | ||||||||||||||||||||||||
Earnings per share |
73.7p | 9.6p | 2.0p | 13.1p | 30.2p | (9.2)p | 119.4p | |||||||||||||||||||||||||
Weighted average number of shares (millions) |
4,914 | 4,914 | ||||||||||||||||||||||||||||||
Adjusted results reconciliation 31 December 2017 |
Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction -related £m |
Divestments, significant legal and other items £m |
US tax reform £m |
Adjusted results £m |
||||||||||||||||||||||||
Turnover |
30,186 | 30,186 | ||||||||||||||||||||||||||||||
Cost of sales |
(10,342 | ) | 546 | 400 | 545 | 80 | | (8,771 | ) | |||||||||||||||||||||||
Gross profit |
19,844 | 546 | 400 | 545 | 80 | | 21,415 | |||||||||||||||||||||||||
Selling, general and administration |
(9,672 | ) | 248 | 83 | (9,341 | ) | ||||||||||||||||||||||||||
Research and development |
(4,476 | ) | 45 | 288 | 263 | 18 | (3,862 | ) | ||||||||||||||||||||||||
Royalty income |
356 | 356 | ||||||||||||||||||||||||||||||
Other operating income/(expense) |
(1,965 | ) | 1,519 | (220 | ) | 666 | | |||||||||||||||||||||||||
Operating profit |
4,087 | 591 | 688 | 1,056 | 1,599 | (119 | ) | 666 | 8,568 | |||||||||||||||||||||||
Net finance costs |
(669 | ) | 4 | 8 | (657 | ) | ||||||||||||||||||||||||||
Profit on disposal of associates |
94 | (94 | ) | | ||||||||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
13 | 13 | ||||||||||||||||||||||||||||||
Profit before taxation |
3,525 | 591 | 688 | 1,060 | 1,599 | (205 | ) | 666 | 7,924 | |||||||||||||||||||||||
Taxation |
(1,356 | ) | (134 | ) | (176 | ) | (209 | ) | (619 | ) | (251 | ) | 1,078 | (1,667 | ) | |||||||||||||||||
Tax rate |
38.5% | 21.0% | ||||||||||||||||||||||||||||||
Profit after taxation |
2,169 | 457 | 512 | 851 | 980 | (456 | ) | 1,744 | 6,257 | |||||||||||||||||||||||
Profit attributable to non-controlling interests |
637 | 42 | 114 | 793 | ||||||||||||||||||||||||||||
Profit attributable to shareholders |
1,532 | 457 | 512 | 851 | 938 | (456 | ) | 1,630 | 5,464 | |||||||||||||||||||||||
Earnings per share |
|
31.4p |
|
9.4p | 10.5p | 17.4p | 19.2p | (9.4)p | 33.3p | 111.8p | ||||||||||||||||||||||
Weighted average number of shares (millions) |
4,886 | 4,886 |
233
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Financial statements
| ||
Investor information
|
Five year record continued
Adjusted results reconciliation 31 December 2016 |
Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction -related £m |
Divestments, significant legal and other items £m |
Adjusted results £m |
|||||||||||||||||||||
Turnover |
27,889 | 27,889 | ||||||||||||||||||||||||||
Cost of sales |
(9,290 | ) | 547 | 7 | 297 | 86 | 2 | (8,351 | ) | |||||||||||||||||||
Gross profit |
18,599 | 547 | 7 | 297 | 86 | 2 | 19,538 | |||||||||||||||||||||
Selling, general and administration |
(9,366 | ) | 514 | 55 | (8,797 | ) | ||||||||||||||||||||||
Research and development |
(3,628 | ) | 41 | 13 | 159 | (81 | ) | 28 | (3,468 | ) | ||||||||||||||||||
Royalty income |
398 | 398 | ||||||||||||||||||||||||||
Other operating income/(expense) |
(3,405 | ) | 3,914 | (509 | ) | | ||||||||||||||||||||||
Operating profit |
2,598 | 588 | 20 | 970 | 3,919 | (424 | ) | 7,671 | ||||||||||||||||||||
Net finance costs |
(664 | ) | 4 | 8 | (652 | ) | ||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
5 | 5 | ||||||||||||||||||||||||||
Profit before taxation |
1,939 | 588 | 20 | 974 | 3,919 | (416 | ) | 7,024 | ||||||||||||||||||||
Taxation |
(877 | ) | (130 | ) | (5 | ) | (217 | ) | (439 | ) | 170 | (1,498 | ) | |||||||||||||||
Tax rate |
45.2% | 21.3% | ||||||||||||||||||||||||||
Profit after taxation |
1,062 | 458 | 15 | 757 | 3,480 | (246 | ) | 5,526 | ||||||||||||||||||||
Profit attributable to non-controlling interests |
150 | 487 | 637 | |||||||||||||||||||||||||
Profit attributable to shareholders |
912 | 458 | 15 | 757 | 2,993 | (246 | ) | 4,889 | ||||||||||||||||||||
Earnings per share |
18.8p | 9.4p | 0.3p | 15.6p | 61.6p | (5.1) | p | 100.6p | ||||||||||||||||||||
Weighted average number of shares (millions) |
4,860 | 4,860 | ||||||||||||||||||||||||||
Adjusted results reconciliation 31 December 2015 |
Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction -related £m |
Divestments, significant legal and other items £m |
Adjusted results £m |
|||||||||||||||||||||
Turnover |
23,923 | 23,923 | ||||||||||||||||||||||||||
Cost of sales |
(8,853 | ) | 522 | 147 | 563 | 89 | 12 | (7,520 | ) | |||||||||||||||||||
Gross profit |
15,070 | 522 | 147 | 563 | 89 | 12 | 16,403 | |||||||||||||||||||||
Selling, general and administration |
(9,232 | ) | 7 | 1,009 | 88 | 151 | (7,977 | ) | ||||||||||||||||||||
Research and development |
(3,560 | ) | 41 | 52 | 319 | 52 | (3,096 | ) | ||||||||||||||||||||
Royalty income |
329 | 329 | ||||||||||||||||||||||||||
Other operating income/(expense) |
7,715 | 2,061 | (9,776 | ) | | |||||||||||||||||||||||
Operating profit |
10,322 | 563 | 206 | 1,891 | 2,238 | (9,561 | ) | 5,659 | ||||||||||||||||||||
Net finance costs |
(653 | ) | 5 | 12 | (636 | ) | ||||||||||||||||||||||
Profit on disposal of associates |
843 | (843 | ) | | ||||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
14 | (16 | ) | (2 | ) | |||||||||||||||||||||||
Profit before taxation |
10,526 | 563 | 206 | 1,896 | 2,238 | (10,408 | ) | 5,021 | ||||||||||||||||||||
Taxation |
(2,154 | ) | (161 | ) | (50 | ) | (441 | ) | (352 | ) | 2,182 | (976 | ) | |||||||||||||||
Tax rate |
20.5% | 19.4% | ||||||||||||||||||||||||||
Profit after taxation |
8,372 | 402 | 156 | 1,455 | 1,886 | (8,226 | ) | 4,045 | ||||||||||||||||||||
(Loss)/profit attributable to non-controlling interests |
(50 | ) | 500 | (10 | ) | 440 | ||||||||||||||||||||||
Profit attributable to shareholders |
8,422 | 402 | 156 | 1,455 | 1,386 | (8,216 | ) | 3,605 | ||||||||||||||||||||
Earnings per share |
174.3p | 8.3p | 3.2p | 30.1p | 28.8p | (170.1)p | 74.6p | |||||||||||||||||||||
Weighted average number of shares (millions) |
4,831 | 4,831 |
234
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Financial record continued
Five year record continued
Adjusted results reconciliation 31 December 2014 |
Total results £m |
Intangible asset amortisation £m |
Intangible asset impairment £m |
Major restructuring £m |
Transaction -related £m |
Divestments, significant legal and other items £m |
Adjusted results £m |
|||||||||||||||||||||
Turnover |
23,006 | 23,006 | ||||||||||||||||||||||||||
Cost of sales |
(7,323 | ) | 503 | 78 | 204 | 3 | (6,535 | ) | ||||||||||||||||||||
Gross profit |
15,683 | 503 | 78 | 204 | 3 | 16,471 | ||||||||||||||||||||||
Selling, general and administration |
(8,246 | ) | 430 | 68 | 536 | (7,212 | ) | |||||||||||||||||||||
Research and development |
(3,450 | ) | 72 | 72 | 116 | 77 | (3,113 | ) | ||||||||||||||||||||
Royalty income |
310 | 310 | ||||||||||||||||||||||||||
Other operating income/(expense) |
(700 | ) | 768 | (68 | ) | | ||||||||||||||||||||||
Operating profit |
3,597 | 575 | 150 | 750 | 839 | 545 | 6,456 | |||||||||||||||||||||
Net finance costs |
(659 | ) | 5 | 8 | (646 | ) | ||||||||||||||||||||||
Share of after tax profits of associates and joint ventures |
30 | 30 | ||||||||||||||||||||||||||
Profit before taxation |
2,968 | 575 | 150 | 755 | 839 | 553 | 5,840 | |||||||||||||||||||||
Taxation |
(137 | ) | (209 | ) | (29 | ) | (215 | ) | (207 | ) | (368 | ) | (1,165 | ) | ||||||||||||||
Tax rate |
4.6% | 19.9% | ||||||||||||||||||||||||||
Profit after taxation |
2,831 | 366 | 121 | 540 | 632 | 185 | 4,675 | |||||||||||||||||||||
Profit attributable to non-controlling interests |
75 | 147 | 222 | |||||||||||||||||||||||||
Profit attributable to shareholders |
2,756 | 366 | 121 | 540 | 485 | 185 | 4,453 | |||||||||||||||||||||
Earnings per share |
57.3p | 7.6p | 2.5p | 11.3p | 10.2p | 3.8p | 92.7p | |||||||||||||||||||||
Weighted average number of shares (millions) |
4,808 | 4,808 |
235
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Governance and remuneration
| ||
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| ||
Investor information
|
Pipeline, products and competition
Pharmaceuticals and Vaccines product development pipeline
Key | | In-licence or other alliance relationship with third party | R | Receipt of Complete Response Letter | ||||||
^ | ViiV Healthcare, a global specialist HIV company with | BLA | Biological Licence Application | |||||||
GSK, Pfizer, Inc. and Shionogi Limited as shareholders, | MAA | Marketing Authorisation Application (Europe) | ||||||||
is responsible for developing and delivering HIV medicines. | NDA | New Drug Application (US) | ||||||||
* | Registrational in PhII | Phase I | Evaluation of clinical pharmacology, usually conducted | |||||||
** | Under review | in volunteers | ||||||||
1 | Option-based alliance with Ionis Pharmaceuticals, Inc. | Phase II | Determination of dose and initial evaluation of efficacy, | |||||||
2 | Option-based alliance with Immunocore Ltd. | conducted in a small number of patients | ||||||||
3 | Pending closure of transaction with Merck KGaA, Darmstadt, Germany | |||||||||
S | First submission | Phase III | Large comparative study (compound versus placebo | |||||||
A | First regulatory approval (for MAA, this is the first EU | and/or established treatment) in patients to establish | ||||||||
approval letter)
|
clinical benefit and safety
|
MAA and NDA/BLA regulatory review milestones shown in the table below are those that have been achieved. Future filing dates are not included in this list.
Achieved regulatory review milestones | ||||||||||
| ||||||||||
Compound | Type | Indication | Phase | MAA | NDA/BLA | |||||
Oncology | ||||||||||
Zejula (niraparib) | Poly (ADP-ribose) polymerase (PARP) 1/2 inhibitor |
First line maintenance ovarian cancer and other solid tumours | III | |||||||
dostarlimab | Anti-Programmed Cell Death protein 1 receptor (PD-1) antibody | Ovarian cancer Non-small cell lung cancer, MSI-H cancer (incl endometrial)* |
III II |
|||||||
2857916 | B-cell maturation antigen antibody drug conjugate | Multiple myeloma* | II | |||||||
3377794 | NY-ESO-1 autologous engineered TCR-T cells (engineered TCR) | Sarcoma, solid and heme malignancies | II | |||||||
3359609 | Induced T-cell co-stimulator (ICOS) agonist antibody | Non-small cell lung cancer and solid tumours | II | |||||||
molibresib (525762) |
BET family bromodomain inhibitor | ER+ breast cancer, other solid tumours and haematological malignancies | II | |||||||
M78243 | Transforming growth factor beta (TGFß) trap and immune checkpoint (PD-1) inhibitor bispecific | Non-small cell lung cancer | II | |||||||
TSR-022 | Anti-T-cell immunoglobulin and mucin domain-3 (TIM-3) antibody | Non-small cell lung cancer | II | |||||||
3174998 | OX40 agonist monoclonal antibody | Solid tumours and haematological malignancies | II | |||||||
3326595 | Protein arginine methyltransferase 5 (PRMT5) inhibitor | Solid tumours, heme malignancies | I/II | |||||||
1795091 | Toll-like receptor 4 (TLR4) agonist | Cancer | I | |||||||
2636771 | Phosphatidylinositol 3-kinase (PI3K) beta inhibitor | Cancer | I | |||||||
3368715 | Protein arginine methyltransferase 1 (PRMT1) inhibitor | Cancer | I | |||||||
3145095 | RIP1 kinase inhibitor | Pancreatic cancer and selected solid tumors | I | |||||||
35371422 | NY-ESO-1-targeting bispecific | Cancer | I | |||||||
TSR-033 | Anti-lymphocyte activation gene-3 (LAG-3) antibody | Cancer | I | |||||||
HIV^ and Infectious Diseases | ||||||||||
Dectova (zanamivir) i.v. | Neuraminidase inhibitor (i.v.) | Influenza | Submitted | S: Nov17 | ||||||
dolutegravir + lamivudine | HIV integrase strand transfer inhibitor + nucleoside reverse transcriptase inhibitor (NRTI) | HIV infection | Submitted | S:Sep18 | S:Oct18 | |||||
fostemsavir | HIV attachment inhibitor | HIV infection | III | |||||||
cabotegravir + rilpivirine | HIV integrase strand transfer inhibitor + non-nucleoside reverse transcriptase inhibitor (NNRTI) (long-acting regimen) | HIV infection | III | |||||||
cabotegravir | HIV integrase strand transfer inhibitor (long-acting) | HIV pre-exposure prophylaxis | III | |||||||
gepotidacin | Type 2 topoisomerase inhibitor | Bacterial infections | II | |||||||
32288361 | HBV antisense oligonucleotide | Hepatitis B | II | |||||||
33894041 | HBV LICA antisense oligonucleotide | Hepatitis B | II | |||||||
3640254 | HIV maturation inhibitor | HIV infection | II | |||||||
3036656 | Leucyl t-RNA synthetase inhibitor | Tuberculosis | I | |||||||
3810109 | HIV broadly neutralizing antibody | HIV infection | I |
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Pharmaceuticals and Vaccines product development pipeline continued
Achieved regulatory review milestones | ||||||||||
| ||||||||||
Compound | Type | Indication | Phase | MAA | NDA/BLA | |||||
Immuno-inflammation | ||||||||||
Benlysta + Rituxan | B lymphocyte stimulator monoclonal antibody (s.c.) + cluster of differentiation 20 (CD20) monoclonal antibody (i.v.) | Systemic lupus erythematosus Sjogrens syndrome |
III II |
|||||||
3196165 | Granulocyte macrophage colony-stimulating factor monoclonal antibody | Rheumatoid arthritis | II | |||||||
2982772 | Receptor-interacting protein 1 (RIP1) kinase inhibitor | Psoriasis**, rheumatoid arthritis, ulcerative colitis | II | |||||||
2330811 | Oncostatin M (OSM) monoclonal antibody | Systemic sclerosis | II | |||||||
2831781 | Lymphocyte activation gene 3 (LAG3) protein monoclonal antibody | Ulcerative colitis | I | |||||||
2983559 | Receptor-interacting protein 2 (RIP2) kinase inhibitor | Inflammatory bowel diseases** | I | |||||||
3358699 | BET targeted inhibitor | Rheumatoid arthritis | I | |||||||
3858279 | CCL17 inhibitor | Pain in osteoarthritis | I | |||||||
Respiratory | ||||||||||
mepolizumab | Interleukin 5 (IL5) monoclonal antibody | COPD
hypereosinophilic syndrome and nasal polyposis |
Complete response letter III |
R: Sep18 | ||||||
fluticasone furoate + vilanterol + umeclidinium | Glucocorticoid agonist + long-acting beta2 agonist + muscarinic a cetylcholine antagonist | Asthma | III | |||||||
2586881 | Recombinant human angiotensin converting enzyme 2 (rhACE2) | Acute lung injury** and pulmonary arterial hypertension | II | |||||||
2862277 | Tumour necrosis factor receptor-1 (TNFR1) domain antibody | Acute lung injury | II | |||||||
3772847 | Interleukin 33r (IL33r) monoclonal antibody | Asthma | II | |||||||
2881078 | Selective androgen receptor modulator | COPD muscle weakness | II | |||||||
nemiralisib | Phosphatidylinositol 3-kinase delta (PI3Kd) inhibitor | Activated PI3K delta syndrome | I | |||||||
2292767 | Phosphatidylinositol 3-kinase delta (PI3Kd) inhibitor | Respiratory diseases** | I | |||||||
3511294 | Interleukin 5 (IL5) long-acting monoclonal antibody | Asthma | I | |||||||
Other Pharmaceuticals | ||||||||||
Krintafel (tafenoquine) | 8-aminoquinoline | Plasmodium vivax malaria | Approved | A: Jul18 | ||||||
daprodustat (1278863) | Prolyl hydroxylase inhibitor (oral) | Anaemia associated with chronic renal disease | III | |||||||
oxytocin (inhaled) | Oxytocin | Postpartum hemorrhage | II | |||||||
linerixibat (2330672) | Ileal bile acid transporter (IBAT) inhibitor | Cholestatic pruritus | II | |||||||
3439171 | Hematopoietic prostaglandin D2 (hPGD2) synthase inhibitor | Muscle repair | I |
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| ||||||||||
Compound | Type | Indication | Phase | MAA | NDA/BLA | |||||
Vaccines | ||||||||||
Shingrix (Zoster Vaccine) |
Recombinant | Herpes Zoster prophylaxis Herpes Zoster prophylaxis for immunocompromised |
Approved III | A:March 2018 | ||||||
Bexsero | Recombinant | Meningococcal B disease prophylaxis in infants | III (US) | |||||||
Rotarix | Live attenuated, PCV (Porcine circovirus) free | Rotavirus prophylaxis | III | |||||||
MMR | Live attenuated | Measles, mumps, rubella prophylaxis | III (US) | |||||||
COPD | Recombinant | Reduction of the frequency of moderate and severe acute exacerbations in COPD patients by targeting non-typeable Haemophilus influenzae and Moraxella catarrhalis | II | |||||||
Hepatitis C | Heterologous recombinant viral vectors | Hepatitis C virus prophylaxis: prevention of establishment of chronic infection | II | |||||||
Malaria next generation | Recombinant | Malaria prophylaxis (Plasmodium falciparum) | II | |||||||
Men ABCWY | Recombinant conjugated | Meningococcal A,B,C,W and Y disease prophylaxis in adolescents | II | |||||||
Menveo Liquid | Conjugated | Meningococcal A,C,W and Y disease prophylaxis in adolescents | II | |||||||
Shigella | Conjugated and outer membrane | Shigella diarrhea prophylaxis | II | |||||||
Tuberculosis | Recombinant | Tuberculosis prophylaxis | II | |||||||
RSV | Replication-defective recombinant viral vector | Respiratory syncytial virus prophylaxis in paediatric population | II | |||||||
Respiratory syncytial virus prophylaxis in older adult population | I/II | |||||||||
Respiratory syncytial virus prophylaxis in maternal population | I/II | |||||||||
HIV | Recombinant proteins | HIV infection prophylaxis | II | |||||||
Flu universal | Universal inactivated split influenza vaccine | Flu disease prophylaxis with broad protection over multiple seasons | I/II |
Brand names appearing in italics are trade marks owned by or licensed to the GSK group of companies.
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Pharmaceutical products, competition and intellectual property
Major | Patent expiry dates2 | |||||||||
| ||||||||||
Products | Compounds | Indication(s) | competitor brands | US | EU | |||||
Respiratory | ||||||||||
Anoro Ellipta | umeclidinium bromide/ vilanterol trifenatate |
COPD | Stiolto Respimat, Utibron/Ultibro Breezhaler, Duaklir Genuair Bevespi, Aerosphere |
2027 (NCE) 2027-2030 (device/ formulation) |
2029 (NCE) 2022-2026 (device/ formulation) | |||||
Arnuity Ellipta | fluticasone furoate | asthma | Qvar, Pulmicort Asmanex, Alvesco |
2021 (NCE) 2027-2030 (device/ formulation) |
NA | |||||
Avamys/Veramyst | fluticasone furoate | rhinitis | Nasonex | 20211 | 2023 | |||||
Flixotide/Flovent | fluticasone propionate | asthma/COPD | Qvar, Singulair | expired (Diskus device) 2019-2026 (HFA-device) |
expired (Diskus device) expired (HFA-device) | |||||
Incruse Ellipta | umeclidinium bromide | COPD | Spiriva Handihaler/ Respimat, Eklira Genuair Seebri Breezhaler | 2027 (NCE) 2027-2030 (device/ formulation) |
2029 (NCE) 2022-2026 (device/ formulation) | |||||
Nucala | mepolizumab | severe eosinophilic asthma, EGPA | Xolair, Cinqair, Fasenra, Dupixent |
20193 | 20203 | |||||
Relvar/Breo Ellipta | fluticasone furoate/ vilanterol trifenatate |
asthma/COPD | Symbicort, Foster, Flutiform, Dulera | 2025 (NCE) 2027-2030 (device/ formulation) |
2027 (NCE) 2022-2026 (device/ formulation) | |||||
Seretide/Advair | salmeterol xinafoate/ fluticasone propionate |
asthma/COPD | Symbicort, Foster, Flutiform, Dulera | expired (Diskus device) 2019-2026 (HFA-device) |
expired (Diskus device) expired (HFA-device) | |||||
Trelegy Ellipta | fluticasone furoate/ vilanterol trifenatate umeclidinium bromide |
COPD | Trimbow | 2027 (NCE) 2027-2030 (device/ formulation) |
2029 (NCE) 2022-2026 (device/ formulation) | |||||
Ventolin HFA | albuterol sulphate | asthma/COPD | generic companies | 2019-2026 (HFA-device) |
expired (HFA-device) | |||||
Anti-virals | ||||||||||
Valtrex | valaciclovir | genital herpes, coldsores, shingles | Famvir | expired | expired | |||||
Central nervous system | ||||||||||
Lamictal | lamotrigine | epilepsy, bipolar disorder | Keppra, Dilantin | expired | expired | |||||
Imigran/Imitrex | sumatriptan | migraine | Zomig, Maxalt, Relpax | expired | expired | |||||
Seroxat/Paxil | paroxetine | depression, various anxiety disorders | Effexor, Cymbalta, Lexapro | expired | expired | |||||
Cardiovascular and urogenital | ||||||||||
Avodart | dutasteride | benign prostatic hyperplasia | Proscar, Flomax, finasteride | expired | expired | |||||
Anti-bacterials | ||||||||||
Augmentin | amoxicillin/clavulanate potassium |
common bacterial infections |
generic products | NA | expired | |||||
Rare diseases | ||||||||||
Volibris
|
ambrisentan
|
pulmonary hypertension
|
Tracleer, Revatio
|
NA
|
2020
| |||||
Immuno-inflammation | ||||||||||
Benlysta, Benlysta SC
|
belimumab
|
systemic lupus erythematosus
|
2025
|
2026
|
1 | Generic competition commenced in 2017. |
2 | Includes Supplementary Protection Certificates which were granted in multiple countries in EU and patent term extensions granted in the US. |
3 | Data exclusivity expires 2025 (EU) and 2027 (US). |
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Major | Patent expiry dates3 | |||||||||
| ||||||||||
Products | Compounds | Indication(s) | competitor brands | US | EU | |||||
HIV | ||||||||||
Epzicom/Kivexa | lamivudine and abacavir | HIV/AIDS | Truvada, Atripla Descovy, Genvoya Odefsey |
expired | 20191,2 (combination) | |||||
Juluca | dolutegravir, rilpivirine | HIV/AIDS | Genvoya, Odefsey Descovy, Atripla |
2027 (NCE) |
2029 (NCE) | |||||
Selzentry/Celsentri | maraviroc | HIV/AIDS | Isentress, Intelence, Prezista |
2021 (NCE) |
2022 (NCE) | |||||
Tivicay | dolutegravir | HIV/AIDS | Isentress, Prezista Reyataz, Kaletra, Biktarvy |
20271 (NCE) |
2029 (NCE) | |||||
Triumeq | dolutegravir, lamivudine and abacavir |
HIV/AIDS | Atripla, Descovy, Odefsey, Genvoya, Biktarvy |
2027 (NCE) |
2029 (NCE) | |||||
Vaccine products, competition and intellectual property
| ||||||||||
Major | Patent expiry dates3 | |||||||||
| ||||||||||
Products | Compounds | Indication(s) | competitor brands | US | EU | |||||
Bexsero | meningococcal group-B vaccine |
Meningitis group B prevention | Trumenba | 2027 | 2028 | |||||
Boostrix | diphtheria, tetanus, acellular pertussis |
diphtheria, tetanus, acellular Pertussis booster vaccination | Adacel | expired | expired | |||||
Infanrix Hexa/Pediarix | diphtheria, tetanus, pertussis, polio, hepatitis B, Haemophilus influenzae type B (EU) |
Prophylaxis against diphtheria, tetanus, pertussis, polio, hepatitis B, Haemophilus influenzae type B (EU) |
Pentacel, Pediacel, Pentaxim, Pentavac, Hexaxim, Hexyon Vaxelis |
expired | expired | |||||
Cervarix | HPV 16 & 18 virus like particles (VLPs), AS04 adjuvant (MPL + aluminium hydroxide) |
human papilloma virus type 16 and 18 |
Gardasil (Silgard) | 2028 | 2022 | |||||
Fluarix Tetra | split inactivated influenza antigens (2 virus subtypes A and 2 subtype B) |
seasonal influenza prophylaxis | Intenza, Flumist QIV, Vaxigrip QIV, Fluzone QIV, Fluzone High Dose |
2022 | 2022 | |||||
FluLaval | split inactivated influenza antigens (2 virus subtypes A and 2 subtype B) |
seasonal influenza prophylaxis | Vaxigrip, Mutagrip, Fluzone, Influvac, Aggripal, Fluad, Intenza, Flumist |
2022 | 2022 | |||||
Menveo | meningococcal group A, C, W- 135 and Y conjugate vaccine |
Meningitis group A, C, W-135 and Y prophylaxis |
Nimenrix, Menactra | 2025 | 2025 | |||||
Prepandrix | derived split inactivated influenza virus antigen, AS03 adjuvant |
pandemic H5N1 influenza prophylaxis | Aflunov, Vepacel | | 2026 | |||||
Priorix, Priorix Tetraa,b Varilrixb | live attenuated measles, mumps, rubella and varicella vaccine |
measles, mumps, rubella and chickenpox prophylaxis | MMR II (M-M-RVaxPro) Proquad, Varivax | 20194 | expired | |||||
Rotarix | Human rotavirus RIX4414 strain | Rotavirus prophylaxis | Rotateq | | 2020 | |||||
Synflorix | conjugated pneumococcal polysaccharide | Prophylaxis against invasive disease, pneumonia, acute otitis media |
Prevenar (Prevnar) | NA | 2024 | |||||
Shingrix | zoster vaccine recombinant, adjuvanted |
herpes zoster (shingles) |
Zostavax | 2026 | 2026 |
1 | See Note 45 to the financial statements, Legal proceedings. |
2 | Generic competition commenced in many markets during 2016. |
3 | Includes Supplementary Protection Certificates which were granted in multiple countries in EU and patent term extensions granted in the US. |
4 | Refers to Priorix and Priorix Tetra, as all patents on Varilrix have expired. |
a | Related compounds/indications are measles, mumps and rubella vaccine/prophylaxis |
b | Related compound is varicella vaccine |
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Consumer Healthcare products and competition
Brand |
Products | Application | Markets | Competition | ||||
Wellness Respiratory |
||||||||
Otrivin | nasal spray | nasal decongestant | Germany, Poland, Russia, Sweden, Ukraine |
Afrin, Merck Nasivin, Merck | ||||
Theraflu | tablets, syrups and pods | cold and flu relief | Russia, Poland, Ukraine, US |
Tylenol Cold & Flu, Johnson & Johnson Mucinex, Reckitt Benckiser Lemsip, Reckitt Benckiser | ||||
Flonase | nasal spray | allergy relief | US | Claritin, Bayer, Nasacort, Sanofi | ||||
Flixonase, Piriton | nasal spray, tablets | allergy relief | UK, Ireland | Benadryl, Johnson & Johnson | ||||
Nicorette (US), NicoDerm, Nicotinell (ex. Australia)
Pain relief |
lozenges, gum and trans-dermal patches |
treatment of nicotine withdrawal as an aid to smoking reduction and cessation |
global | Nicorette, Johnson & Johnson NiQuitin, Perrigo | ||||
Panadol and Panadol Cold & Flu |
tablets, caplets, infant syrup drops |
paracetamol-based treatment for headache, joint pain, fever, cold symptoms |
global (except US) | Advil, Pfizer Aspirin, Bayer Tylenol, Johnson & Johnson | ||||
Voltaren | topical gel | non-steroidal, diclofenac based anti-inflammatory |
global (except US) | Advil, Pfizer Aspirin, Bayer Tylenol, Johnson & Johnson | ||||
Other | ||||||||
ENO | effervescent | immediate relief antacid | global (except US) | Estomazil, Hypermarca Gelusil, Pfizer | ||||
Tums | chewable tablets | immediate relief antacid | US | Alka-Seltzer, Bayer Gaviscon, Reckitt Benckiser Rolaids, Sanofi | ||||
Oral health | ||||||||
Sensodyne, Pronamel |
toothpastes, toothbrushes, mouth rinse |
relief of dentinal hypersensitivity. Pronamel additionally protects against acid erosion |
global | Colgate Sensitive Pro-Relief, Colgate-Palmolive Elmex, Colgate-Palmolive Oral B, Procter & Gamble | ||||
parodontax/ Corsodyl |
toothpaste, medicated mouthwash, gel and spray |
helps stop and prevent bleeding gums, treats and prevents gingivitis |
global | Colgate Total Gum Health, Colgate-Palmolive Oral B Gum & Enamel Repair, Crest Gum Detoxify, Procter & Gamble | ||||
Polident, Poligrip, Corega |
denture adhesive, denture cleanser, wipes |
improve retention and comfort of dentures, cleans dentures |
global | Fixodent and Kukident, Procter & Gamble, Steradent, Reckitt Benckiser | ||||
Aquafresh | toothpastes, toothbrushes mouthwashes |
aids prevention of dental cavities, maintains healthy teeth, gums and fresh breath |
global | Colgate, Colgate-Palmolive Crest, Procter & Gamble Oral-B, Procter & Gamble | ||||
Skin health | ||||||||
Zovirax Abreva |
topical cream and non-medicated patch |
lip care to treat and prevent the onset of cold sores |
global | Compeed, Johnson & Johnson Carmex, Carma Labs Blistex, Blistex Incorporated retail own label | ||||
Nutrition | ||||||||
Horlicks | malted drinks and foods | nutritional beverages & food |
Indian sub-continent, United Kingdom, Ireland |
Bournvita, Mondelez Complan, Heinz |
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Patient safety
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Financial controls and reporting continued
Anti-bribery and corruption (ABAC)
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Privacy
Research practices
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Principal risks and uncertainties continued
Third party oversight (TPO)
Environment, health & safety and sustainability (EHS&S)
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Information security
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Supply continuity
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Shareholder information continued
Share capital and control continued
Nature of trading market
The following tables set out, for the periods indicated, the high and low middle market closing quotations in pence for the shares on the London Stock Exchange, and the high and low closing prices in US dollars for the ADS on the NYSE.
Ordinary Shares | ADS | |||||||||||||||
Pence per share | US dollars per share | |||||||||||||||
High | Low | High | Low | |||||||||||||
March 2019* |
1510 | 1510 | 40.39 | 40.39 | ||||||||||||
February 2019 |
1558 | 1458 | 40.76 | 38.58 | ||||||||||||
January 2019 |
1537 | 1436 | 39.38 | 37.83 | ||||||||||||
December 2018 |
1513 | 1418 | 38.61 | 37.07 | ||||||||||||
November 2018 |
1622 | 1480 | 41.87 | 38.84 | ||||||||||||
October 2018 |
1558 | 1429 | 40.87 | 38.31 | ||||||||||||
September 2018 |
1585 | 1484 | 40.53 | 38.99 | ||||||||||||
Quarter ended 31 December 2018 |
1622 | 1418 | 41.87 | 37.07 | ||||||||||||
Quarter ended 30 September 2018 |
1619 | 1484 | 41.87 | 38.99 | ||||||||||||
Quarter ended 30 June 2018 |
1580 | 1378 | 41.94 | 38.85 | ||||||||||||
Quarter ended 31 March 2018 |
1397 | 1243 | 35.49 | 39.38 | ||||||||||||
Quarter ended 31 December 2017 |
1536 | 1276 | 41.10 | 34.66 | ||||||||||||
Quarter ended 30 September 2017 |
1630 | 1452 | 42.77 | 38.68 | ||||||||||||
Quarter ended 30 June 2017 |
1722 | 1550 | 44.37 | 40.68 | ||||||||||||
Quarter ended 31 March 2017 |
1691 | 1520 | 42.73 | 38.72 | ||||||||||||
Year ended 31 December 2018 |
1622 | 1243 | 41.94 | 35.49 | ||||||||||||
Year ended 31 December 2017 |
1722 | 1276 | 44.37 | 34.66 | ||||||||||||
Year ended 31 December 2016 |
1723 | 1345 | 45.49 | 37.39 | ||||||||||||
Year ended 31 December 2015 |
1642 | 1238 | 48.81 | 37.56 | ||||||||||||
Year ended 31 December 2014 |
1691 | 1324 | 56.66 | 41.30 | ||||||||||||
Year ended 31 December 2013
|
|
1782
|
|
|
1359
|
|
|
53.68
|
|
|
43.93
|
| ||||
* to 1 March 2019
Analysis of shareholdings at 31 December 2018
Number of |
% of total |
% of total |
Number of |
|||||||||||||
Holding of shares |
||||||||||||||||
Up to 1,000 |
78,209 | 71.19 | 0.50 | 27,196,746 | ||||||||||||
1,001 to 5,000 |
24,687 | 22.47 | 0.99 | 53,245,886 | ||||||||||||
5,001 to 100,000 |
5,762 | 5.25 | 1.66 | 89,028,177 | ||||||||||||
100,001 to 1,000,000 |
842 | 0.77 | 5.49 | 295,494,317 | ||||||||||||
Over 1,000,000 |
355 | 0.32 | 91.36 | 4,914,102,498 | ||||||||||||
109,855 | 100.00 | 100.00 | 5,379,067,624 | |||||||||||||
Held by |
||||||||||||||||
Nominee companies |
5,102 | 4.65 | 62.48 | 3,360,713,155 | ||||||||||||
Investment and trust companies |
24 | 0.02 | 0.02 | 1,210,233 | ||||||||||||
Insurance companies |
3 | 0.00 | 0.00 | 768 | ||||||||||||
Individuals and other corporate bodies |
104,724 | 95.33 | 12.45 | 669,844,173 | ||||||||||||
BNY (Nominees) Limited |
1 | 0.00 | 17.34 | 932,693,345 | ||||||||||||
Held as Treasury shares by GlaxoSmithKline |
1 | 0.00 | 7.71 | 414,605,950 | ||||||||||||
The Bank of New York Mellon is the Depositary for the companys ADS, which are listed on the NYSE. Ordinary Shares representing the companys ADS programme, which is managed by the Depositary, are registered in the name of BNY (Nominees) Limited. At 1 March 2019, BNY (Nominees) Limited held 934,362,581 Ordinary Shares representing 18.81% of the issued share capital (excluding Treasury shares) at that date.
At 1 March 2019, the number of holders of Ordinary Shares in the US was 974 with holdings of 994,696 Ordinary Shares, and the number of registered holders of ADS was 21,197 with holdings of 467,181,290 ADS. Certain of these Ordinary Shares and ADS were held by brokers or other nominees. As a result, the number of holders of record or registered holders in the US is not representative of the number of beneficial holders or of the residence of beneficial holders.
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Tax information for shareholders
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Other statutory disclosures
Shareholder services and contacts
Registrar
The companys registrar is:
Equiniti Limited
Aspect House, Spencer Road, Lancing, BN99 6DA
www.shareview.co.uk
Tel: 0371 384 2991 (in the UK)*
Tel: +44 (0)121 415 7067 (outside the UK)
Equiniti provides a range of services for shareholders:
Service
|
What it offers
|
How to participate
| ||
Dividend Reinvestment Plan (DRIP) |
As an alternative to receiving cash dividends you may choose to reinvest your dividends to buy more GSK shares.
|
A DRIP election form can be downloaded from www.shareview.co.uk or requested by contacting Equiniti.
| ||
Dividend payment direct to your bank account (Bank Mandate)
|
If you currently receive your dividends by cheque through the post, you can instead have them paid directly into your bank or building society account. This is quicker, more secure and avoids the risk of your cheque going astray.
|
A dividend bank mandate form can be downloaded from www.shareview.co.uk or requested by contacting Equiniti.
| ||
Dividend payment direct to bank account for overseas shareholders
|
Instead of waiting for a sterling cheque to arrive by post, Equiniti will convert your dividend into your local currency and send it direct to your local bank account. This service is available in over 100 countries worldwide.
|
For more details on this service and the costs involved please contact Equiniti. | ||
Electronic communications |
Shareholders may elect to receive electronic notifications of company communications including our Annual Report, dividend payments (if paid by way of a Bank Mandate), access to dividend confirmations and the availability of online voting for all general meetings. Each time GSK mails out hard copy shareholder documents you will receive an email containing a link to the document or relevant website.
|
You can register at www.shareview.co.uk | ||
Shareview portfolio service |
This enables you to create a free online portfolio to view your share balance and movements, update your address and dividend payment instructions and register your votes for our AGM.
|
You can register at www.shareview.co.uk | ||
De-duplication of publications or mailings |
If you receive duplicate copies of mailings, you may have more than one account. Please contact Equiniti and they will arrange for your accounts to be merged into one for your convenience and to avoid waste and unnecessary costs.
|
Please contact Equiniti. | ||
Share dealing service (please note that market trading hours are from 8.00am to 4.30pm UK time, Monday to Friday (excluding public holidays in England and Wales)) |
Shareholders may trade shares, either held in certificated form or held in our Corporate Sponsored Nominee, online, by telephone or by a postal dealing service provided by Equiniti Financial Services Limited.
|
For online transactions, please log on to www.shareview.co.uk/dealing.
For telephone transactions, please call 0345 603 7037 (in the UK) or +44 (0)121 415 7560 (outside the UK).
For postal transactions, please call 0371 384 2991* to request a dealing form.
| ||
Corporate Sponsored Nominee Account |
This is a convenient way to manage your shares without requiring a share certificate. The service provides a facility for you to hold your shares in a nominee account sponsored by the company. You will continue to receive dividend payments, annual reports and can attend and vote at the companys general meetings. Shareholders names do not appear on the publicly available share register and the service is free to join.
|
An application form can be requested from www.shareview.co.uk or by contacting Equiniti. | ||
Individual Savings Accounts (ISAs) |
The company has arranged for Equiniti Financial Services Limited to provide a GSK Corporate ISA to hold GSK Ordinary Shares. |
Details are available from www.shareview.co.uk or can be requested by telephoning Equiniti, on 0345 300 0430. Lines are open 8.00am to 4.30pm for dealing, and until 6.00pm for enquiries Monday to Friday (excluding public holidays in England and Wales).
|
* | UK lines are open from 8.30am to 5.30pm, Monday to Friday (excluding public holidays in England and Wales). |
| The provision of share dealing details is not intended to be an invitation or inducement to engage in an investment activity. |
Advice on share dealing should be obtained from a stockbroker or independent financial adviser. |
257
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GSK Annual Report 2018 |
Strategic report
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Governance and remuneration
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Financial statements
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Investor information
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Shareholders services and contacts continued
258
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GSK Annual Report 2018
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Other statutory disclosures continued
259
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GSK Annual Report 2018 |
Strategic report
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Governance and remuneration
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Financial statements
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Investor information
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US law and regulation continued
Donations to political organisations and political expenditure
260
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GSK Annual Report 2018
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|
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|
Other statutory disclosures continued
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, associates, joint ventures and joint arrangements, the address of the registered office and effective percentage of equity owned, as at 31 December 2018 are disclosed below. Unless otherwise stated the share capital disclosed comprises ordinary shares which are indirectly held by GlaxoSmithKline plc. The percentage held by class of share is stated where this is less than 100%. Unless otherwise stated, all subsidiary companies have their registered office in their country of incorporation. All subsidiary companies are resident for tax purposes in their country of incorporation unless otherwise stated.
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries
|
||||
1506369 Alberta ULC
|
Common
|
3500 855-2nd Street SW, Calgary, AB, T2P 4J8, Canada
| ||
Action Potential Venture Capital Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Adechsa GmbH (iv)
|
Ordinary
|
c/o PRV Provides Treuhandgesellschaft AG, Dorfstrasse 38, Baar, 6341, Switzerland
| ||
Adriatic Acquisition Corporation
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Affymax Research Institute
|
Common
|
Corporation Service Company, 2710 Gateway Oaks Drive, Suite 150N, Sacramento, California, 95833, United States
| ||
Alenfarma Especialidades Farmaceuticas, Limitada (iv)
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
Allen & Hanburys Limited (iv)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Allen & Hanburys Pharmaceutical Nigeria Limited
|
Ordinary
|
24 Abimbola Way, Ilasamaja, Isolo, Lagos, Nigeria
| ||
Allen Farmaceutica, S.A.
|
Ordinary
|
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
Allen Pharmazeutika Gesellschaft m.b.H.
|
Ordinary
|
Wagenseilgasse 3, Euro Plaza, Gebäude I, 4. Stock, Vienna, A-1120, Austria
| ||
Barrier Therapeutics, Inc.
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Beecham Group p.l.c
|
20p Shares A; 5p Shares B
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Beecham Pharmaceuticals (Pte) Limited
|
Ordinary
|
38 Quality Road, Jurong Industrial Estate, Jurong, 618809, Singapore
| ||
Beecham Pharmaceuticals S.A. (iv) (vi)
|
Nominative
|
Av 10 De Agosto N36-239, y Naciones Unidas, Edificio Electroectuatoriana, 2do piso, Quito, Ecuador
| ||
Beecham Portuguesa-Produtos Farmaceuticos e Quimicos, Lda,
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
Beecham S.A. (iv)
|
Ordinary
|
Parc de la Noire Epine, rue Fleming 20, 1300 Wavre, Belgium
| ||
Biovesta Ilaçlari Ltd. Sti. (iv)
|
Nominative
|
Büyükdere Caddesi No. 173, 1.Levent Plaza B Blok, 1.Levent, Istanbul, 34394, Turkey
| ||
Block Drug Company, Inc.
|
Common
|
Corporation Service Company, Princeton South Corporate Center, Suite 160, 100 Charles Ewing Blvd, Ewing, New Jersey, 08628, United States
| ||
Block Drug Corporation (iv)
|
Common
|
Corporation Service Company, Princeton South Corporate Center, Suite 160, 100 Charles Ewing Blvd, Ewing, New Jersey, 08628, United States
| ||
Burroughs Wellcome & Co (Bangladesh) Limited
|
Ordinary
|
Fouzderhat Industrial Area, Dhaka Trunk Road, North Kattali, Chittagong 4217, Bangladesh
| ||
Burroughs Wellcome International Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Cascan GmbH & Co. KG
|
Partnership Capital
|
Industriestrasse 32-36, Bad Oldesloe, 23843, Germany
| ||
Castleton Investment Ltd (vi)
|
Ordinary
|
C/O DTOS, 19 Cybercity, 10th Floor Standard Chartered Tower, Ebene, Mauritius
| ||
Cellzome GmbH
|
Ordinary
|
Meyerhofstrasse 1, Heidelberg, 69117, Germany
| ||
Cellzome Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Cellzome Therapeutics, Inc. (iv)
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Cellzome, Inc.
|
Common; Series A Preferred; Series B Preferred; Series C-1 Convertible Preferred; Series C-3 Convertible Preferred
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Charles Midgley Limited (iv)
|
Ordinary; 7% Cumulative Preference
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Chiron Behring Vaccines Private Limited (vi)
|
Ordinary
|
401-402, A, Wing, 4th Floor,Floral Deck Plaza, Opp Rolta Bhavan, Central MIDC Road, Mumbai, Andheri (E), 400093, India
| ||
Clarges Pharmaceuticals Limited (iv)
|
Ordinary; Preference (99.97%)
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Colleen Corporation
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Corixa Corporation
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Coulter Pharmaceutical, Inc. (iv)
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
|
261
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Group companies continued
Name | Security | Registered address | ||
Wholly owned subsidiaries continued
|
||||
de Miclén s.r.o.
|
Ordinary
|
Priemyselny Park Gena, Ul. E. Sachsa 4-6, 934 01, Levice, Slovakia
| ||
Dealcyber Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Desarrollo Energia Solar Alternativa S.L.
|
Ordinary
|
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
Domantis Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Duncan Consumer Healthcare Philippines Inc
|
Common
|
2266 Don Chino Roces Avenue, Makati City, Philippines
| ||
Duncan Flockhart Australia Pty Limited (iv) (vi)
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
Duncan Pharmaceuticals Philippines Inc.
|
Common
|
2266 Chino Roces Avenue, City of Makati, 1231, Philippines
| ||
Edinburgh Pharmaceutical Industries Limited
|
Ordinary; Preference
|
Shewalton Road, Irvine, Ayrshire, KA11 5AP, Scotland
| ||
Eskaylab Limited
|
10p Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Etex Farmaceutica Ltda
|
Social Capital
|
Avenue Andres Bello 2687, Piso 19, Las Condes, Santiago, C.P. 7550611, Chile
| ||
Ex-Lax, Inc.
|
Common
|
The Prentice Hall Corporation System, Puerto Rico, Inc., c/o Fast Solutions, LLC, Citi Tower, 252 Ponce de Leon Avenue, Floor 20, San Juan, 00918, Puerto Rico
| ||
Fipar (Thailand) Ltd (in liquidation)
|
Ordinary
|
12th Floor Wave Place, 55 Wireless Road, Lumpini, Pathumwan, Bangkok, 10330, Thailand
| ||
Genelabs Technologies, Inc.
|
Common
|
Corporation Service Company, 2710 Gateway Oaks Drive, Suite 150N, Sacramento, California, CA, 95833, United States
| ||
Glaxo AS (iv) (vi)
|
Ordinary
|
Drammensveien 288, 1326 Lysaker, Norway
| ||
Glaxo Group Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Glaxo Kabushiki Kaisha (iv)
|
Ordinary
|
1-8-1 Akasaka Minato-Ku, Tokyo, Japan
| ||
Glaxo Laboratories (Nigeria) Limited (iv)
|
Ordinary
|
82 Marine Road, Apapa, Lagos, Nigeria
| ||
Glaxo Laboratories Limited (iv)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Glaxo New Zealand Pension Plan Trustee Limited
|
Ordinary
|
Level 11, Zurich House, 21 Queen Street, Auckland, 1010, New Zealand
| ||
Glaxo Operations UK Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Glaxo Properties BV
|
Ordinary
|
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands
| ||
Glaxo Verwaltungs GmbH
|
Ordinary
|
Industriestrasse 32-36, Bad Oldesloe, 23843, Germany
| ||
Glaxo Wellcome Australia Pty Ltd (iv) (vi)
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
Glaxo Wellcome Farmaceutica, Limitada
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
Glaxo Wellcome International B.V. (v)
|
Ordinary
|
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands
| ||
Glaxo Wellcome Manufacturing Pte Ltd
|
Ordinary
|
1 Pioneer Sector 1, Jurong Industrial Estate, Jurong, 628413, Singapore
| ||
Glaxo Wellcome Production S.A.S.
|
Ordinary
|
23 rue François Jacob, 92500, Rueil-Malmaison, France
| ||
Glaxo Wellcome UK Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Glaxo Wellcome Vidhyasom Limited (iv)
|
Ordinary
|
12th Floor Wave Place, 55 Wireless Road, Lumpini, Pathumwan, Bangkok, 10330, Thailand
| ||
Glaxo Wellcome, S.A.
|
Ordinary
|
Poligono Industrial Allendeduero, Avenida de Extremadura, 3, Aranda de Duero, Burgos, 09400, Spain
| ||
Glaxo, S.A.
|
Ordinary
|
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
Glaxo-Allenburys (Nigeria) Limited (iv)
|
Ordinary
|
41 Creek Road, Apapa, Lagos, PMB 1401, Nigeria
| ||
Glaxochem (UK) Unlimited
|
Ordinary; Ordinary B; Ordinary C
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Glaxochem Pte Ltd (v)
|
Ordinary
|
23 Rochester Park, 139234, Singapore
| ||
GlaxoSmithKline - Produtos Farmaceuticos, Limitada
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
GlaxoSmithKline (Cambodia) Co., Ltd. (vi)
|
Ordinary
|
5th Floor DKSH Building, No.797 Preah Monivong Boulevard (Corner of Street 484), Sangkat Phsar Deum Thakov, Khan Chamkarmon, Phnom Penh, Cambodia
| ||
GlaxoSmithKline (China) Investment Co Ltd
|
Ordinary
|
Room 901 - 910, Building A, Ocean International Center, 56 Mid 4th East Ring Road, Bejing, Chaoyang District, China
| ||
GlaxoSmithKline (China) R&D Company Limited
|
Equity
|
No 3 Building, 898 Halei Road, Zhang Jiang, Hi Tech Park Pudong New Area, Shanghai, China
| ||
GlaxoSmithKline (Cyprus) Limited
|
Ordinary
|
Arch. Makariou III, 2-4, Capital Center, 9th Floor, Nicosia, P.C. 1505, Cyprus
| ||
GlaxoSmithKline (GSK) S.R.L.
|
Ordinary
|
1-5 Costache Negri Street, Opera Center One, 5th and 6th floors, Zone 1, District 5, Bucharest, Romania
| ||
GlaxoSmithKline (Ireland) Limited (ii)
|
Ordinary
|
12 Riverwalk Citywest Business Campus, Dublin, 24, Ireland
| ||
GlaxoSmithKline (Israel) Ltd
|
Ordinary
|
25 Basel Street, PO Box 10283, Petach-Tikva, 49002, Israel
| ||
GlaxoSmithKline (Malta) Limited
|
Ordinary
|
1, First Floor, De La Cruz Avenue, Qormi, QRM2458, Malta
| ||
GlaxoSmithKline (Private) Limited (iv)
|
Ordinary
|
Unit 3, 20 Anthony Road, Msasa, Harare, Zimbabwe
|
262
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Other statutory disclosures continued
Group companies continued
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries continued
|
||||
GlaxoSmithKline (Thailand) Limited
|
Ordinary
|
12th Floor Wave Place, 55 Wireless Road, Lumpini, Pathumwan, Bangkok, 10330, Thailand
| ||
GlaxoSmithKline A.E.B.E.
|
Ordinary
|
266 Kifissias Avenue, Halandri, Athens, 152 32, Greece
| ||
GlaxoSmithKline AB
|
Ordinary
|
Hemvarnsg. 9, Solna, 171 54, Sweden
| ||
GlaxoSmithKline AG
|
Ordinary
|
Talstrasse 3-5, 3053 Muenchenbuchsee, Switzerland
| ||
GlaxoSmithKline Angola Unipessoal Limitada (vi)
|
Quotas
|
Luanda, Bairro Petrangol, Estrada de Cacuaco n° 288, Angola
| ||
GlaxoSmithKline Argentina S.A.
|
Ordinary
|
Tucumán 1, piso 4, Buenos Aires, C1049AAA, Argentina
| ||
GlaxoSmithKline AS
|
Ordinary
|
Drammensveien 288, 1326 Lysaker, Norway
| ||
GlaxoSmithKline Asia Pvt. Limited
|
Equity
|
Patiala Road, Nabha 147201, Dist Patiala, Punjab, India
| ||
GlaxoSmithKline Australia Pty Ltd
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
GlaxoSmithKline B.V.
|
Ordinary
|
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands
| ||
GlaxoSmithKline Beteiligungs GmbH
|
Ordinary
|
Prinzregentenplatz 9, Munchen, 81675, Germany
| ||
GlaxoSmithKline Biologicals (Shanghai) Ltd.
|
Ordinary
|
No. 277 Niudun Road, China (Shanghai) Pilot Free Trade Zone
| ||
GlaxoSmithKline Biologicals Kft.
|
Ordinary
|
2100 Gödöllõ, Homoki Nagy István utca 1, Hungary
| ||
GlaxoSmithKline Biologicals S.A.S.
|
Ordinary
|
637 Rue des Aulnois, Saint-Amand Les Eaux, 59230, France
| ||
GlaxoSmithKline Biologicals SA
|
Ordinary; Preference
|
Rue de lInstitut 89, B-1330 Rixensart, Belgium
| ||
GlaxoSmithKline Brasil Limitada
|
Quotas
|
Estrada dos Banderiantes, 8464, Rio de Janeiro, 22783-110, Brazil
| ||
GlaxoSmithKline Brasil Produtos para Consumo e Saude Ltda
|
Quotas
|
66 BL1/302, Vitor Civita Street, Barra Tijuca, Rio de Janeiro, 22775-044, Brazil
| ||
GlaxoSmithKline Capital Inc.
|
Common
|
Wilmington Trust SP Services Inc., 1105 North Market Street, Suite 1300, Wilmington, Delaware, 19801, United States
| ||
GlaxoSmithKline Capital plc
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Caribbean Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Chile Farmaceutica Limitada
|
Social Capital
|
Avenue Andres Bello No. 2687, Piso 19, Las Condes, Santiago, C.P. 7550611, Chile
| ||
GlaxoSmithKline Colombia S.A.
|
Ordinary
|
Avenida El Dorado, #69B-45/Piso 9, Bogota, Colombia
| ||
GlaxoSmithKline Consumer Healthcare (China) Co. Ltd
|
Ordinary
|
Floor 8, 168 Xizangzhong Road, Huangpu District, Shanghai, China
| ||
GlaxoSmithKline Consumer Healthcare (Hong Kong) Limited
|
Ordinary
|
Units 2201, 2214 and 23/F, Tower 6, The Gateway, 9 Canton Road, Harbour City, Tsimshatsui, Kowloon, Hong Kong
| ||
GlaxoSmithKline Consumer Healthcare (Ireland) Limited (ii)
|
Ordinary
|
12 Riverwalk Citywest Business Campus, Dublin, 24, Ireland
| ||
GlaxoSmithKline Consumer Healthcare (Overseas) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare (Thailand) Limited
|
Ordinary
|
13th Floor, Unit 13.05 and 13.06 Wave Place, 55 Wireless Road, Lumpini, Pathumwan, Bangkok, 10330, Thailand
| ||
GlaxoSmithKline Consumer Healthcare (UK) (No.1) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare (UK) IP Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare (UK) Trading Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare (US) IP LLC
|
LLC Interests
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GlaxoSmithKline Consumer Healthcare A/S
|
Ordinary
|
Nykaer 68, Brondby, DK-2605, Denmark
| ||
GlaxoSmithKline Consumer Healthcare AB (vii)
|
Ordinary
|
Nykaer 68, DK-2605, Brondby, Denmark
| ||
GlaxoSmithKline Consumer Healthcare Australia Pty ltd
|
Ordinary
|
82 Hughes Avenue, Ermington, NSW, 2115, Australia
| ||
GlaxoSmithKline Consumer Healthcare B.V.
|
Ordinary
|
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands
| ||
GlaxoSmithKline Consumer Healthcare Colombia SAS
|
Ordinary
|
Avenida El Dorado, #69B-45/Piso 9, Bogota, Colombia
| ||
GlaxoSmithKline Consumer Healthcare Czech Republic s.r.o.
|
Ordinary
|
Hvezdova 1734/2c, Prague, 4 140 00, Czech Republic
| ||
GlaxoSmithKline Consumer Healthcare Finance Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare Finance No.2 Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare Finland Oy
|
Ordinary
|
Piispansilta 9A, Fin-02230, Espoo, Finland
| ||
GlaxoSmithKline Consumer Healthcare GmbH
|
Ordinary
|
Wagenseilgasse 3, Euro Plaza, Gebäude I, 4. Stock, Vienna, A-1120, Austria
| ||
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG
|
Partnership Capital
|
Barthstr. 4, München, 80339, Germany
| ||
GlaxoSmithKline Consumer Healthcare Greece Societe Anonyme
|
Ordinary
|
274 Kifissias Avenue Halandri, Athens, 152 32, Greece
| ||
GlaxoSmithKline Consumer Healthcare Holdings (US) LLC
|
LLC Interests
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GlaxoSmithKline Consumer Healthcare Holdings Limited
|
Ordinary A
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare Inc.
|
Common
|
7333 Mississauga Road North, Mississagua, ON, L5N 6L4, Canada
| ||
GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 3) Limited (ii) (v)
|
Ordinary
|
Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland
| ||
GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No.2) Unlimited Company (ii) (v)
|
Ordinary
|
Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland
| ||
GlaxoSmithKline Consumer Healthcare Investments (Ireland) Limited (ii) (v) (vi)
|
Ordinary
|
6900 Cork Airport Business Park, Kinsale Road, Cork, County Cork, Ireland
|
263
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GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Group companies continued
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries continued
|
||||
GlaxoSmithKline Consumer Healthcare Ireland IP Limited (ii) (v) (vi)
|
Ordinary
|
Currabinny, Carrigaline, County Cork, Ireland
| ||
GlaxoSmithKline Consumer Healthcare Japan K.K.
|
Ordinary
|
1-8-1 Akasaka Minato-Ku, Tokyo, Japan
| ||
GlaxoSmithKline Consumer Healthcare Korea Co., Ltd.
|
Ordinary
|
9F LS Yongsan Tower, 92, Hangang-daero, Yongsan-gu, Seoul, 04386, Korea, Republic of
| ||
GlaxoSmithKline Consumer Healthcare L.L.C.
|
LLC Interests
|
Corporation Service Company, 2595 Interstate Drive Suite 103, Harrisburg, Pennsylvania, 17110, United States
| ||
GlaxoSmithKline Consumer Healthcare Mexico, S. De R.L. de C.V.
|
Ordinary
|
Calzada Mexico-Xochimilco 4900, Colonia San Lorenzo Huipulco, Delegacion Tlalpan, Mexico, D.F. 14370, Mexico
| ||
GlaxoSmithKline Consumer Healthcare New Zealand Limited
|
Ordinary
|
Level 11, Zurich House, 21 Queen Street, Auckland, 1010, New Zealand
| ||
GlaxoSmithKline Consumer Healthcare Norway AS
|
Ordinary
|
Drammensveien 288, 1326 Lysaker, Norway
| ||
GlaxoSmithKline Consumer Healthcare Philippines Inc
|
Common
|
2266 Don Chino Roces Avenue, Makati City, Philippines
| ||
GlaxoSmithKline Consumer Healthcare Pte. Ltd.
|
Ordinary
|
23 Rochester Park, 139234, Singapore
| ||
GlaxoSmithKline Consumer Healthcare S.A.
|
Ordinary
|
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, Belgium
| ||
GlaxoSmithKline Consumer Healthcare S.A.
|
Ordinary
|
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
GlaxoSmithKline Consumer Healthcare S.p.A.
|
Ordinary
|
Via Zambeletti snc,Baranzate, Milan, 20021, Italy
| ||
GlaxoSmithKline Consumer Healthcare Saudi Limited
|
Ordinary
|
603 Salamah Tower 6th Floor, Madinah Road Al-Salamah District Jeddah 21425 Saudi Arabia
| ||
GlaxoSmithKline Consumer Healthcare Sdn. Bhd.
|
Ordinary
|
Lot 89, Jalan Enggang, Ampang/Ulu Kelang Industrial Estate, Selangor, 54200, Malaysia
| ||
GlaxoSmithKline Consumer Healthcare Slovakia s. r. o.
|
Ownership interest
|
Galvaniho 7/A, Bratislava, 821 04, Slovakia
| ||
GlaxoSmithKline Consumer Healthcare South Africa (Pty) Ltd
|
Ordinary
|
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston 2021, South Africa
| ||
GlaxoSmithKline Consumer Healthcare Sp.z.o.o.
|
Ordinary
|
Ul. Grunwaldzka 189, Poznan, 60-322, Poland
| ||
GlaxoSmithKline Consumer Healthcare Sri Lanka Holdings Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Consumer Healthcare SRL
|
Ordinary
|
1-5 Costache Negri Street, Opera Center One, 6th floor (Zone 2), District 5, Bucharest, Romania
| ||
GlaxoSmithKline Consumer Healthcare Vietnam Company Limited (iv)
|
Charter Capital
|
Floor 16, Metropolitan, 235 Dong Khoi, Ben Nghe Ward, District 1, Ho Chi Minh City, Viet Nam
| ||
GlaxoSmithKline Consumer Healthcare, Produtos para a Saude e Higiene, Lda
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
GlaxoSmithKline Consumer Holding B.V. (iv)
|
Ordinary
|
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands
| ||
GlaxoSmithKline Consumer Private Limited
|
Equity
|
Patiala Road, Nabha 147201, Dist Patiala, Punjab, India
| ||
GlaxoSmithKline Consumer Trading Services Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Costa Rica S.A.
|
Ordinary
|
San Jose 300 Este de la Rotonda Betania, Carretera a Sabanilla, Costa Rica
| ||
GlaxoSmithKline d.o.o
|
Quotas
|
Zmja od Bosne broj 7-7a, Sarajevo, 71000, Bosnia and Herzegovina
| ||
GlaxoSmithKline d.o.o.
|
Equity capital
|
Ulica Damira Tomljanovica Gavrana 15, Zagreb, Croatia
| ||
GlaxoSmithKline doo Beograd
|
Ordinary
|
Omladinskih brigada 88, New Belgrade, City of Belgrade, 11070, Serbia
| ||
GlaxoSmithKline Dungarvan Limited (ii)
|
Ordinary
|
Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland
| ||
GlaxoSmithKline Ecuador S.A.
|
Ordinary
|
Av 10 De Agosto N36-239, y Naciones Unidas, Edificio Electroectuatoriana, 2do piso, Quito, Ecuador
| ||
GlaxoSmithKline Eesti OU
|
Ordinary
|
Lõõtsa 8a, Tallinn, 11415, Estonia
| ||
GlaxoSmithKline El Salvador S.A. de C.V.
|
Ordinary
|
Avenida El Boqueron y Calle Izalco No 7 y 8 Parque Industrial El Boqueron, Santa Elen, Antiguo Custatlan, La Libertad, El Salvador
| ||
GlaxoSmithKline EOOD
|
Ordinary
|
115 G Tsarigradsko Shose Blvd., floor 9, Mladost Region, Sofia, 1784, Bulgaria
| ||
GlaxoSmithKline Export Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Export Panama S.A.
|
Ordinary
|
Panama City, Republic of Panama, Panama
| ||
GlaxoSmithKline Far East B.V.
|
Ordinary
|
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands
| ||
GlaxoSmithKline Finance plc
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline GmbH & Co. KG
|
Partnership Capital
|
Prinzregentenplatz 9, Munchen, 81675, Germany
| ||
GlaxoSmithKline Guatemala S.A.
|
Ordinary
|
Novena Avenida 0-09, Zona 4, Guatemala City, Guatemala
| ||
GlaxoSmithKline Healthcare AO
|
Ordinary
|
Presnenskaya nab 10, Moscow, 123112, Russian Federation
| ||
GlaxoSmithKline Healthcare GmbH
|
Ordinary
|
Barthstr. 4, München, 80339, Germany
| ||
GlaxoSmithKline Healthcare Ukraine O.O.O.
|
Ownership interest
|
Pavla Tychyny avenue, 1-V, Kiev, 02152, Ukraine
| ||
GlaxoSmithKline Holding AS
|
Ordinary
|
Drammensveien 288, 1326 Lysaker, Norway
| ||
GlaxoSmithKline Holdings (Americas) Inc.
|
Common
|
Wilmington Trust SP Services Inc., 1105 North Market Street, Suite 1300, Wilmington, Delaware, 19801, United States
| ||
GlaxoSmithKline Holdings (Ireland) Limited
|
Ordinary; Deferred
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
|
264
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Other statutory disclosures continued
Group companies continued
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries continued
|
||||
GlaxoSmithKline Holdings (One) Limited (i)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Holdings Limited (i)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Holdings Pty Ltd
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
GlaxoSmithKline Honduras S.A.
|
Ordinary
|
Tegucigalpa, MDC, Honduras
| ||
GlaxoSmithKline IHC Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Ilaclari Sanayi ve Ticaret A.S.
|
Nominative
|
Büyükdere Caddesi No. 173, 1.Levent Plaza B Blok, 1.Levent, Istanbul, 34394, Turkey
| ||
GlaxoSmithKline Inc.
|
Class A Common; Class C Preference
|
7333 Mississauga Road North, Mississauga, ON, L5N 6L4, Canada
| ||
GlaxoSmithKline Insurance Ltd.
|
Ordinary
|
19 Par-La-Ville Road, Hamilton, HM11, Bermuda
| ||
GlaxoSmithKline Intellectual Property (No.2) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Intellectual Property (No.3) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Intellectual Property (No.4) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Intellectual Property Development Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Intellectual Property Holdings Limited
|
A Ordinary; B Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Intellectual Property Limited
|
Ordinary; Deferred
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Intellectual Property Management Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline International Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Investigación y Desarrollo, S.L.
|
Ordinary
|
Severo Ochoa 2 Parque Tecnológico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
GlaxoSmithKline Investment Holdings Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Investment Services Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Investments (Ireland) Limited (ii) (v) (vi)
|
Ordinary
|
Currabinny, Carrigaline, County Cork, Ireland
| ||
GlaxoSmithKline Investments Pty Ltd
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
GlaxoSmithKline K.K.
|
Ordinary
|
1-8-1 Akasaka Minato-Ku, Tokyo, Japan
| ||
GlaxoSmithKline Korea Limited
|
Ordinary
|
9F LS Yongsan Tower 92, Hangangdae-ro Yongsan-gu, Seoul, 04386, Republic of Korea
| ||
GlaxoSmithKline Latin America, S.A.
|
Ordinary
|
Panama City, Republic of Panama, Panama
| ||
GlaxoSmithKline Latvia SIA
|
Ordinary
|
Duntes iela 3, Riga, Latvia
| ||
GlaxoSmithKline Lietuva UAB | Ordinary
|
Ukmerges st. 120, Vilnius, LT-08105, Lithuania
| ||
GlaxoSmithKline Limited
|
Ordinary
|
Units 2201, 2214 and 23/F, Tower 6, The Gateway, 9 Canton Road, Harbour City, Tsimshatsui, Kowloon, Hong Kong
| ||
GlaxoSmithKline Limited
|
Ordinary
|
Likoni Road, PO Box 78392, Nairobi, Kenya
| ||
GlaxoSmithKline LLC
|
LLC Interests
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GlaxoSmithKline Manufacturing SpA
|
Ordinary
|
Via Alessandro Fleming 2, Verona, 37135, Italy
| ||
GlaxoSmithKline Maroc S.A.
|
Ordinary
|
42-44 Angle Bd, Rachidi et Abou Hamed El Glaza, Casablanca, Morocco
| ||
GlaxoSmithKline Medical and Healthcare Products Limited
|
Ordinary
|
H-1124, Csorsz utca 43, Budapest, Hungary
| ||
GlaxoSmithKline Mercury Limited (i)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Mexico S.A. de C.V.
|
Ordinary A; Ordinary B
|
Calzada, Mexico-Xochimilco 4900, Colonia San Lorenzo, Huipulco, Delegacion Tlalpan, 14370, Mexico
| ||
GlaxoSmithKline NZ Limited
|
Ordinary
|
Level 11, Zurich House, 21 Queen Street, Auckland, 1010, New Zealand
| ||
GlaxoSmithKline Oy
|
Ordinary
|
Piispansilta 9A, P.O. Box 24, Espoo, FIN-02230, Finland
| ||
GlaxoSmithKline Panama S.A.
|
Ordinary
|
Urbanizacion Industrial Juan D, Calles A Y B, Republic of Panama, Panama
| ||
GlaxoSmithKline Paraguay S.A.
|
Ordinary
|
Oficial Gilberto Aranda 333, Planta Alta casi Salvador del Mundo, Asuncion, Paraguay
| ||
GlaxoSmithKline Peru S.A.
|
Ordinary
|
Av. Javier Prado Oeste, 995, San Isidro, LIMA 27, Peru
| ||
GlaxoSmithKline Pharma A/S
|
Ordinary
|
Nykaer 68, Brondby, DK-2605, Denmark
| ||
GlaxoSmithKline Pharma GmbH
|
Ordinary
|
Wagenseilgasse 3, Euro Plaza, Gebäude I, 4. Stock, Vienna, A-1120, Austria
| ||
GlaxoSmithKline Pharmaceutical Kenya Limited
|
Ordinary
|
L.R. NO. 209/6921, 5th Floor, Icea Lion Centre, Riverside Park West Wing, Chiromo Road, Westlands P.O. Box 10643-00100, Nairobi, Kenya
| ||
GlaxoSmithKline Pharmaceutical Nigeria Limited
|
Ordinary
|
1 Industrial Avenue, Ilupeju, Ikeja, Lagos, PM B 21218, Nigeria
| ||
GlaxoSmithKline Pharmaceutical Sdn Bhd
|
Ordinary
|
Level 6, Quill 9, 112, Jalan Semangat, Petaling Jaya, Selangor Darul Ehsan, 46300, Malaysia
| ||
GlaxoSmithKline Pharmaceuticals (Pvt) Ltd
|
Ordinary
|
121 Galle Road, Kaldemulla, Moratuwa, Sri Lanka
| ||
GlaxoSmithKline Pharmaceuticals (Suzhou) Limited
|
Ordinary
|
No 40 Su Hong Xi Road, Suzhou Industrial Park, Suzhou, 215021, China
| ||
GlaxoSmithKline Pharmaceuticals Costa Rica S.A
|
Ordinary
|
300 metros al este de la Rotonda de la Betania, Mercedes de Montes de Oca, Sabanilla, Montes de Oca, San Jose, Costa Rica
|
265
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Group companies continued
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries continued
|
||||
GlaxoSmithKline Pharmaceuticals S.A.
|
Ordinary A; Ordinary B; Ordinary C; Ordinary D
|
Ul. Grunwaldzka 189, Poznan, 60-322, Poland
| ||
GlaxoSmithKline Pharmaceuticals SA
|
Ordinary
|
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, Belgium
| ||
GlaxoSmithKline Pharmaceuticals Ukraine LLC
|
Chartered Capital
|
Pavla Tychyny avenue, 1-V, Kiev, 02152, Ukraine
| ||
GlaxoSmithKline Philippines Inc
|
Common
|
2266 Chino Roces Avenue, City of Makati, 1231, Philippines
| ||
GlaxoSmithKline Pte Ltd
|
Ordinary
|
23 Rochester Park, 139234, Singapore
| ||
GlaxoSmithKline Puerto Rico Inc.
|
Common
|
Centro Internacional de Mercadeo, 90 Road # 165, Tower II, Suite 800, Guaynabo, 00968, Puerto Rico
| ||
GlaxoSmithKline Republica Dominicana S.A.
|
Ordinary
|
Av. Lope de Vega No. 29, Torre Empresarial Novocentro, Local 406, Ensanche Naco, Santo Domingo, Distrito Nacional, Dominican Republic
| ||
GlaxoSmithKline Research & Development Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline S.A.
|
Ordinary
|
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
GlaxoSmithKline S.p.A.
|
Ordinary
|
Via Alessandro Fleming 2, Verona, 37135, Italy
| ||
GlaxoSmithKline s.r.o.
|
Ordinary
|
Hvezdova 1734/2c, Prague, 4 140 00, Czech Republic
| ||
GlaxoSmithKline Sante Grand Public SAS
|
Ordinary
|
23 rue François Jacob, 92500, Rueil-Malmaison, France
| ||
GlaxoSmithKline Services GmbH & Co. KG
|
Partnership Capital
|
Prinzregentenplatz 9, Munchen, 81675, Germany
| ||
GlaxoSmithKline Services Inc. (iv)
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GlaxoSmithKline Services Unlimited (i)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline SL Holdings, LLC
|
LLC Interests
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GlaxoSmithKline SL LLC
|
LLC Interests
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GlaxoSmithKline SL LP (iv)
|
Partnership
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Slovakia s.r.o.
|
Ordinary
|
Galvaniho 7/A, Bratislava, 821 04, Slovakia
| ||
GlaxoSmithKline South Africa (Pty) Limited
|
Ordinary
|
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston 2021, South Africa
| ||
GlaxoSmithKline Trading
|
Ordinary
|
Leningradskiy Prospect, 37A, bld. 4, Moscow, 125167, Russian Federation
| ||
GlaxoSmithKline Trading Services Limited (ii) (v)
|
Ordinary
|
Currabinny, Carrigaline, County Cork, Ireland
| ||
GlaxoSmithKline Tuketici Sagligi Anonim Sirketi
|
Nominative
|
Büyükdere Caddesi No. 173, 1.Levent Plaza B Blok, 1.Levent, Istanbul, 34394, Turkey
| ||
GlaxoSmithKline Tunisia S.A.R.L.
|
Ordinary
|
Immeuble Les Quatres R, Rue du Lac Lochness, Berges du Lac, Tunis, Tunisia
| ||
GlaxoSmithKline UK Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Uruguay S.A.
|
Registered shares provisory stock
|
Salto 1105, CP 11.200 Montevideo, Uruguay
| ||
GlaxoSmithKline US Trading Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GlaxoSmithKline Venezuela C.A.
|
Ordinary
|
Urbanizacion La Trinidad, Calle luis De Camoems, Edif No 115-117 Apatado Posta, Caracas, 1010, Venezuela
| ||
GlaxoSmithKline Vietnam Limited Liability Company (iv) (vi)
|
Equity capital
|
The Metropolitan, 235 Dong Khoi Street, District 1, 7th Floor Unit 701, Ho Chi Minh City, Viet Nam
| ||
GlaxoSmithKline-Consumer Hungary Limited Liability Company
|
Membership
|
H-1124, Csorsz utca 43, Budapest, Hungary
| ||
GlycoVaxyn AG (vi)
|
Common; Preferred A; Preferred B; Preferred C
|
Grabenstrasse 3, 8952 Schlieren, Switzerland
| ||
Groupe GlaxoSmithKline S.A.S.
|
Ordinary
|
23 Rue françois Jacob, 92500, Rueil-Malmaison, France
| ||
GSK Australia NVD Pty Ltd (iv) (vi)
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
GSK Business Service Centre Sdn Bhd
|
Ordinary
|
Level 6, Quill 9, 112, Jalan Semangat, Petaling Jaya, Selangor Darul Ehsan, 46300, Malaysia
| ||
GSK Capital K.K.
|
Ordinary
|
1-8-1 Akasaka Minato-Ku, Tokyo, Japan
| ||
GSK CH Argentina S.A.
|
Nominative non endorseable ordinary shares
|
Tucumán 1, piso 4, Buenos Aires, C1049AAA, Argentina
| ||
GSK CH Kazakhstan LLP
|
Charter Capital
|
32 A Manasa Str., Bostandyk District, Almaty, 050008, Kazakhstan
| ||
GSK Commercial Sp. z o.o.
|
Ordinary
|
ul. Rzymowskiego 53, Warsaw, 02-697, Poland
| ||
GSK Consumer Health, Inc.
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GSK Consumer Healthcare Israel Ltd
|
Ordinary
|
25 Basel Street, Petech Tikva 49510, Israel
| ||
GSK Consumer Healthcare S.A.
|
Ordinary
|
Route de IEtraz 2, 1197 Prangins, Switzerland
| ||
GSK Consumer Healthcare Schweiz AG
|
Ordinary
|
Suurstoffi 14, Rotkreuz, 6343, Switzerland
| ||
GSK Consumer Healthcare Services, Inc.
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
GSK Consumer Healthcare Singapore Pte. Ltd.
|
Ordinary
|
23 Rochester Park, 139234, Singapore
|
266
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Other statutory disclosures continued
Group companies continued
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries continued
|
||||
GSK d.o.o., Ljubljana
|
Ordinary
|
Amerika ulica 8,Ljubljana, 1000, Slovenia
| ||
GSK Finance (No 2) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
GSK Kazakhstan LLP
|
Partnership Interest
|
273, N. Nazarbayev ave., Almaty, Medau District, 050059, Kazakhstan
| ||
GSK Pharmaceutical Trading SA (iv) (vi)
|
Ordinary
|
5 Poienelor Street, Brasov, Romania
| ||
GSK Services Sp z o.o.
|
Ordinary
|
Ul. Grunwaldzka 189, Poznan, 60-322, Poland
| ||
GSK Vaccines BV
|
Ordinary
|
Hullenbergweg 85, Amsterdam, 1101 CL, Netherlands
| ||
GSK Vaccines GmbH
|
Ordinary
|
Emil-von-Behring-Str.76, 35041 Marburg, Germany
| ||
GSK Vaccines Institute for Global Health S.r.l.
|
Quotas
|
Via Fiorentina 1, Siena, 53100, Italy
| ||
GSK Vaccines S.r.l.
|
Quotas
|
Via Fiorentina 1, Siena, 53100, Italy
| ||
GSK Vaccines Vertriebs GmbH (iv)
|
Ordinary
|
Rudolf-Diesel-Ring 27, Holzkirchen, 83607, Germany
| ||
HGS France S.a.r.l. (iv) (vi)
|
Ordinary
|
117 Avenue, Victor Hugo, Boulogne-Billancourt, 92100, France
| ||
Horlicks Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Human Genome Sciences, Inc.
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
ID Biomedical Corporation of Quebec
|
Common
|
2323 du Parc Technologique, Québec, PQ, G1P 4R8, Canada
| ||
ID Biomedical Corporation of Washington (iv)
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Instituto Luso Farmaco, Limitada (iv)
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
InterPharma Dienstleistungen GmbH
|
Quotas
|
Wagenseilgasse 3, Euro Plaza, Gebäude I, 4. Stock, Vienna, A-1120, Austria
| ||
Iodosan S.p.A.
|
Ordinary
|
Via Zambeletti snc,Baranzate, Milan, 20021, Italy
| ||
J&J Technologies, LC (iv)
|
LLC Interests
|
Corporation Service Company, Bank of America, 16th Floor, 1111 East Main Street, Richmond, Virginia, 23219, United States
| ||
Kuhs GmbH
|
Ordinary
|
Barthstr. 4, München, 80339, Germany
| ||
Laboratoire GlaxoSmithKline
|
Ordinary
|
23 rue François Jacob, 92500, Rueil-Malmaison, France
| ||
Laboratoire Pharmaceutique Algérien LPA Production SPA
|
Ordinary
|
Zone Industrielle Est, Boudouaou, Boumerdes, Algeria
| ||
Laboratoire Pharmaceutique Algérien SPA
|
Ordinary
|
Zone Industrielle Est, Boudouaou, Boumerdes, Algeria
| ||
Laboratoires Paucourt (iv)
|
Ordianry
|
23 rue François Jacob, 92500, Rueil-Malmaison, France
| ||
Laboratoires Saint-Germain (iv)
|
Ordianry
|
23 rue François Jacob, 92500, Rueil-Malmaison, France
| ||
Laboratorios Dermatologicos Darier, S.A de C.V.
|
Ordinary A, Ordinary B
|
Calzada Mexico Xochimilco, 4900 San Lorenzo Huipulco, District Federal Mexico, 14370, Mexico
| ||
Laboratorios Farmaceuticos Stiefel (Portugal) LTDA (iv)
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
Laboratorios Stiefel de Venezuela SA
|
Ordinary
|
Calle Luis de Camoens, Edificio GlaxoSmithKline, No. 115-117, Urb. La Trinidad, Caracas, Venezuela
| ||
Laboratorios Stiefel Ltda.
|
Ordinary
|
Rua Professor Joao Cavalheiro Salem 1077, Guarulhos, Sao Paulo, Brazil
| ||
Laboratorios Wellcome De Portugal Limitada (iv)
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
Maxinutrition Limited (in liquidation)
|
Ordinary
|
55 Baker Street, London, W1U 7EU, England
| ||
Mixis Genetics Limited (vi)
|
Ordinary; Ordinary Euro
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Montrose Fine Chemical Company Ltd
|
Ordinary
|
Shewalton Road, Irvine, Ayrshire, KA11 5AP, Scotland
| ||
Montrose Pharma Company Limited (iv) (vi)
|
Ordinary Quota
|
H-1124, Csorsz utca 43, Budapest, Hungary
| ||
N.C.H. Nutrition Consumer Health Ltd (iv)
|
Ordinary
|
14 Hamephalsim St, Petach Tikva, Israel
| ||
Okairos AG (in liquidation)
|
Common; Preferred A; Preferred B
|
c/o OBC Suisse AG, Aeschenvorstadt 71, 4051, Basel, Switzerland
| ||
P.T. Sterling Products Indonesia
|
A shares; B Shares
|
Graha Paramita Building, 5th F, Jalan Denpasar Raya Blok D-2, Jakarta, 12940, Indonesia
| ||
Panadol GmbH
|
Ordinary
|
Barthstr. 4, München, 80339, Germany
| ||
Penn Labs Inc. (iv)
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
PT GSK Consumer Healthcare Indonesia
|
Ordinary
|
Graha Paramita 5th F, Jl. Denpasar Raya Blok D-2, Kuningan, Jakarta, 12940, Indonesia
| ||
PT. Bina Dentalindo (in liquidation)
|
Ordinary
|
Gedung Graha Ganesha Lantai 3, Jl Raya Bekasi Km 17, No5, Jakarta Timur 13930, Indonesia
| ||
S.R. One International B.V.
|
Ordinary
|
Huis ter Heideweg, 62 3705, LZ Zeist, Netherlands
| ||
S.R. One, Limited
|
Units (Common)
|
Corporation Service Company, 2595 Interstate Drive, Suite 103, Harrisburg, Pennsylvania, 17110, United States
|
267
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Group companies continued
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries continued
|
||||
Setfirst Limited
|
Ordinary; Preference
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Smith Kline & French Laboratories Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Smith Kline & French Portuguesa-Produtos Farmaceuticos, LDA (iv)
|
Ordinary Quota
|
Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| ||
SmithKline Beecham (Bangladesh) Private Limited (iv)
|
Ordinary
|
14, Topkhana Road, Segunbagicha, Dhaka 1000, Bangladesh
| ||
SmithKline Beecham (Cork) Limited (ii)
|
Ordinary
|
Currabinny, Carrigaline, County Cork, Ireland
| ||
SmithKline Beecham (Export) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham (H) Limited
|
Non-cumulative non-redeemables; Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham (Investments) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham (Manufacturing) Limited (ii)
|
Ordinary
|
Currabinny, Carrigaline, County Cork, Ireland
| ||
SmithKline Beecham (SWG) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham Biologicals US Partnership
|
Partnership Interest
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
SmithKline Beecham Egypt L.L.C.
|
Quotas
|
Amoun Street, El Salam City, Cairo, Egypt
| ||
SmithKline Beecham Farma, S.A.
|
Ordinary
|
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
SmithKline Beecham Inter-American Corporation (iv)
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
SmithKline Beecham Limited
|
Ordinary 6.25p
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham Marketing and Technical Services Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham Nominees Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham Overseas Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham Pension Plan Trustee Limited (iv)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham Pension Trustees Limited (iv)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham Pharma GmbH & Co KG
|
Partnership Capital
|
Prinzregentenplatz 9, Munchen, 81675, Germany
| ||
SmithKline Beecham Pharma Verwaltungs GmbH
|
Ordinary
|
Prinzregentenplatz 9, Munchen, 81675, Germany
| ||
SmithKline Beecham Pharmaceuticals (Pty) Limited (iv) (vi)
|
Ordinary
|
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston 2021, South Africa
| ||
SmithKline Beecham Pharmaceuticals Co.
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
SmithKline Beecham Port Louis Limited (vi)
|
Ordinary
|
C/o CIM Corporate Services Ltd, Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius
| ||
SmithKline Beecham Research Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
SmithKline Beecham S.A.
|
Ordinary
|
Ctra de Ajalvir Km 2.500, Alcala de Henares, Madrid, 28806, Spain
| ||
SmithKline Beecham Senior Executive Pension Plan Trustee Limited (iv)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Stafford-Miller (Ireland) Limited (ii)
|
Ordinary
|
Clocherane, Youghal Road, Dungarvan, Co. Waterford, Ireland
| ||
Stafford-Miller Limited
|
Ordinary; Non-Cumulative Non Redeemable Preference
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Sterling Drug (Malaya) Sdn Berhad
|
Ordinary
|
Lot 89, Jalan Enggang, Ampang/Ulu Kelang Industrial Estate, Selangor, 54200, Malaysia
| ||
Sterling Products International, Incorporated (iv)
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Stiefel Consumer Healthcare (UK) Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Stiefel Distributors (Ireland) Limited (ii) (iv)
|
Ordinary
|
Finisklin Business Park, Sligo, Ireland
| ||
Stiefel Dominicana, S.R.L. (iv) (vi)
|
Ordinary
|
Ave. Lope de Vega #29, Torre NovoCentro, Local 406, Santo Domingo, Dominican Republic
| ||
Stiefel Farma, S.A.
|
Ordinary
|
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain
| ||
Stiefel GmbH & Co. KG
|
Partnership Capital
|
Industriestrasse 32-36, Bad Oldesloe, 23843, Germany
| ||
Stiefel India Private Limited
|
Equity
|
401-402, A, Wing, 4th Floor, Floral Deck Plaza, Opp Rolta Bhavan, Central MIDC Road, Mumbai, Andheri (E), 400093, India
| ||
Stiefel Laboratories (Ireland) Limited (ii)
|
Ordinary
|
Finisklin Business Park, County Sligo, Ireland
| ||
Stiefel Laboratories (Maidenhead) Ltd (vi)
|
Ordinary
|
Eurasia Headquarters, Concorde Road, Maidenhead, Berkshire, SL6 4BY, England
| ||
Stiefel Laboratories (U.K.) Ltd
|
Ordinary
|
Eurasia Headquarters, Concorde Road, Maidenhead, Berkshire, SL6 4BY, England
| ||
Stiefel Laboratories Legacy (Ireland) Limited (ii)
|
Ordinary
|
Finisklin Business Park, Sligo, Ireland
| ||
Stiefel Laboratories Limited (iv)
|
Ordinary
|
Eurasia Headquarters, Concorde Road, Maidenhead, Berkshire, SL6 4BY, England
| ||
Stiefel Laboratories Pte Limited (iv)
|
Ordinary
|
103 Gul Circle, 629589, Singapore
|
268
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Other statutory disclosures continued
Group companies continued
Name
|
Security
|
Registered address
| ||
Wholly owned subsidiaries continued
|
||||
Stiefel Laboratories, Inc.
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Stiefel Maroc SARL (iv) (vi)
|
Ordinary
|
275 Boulevard Zerktouni, Casablanca, Morocco
| ||
Stiefel Research (Australia) Holdings Pty Ltd
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
Stiefel Research Australia Pty Ltd
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
Stiefel West Coast LLC
|
LLC Interests
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Strebor Inc.
|
Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
Tempero Pharmaceuticals, Inc.
|
Series A Preference; Series B Preference; Common
|
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| ||
The Sydney Ross Co. (iv)
|
Common
|
Corporation Service Company, Princeton South Corporate Center, Suite 160, 100 Charles Ewing Blvd, Ewing, New Jersey, 08628, United States
| ||
The Wellcome Foundation Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
UCB Pharma Asia Pacific Sdn Bhd (iv) | Ordinary | Level 8, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Petaling Jaya, Selangor Darul Ehsan, 47301, Malaysia | ||
Vog AU PTY LTD (iv)
|
Ordinary; Redeemable Preference
|
82 Hughes Avenue, Ermington, NSW, 2115, Australia
| ||
Wellcome Consumer Healthcare Limited (iv)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Wellcome Consumer Products Limited (iv)
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Wellcome Developments Pty Ltd (iv) (vi)
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
| ||
Wellcome Limited
|
Ordinary
|
980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| ||
Wellcome Operations Pty Ltd (iv) (vi)
|
Ordinary
|
1061 Mountain Highway, Boronia, VIC, 3155, Australia
|
Name
|
Security
|
Effective %
|
Registered address
| |||
Subsidiaries where the effective interest is less than 100%
|
||||||
Amoun Pharmaceutical Industries Co. S.A.E. |
New Monetary Shares (99.5%) |
90.7 |
El Salam City 11491, PO Box 3001, Cairo, Egypt | |||
Beecham Enterprises Inc. (iv) |
Common |
88 |
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States | |||
Biddle Sawyer Limited |
Equity |
75 |
252 Dr Annie Besant Road, Mumbai, 400030, India | |||
British Pharma Group Limited (i) |
Capital (50%) |
50 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
Galvani Bioelectronics Inc. |
Common |
55 |
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States | |||
Galvani Bioelectronics Limited |
A Ordinary; B Ordinary (0%) |
55 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
Glaxo Saudi Arabia Limited |
Ordinary |
75 |
PO Box 22617, Area No 73 to 156, Warehouse City, First Stage Al Khomrah, Jeddah 21416, Saudi Arabia | |||
Glaxo Wellcome Ceylon Limited |
Ordinary; Ordinary B |
99.6 |
121 Galle Road, Kaldemulla, Moratuwa, Sri Lanka | |||
GlaxoSmithKline (Tianjin) Co. Ltd |
Ordinary |
90 |
No. 65, the Fifth Avenue, Tai Feng Industrial Park, Tianjin Economic and Technolog, Tianjin, 300457, China | |||
GlaxoSmithKline Algérie S.P.A. |
Ordinary |
99.99 |
Zone Industrielle Est, Boudouaou, Wilaya de Boumerdes, Algeria | |||
GlaxoSmithKline Bangladesh Limited (vi) |
Ordinary (82%) |
82 |
Fouzderhat Industrial Area, Dhaka Trunk Road, North Kattali, Chittagong 4217, Bangladesh | |||
GlaxoSmithKline Consumer Healthcare Limited (vi) |
Ordinary |
72.5 |
Patiala Road, Nabha 147201, Dist Patiala, Punjab, India | |||
GlaxoSmithKline Consumer Healthcare Pakistan Limited |
Ordinary (85.8%) |
85.8 |
The Sykes Building, 35 Dockyard Road, West Wharf, Karachi, 74000, Pakistan | |||
GlaxoSmithKline Consumer Healthcare, L.P. |
Partnership Capital |
88 |
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States | |||
GlaxoSmithKline Consumer Nigeria plc (iii) |
Ordinary (46.4%) |
46.4 |
1 Industrial Avenue, Ilupeju, Ikeja, Lagos, PM B 21218, Nigeria | |||
GlaxoSmithKline OTC (PVT.) Limited |
Ordinary |
85.8 |
The Sykes Building, 35 Dockyard Road, West Wharf, Karachi, 74000, Pakistan | |||
GlaxoSmithKline Pakistan Limited |
Ordinary (82.6%) |
82.6 |
35 Dockyard Road, West Wharf, Karachi, 74000, Pakistan | |||
GlaxoSmithKline Pharmaceuticals Limited |
Equity (75%) |
75 |
252 Dr Annie Besant Road, Mumbai, 400030, India | |||
GlaxoSmithKline S.A.E. |
Ordinary (91.2%) |
91.2 |
Boomerang Office Building - Land No. 46, Zone (J) 1st District, Town Center 5th Tagammoe, New Cairo City, Egypt |
269
| ||
GSK Annual Report 2018 |
Strategic report
| |
Governance and remuneration
| ||
Financial statements
| ||
Investor information
|
Group companies continued
Name
|
Security
|
Effective % Ownership
|
Registered address
| |||
Subsidiaries where the effective interest is less than 100% continued
|
||||||
GSK-Gebro Consumer Healthcare GmbH |
Ordinary |
60 |
Bahnhofbichl 13, 6391 Fieberbrunn, Kitzbühel, Austria | |||
Laboratorios ViiV Healthcare, S.L. |
Ordinary |
78.3 |
Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres Cantos, Madrid, 28760, Spain | |||
Modern Pharma Trading Company L.L.C. |
Quotas (98.2%) |
98.2 |
Amoun Street, PO Box 3001, El Salam City, Cairo, 11491, Egypt | |||
P.T. SmithKline Beecham Pharmaceuticals |
A Shares; B Shares (0%) |
99 |
Jl. Pulobuaran Raya, Kav. III DD/2,3,4, Kawasan Industri Pulogadung, Jakarta, 13930, Indonesia | |||
PHIVCO Jersey II Limited (iv) (v) (vi) |
Ordinary |
78.3 |
13 Castle Street, St. Helier, JE4 5UT, Jersey | |||
PHIVCO Jersey Limited (iv) (v) (vi) |
Ordinary |
78.3 |
13 Castle Street, St. Helier, JE4 5UT, Jersey | |||
PHIVCO UK II Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
PHIVCO UK Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
PHIVCO-1 LLC |
LLC Interests |
78.3 |
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States | |||
PHIVCO-2 LLC |
LLC Interests |
78.3 |
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States | |||
PT Glaxo Wellcome Indonesia |
A Shares; B Shares (0%) |
95 |
Jl Pulobuaran Raya Kav III DD/, Kawasan Industri Pulogadung, Timur, Jakarta, 13930, Indonesia | |||
Shionogi-ViiV Healthcare LLC (iv) |
Common Interests |
78.3 |
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States | |||
Sino-American Tianjin Smith Kline & French Laboratories Ltd |
Ordinary (55%) |
55 |
Cheng Lin Zhuang Industrial Zone, Dong Li District, Tianjin, 300163, China | |||
SmithKline Beecham (Private) Limited |
Ordinary (99.6%) |
99.6 |
World Trade Center, Level 34, West Tower, Echelon Square, Colombo 1, Sri Lanka | |||
SmithKline Beecham-Biomed O.O.O. |
Participation Interest (97%) |
97 |
Leningradskiy Prospect, 37A, bld. 4, Moscow, 125167, Russian Federation | |||
Stiefel Egypt LLC (iv) |
Quota (99%) |
99 |
Amoun Street, El Salam City, Cairo, Egypt | |||
ViiV Healthcare (South Africa) (Proprietary) Limited (iv) (vi) |
Ordinary |
78.3 |
Flushing Meadows Building, The Campus, 57 Sloane Street, Bryanston 2021, South Africa | |||
ViiV HealthCare BV |
Ordinary |
78.3 |
Huis ter Heideweg 62, 3705 LZ, Zeist, Netherlands | |||
ViiV Healthcare Company |
Common |
78.3 |
Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States | |||
ViiV Healthcare Finance 1 Limited (vi) |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare Finance 2 Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare Finance Limited |
Ordinary; Redeemable Preference |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare GmbH |
Ordinary |
78.3 |
Prinzregentenplatz 9, Munchen, 81675, Germany | |||
ViiV Healthcare GmbH |
Ordinary |
78.3 |
Talstrasse 3-5, 3053 Muenchenbuchsee, Switzerland | |||
ViiV Healthcare Hong Kong Limited (iv) |
Ordinary |
78.3 |
23/F Tower 6, The Gateway, 9 Canton Road, Harbour City, Tsimshatsui, Kowloon, Hong Kong | |||
ViiV Healthcare Kabushiki Kaisha |
Ordinary |
78.3 |
1-8-1 Akasaka Minato-Ku, Tokyo, Japan | |||
ViiV Healthcare Limited |
Class A Shares, Deferred; |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
Class B Shares (0%); |
||||||
Class C Shares (0%); | ||||||
Class D1 (0%); | ||||||
Class D2 (0%); | ||||||
Class E 5% | ||||||
Cumulative Preference (0%) | ||||||
ViiV Healthcare Overseas Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare Pty Ltd |
Ordinary |
78.3 |
1061 Mountain Highway, Boronia, VIC, 3155, Australia | |||
ViiV Healthcare Puerto Rico, LLC |
LLC Interests |
78.3 |
Centro International de Mercadeo, 90 carr. 165 Torre 2, Suite 800, Guaynabo, 00968, Puerto Rico | |||
ViiV Healthcare S.r.l. |
Quota |
78.3 |
Via Alessandro Fleming 2, Verona, 37135, Italy | |||
ViiV Healthcare SAS |
Ordinary |
78.3 |
23 rue François Jacob, 92500, Rueil-Malmaison, France | |||
ViiV Healthcare sprl |
Ordinary |
78.3 |
Site Apollo, Avenue Pascal 2-4-6, Wavre, 1300, Belgium | |||
ViiV Healthcare Trading LLC (iv) |
Participation Interest |
78.3 |
Leningradskiy Prospect, 37A, bld. 4, Moscow, 125167, Russian Federation | |||
ViiV Healthcare Trading Services UK Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare UK (No.2) Limited (v) (vi) |
Ordinary |
78.3 |
13 Castle Street, St. Helier, JE4 5UT, Jersey | |||
ViiV Healthcare UK (No.3) Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare UK (No.4) Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare UK (No.5) Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England | |||
ViiV Healthcare UK (No.6) Limited |
Ordinary |
78.3 |
980 Great West Road, Brentford, Middlesex, TW8 9GS, England |
270
|
||
GSK Annual Report 2018
|
||
|
||
|
||
|
Other statutory disclosures continued
Group companies continued
Name
|
Security
|
Effective %
|
Registered address
| |||
Subsidiaries where the effective interest is less than 100% continued
|
||||||
ViiV Healthcare UK Limited |
Ordinary
|
78.3 | 980 Great West Road, Brentford, Middlesex, TW8 9GS, England
| |||
ViiV Healthcare ULC |
Common
|
78.3 | 3500 855-2nd Street SW, Calgary, AB, T2P 4J8, Canada
| |||
ViiV Healthcare Venture LLC |
LLC Interests | 78.3 | Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| |||
ViiVHIV Healthcare Unipessoal Lda |
Quota |
78.3 | Rua Dr Antonio Loureiro Borges No 3, Arquiparque, Miraflores, Alges, 1495-131, Portugal
| |||
Winster Pharmaceuticals Limited (iv) |
Ordinary |
46.4 | 2A Association Avenue, Ilupeju Industrial Estate, Lagos, PO Box 3199, Nigeria
| |||
Zhejiang Tianyuan Bio-Pharmaceutical Co. Ltd. |
Ordinary |
95 | No. 56, Tian He Road, Yuhang Economic Development Zone, Hangzhou, Zhejiang Province, China
| |||
Associates
|
||||||
Apollo Therapeutics LLP
|
Partnership Interest (25%) |
25 | Gunnels Wood Road, Stevenage SG1 2FX, England
| |||
Calci Medica Inc.
|
Series A and Junior Preferred (33.9%)
|
43.3 | 505 Coast Boulevard South, Suite 202, La Jolla, CA 92037, United States
| |||
GlaxoSmithKline Landholding Company, Inc.
|
Common (40%) | 40 | 2266 Chino Roces Avenue, City of Makati, 1231, Philippines
| |||
Index Ventures Life VI (Jersey) LP
|
Partnership Interest (25%)
|
25 | 3 Burlington Gardens, London W15 3EP, England
| |||
Innoviva, Inc.
|
Common (31.7%) | 31.7 | 2000 Sierra Point Parkway, Suite 500, Brisbane, CA 94005, United States
| |||
Japan Vaccine Distribution Co., Ltd
|
Ordinary (50%)
|
50 | 6 Yobancho, Chiyoda-Ku, Tokyo, Japan
| |||
Kurma Biofund II, FCPR
|
Partnership Interest (32%) | 32 | 24 Rue Royale, 5e étage, 75008 Paris, France
| |||
Longwood Founders Fund LP |
Partnership Interest (28%) |
28 | The Prudential Tower, 800 Boylston Street, Suite 1555, Boston, MA 02199, United States
| |||
Medicxi Ventures I LP
|
Partnership Interest (26.2%)
|
26.2 | 25 Great Pulteney Street, Soho, London W1F 9ND, England
| |||
Joint Ventures
|
||||||
Chiron Panacea Vaccines Private Limited (vi) |
Equity Shares (50%) |
50 | 708/718, 7th Floor, A Wing, Sagar Tech Plaza, Saki Naka, Andheri East, Mumbai, Maharashtra, 400072, India
| |||
Japan Vaccine Co., Ltd. (vi)
|
Ordinary
|
50 | 6 Yonbancho, Chiyoda-ku, Tokyo, Japan
| |||
Japan Vaccine Distribution Co., Ltd. (vi)
|
Ordinary
|
50 | 6 Yonbancho, Chiyoda-ku, Tokyo, Japan
| |||
Qualivax Pte. Limited
|
Ordinary | 50 | 80 Robinson Road, #02-00, 068898 Singapore
| |||
Quell Intellectual Property Corp., LLC (iv)
|
Membership Interest |
50 | Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
| |||
Qura Therapeutics, LLC
|
Units |
50 | Corporation Service Company, 251 Little Falls Drive, Wilmington, Delaware, 19808, United States
|
Key
271
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GSK Annual Report 2018 |
Strategic report
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Governance and remuneration
| ||
Financial statements
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Investor information
|
|
Terms used in the Annual Report | US equivalent or brief description
| |
Accelerated capital allowances | Tax allowance in excess of depreciation arising from the purchase of fixed assets that delay the charging and payment of tax. The equivalent of tax depreciation.
| |
American Depositary Receipt (ADR) | Receipt evidencing title to an ADS. Each GSK ADR represents two Ordinary Shares.
| |
American Depositary Shares (ADS) | Listed on the New York Stock Exchange; represents two Ordinary Shares.
| |
Basic earnings per share | Basic income per share.
| |
Called up share capital | Ordinary Shares, issued and fully paid.
| |
CER growth | Growth at constant exchange rates.
| |
The company | GlaxoSmithKline plc.
| |
Currency swap | An exchange of two currencies, coupled with a subsequent re-exchange of those currencies, at agreed exchange rates and dates.
| |
Defined benefit plan | Pension plan with specific employee benefits, often called final salary scheme.
| |
Defined contribution plan | Pension plan with specific contributions and a level of pension dependent upon the growth of the pension fund.
| |
Derivative financial instrument | A financial instrument that derives its value from the price or rate of some underlying item.
| |
Diluted earnings per share | Diluted income per share.
| |
Employee Share Ownership Plan Trusts | Trusts established by the Group to satisfy share-based employee incentive plans.
| |
Equity Shareholders funds | Shareholders equity.
| |
Finance lease | Capital lease.
| |
Freehold | Ownership with absolute rights in perpetuity.
| |
The Group | GlaxoSmithKline plc and its subsidiary undertakings.
| |
GSK | GlaxoSmithKline plc and its subsidiary undertakings.
| |
Hedging | The reduction of risk, normally in relation to foreign currency or interest rate movements, by making off-setting commitments.
| |
Intangible fixed assets | Assets without physical substance, such as computer software, brands, licences, patents, know-how and marketing rights purchased from outside parties.
| |
Novartis transaction | The three-part inter-conditional transaction with Novartis AG involving the Consumer Healthcare, Vaccines and Oncology businesses completed on 2 March 2015.
| |
Ordinary Share | A fully paid up ordinary share in the capital of the company.
| |
Profit | Income.
| |
Profit attributable to shareholders | Net income.
| |
Share capital | Ordinary Shares, capital stock or common stock issued and fully paid.
| |
Share option | Stock option.
| |
Share premium account | Additional paid-up capital or paid-in surplus (not distributable).
| |
Shares in issue | The number of shares outstanding.
| |
Subsidiary | An entity in which GSK exercises control.
| |
Treasury share | Treasury stock.
| |
Turnover | Revenue.
| |
UK Corporate Governance Code | As required by the UK Listing Authority, the company has disclosed in the Annual Report how it has applied the best practice corporate governance provisions of the Financial Reporting Councils UK Corporate Governance Code.
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272
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GSK Annual Report 2018
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Index
Page | Page | |||||||
| ||||||||
Accountability | 79 | Key accounting judgements and estimates | 151 | |||||
Accounting principles and policies | 146 | Key performance indicators | 08 | |||||
Acquisitions and disposals | 191 | Leadership and effectiveness | 72 | |||||
Adjustments reconciling profit after tax to operating | Legal proceedings | 215 | ||||||
cash flows | 189 | Major restructuring costs | 158 | |||||
Affordability and availability | 26 | Modern employer | 28 | |||||
Annual General Meeting 2019 | 254 | Movements in equity | 187 | |||||
Approach to Brexit | 36 | Net debt | 184 | |||||
Approach to tax | 43 | New accounting requirements | 152 | |||||
Assets held for sale | 173 | Nominations Committee Report | 77 | |||||
Associates and joint ventures | 160 | Non-controlling interests | 195 | |||||
Audit & Risk Committee Report | 79 | Non-controlling interests in ViiV Healthcare | 41 | |||||
Business model | 12 | Non-Executive Directors fees | 112 | |||||
Cash and cash equivalents | 172 | Non-financial information statement | IFC | |||||
Cash generation and conversion | 56 | Notes to the financial statements | 144 | |||||
CEOs statement | 03 | Operating profit | 157 | |||||
CFOs statement | 38 | Other intangible assets | 168 | |||||
Chairmans statement | 02 | Other investments | 170 | |||||
Chairmans Governance statement | 66 | Other non-current assets | 171 | |||||
Chairmans Remuneration annual statement | 96 | Other non-current liabilities | 184 | |||||
Commitments | 197 | Other operating income/(expense) | 156 | |||||
Consolidated balance sheet | 141 | Other provisions | 183 | |||||
Consolidated cash flow statement | 143 | Our Board | 68 | |||||
Consolidated income statement | 140 | Our long-term priorities | 07 | |||||
Consolidated statement of changes in equity | 142 | Pensions and other post-employment benefits | 174 | |||||
Consolidated statement of comprehensive income | 140 | Pharmaceuticals | 13 | |||||
Consumer Healthcare | 21 | Pharmaceutical products, competition and | ||||||
Consumer Healthcare products and competition | 240 | intellectual property | 238 | |||||
Contingent consideration liabilities | 194 | Pipeline | 235 | |||||
Contingent liabilities | 186 | Post balance sheet events | 218 | |||||
Corporate Executive Team | 71 | Presentation of the financial statements | 144 | |||||
Corporate governance | 65 | Principal Group companies | 214 | |||||
Corporate Responsibility Committee Report | 92 | Principal risks and uncertainties | 241 | |||||
Critical accounting policies | 63 | Property, plant and equipment | 165 | |||||
Data and engagement | 31 | Quarterly trend | 224 | |||||
Directors and senior management | 119 | Reconciliation of net cash flow to movement in net debt | 190 | |||||
Directors interests in shares | 113 | Registrar | 256 | |||||
Directors statement of responsibilities | 126 | Related party transactions | 189 | |||||
Dividends | 164,253 | Relations with stakeholders | 89 | |||||
Donations to political organisations and political expenditure | 259 | Reliable supply | 29 | |||||
Earnings per share | 164 | Remuneration governance | 110 | |||||
Employee costs | 158 | 2017 Remuneration policy summary | 120 | |||||
Employee share schemes | 212 | Remuneration report | 98 | |||||
Environment | 32 | Reporting framework | 40 | |||||
Ethics and values | 30 | Risk management | 34 | |||||
Exchange rates | 153 | Science and technology | 25 | |||||
Executive Director remuneration | 98 | Science Committee report | 91 | |||||
Finance expense | 160 | Share capital and control | 251 | |||||
Finance income | 159 | Share capital and share premium account | 186 | |||||
Financial calendar | 253 | Shareholder information | 251 | |||||
Financial instruments and related disclosures | 198 | Shareholder services and contacts | 256 | |||||
Financial performance | 04 | Stakeholder engagement | 11 | |||||
Financial position and resources | 58 | Taxation | 161 | |||||
Financial statements of GlaxoSmithKline plc, prepared | Tax information for shareholders | 254 | ||||||
under UK GAAP | 219 | Trade and other payables | 173 | |||||
Five year record | 229 | Trade and other receivables | 172 | |||||
Glossary of terms | 271 | Treasury policies | 62 | |||||
Goodwill | 166 | Trust | 24 | |||||
Group companies | 260 | Turnover and segment information | 153 | |||||
Group financial review | 37 | US law and regulation | 258 | |||||
Independent Auditors report | 128 | Vaccines | 18 | |||||
Industry trends | 09 | Vaccine products, competition and intellectual property | 239 | |||||
Inventories | 171 | Viability statement | 44 | |||||
Investments in associates and joint ventures | 170 | |||||||
Investor relations | 257 |
|
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GSK Annual Report 2018
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About GSK
GlaxoSmithKline plc was incorporated as an English public limited company on 6 December 1999. We were formed by a merger between Glaxo Wellcome plc and SmithKline Beecham plc. GSK acquired these two English companies on 27 December 2000 as part of the merger arrangements.
Our shares are listed on the London Stock Exchange and the New York Stock Exchange.
Read more at www.gsk.com |
Brand names
Brand names appearing in italics throughout this report are trade marks either owned by and/or licensed to GSK or associated companies, with the exception of Cialis owned by Eli Lilly and Company, Gardasil owned by Merck Sharp & Dohme Corp. and Rituxan owned by Biogen MA Inc. Zofran owned by Novartis AG Trumenba owned by Pfizer Inc. and Volibris owned by Gilead Science.
Acknowledgements
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Download PDFs:
Annual Report 2018
Form 20-F |
Cautionary statement regarding forward-looking statements
The Groups reports filed with or furnished to the US Securities and Exchange Commission (SEC), including this document and written information released, or oral statements made, to the public in the future by or on behalf of the Group, may contain forward-looking statements. Forward-looking statements give the Groups current expectations or forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as anticipate, estimate, expect, intend, will, project, plan, believe and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority), the Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The reader should, however, consult any additional disclosures that the Group may make in any documents which it publishes and/or files with the SEC. All readers, wherever located, should take note of these disclosures. Accordingly, no assurance can be given that any particular expectation will be met and shareholders are cautioned not to place undue reliance on the forward-looking statements.
Forward-looking statements are subject to assumptions, inherent risks and uncertainties, many of which relate to factors that are beyond the Groups control or precise estimate. The Group cautions investors that a number of important factors, including those in this document, could cause actual results to differ materially from those expressed or implied in any forward-looking statement.
Such factors include, but are not limited to, those discussed under Principal risks and uncertainties on pages 241 to 250 of this Annual Report. Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made and are based upon the knowledge and information available to the Directors on the date of this Annual Report.
A number of non-IFRS measures are used to report the performance of our business. These measures are defined on pages 40 to 42 and a reconciliation of Adjusted results to Total results is set out on page 51. |
The information in this document does not constitute an offer to sell or an invitation to buy shares in GlaxoSmithKline plc or an invitation or inducement to engage in any other investment activities. Past performance cannot be relied upon as a guide to future performance. Nothing in this Annual Report should be construed as a profit forecast.
Assumptions related to 2016-2020 outlook
In outlining the expectations for 2019 and the five-year period 2016-2020, the Group has made certain assumptions about the healthcare sector, the different markets in which the Group operates and the delivery of revenues and financial benefits from its current portfolio, pipeline and restructuring programmes.
For the Group specifically, over the period to 2020, GSK expects further declines in sales of Seretide/Advair. The introduction of a generic alternative to Advair in the US has been factored into the Groups assessment of its future performance. The Group assumes no premature loss of exclusivity for other key products over the period.
The assumptions for the Groups revenue, earnings and dividend expectations assume no material interruptions to supply of the Groups products, no material mergers, acquisitions or disposals, except for the acquisition of Tesaro, the proposed divestment of Horlicks and other Consumer Healthcare products to Unilever and the proposed formation of a new Consumer Healthcare Joint Venture with Pfizer, all announced in December 2018, no material litigation or investigation costs for the Company (save for those that are already recognised or for which provisions have been made), no share repurchases by the Company, and no change in the Groups shareholdings in ViiV Healthcare. The assumptions also assume no material changes in the macro-economic and healthcare environment. The 2019 guidance and 2016-2020 outlook have factored in all divestments and product exits since 2015, including the divestment and exit of more than 130 non-core tail brands (£0.5 billion in annual sales) as announced on 26 July 2017 and the product divestments planned in connection with the proposed Consumer Healthcare transaction with Pfizer.
The Groups expectations assume successful delivery of the Groups integration and restructuring plans over the period 2016-2020, including the extension and enhancement to the combined programme announced on 26 July 2017 as well as the new major restructuring plan announced on 25 July 2018. |
They also assume that the proposed Consumer Healthcare nutrition disposal closes by the end of 2019 and the proposed Consumer Healthcare Joint Venture with Pfizer closes during H2 2019 and that the integration and investment programmes following the Tesaro acquisition and the proposed Consumer Healthcare Joint Venture with Pfizer over this period are delivered successfully.
Material costs for investment in new product launches and R&D have been factored into the expectations given. Given the potential development options in the Groups pipeline, the outlook may be affected by additional data-driven R&D investment decisions. The expectations are given on a constant currency basis (2016-2020 outlook at 2015 CER).
Subject to material changes in the product mix, the Groups medium-term effective tax rate is expected to be around 19% of Adjusted profits. This incorporates managements best estimates of the impact of US tax reform on the Group based on the information currently available. As more information on the detailed application of the US Tax Cuts and Jobs Act becomes available, the assumptions underlying these estimates could change with consequent adjustments to the charges taken that could have a material impact on the results of the Group.
Notice regarding limitations on Director Liability under English Law
Under the UK Companies Act 2006, a safe harbour limits the liability of Directors in respect of statements in and omissions from the Directors Report (for which see page 94), the Strategic report and the Remuneration report. Under English law the Directors would be liable to the company, but not to any third party, if one or more of these reports contained errors as a result of recklessness or knowing misstatement or dishonest concealment of a material fact, but would otherwise not be liable. Pages 65 to 94, 126 to 127, and 241 to 270 inclusive comprise the Directors Report, pages 01 to 64 inclusive comprise the Strategic report and pages 95 to 124 inclusive comprise the Remuneration report, each of which have been drawn up and presented in accordance with and in reliance upon English company law and the liabilities of the Directors in connection with these reports shall be subject to the limitations and restrictions provided by such law.
Website
GSKs website www.gsk.com gives additional information on the Group. Notwithstanding the references we make in this Annual Report to GSKs website, none of the information made available on the website constitutes part of this Annual Report or shall be deemed to be incorporated by reference herein.
| ||
Head Office and Registered Office
GlaxoSmithKline plc
980 Great West Road
Brentford, Middlesex TW8 9GS
United Kingdom
Tel: +44 (0)20 8047 5000 Registered number: 3888792
www.gsk.com
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