Document:

EX-10.9

 Exhibit 10.9 

Lease Agreement 

BIOCENTER AT SOUTHWESTERN MEDICAL DISTRICT

 East Campus Building B 

2330 Inwood Road 
 Dallas,
Texas 75235 
 Suite Numbers 226 and 227 

BOARD OF REGENTS OF THE 

UNIVERSITY OF TEXAS SYSTEM 

Landlord 
 for the use
and benefit of 
 THE UNIVERSITY OF TEXAS 

SOUTHWESTERN MEDICAL CENTER 

and 
 PELOTON
THERAPEUTICS, INC. 
 Tenant 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 1

 TABLE OF CONTENTS 

 

							
	 	 	 	  	Page Number	 
			
	 1.
	 	 BASIC LEASE PROVISIONS AND DEFINITIONS
	  	 	3	 
			
	 2.
	 	 GRANT AND TERM
	  	 	7	 
			
	 3.
	 	 MONETARY PROVISIONS
	  	 	7	 
			
	 4.
	 	 PREMISES, COMMON AREAS, SERVICE AREAS
	  	 	10	 
			
	 5.
	 	 USE
	  	 	11	 
			
	 6.
	 	 SERVICES AND UTILITIES
	  	 	15	 
			
	 7.
	 	 REPAIRS AND MAINTENANCE
	  	 	20	 
			
	 8.
	 	 LANDLORD’S RIGHT OF ENTRY
	  	 	23	 
			
	 9.
	 	 INSURANCE, FIRE AND CASUALTY DAMAGE
	  	 	24	 
			
	 10.
	 	 INDEMNITY AND PUBLIC LIABILITY INSURANCE
	  	 	27	 
			
	 11.
	 	 CONDEMNATION
	  	 	28	 
			
	 12.
	 	 ASSIGNMENT, TRANSFER AND SUBLEASING BY TENANT
	  	 	28	 
			
	 13.
	 	 HOLDING OVER
	  	 	29	 
			
	 14.
	 	 DEFAULT BY TENANT; LANDLORD’S REMEDIES
	  	 	30	 
			
	 15.
	 	 BANKRUPTCY OR INSOLVENCY OF TENANT
	  	 	34	 
			
	 16.
	 	 STATUTORY MATTERS
	  	 	36	 
			
	 17.
	 	 SUBORDINATION AND ATTORNMENT
	  	 	37	 
			
	 18.
	 	 TENANT ESTOPPEL LETTER
	  	 	37	 
			
	 19.
	 	 QUIET ENJOYMENT
	  	 	37	 
			
	 20.
	 	 NO IMPLIED WAIVER
	  	 	37	 
			
	 21.
	 	 PAYMENTS AND NOTICES
	  	 	38	 
			
	 22.
	 	 SUBSTITUTION OF SPACE
	  	 	38	 
			
	 23.
	 	 MISCELLANEOUS
	  	 	38	 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 2

 LEASE AGREEMENT 

This Lease Agreement (hereafter called “Lease,” both in reference to this Lease and to the real estate transaction between
Landlord and Tenant) is executed to be effective as of January 27, 2012 (“Reference Date”) by and between the Board of Regents of The University of Texas System (“Landlord”) for the use and benefit of
The University of Texas Southwestern Medical Center, and Peloton Therapeutics, Inc. (“Tenant”). 

WHEREAS, in furtherance of the public use and mission of Landlord, Landlord has constructed the BioCenter at Southwestern
Medical District to make available offices, laboratories, and associated facilities for lease to persons working in the field of biotechnology research and development; 

WHEREAS, The University of Texas Southwestern Medical Center has constructed the “BioCenter at Southwestern Medical
District,” to further develop the University’s missions in research and clinical medicine by improving university relations with commercial biomedical industry that will be located in BioCenter and to facilitate the translation into
clinical healthcare of new technologies arising from the university’s research and clinical activities; and 
 WHEREAS,
the location of Tenant in the BioCenter is consistent with this mission. 
 NOW THEREFORE Landlord and Tenant
agree as follows: 
 1.    BASIC LEASE PROVISIONS AND DEFINITIONS 

1.01    Basic Lease Provisions. For the purposes of this Lease, the following terms and provisions shall
have the respective meanings attributed to them below: 
  

					
	(a)	  	Landlord:	 	Board of Regents of The University of Texas System for the use and benefit of The University of Texas Southwestern Medical Center
			
	(b)	  	Landlord’s Mailing Address:	 	For payment of Rent:
		  		 	Real Estate Office
		  		 	UT Southwestern Medical Center
		  		 	5323 Harry Hines Blvd.
		  		 	Dallas, TX 75390-9188
			
		  		 	For Notices Under Section 21.02:
		  		 	Real Estate Office
		  		 	UT Southwestern Medical Center
		  		 	5323 Harry Hines Blvd.
		  		 	Dallas, TX 75390-9188
			
		  		 	With copy to:
			
		  		 	Office of General Counsel
		  		 	c/o Real Estate Office
		  		 	University of Texas System
		  		 	201 West 7th Street
		  		 	Austin, Texas 78701
		  		 	Attn: Executive Director of Real Estate

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 3

					
	(c)	  	Tenant:	 	Peloton Therapeutics, Inc.
			
	(d)	  	Tenant’s Mailing Address:	 	
			
		  	Before the Rent Commencement Date:	 	
			
		  	After the Rent Commencement Date:	 	2330 Inwood Road, Suite 226
		  		 	Dallas, Texas 75235
		  		 	Attn: Chief Scientific Officer
			
	(e)	  	Guarantor(s):	 	None
			
	(f)	  	Guarantor’s Street Address(es):	 	Not applicable.
			
	(g)	  	Premises:	 	The portion of the Building to be leased pursuant to this Lease, as shown on the attached Exhibit A, which is commonly called Suite Nos. 226 and 227 in the Building. Suite 226 is divided into separate office use area
(the “Office Area”)and server room (the “Server Room”), as shown on Exhibit A. Suite 227 is the laboratory use area (the “Laboratory Area”), as shown on Exhibit
A.
			
	(h)	  	Building:	 	The office building containing the Premises, as shown on the site plan in the attached Exhibit B and located on the real property described in said Exhibit B, and commonly known as East Campus Building B,
BioCenter at Southwestern Medical District, 2330 Inwood Road, Dallas, Texas 75235.
			
	(i)	  	Base Rental:	 	$628,769 per annum, payable monthly in advance, in installments of $52,397.42 each. This Base Rental is in part based on Landlord’s Contribution towards the Landlord Improvements being equal to $155.1933 per square foot of
Rentable Area of the Premises (being a total of $2,005,873 for the 12,925 rentable square feet of the Premises), as further described and defined in Rider 101 to this Lease. In the event that after construction of the Landlord
Improvements it is determined that Landlord’s Contribution is less than $2,005,873, then Base Rental shall be reduced by $0.13 per square foot of Rentable Area of the Premises per annum for every $1.00 per square foot of Rentable Area of the
Premises that the Landlord’s Contribution is less than $155.19 per square foot. Landlord’s Contribution may only be increased above $2,005,873 by written amendment signed by both parties, in which event the Base Rental shall be increased
in like manner pursuant to such amendment.

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 4

					
	(j)	  	Security Deposit:	 	None.
			
	(k)	  	Anticipated Rent	 	
		  	Commencement Date:	 	June 1, 2012.
			
	(l)	  	Lease Commencement Date and	 	
		  	Rent Commencement Date:	 	The later of the Anticipated Rent Commencement Date or one (1) week after the date on which the Premises are “ready for occupancy,” as defined in Rider 101.
			
	(m)	  	Initial Term and Term:	 	The “Initial Term” is the period of time commencing upon the Lease Commencement Date and expiring sixty months thereafter. The Initial Term and any Extension Term (as defined in Exhibit G) duly exercised
under this Lease are herein collectively called the “Term”.
			
	(n)	  	Rentable Area of the Building:	 	Deemed to be 105,515 rentable square feet for all purposes of this Lease.
			
	(o)	  	Rentable Area of the Premises:	 	Deemed to be 12,925 rentable square feet for all purposes of this Lease. (Said amount includes approximately 1,400 rentable square feet for the vivarium.)
			
	(p)	  	Tenant’s Broker, if any:	 	Grubb & Ellis
		  		 	5430 LBJ Freeway
		  		 	Suite 1400
		  		 	Dallas, Texas, 75240
		  		 	Attn: Sheila J. Bellinger
			
	(q)	  	Landlord’s Broker:	 	Jones Lang LaSalle Brokerage, Inc.
		  		 	8343 Douglas Avenue, Suite 100
		  		 	Dallas, TX 75225
			
	(r)	  	Tenant’s Pro Rata Share:	 	12.2494%, calculated pursuant to Section 1.02(a).
		  	(of Excess Operating Costs)	 	
			
	(s)	  	Rent:	 	The sum of Base Rental, Tenant’s Pro Rata Share of Excess Operating Costs and all other amounts denominated as “rent” under this Lease.
			
	(t)	  	Permitted Use:	 	General Office and Biotechnology research, with an associated vivarium for rats and mice only; provided further that Tenant may not (i) sell or lease vivarium services or space to third parties, or (ii) conduct any
research in the Premises that would be required to be conducted in a Biosafety Level 2, 3 or 4 (as defined by the U.S. Center for Disease Control and Prevention) Laboratory.

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 5

					
			
	(u)	  	Normal Business Hours:	 	7:00 a.m. to 7:00 p.m. on Monday through Friday and 8:00 a.m. to 1:00 p.m. on Saturday for the Office Area and twenty four hours per day, seven days a week for the Laboratory Area and Server Room.
			
	(v)	  	Base Year:	 	Calendar Year 2012

 1.02    Certain Definitions. The following definitions are used in this Lease:

 (a)    Tenant’s Pro Rata Share: The Rentable Area of the Premises divided by the Rentable Area of the
Building. 
 (b)    Building Facilities: All equipment, machinery, facilities, fixtures and other personal
property owned by Landlord and located in the Building or on the Land (as hereinafter described) and/or used or utilized solely in connection with the operation and/or maintenance of the Building, or any part thereof. 

(c)    Land: The real property described in Exhibit B attached hereto, on which the Building is
constructed. 
 (d)    Project: The Land, the Building, buildings constructed on the Land in the future, the
Parking Facilities, all Building Facilities, and all appurtenances pertaining to the foregoing. 
 (e)    Common
Area(s): Those portions of the Building, the Land and any future buildings and facilities that may hereafter be constructed on the Land that are for the common use and enjoyment of all tenants of the Project and their respective customers,
clients, invitees, and contractors, such as (by way of example only, without limitation), elevators, stairways, lobby areas, drinking fountains, sidewalks, hallways not located within the premises of a Building tenant, Parking Facilities and
landscaping. 
 (f)    Service Areas: Those areas, spaces, facilities, and equipment serving the Building
(whether or not located within the Building) but to which Tenant and other occupants of the Building will not have access, including, but not limited to, mechanical, telephone, electrical and similar rooms, and air and water refrigeration equipment.

 (g)    Lease Year: A period of twelve (12) consecutive calendar months (during the Term) beginning on
January 1 and ending on December 31, except that the first Lease Year begins on the Lease Commencement Date of this Lease and ends on the next following December 31 and the last Lease Year begins on January 1 of the calendar year
in which the Term ends and ends on the last day of the Term. 
 (h)    Rules: The rules and regulations
promulgated by Landlord with respect to use and occupancy of the Building and Project. The original Rules are attached as Exhibit C, and are subject to modification from time to time in accordance with
Section 5.02. 
 (i)    Parking Facilities. All parking areas, garages and facilities
located on the Land that are made available by Landlord for the parking of motor vehicles by Project tenants and their employees and business invitees. 

(j)    Landlord Improvements. The improvements to be constructed by Landlord in the Premises pursuant to Rider
101, as further defined therein. The Landlord Improvements shall be owned by Landlord, subject to Tenant’s rights and responsibilities under this Lease with respect thereto. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 6

 1.03    Other Definitions. Other terms defined in this Lease
have the meanings assigned to them elsewhere in this Lease. 
 2.    GRANT AND TERM 

2.01    Grant. For good and valuable consideration, the receipt and legal sufficiency of which is acknowledged
by each of Landlord and Tenant, Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, as of the Lease Commencement Date (even if the Rent Commencement Date is a later date), the Premises described in
Section 1.01(g), which are located in the “Building” described in Section 1.01(h), for the Term set forth in Section 1.01(m), on the terms, conditions,
covenants and limitations set forth in this Lease. Landlord further grants to Tenant (i) the non-exclusive right to use the Common Areas of the Building and the Project; and (ii) parking privileges
in the Parking Facilities serving the Building, on the terms and conditions set forth in the attached Rider 201. 

2.02    Acknowledgment of Rent Commencement Date. Upon Landlord’s request, Tenant agrees to execute and
deliver to Landlord an acknowledgement of the actual Lease Commencement Date and Rent Commencement Date in the form attached as Exhibit D, if it differs from the Anticipated Rent Commencement Date. The Anticipated Rent Commencement
Date is the date currently expected by the parties to be the date on which the Landlord Improvements (as defined in Rider 101) will have been substantially completed and Exhibit D shall be signed by the parties to
evidence the actual Rent Commencement Date, with Rent to be pro-rated per Section 3.02, below. 

3.    MONETARY PROVISIONS 

3.01    Electricity and Special Services. In addition to the Base Rental payable under
Section 3.02, Tenant shall pay prior to delinquency (i) all charges for electric utilities, which shall be separately metered to the Premises, which metered charges are payable by Tenant to Landlord within thirty
(30) days after Landlord’s billing of Tenant; and (ii) all charges for any services that, following the request of Tenant, Landlord agrees to provide from time to time during the Term that are in addition to the services that Landlord
has agreed to provide to Tenant under this Lease. 
 3.02    Base Rental. Tenant shall pay to Landlord,
without offset or deduction, Base Rental for the Premises in monthly installments in advance. Base Rental begins to accrue hereunder on the Rent Commencement Date. The first monthly installment shall be made on or before the Rent Commencement Date
and a like monthly installment shall be made on or before the first day of each succeeding calendar month during the Term, beginning with the second month. Base Rental for any partial month shall be prorated on a per diem basis. The Base Rental is
subject to adjustment in accordance with Section 3.03. 
 3.03    Excess Operating Costs.
Beginning with the monthly rental installment due on January 1, 2013, and then again on each succeeding January 1 during the Term of this Lease, annual Base Rental and the corresponding monthly installments of Base Rental will be adjusted
to reflect Tenant’s Pro Rata Share of any and all increases (“Excess Operating Costs”, as further defined below in Section 3.04) in Operating Costs (as defined below in
Section 3.04) over the 2012 Base Year. 
 3.04    Calculation of Excess Operating Costs.
Tenant shall pay, as Additional Rent, Tenant’s Pro Rata Share of Excess Operating Costs incurred by Landlord on behalf of the Project. As used herein, “Excess Operating Costs” are the actual Operating Costs (as defined below) per
rentable square foot minus the Operating Costs per rentable square foot for the Base Year. For each calendar year of the Term after the Base 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 7

 
Year, Landlord will provide Tenant a written good faith estimate of the Tenant’s Pro Rata Share of Excess Operating Costs for such calendar year, in accordance with
Section 3.04(b), below. (In the event that Landlord does not give Tenant a good faith estimate of Tenant’s Pro Rata Share of Excess Operating Costs prior to January 1 of the calendar year, Tenant’s Pro Rata
Share of Operating Expenses shall be deemed to be same as for the prior calendar year until such time as Landlord delivers its estimate of the Excess Operating Costs, following which delivery a reconciliation of the payments of Excess Operating
Costs made by Tenant and the amounts actually owing by Tenant shall be made in accordance with Section 3.04(c), below.) Tenant shall pay to Landlord, on the first day of each calendar month thereafter, an amount equal to
1/12 of Tenant’s Pro Rata Share of the estimated Excess Operating Costs for such year. From time to time during any calendar year, Landlord may re-estimate the Excess Operating Costs for
that calendar year in accordance with Section 3.04(c), in which event the estimated Excess Operating Costs paid by Tenant shall be adjusted pursuant to paragraph (c) of this Section 3.04. In
addition, Landlord shall have the right, from time to time, to equitably allocate and prorate some or all of the Operating Costs among different tenants and/or different portions of the building(s) in the Project, adjusting Tenant’s
Proportionate Share as to each of the separately allocated costs based on the ratio of the rentable square feet in the Premises to the rentable square feet of all of the premises to which such costs are allocated. 

(a)    Operating Costs. “Operating Costs” means all costs, charges, and expenses incurred by
Landlord in connection with owning, operating, maintaining, repairing, insuring and managing the Building, and the Building’s portion of the Project’s Common Areas and Service Areas, computed on an accrual basis and including, without
limitation, costs, charges and expenses incurred with respect to the items enumerated as “Operating Cost Examples” in Paragraph A of Exhibit E to this Lease; provided, however, that Operating Costs do not include those
items enumerated as “Operating Cost Exclusions” in Paragraph B of Exhibit E to this Lease. If less that 100% of the Area of the Building is occupied during a Lease Year, then the Operating Costs for that Lease Year
shall be determined as if the Building had been occupied to that extent for that Lease Year, taking into account the fixed or variable nature of the particular costs and expenses. Operating Expenses in the Base Year shall be determined as if the
Building had been 100% fully assessed and occupied throughout that year. 
 (b)    Estimated Costs. Tenant’s
Pro Rata Share of Excess Operating Costs for each Lease Year of the Term shall be estimated in good faith by Landlord, and notice of the estimated amounts will be given to Tenant at least 30 days before the beginning of each Lease Year. For each
full Lease Year of the Term, commencing January 1, 2013, Tenant shall pay to Landlord each month, at the same time the monthly installment of Base Rental is due, an amount equal to one-twelfth (1/12) of
the estimated Tenant’s Pro Rata Share of Excess Operating Costs due for that year. If the first or the last Lease Year of the Term is less than a full calendar year, then Tenant’s Share of Excess Operating Costs for that Lease Year shall
be prorated, based on the number of days in such Lease Year compared to the number of days in the calendar year. 

(c)    Revisions to Estimate. At any time and from time to time during the Term, Landlord may, by giving notice to
Tenant, change the monthly amount then payable by Tenant for Tenant’s estimated Pro Rata Share of Excess Operating Costs to reflect more accurately, in the reasonable judgment of Landlord, Tenant’s actual Pro Rata Share of Excess Operating
Costs for the then current Lease Year. Tenant shall begin paying the revised estimated amount together with the next monthly payment of Base Rental due after receipt by Tenant of Landlord’s notice. 

(d)    Annual Adjustments. Within a reasonable period after the start of each Lease Year, Landlord will prepare and
deliver to Tenant a statement setting forth the calculation of the actual Tenant’s Pro Rata Share of Excess Operating Costs for the previous Lease Year. Within 30 days after receipt of the statement of the actual Tenant’s Pro Rata Share of
Excess Operating Costs, if Tenant owes money to Landlord, then Tenant shall pay to Landlord, or if Landlord owes money to Tenant, Landlord will credit against the next Base Rental or other payment or payments due from Tenant, as the case may be, the
difference between the actual Tenant’s Pro Rata Share of Excess Operating Costs for the preceding Lease Year and the estimated Tenant’s Pro Rata Share of Excess Operating Costs paid by Tenant during that year. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 8

 (e)    Final Partial Year. If the Term expires or this Lease
terminates before a final determination of the actual Tenant’s Pro Rata Share of Excess Operating Costs, then the amount of adjustment between the estimated Tenant’s Pro Rata Share of Excess Operating Costs and actual Tenant’s Pro
Rata Share of Excess Operating Costs above the Base Year payable for the preceding Lease Year and/or the final partial Lease Year of the Term will be estimated by the Landlord based on the best data available to Landlord at the time of the estimate.
Before the scheduled last day of the Term, or as soon as possible after an earlier termination of this Lease, an economic reconciliation will be made between Landlord and Tenant. 

(f)    Survival. The obligations set forth in this Section 3.04 shall survive the
expiration or earlier termination of this Lease. 
 3.05    Personal Property Taxes. Tenant shall pay,
before delinquency, all taxes, fees or charges, rates, duties and assessments that are imposed, levied or assessed directly against Tenant, or indirectly through Landlord, and payable during the Term hereof, on Tenant’s equipment, furniture,
movable trade fixtures and other personal property located in the Premises. Tenant shall also pay, before delinquency, business and other taxes, fees or charges, rates, duties and assessments imposed, levied or assessed because of the operation of
Tenant’s business in the Premises or on the business or income of Tenant generated from the Premises. 
 3.06    Taxes
for Leasehold Improvements. Commencing January 1, 2013, Tenant shall pay to Landlord any portion of the increases in ad valorem taxes assessed against the Building in excess of those assessed for the Base Year, in accordance with
Exhibit E. 
 3.07    Late Payments. 

(a)    Late Charge. If any amounts owing by Tenant under this Lease are not received by Landlord by the fifth (5th)
calendar day after the date due, then the amount past due is subject to (i) default interest at the lesser of 12% per annum or the highest rate permitted under applicable law, and (ii) a $25.00 service charge, to defray Landlord’s
administrative and other overhead expenses. 
 (b)    Administrative Reimbursement. If Landlord performs
construction, maintenance, or repairs for Tenant under Section 7.04 or Section 14.02 of this Lease, then Tenant shall reimburse Landlord within five (5) days after receipt of an invoice from Landlord
for the cost of those items plus an amount equal to ten percent (10%) of those costs (“Administrative Reimbursement”) to reimburse Landlord for administration and overhead. 

3.08    Security Deposit. 

(a)    Security Deposit. If required by Landlord, Tenant shall deposit with Landlord, in addition to the advance
payment of Base Rental described in Section 3.02, the Security Deposit. The Security Deposit shall be held by Landlord without interest as security for the performance of Tenant’s obligations under this Lease. The
Security Deposit is not an advance payment of Base Rental or a measure of liquidated damages on a default by Tenant. On an Event of Default (hereinafter defined in Section 14.01), Landlord may, from time to time and without
prejudice to any other remedy provided herein or by law, use the Security Deposit to cure the Event of Default. After an application of the Security Deposit, Tenant shall pay to Landlord, on demand, the amount necessary to replenish the Security
Deposit to its original amount. On the expiration or termination of the Term, Landlord may deduct from the Security Balance any amount lawfully owing to Landlord under this Lease and applicable law, and any remaining balance of the Security Deposit
shall be returned by Landlord to Tenant in accordance with applicable law if Tenant has provided Landlord with a forwarding address in accordance with the provisions of the Texas Property Code. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 9

 (b)    Return of Security Deposit. Unless there has been a
permitted assignment of this Lease pursuant to Article 12 and in connection therewith Landlord receives written notice of an assignment of the right to receive the Security Deposit or the remaining balance thereof and a
replacement Security Deposit from the assignee(s), Landlord may return the Security Deposit to the original Tenant, regardless of one or more assignments of Tenant’s interest in the Security Deposit. In this event, on the return of the Security
Deposit (or balance thereof) to the original Tenant (or permitted assignee, as appropriate), Landlord has no further liability with respect to the Security Deposit. 

(c)    Transfer on Sale. On a transfer of the Premises, this Lease or the Building, Landlord may in accordance with
applicable law transfer the Security Deposit to the transferee, after which Landlord is released from all liability for the return of the Security Deposit, for which Tenant shall look solely to the transferee. 

4.    PREMISES, COMMON AREAS, SERVICE AREAS 

4.01    Condition of Premises. Except to the extent that Landlord is obligated to construct improvements in
the Premises, as provided on a Rider 101 attached to this Lease, and except for Landlord’s agreement to complete or correct “punch list items,” as described in the second paragraph of this
Section 4.01, the Premises are delivered to Tenant and are being leased “AS IS” and “WITH ALL FAULTS,” and Landlord makes no representation or warranty of any kind, expressed or implied, with respect to
the condition of the Premises (including habitability, fitness or suitability for particular purpose of the Premises, or that the Building or the improvements to the Premises have been constructed in a good and workmanlike manner). TO THE MAXIMUM
EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD HEREBY DISCLAIMS, AND TENANT WAIVES THE BENEFIT OF, ANY AND ALL IMPLIED WARRANTIES, INCLUDING IMPLIED WARRANTIES OF HABITABILITY, FITNESS OR SUITABILITY FOR PURPOSE, OR THAT THE BUILDING OR THE
IMPROVEMENTS IN THE PREMISES HAVE BEEN CONSTRUCTED IN A GOOD AND WORKMANLIKE MANNER. 
 The taking of possession of the Premises by Tenant
conclusively establishes that the Premises and the Building were at that time in satisfactory order and condition except for (i) minor matters of structural, mechanical, electrical, and finish adjustment in the Premises (commonly referred to as
“punch list items”) specified in reasonable detail on a list delivered by Tenant to Landlord within fifteen (15) days after the date on which Tenant takes possession of the Premises and (ii) defects not discoverable on
inspection and about which Tenant notifies Landlord within one (1) year after taking possession of the Premises. Landlord neither makes nor offers any other construction warranties of any kind or nature whatsoever. 

4.02    Minor Variations in Area. The Rentable Area of the Building contained in
Section 1.01(n) and the Rentable Area of the Premises contained in Section 1.01(o) have been agreed upon and stipulated by Landlord and Tenant as the deemed Rentable Area of the Premises and the
Rentable Area of the Building for all purposes, regardless of variations in the actual measurements. 
 4.03    Ceilings,
Walls, Floors. Tenant acknowledges that pipes, ducts, conduits, wires and equipment serving other parts of the Building may be located at or above ceiling surfaces, below floor surfaces or within walls in the Premises. So long as such
access does not unreasonably interfere with Tenant’s use of the Premises, Landlord reserves the right of access to such areas as reasonably necessary for the maintenance, repair, and operation of the Building and the Project. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 10

 4.04    Common Areas. Tenant is granted a non-exclusive right to use the Common Areas of the Building available for the general use of all tenants during the Term of this Lease for their intended purposes, in common with other persons, subject to the terms
and conditions of this Lease, including, without limitation, the Rules. 
 4.05    Delay. If the Premises
are not ready for occupancy by Tenant on the Anticipated Rent Commencement Date for any reason other than a delay caused by Tenant or anyone acting under or for Tenant, the obligations of Landlord and Tenant shall nevertheless continue in full force
and effect; provided that, except as otherwise provided in Rider 101, the Term of this Lease shall not begin and Rent shall not begin to accrue until the actual Rent Commencement Date. The delay in commencement of the Term and in the
accrual of Rent described in the foregoing sentence constitutes full settlement of all claims that Tenant might otherwise have by reason of the Premises not being ready for occupancy on the Anticipated Rent Commencement Date. If the Premises are not
ready for occupancy by Tenant on the Anticipated Rent Commencement Date due to one or more delays caused by Tenant or anyone acting under or for Tenant, Landlord has no liability and the Rent obligations of Tenant under this Lease shall nevertheless
begin as of the date the Rent Commencement Date would have occurred following the Anticipated Rent Commencement Date but for such delays as provided in Section B of Rider 101. Notwithstanding the foregoing, if the Rent
Commencement Date has not occurred for any reason whatsoever other than Tenant Delay (as defined in Section A.6 of Rider 101) on or before June 30, 2012, then, in addition to Tenant’s other rights or remedies, Tenant
may terminate this Lease by written notice to Landlord delivered on or before the earlier to occur of (i) July 31, 2012, or (ii) the Rent Commencement Date, whereupon any monies previously paid by Tenant to Landlord, if any, shall be
reimbursed to Tenant, or, at Tenant’s election, the date Tenant is otherwise obliged to commence payment of Rent shall be delayed by one day for each day that the Rent Commencement Date is delayed beyond such date. 

5.    USE 

5.01    Permitted Use. The Premises shall be used and occupied solely for the Permitted Use. Without
limitation of the foregoing, Tenant may not use the Premises for residential purposes or to examine or treat patients in the Premises. 

5.02    Rules. Tenant’s use of the Premises and the Common Areas are subject at all times during the Term
to the Rules, as the same are modified and amended by Landlord from time to time. Tenant shall cause Tenant’s employees, servants and agents to comply with the Rules. Modifications to the Rules will not become effective as to Tenant until
notice thereof has been delivered to Tenant. The inability of Landlord to cause another occupant of the Building to comply with the Rules will neither excuse Tenant’s obligation to comply with the Rules or any other obligation of Tenant under
this Lease nor cause Landlord to be liable to Tenant for any damage resulting to Tenant. 
 5.03    Additional Covenants of
Tenant. 
 (a)    Laws, Statutes, Etc. Tenant shall, at Tenant’s sole cost, strictly comply with all
laws, statutes, ordinances, regulations, guidelines, restrictive covenants or requirements now in force or hereafter enacted that are applicable to the Premises, the Building, the Project, and Tenant’s use and occupancy thereof. The judgment of
any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord is a party thereto or not, that Tenant has violated any of the foregoing is conclusive of that fact as between Landlord and Tenant.
Notwithstanding anything to the contrary in this Lease, Tenant shall not be required to pay for alterations or improvements in the Premises (i) necessary to comply with or cause the Premises to comply with any EHS or insurance requirements; or
(ii) to comply with changes in state or federal laws, rules, or regulations, unless such alterations or improvements are necessitated solely due to Tenant’s particular use of the Premises. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 11

 (b)    Nuisance. Tenant shall not do or permit anything to be
done in or about the Premises, the Building or the Project that will in any way (i) obstruct or interfere with the operation of the Building or the Project; or (ii) injure or interfere with the rights of other tenants and occupants of the
Building and the Project. 
 (c)    Building Reputation. Tenant shall not use or permit the Premises to be used
for any purpose other than the Permitted Use. 
 (d)    Fire Hazards. Except as expressly contemplated by the
Permitted Use, Tenant shall not cause, maintain or permit anything to be done in the Premises nor keep anything in the Premises which will, in the reasonable opinion of Landlord, increase the possibility of fire or other casualty or increase the
then existing premiums for or void the coverage of any insurance on the Building or contents of the Building. 

(e)    Hazardous Materials and Waste. 

(i)    Infectious and Hazardous Waste. At Tenant’s sole liability, risk, cost, and expense, Tenant shall
provide proper receptacles and containers for all Infectious and Hazardous Waste (as defined below) generated, stored or used in the Premises in accordance with the Permitted Use and shall make such arrangements as shall be necessary, proper, and/or
required by applicable law for the disposal of Tenant’s Infectious and Hazardous Waste in strict compliance with all applicable laws. Tenant’s arrangements for the disposal of Tenant’s Infectious and Hazardous Waste are subject to the
prior written consent of Landlord, which consent may, among other matters, be conditioned upon (i) Tenant’s use of a Landlord-approved waste removal service; and (ii) Tenant’s devising and implementing continuously throughout the
Term a program of safety procedures and protocols reasonably necessary to prevent such Infectious and Hazardous Waste from causing any damage to property or injury or death to person(s). Landlord assumes no duty, obligation, or liability with
respect to Tenant’s Infectious and Hazardous Waste and Tenant agrees to indemnify Landlord from all liability arising out of Tenant’s use of Infectious and Hazardous Waste in or about the Premises and the creation, storage, transportation,
or disposal thereof. For the purposes of this Lease, “Infectious and Hazardous Waste” shall mean any material or substance that, whether by its nature or by use, is subject to regulation under any federal, state, and local
environmental law or regulation as threatening or dangerous to people or the environment. Without limitation of the foregoing, Infectious and Hazardous Waste shall be deemed to include (i) any waste, substance, or material (solid, liquid, or
gaseous), which is generated, produced, or results from the diagnosis, treatment, or immunization of human beings, or any research pertaining thereto, or the production or testing of biological agents; including without limitation, any definition
thereof or referenced thereto in any law, rule, regulation, order, or decree of any federal, state, or local government, including, without limitation, radiation waste, chemical waste and blood-borne pathogens; and (ii) any hazardous or toxic
substance, material or waste, regulated or listed pursuant to any federal, state or local environmental law, including without limitation, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and the Occupational Safety and Health Act. 

(ii)    Chemicals and Radioactive Materials. Subject to subparagraph 5.03(e)(iv) below, no hazardous materials,
chemicals or radioactive materials (collectively, “Hazardous Materials”) may be stored, handled, generated, used, or disposed of, in or about the Premises or the Building without reasonable prior written notice to Landlord and a
reasonable opportunity to review such notice by Landlord. Any review by Landlord under this sub-paragraph is expressly conditioned upon Tenant, at Tenant’s sole cost and expense (i) obtaining all
necessary governmental licenses and permits required for or pertaining to the handling, storage, use and disposal of such Hazardous Materials in accordance with all applicable local, state and federal law, (ii) devising and implementing
continuously throughout the Term a program of safety procedures and protocols reasonably necessary to prevent such Hazardous Materials from causing any 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 12

 
damage to property or injury or death to person(s), (iii) compliance with the terms of this Lease and all applicable laws, including without limitation, Homeland Security laws, and
(iv) providing evidence of same to Landlord with the notice described above together with such other supporting documentation as Landlord may reasonably request. 

(iii)    Air Handling. In its use of the Premises, Tenant shall comply with all applicable air handling and air
quality laws, rules and regulations, including without limitation those of the Texas Commission on Environmental Quality and the U.S. Environmental Protection Agency, as the same may be adopted, amended or modified from time to time. 

(iv)    Special Materials. Tenant has notified Landlord that it intends to order and use the chemical, biological
and/or radiological materials specifically set forth in Exhibit J attached hereto in the quantities listed in such Exhibit. If, in connection with Tenant’s Permitted Use of the Premises, Tenant desires to bring into or store in
the Premises any chemical, biological and radiological material not listed in Exhibit J (or quantities of materials listed in such Exhibit greater than shown in such Exhibit) that would constitute Hazardous Materials under this
Section 5.03, Tenant must first provide prior written notice thereof to Landlord. Tenant’s use of such materials is conditioned upon (i) Tenant’s development and implementation of a safety protocol program
acceptable to Landlord, in Landlord’s reasonable discretion, governing Tenant’s use and storage of such materials in the Premises; (ii) a continuing right of inspection in favor of Landlord for the purpose of monitoring and verifying
Tenant’s compliance with all necessary safety protocol programs, and (iii) Tenant’s compliance with the terms of this Lease and all applicable laws, including without limitation, Homeland Security laws, and (iv) providing
evidence of same to Landlord with the notice described above, together with such other supporting documentation as Landlord may reasonably request. 

(v)    Reports. Tenant shall keep on the Premises copies of all reports required under applicable law with respect
to the use in the Premises of Infectious and Hazardous Waste and Hazardous Materials, which reports will be available for review by Landlord upon request. 

(vi)    Safety Protocols. Tenant’s safety procedures and protocols (“Safety Protocols”) for
handling Infectious and Hazardous Waste and Hazardous Materials are subject to the prior written consent of Landlord, which consent must be obtained by Tenant prior to the actual introduction, generation, storage or use of such materials within the
Premises or Building. Thereafter, Landlord may, in its reasonable discretion, require such modifications or amendments to Tenant’s Safety Protocols as Landlord deems reasonably necessary for the safety of persons and property within the
Building and Premises. Tenant may not alter, modify or terminate any whole or part of Tenant’s Safety Protocols without a prior written report to Landlord. Tenant agrees to consult and cooperate with Landlord’s Environmental Health and
Safety Department (“EHS”) in formulating Tenant’s Safety Protocols. 
 (vii)    Notification of
Violation or Release. Tenant will promptly notify Landlord in writing upon Tenant’s discovery of (i) Tenant’s violation of the provisions of this Section 5.03, or (ii) the release of Infectious and
Hazardous Waste or Hazardous Materials in or about the Premises, Building or Project. 
 (f)    No Warranty.
Notwithstanding any provision of this Lease to the contrary, neither (i) Landlord’s review of or consent to any safety procedures or protocols required of Tenant under subsection 5.03(e) nor (ii) any alteration modification or
amendment to such safety procedures or protocols, regardless of whether the same are suggested or required by Landlord, shall be deemed a warranty or representation by Landlord to Tenant that such are sufficient or adequate to achieve or ensure
their intended purposes. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 13

 (g)    Decommission. For purposes of this
Section 5.03(g), the term “decommission” means assessing all portions of the Premises where Infectious and Hazardous Waste or Hazardous Materials were used or stored by Tenant or its agents, employees or
contractors at any time during the Term hereof (such portions to include, without limitation, walls, hot sinks, bench tops and hoods), and clearing all such portions in accordance with all applicable laws. At least ninety (90) days prior to the
expiration of the Term of the Lease, Tenant and Landlord’s EHS shall meet to inspect the Premises to determine whether or not decommissioning is necessary. If decommissioning is necessary, the Tenant shall promptly provide the Landlord with a
written proposed decommission plan, which shall contain (i) the name, address and telephone number of the contractor engaged by Tenant to effectuate the decommission, unless Landlord and Tenant agree that Tenant can perform such work,
(ii) the cost of the decommission, (iii) a time sequence for the decommission, and (iv) Tenant’s covenant to complete the decommission prior to a date mutually agreed upon by Landlord and Tenant. If Tenant does not timely provide
the Landlord a satisfactory decommission plan, then the Landlord, in addition to all other rights and remedies it has hereunder or at law or in equity, may, but shall not be obligated to, undertake the decommission on Tenant’s behalf and at
Tenant’s cost and expense. Tenant hereby agrees to decommission the Premises prior to the mutually agreed date in accordance with the decommission plan approved by the Landlord and in accordance with all applicable laws, without any expense to
the Landlord, at Tenant’s expense. 
 (h)    Landlord Representations and Indemnity. To the knowledge of
Landlord, based on the knowledge of the Executive Vice President of The University of Texas Southwestern Medical Center after consultation with the architects for the Building and the Director of Capital Improvements for The University of Texas
Southwestern Medical Center, no asbestos, lead or Hazardous Materials were used in the construction of the Building. The Building is a medical research building with tenants and users, including Tenant, who use and handle Hazardous Materials and may
generate Infectious and Hazardous Wastes and any such material in the Building’s research and laboratory areas are required to be handled in accordance with appropriate safety and research protocols. To the extent authorized by the Constitution
and laws of the State of Texas, Landlord shall indemnify, and hold harmless Tenant, its agents, contractors, stockholders, directors, successors, representatives, and assigns from and against, all losses, costs, claims, liabilities and damages
(including attorneys’ and consultants’ fees) caused by any Infectious and Hazardous Waste, mold or Hazardous Material present at any time on or about the Project to the extent, and only to the extent, that such presence is caused by the
negligent acts or willful misconduct of Landlord. 
 5.04    Control of Building and Common Areas. 

(a)    Control of Building. The Building and Common Areas will be at all times under the exclusive control,
management and operation of Landlord. Subject to Section 5.04(b), Landlord may from time to time (i) alter or redecorate the Building (including the Common Areas or Service Areas) or construct additional facilities
adjoining or approximate to the Building; (ii) close temporarily doors, entry ways, public spaces and corridors and interrupt or suspend temporarily Building services and facilities in order to perform any redecorating or alteration or in order
to prevent the public from acquiring prescriptive rights in the Common Areas; and (iii) change the name of the Building and/or the Project. 

(b)    Minimization of Disruption. Landlord will attempt not to disrupt Tenant’s operations in the Premises
during the exercise of Landlord’s rights of Section 5.04, 6.02(b) or 8.01, and in no event shall Landlord in exercising such rights unreasonably interfere with Tenant’s use of or access to the
Premises or the parking area. Subject to Landlord’s compliance with the foregoing, Tenant hereby waives all claims for damages or injuries or interference with Tenant’s business, loss of occupancy, or quiet enjoyment and any other laws
resulting from the exercise by Landlord of any right under Section 5.04, 6.02(b) or 8.01, and no exercise by Landlord of any right under Section 5.04 or 8.01 constitutes
actual or constructive eviction or breach of any expressed or implied covenant for quiet enjoyment. 

  

			
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 5.05    Landlord Provided Equipment. To the extent that
Tenant utilizes any equipment, furniture or systems (by way of example but not limited to, any water purification systems, laminar flow hoods, chemical flow hoods, or cold/warm rooms) previously installed within the Premises prior to the Term hereof
or otherwise provided for Tenant’s use by Landlord other than as part of the Landlord Improvements (whether paid for by Tenant or provided free of charge) (the “Landlord Provided Equipment”), the following shall apply: 

(a)    Maintenance. Tenant shall, at its own cost and in coordination with EHS, maintain all Landlord Provided
Equipment in first-class working order and operation, and in connection therewith shall utilize the services of qualified Landlord approved maintenance vendors if required by Landlord or by applicable law, and shall timely obtain all permitting and
training required to operate such Landlord Provided Equipment. 
 (b)    No Warranty. LANDLORD DOES NOT MAKE, AND
HEREBY DISCLAIMS, ANY AND ALL REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH REGARD TO THE LANDLORD PROVIDED EQUIPMENT, INCLUDING WITHOUT LIMITATION, WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY,
AND SECURE, ERROR-FREE OR UNINTERRUPTED OPERATION. 
 (c)    Removal from Premises. No Landlord Provided
Equipment shall be removed from the Premises without the prior written consent of Landlord, which consent Landlord may grant or withhold in its sole discretion. 

6.    SERVICES AND UTILITIES 

6.01    Services by Landlord. Subject to the conditions and standards contained in this Lease and to
standards, limitations and guidelines imposed by governmental authorities and utility companies, Landlord will use commercially reasonable efforts to furnish, or cause to be furnished, the following services and utilities: 

(a)    Water. Water at the normal temperature of the supply of water to the Building for lavatory and drinking
purposes, through fixtures installed by Landlord or by Tenant with Landlord’s consent; 
 (b)    Treated
Water. Reverse osmosis and distilled water (but not “polished” water) in such quantities as Landlord deems reasonable in its sole discretion, through fixtures installed by Landlord or, with Landlord’s prior written consent, by
Tenant at Tenant’s cost. 
 (c)    Janitorial Services. 

(i)    Building Common Areas. Janitorial cleaning services for the common areas of the Building, as Landlord deems
commercially reasonable, the costs of which services shall be part of the Operating Costs. 
 (ii)    Premises.
Janitorial cleaning services for the Premises will be as mutually agreed between Landlord and Tenant. The costs of such services shall be billed directly by Landlord to Tenant and shall be payable within thirty (30) days of receipt by
Tenant. 
 (d)    HVAC. Heated and refrigerated air conditioning, at such temperatures and in such quantities as
Landlord determines are reasonably necessary for the reasonably comfortable use and occupancy of the Premises for the Permitted Use in accordance with the provisions of this Subsection (d). At Landlord’s sole discretion, HVAC may be separately
metered to the Premises at Landlord’s sole cost and, 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 15

 
after the Base Year, Tenant shall pay prior to delinquency all service charges therefor in excess of such amounts during the Base Year directly to the Landlord or the service provider, as
directed by Landlord. Notwithstanding the foregoing, Tenant shall pay Landlord’s customary charge for after-hours HVAC use by the Office Area. Landlord will provide HVAC service to the Laboratory Area and Server Room on a 24/7 basis, subject to
(i) temporary outages for inspections, maintenance and repair of the system; (ii) the casualty provisions of Article 9, below; and (iii) Force Majeure.  

(e)    Maintenance. Routine maintenance in the Common Areas; 

(f)    Electricity. Electric current to the Premises for Building-standard office lighting and for laboratory and
office machines that consume electric current within the limits set forth in Section 6.03(a)(i); 

(g)    Back-Up Electrical Generator. Landlord will install and operate a back-up generator for the purpose of powering emergency lighting for the common areas of the Building during power outages. If Tenant desires an emergency electrical back-up
generator for Tenant’s use installed in or to serve the Premises, such installation shall be deemed an “Alteration” under Section 7.06, below, and is subject to the requirements of said
Section 7.06. Without limitation of the foregoing, Tenant must (i) pay all costs associated with the acquisition and installation of such back-up generator, (ii) obtain
Landlord’s prior written consent for the installation of such back-up generator, and (iii) pay all costs of operation of such back-up generator. 

(h)    Elevator Service. Twenty-four (24) hour, non-exclusive,
passenger elevator service and, when scheduled through the Building management, non-exclusive freight elevator service to the floor(s) on which the Premises are located; 

(i)    Lighting. Replacement of Building standard (as determined by Landlord) light bulbs and fluorescent tubes in
the Premises; 
 (j)    Natural Gas. Natural gas through fixtures installed by Landlord or by Tenant with
Landlord’s consent. Natural gas shall be separately metered to the Premises and, after the Base Year, Tenant shall pay prior to delinquency all service charges therefor directly to the Landlord or the service provider, as directed by Landlord.

 (k)    De-Ionized Water and Air. Reverse osmosis de-Ionized water (but not “polished water”) and clean, dry air supply and air vacuum service through fixtures installed by Landlord or, with Landlord’s consent, by Tenant at Tenant’s expense.

 (l)    Break Room and Autoclave. With respect to the common area break room and autoclave in the Building as
of the date of this Lease, Tenant and its employees shall have the non-exclusive right to use such break room and autoclave in conjunction with other occupants of the Building, subject to such hours of use and
such rules and regulations as Landlord may prescribe from time to time during the Term of this Lease and Landlord shall be required to maintain such areas as part of the Common Area throughout the Term. 

(m)    Delivery Service. Tenant shall have the non-exclusive right, in
conjunction with other occupants of the Building, to receive shipments of freight at the Building’s freight receiving dock, subject to such hours of use and such rules and regulations as Landlord may prescribe from time to time during the Term
of this Lease. Landlord’s building personnel shall, upon request, assist Tenant with shipping and receiving. Landlord may require all deliveries to be made to the Building’s freight dock. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 16

 6.02    Tenant’s Obligations.  

(a)    Modifications to Premises. Without the prior written consent of Landlord, which consent Landlord may grant or
withhold in its sole discretion, no Tenant modifications to the Premises may exceed, or cause the Building as a whole to exceed, the capacity of the Building systems for electrical, water, mechanical, elevator, plumbing, air handling, and HVAC and
for structural loads of the Building’s floors. 
 (b)    Landlord’s Environmental, Health and Safety
Department. Tenant agrees to cooperate with inspections of the Premises by Landlord’s designated EHS representatives in all matters pertaining to Tenant’s obligations and covenants under this Lease and to comply with all directives of
Landlord’s EHS promulgated from time to time in connection with changes in applicable law. Subject to Section 8.01, EHS shall have the right at all times to enter the Premises to verify Tenant’s compliance with
the foregoing obligations. 
 (c)    Telecommunications Services. Tenant shall secure for itself
telecommunication services for the Premises and pay, prior to delinquency, all charges and costs for the installation and/or use of all telephone, cable, satellite and telecommunication charges that are furnished to or used on, in or about the
Premises during the Term of this Lease and to comply with all directives of such office, as promulgated from time to time. Tenant shall give Landlord not less than ten (10) days prior written notice of Tenant’s intent to install
telecommunications cabling in the Building or Premises. Such notice shall include (i) the proposed time of installation; (ii) the identity of the party performing the installation; (iii) the party providing the telecommunication
service; (iv) reasonably detailed plans and specifications of the proposed installation; and (v) the insurance coverage to be in effect with all such work. Tenant’s right to install telecommunications cabling in the Building is
subject to (i) Landlord’s reasonable consent as to the location of Tenant’s telecommunications cabling; (ii) Landlord’s reasonable approval of any third party contractor performing work in the Building in connection with
installation of Tenant’s telecommunications cabling; (iii) Tenant’s telecommunications cabling not materially interfering with any Building systems or any telecommunication services to other tenants in the Building;
(iv) Landlord’s right to inspect Tenant’s installation of telecommunications cablings and require, at Tenant’s expense, any changes necessary to bring the installation into conformity with the plans and specifications approved by
Landlord; (v) Landlord’s right to charge a reasonable market fee for such installation and service; (vi) Landlord’s right to require that Tenant and any other person working on the installation of telecommunications cabling
provide, prior to the start of work, proof of adequate insurance coverage for such work, naming Landlord as an additional insured thereunder; and (vii) Landlord’s right to require that Tenant remove the whole or any part of such cabling
upon the expiration or sooner termination of this Lease. Notwithstanding the forgoing, Landlord shall provide Tenant, without charge, access to the server hub located on the first floor of the Building and Tenant shall be responsible for all costs
pertaining to (i) the installation, maintenance and operation of a T-1 line connecting the Premises to Landlord’s T-1 server hub; and (ii) Tenant’s
telecommunications services using Tenant’s T-1 line connection. 

6.03    Tenant’s Additional Service Requirements. 

(a)    Additional Services Requiring Landlord’s Consent. Except as otherwise expressly provided elsewhere in
this Lease (including any exhibit or rider attached to this Lease). Tenant shall not, without Landlord’s prior consent in writing, which consent Landlord may grant or withhold in its reasonable discretion, do the following: 

(i)    Install or use special lighting or any equipment machinery, or device in the Premises that requires a nominal
voltage of more than 120 volts, single phase, or which, in Landlord’s reasonable judgment, exceeds the capacity of existing feeders, conductors, risers, or wiring in or to the Premises or Building , or which will adversely affect the amperage
or voltage of electricity that Landlord can furnish to other occupants of the Building; 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 17

 (ii)    Install or use any heat or cold-generating equipment, machinery
or device that affects the temperature otherwise maintained by the heat or air conditioning system of the Building; 

(iii)    Accumulate refuse or rubbish in excess of that ordinarily accumulated for the Permitted Use; or 

(iv)    Install or use any chemical hoods or ventilation systems that exhaust air outside the Premises or the Building.

 (b)    Providing Additional Services. If, in the reasonable opinion of Landlord, Tenant’s use and
occupancy of the Premises requires services from Landlord beyond those otherwise being provided by Landlord under this Lease, Landlord may: 

(i)    Require that Tenant cease the activity or remove the item (or Landlord may refuse to permit the activity or
installation of the item), causing (or which will cause) the need for the additional service, if Landlord and Tenant are not able to agree on a mutually satisfactory method for providing the additional services, or in Landlord’s reasonable
judgment, providing the additional service is not operationally or economically feasible; 
 (ii)    With respect to
heat or cold-generating equipment, furnish additional heat or air conditioning to the Premises, or install supplementary heating or air conditioning units in the Premises or elsewhere in the Building, or modify the existing heating or air
conditioning system in the Premises. The cost of additional heat or air conditioning, supplementary units, or modifications to the existing system is the obligation of Tenant; 

(iii)    With respect to lighting, purchase and replace, at Tenant’s expense, light bulbs and ballasts and/or
fixtures and charge Tenant for any additional costs attributable to such lights and fixtures; and/or 
 (iv)    With
respect to additional cleaning work, instruct Landlord’s janitorial contractor to provide the services, the cost of which is the obligation of Tenant. 

(c)    Supplemental Heat or Air Conditioning. Landlord shall, upon reasonable prior notice from Tenant and at
Tenant’s expense, provide after hours heat or air conditioning to the Office Area. The cost of after-hours heat or air conditioning will be $45 per hour, subject to annual adjustment by Landlord to reflect changes in Landlord’s costs for
such supplemental service. 
 (d)    Payment. Tenant shall pay to Landlord the cost of any additional service and
any other costs for which Tenant is obligated under Section 6.03(b) or (c) within thirty (30) days after receipt of an invoice from Landlord. 

(e)    Vivarium. Landlord grants Tenant the right to operate a vivarium in accordance with the provisions of
Exhibit G. 
 6.04    Interruption of Service. Landlord will use commercially reasonable
efforts to provide or cause to be provided the services required of Landlord under this Lease. However, Landlord reserves the right, without any liability to Tenant and without affecting Tenant’s covenants and obligations under this Lease, to
stop or interrupt or reduce any of the services listed in Section 6.01 or to stop, interrupt or reduce any other services required of Landlord under this Lease, whenever and for so long as may be necessary, in
Landlord’s reasonable judgment, by reason of (i) accidents or emergencies, (ii) the making of repairs or changes that Landlord in good faith considers necessary or which it is required by this Lease or by law to make, (iii)

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 18

 
practical inability in securing proper supplies of fuel, water, electricity, labor or supplies, or (iv) the compliance by Landlord with mandatory governmental, quasi-governmental or utility
company energy conservation measures. Landlord shall, on an interruption of a utility service affecting Tenant’s use and occupancy of the Premises, use commercially reasonable efforts to cause the service to be resumed as soon as practicable.
However, Landlord is not liable for any interruption or stoppage of any services due to Force Majeure or for any damage to persons or property resulting from such stoppage of a utility service and no such interruption or stoppage of any services
shall ever be construed as an eviction of Tenant nor will such interruption or stoppage cause an abatement of the Rent payable under this Lease or in any manner relieve Tenant from any of Tenant’s obligations under this Lease. If an
interruption or failure of services addressed in this Section 6.04 is the result of a casualty, the provisions of Article 9 shall control. 

6.05    Security. Landlord will (i) patrol the Campus (including the Building) with its campus police force on a
24 hour per day, seven day per week basis throughout the Term; (ii) maintain a security guard in the lobby of the Building during Normal Business Hours throughout the Term; (iii) maintain a procedure for employees of Tenant to obtain
after-hours escort service from the Building to the parking areas serving the Building, so long as such service is generally supplied to the Campus; and (iv) maintain an alarm security system for the Building throughout the Term. Tenant shall
use commercially reasonable efforts to: (i) at all times outside of Normal Business Hours, lock the doors to the Premises and/or take other reasonable steps to secure the Premises and Tenant’s personal property in the Premises from
unlawful intrusion, theft, fire and other hazards; (ii) keep and maintain in good working order all security and safety devices installed in the Premises by or for the benefit of Tenant (such as locks, smoke detectors and burglar alarms); and
(iii) cooperate with Landlord and other tenants in the Building on Building safety and security matters. Notwithstanding the foregoing, it is agreed that Tenant and Tenant’s employees and authorized representatives shall have access to the
Premises on a 24-hour per day, 7 day per week, basis, although such access may be limited by Landlord during any periods other than Normal Business Hours (and as to Normal Business Hours on state, federal or
other holidays recognized by Landlord) to access by a cardkey access system or other system pursuant to which employees, contractors and/or visitors of Tenant shall be required to reasonably identify themselves to Landlord’s security personnel
in order to access the Building and Premises. Such cards or other access systems may be issued or imposed by Landlord in accordance with Landlord’s then-customary procedures; and provided, further, that if access cards or other forms of
identification issued by the Landlord are lost or damaged by Tenant, or if Tenant requests additional access cards or identification, Landlord may require Tenant to pay a reasonable fee for any such additional or replacement cards. Tenant
acknowledges and agrees that (i) any access control or safety measures employed by Landlord are for the protection of Landlord’s own interests; (ii) Landlord is not a guarantor of the security or safety of the Tenant Parties or their
property; and (iii) such security and safety matters are the responsibility of Tenant and the local law enforcement authorities. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREIN, TENANT HEREBY ACKNOWLEDGES AND AGREES THAT LANDLORD DOES
NOT MAKE, AND TENANT HEREBY WAIVES, ANY GUARANTY OR WARRANTY, EXPRESSED OR IMPLIED, WITH RESPECT TO ANY SECURITY AT THE PROJECT, THE BUILDING OR THE PREMISES, OR THAT ANY SECURITY MEASURES WILL BE TAKEN OR WILL PREVENT OCCURRENCES OR CONSEQUENCES OF
CRIMINAL ACTIVITY, IT BEING HEREBY ACKNOWLEDGED AND AGREED BY TENANT THAT LANDLORD HAS NOT AGREED TO PROVIDE ANY SECURITY SERVICES OR MEASURES AT THE BUILDING OR THE PREMISES OTHER THAN AS MAY BE EXPRESSLY SET FORTH HEREIN AND THAT NEITHER LANDLORD
NOR ANY OTHER LANDLORD PARTY SHALL BE LIABLE TO TENANT IN ANY EVENT FOR, AND TENANT HEREBY RELEASES LANDLORD AND ALL LANDLORD PARTIES FROM ANY RESPONSIBILITY FOR, LOSSES DUE TO THEFT OR BURGLARY OR FOR DAMAGE OR INJURY DONE BY UNAUTHORIZED PERSONS
IN THE BUILDING OR THE PREMISES, OR IN CONNECTION WITH ANY SUCH SECURITY MATTERS (INCLUDING, WITHOUT LIMITATION, ANY DAMAGE OR INJURY RESULTING FROM A CRIMINAL OR TERRORIST ATTACK). 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 19

 7.    REPAIRS AND MAINTENANCE 

7.01    Landlord’s Repair Obligations. Landlord will, subject to the casualty provisions of
Article 9, maintain the (i) Common Areas and Service Areas, (ii) roof, foundation, exterior windows and load-bearing items of the Building; (iii) exterior (located outside the Premises) surfaces of walls;
(iv) plumbing, pipes and conduits located in the Building; and (v) the heating, ventilation and air conditioning, electrical, mechanical, fire and life safety and plumbing systems in the Building. Landlord is not required to make any
repair in connection with or resulting from (i) any alteration or modification to the Premises or to Building equipment performed by, for or because of Tenant or to special equipment or systems installed by, for, or because of Tenant (other
than as part of Landlord Improvements), (ii) the installation, use or operation of Tenant’s property, fixtures and equipment, (iii) the moving of Tenant’s property in or out of the Building or in and about the Premises,
(iv) Tenant’s use or occupancy of the Premises in violation of Article 5, or in a manner not contemplated by the parties at the time of execution of the Lease (such as, without limitation, subsequent installment
of special use rooms); (v) the acts or omissions of Tenant and Tenant’s employees, agents, invitees, subtenants, licensees or contractors; or (vi) fire or other casualty, except as provided in Article 9. Landlord
shall additionally maintain the following items located in the Premises, but all expenses of repair and maintenance incurred by Landlord with respect to the same shall be reimbursable by Tenant to Landlord within thirty (30) days following
submission of a statement by Landlord : 
 Sinks and faucets 

Built in millwork 
 Commode 

Shower 
 Autoclave 

Icemaker 
 Glassware
washer/dryer 
 Surgical light on Necropsy table 

Necropsy Table 
 Inert Cylinder
Storage 
 Dedicated or “split” HVAC System serving the Vivarium, including the electrical connections to the
Building’s emergency generator 
 Landlord shall further provide the maintenance more particularly described in
Exhibit L attached hereto.  
 7.02    Tenant’s Repair
Obligations. Except for janitorial services provided by Landlord and Landlord’s obligations under Sections 4.01 and 7.01, Tenant, at Tenant’s expense, shall maintain the Premises in good
order, condition and repair including, without limitation, the interior surfaces of the windows, walls and ceilings; floors; wall and floor covering; window coverings; doors; interior windows; and all switches, fixtures and Tenant’s equipment
in the Premises. On receipt of reasonable notice from Tenant, Landlord will perform, at the expense of Tenant, all repairs and maintenance to plumbing, pipes and electrical wiring located within walls, above ceiling surfaces and below floor surfaces
resulting from the use of the Premises by Tenant. Tenant is not responsible for any plumbing, pipes and electrical wiring, switches, fixtures and equipment located in the Premises or for portions of the central heat, ventilation and air
conditioning, electrical, mechanical and plumbing systems of the Building that are located in the Premises, except for (i) repairs resulting from the acts of Tenant and Tenant’s employees, agents, invitees, subtenants, licensees or
contractors, (ii) modifications made to any of those systems by, for, or at the request of Tenant after completion of the Landlord Improvements, and (iii) costs expressly payable by Tenant under Section 7.01. Tenant shall keep on the
Premises copies of all records and reports prepared for Tenant or generated by Tenant with respect to Tenant’s maintenance and repair obligations under this Lease, which records and reports will be available for review by Landlord upon request.

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 20

 7.03    ADA Requirements. 

(a)    Tenant Compliance. Subject to Section 5.03, Tenant will be responsible for
compliance with all applicable laws, statutes, ordinances and governmental rules, regulations or requirements now in force or that may hereafter be in force with respect to the operation of Tenant’s business or the Premises, including, without
limitation, any accommodations or alterations that need to be made within the Premises to accommodate disabled employees and customers of Tenant pursuant to requirements under the Americans With Disabilities Act (Public Law 101-336 (July 26, 1990)) and the Texas Architectural Barriers Act (Tex. Civ. Stat. Art. 9102) (collectively, and as amended from time to time, the “Disability Statutes”). Any alterations made to the
Premises in order to comply with any such statutes must be made solely at Tenant’s expense and such alterations must also comply with the requirements of this Lease. If any construction by Tenant in the Premises requires a Texas Accessibility
Standards inspection, Tenant agrees to give Landlord a copy of such report promptly after receipt of the inspection report. 

(b)    Landlord Compliance. Except for the obligations of Tenant under clause (a) above, Landlord shall be
responsible for compliance with all applicable laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may thereafter be in force that affect the Building, including without limitation, the Disability
Statutes applicable to the Common Areas of the Building. Landlord has reasonable discretion to determine when and how to perform alterations under this subsection, and Tenant may not claim any default under this provision. To the knowledge of
Landlord, based on the Project Status Update Form prepared by the Texas Department of Licensing and Regulation and dated as of April 4, 2011, the Building complies with the Disability Statutes. 

7.04    Rights of Landlord. If Tenant fails, in Landlord’s reasonable judgment, to maintain the Premises
in good order, condition and repair following notice of default and opportunity to cure in accordance with the provisions of Section 14.01(b), below, then Landlord may perform the maintenance, repairs, refurbishing or
repairing at Tenant’s expense. 
 7.05    Condition on Surrender. On the expiration or earlier
termination of this Lease, or on the exercise by Landlord of Landlord’s right to re-enter the Premises without terminating this Lease, Tenant shall surrender the Premises in the same condition as received
or as subsequently improved by Landlord or Tenant, except for (i) ordinary wear and tear, (ii) damage by fire, earthquake, acts of God or the elements and (iii) repairs that are Landlord’s responsibility hereunder, and shall
deliver to Landlord all keys for the Premises and combinations to safes located in the Premises. Tenant shall, at Landlord’s option, remove or cause to be removed from the Premises or the Building, at Tenant’s expense and as of the
expiration or termination of this Lease, all signs, notices, displays, or, subject to Section 7.06(d) of this Lease, any non-Building standard tenant improvements placed in the
Premises or the Building that Landlord requested that Tenant remove at the time Landlord consented to such Alteration. Tenant shall repair, at Tenant’s expense, any damage to the Premises or the Building resulting from the removal of any item,
including without limitation, repairing the floor and patching and painting the walls where reasonably required by Landlord. Tenant’s obligations under this Section 7.05 shall survive the expiration or earlier
termination of this Lease. If Tenant fails to remove any item of property permitted or required to be removed at the expiration or earlier termination of the Term, Landlord may, at Landlord’s option, (a) remove that property from the
Premises or Building at Tenant’s expense and sell or dispose of it in a manner that Landlord considers advisable, or (b) place that property in storage at Tenant’s expense. Any property of Tenant remaining in the Premises ten
(10) days after the expiration or termination of this Lease will be deemed to have been abandoned by Tenant. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 21

 7.06    Alterations by Tenant. 

(a)    Approval Required. Tenant shall not make, or cause or permit to be made, any additions, alterations,
installations or improvements in or to the Premises (collectively, “Alterations”), without the prior written consent of Landlord, which consent may, without limitation, be conditioned upon Tenant’s agreement to remove such
alterations, installations or improvements upon the expiration or sooner termination of this Lease. Unless Landlord has waived the requirement in writing, Tenant must also submit with Tenant’s request for Landlord’s approval of an
Alteration (i) a description in reasonable detail of the design concept, plans and specifications; (ii) names of and financial and other pertinent information about proposed contractors; (iii) certificates of insurance to be
maintained by Tenant’s contractors; (iv) hours of construction, proposed construction methods, details with respect to the quality of the proposed work; and (v) with respect to any Alterations costing in excess of One Hundred Fifty
Thousand Dollars ($150,000), reasonable evidence of security (such as, without limitation, payment and performance bonds) to assure timely completion and payment of the costs of the work by the contractor. With respect to an Alteration that is
visible from outside the Premises, the Alteration must, in the sole opinion of the Landlord, also be architecturally and aesthetically harmonious with the remainder of the Building. Notwithstanding anything to the contrary in this Lease, but still
subject to Landlord’s rights of inspection, quality workmanship and Tenant’s obligations to keep the Building and Premises lien-free, (a) with prior, written notice to Landlord including the plans for the work and the name of the
contractor performing the work Tenant may construct non-structural Alterations in the Premises without Landlord’s prior approval (but subject to the obligation to remove such non-structural Alterations if required by Landlord per the other provisions of Section 7.05 and this Section 7.06) if the cost of any such project does not exceed
Twenty-Five Thousand Dollars ($25,000) and the project does not adversely affect the operation or integrity of the Building systems, (b) Tenant’s trade fixtures, furniture, equipment and other personal property installed in the Premises
(“Tenant’s Property”) shall at all times be and remain Tenant’s property, (c) at any time Tenant may remove Tenant’s Property from the Premises, provided that Tenant repairs all damage caused by such removal,
(d) Landlord shall have no lien or other interest in any item of Tenant’s Property, and (e) for the avoidance of doubt, the equipment listed on Exhibit K shall be considered Tenant’s
Property. 
 (b)    Complex Alterations. If the nature, volume or complexity of any proposed Alteration will
affect the basic heat, ventilation and air conditioning or other Building Facilities or systems or the Building, Tenant shall furnish to Landlord information, including, without limitation, construction plans and consultant’s reports, required
by Landlord to assure Landlord that the Alterations do not adversely affect the Building or Building Facilities or systems; otherwise, Landlord may (i) withhold its consent for the Alteration; or (ii) require that the work be designed by
consultants designated by Landlord and/or be performed by Landlord or Landlord’s contractors. 
 (c)    Standard
of Work. All work to be performed by or for Tenant pursuant hereto will be performed diligently and in a first-class, workmanlike manner, and in compliance with all applicable laws, ordinances, regulations and rules of any public authority
having jurisdiction over the Building and/or Tenant. Landlord has the right, but not the obligation, to inspect periodically the work on the Premises and may require Tenant to make changes in the method or quality of the work to conform with the
approved plans and specifications. Such inspections are solely for the benefit of Landlord, and shall not be deemed a representation or warranty by Landlord to Tenant that such work has been performed in accordance with the approved plans and
specifications or is of any particular standard of quality or workmanship. 
 (d)    Ownership of Alterations.
Upon the expiration or sooner termination of this Lease, all Alterations made by or for Tenant (other than Tenant’s trade fixtures) shall immediately become the property of Landlord, without compensation to Tenant, but Landlord has no
obligation to repair, maintain or insure those Alterations. Carpeting, shelving, cabinetry and casework are considered improvements of the Premises and not movable trade fixtures, regardless of how or where affixed. No Alterations will be removed by
Tenant from the Premises either during or at the expiration or earlier termination of the Term, and they shall be surrendered as a part of the Premises unless the Alteration is not Building-standard and Landlord requested that Tenant remove it at
the time it consented to such Alteration; provided, however, that in the event that the 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 22

 
Alterations were not subject to the prior approval of Landlord under Section 7.06(a), Landlord shall designate in writing to Tenant within ten (10) business days
after receipt of written notice from Tenant detailing such Alterations which of the Alterations must be removed at the end of the Term. Landlord may designate which non-Building-standard Tenant improvements
resulting from the Alteration are subject to removal at the end of the Term as part of its consent thereto. In the absence of such a designation, no non-Building-standard improvements resulting from the
Alteration are subject to removal in accordance with the provisions of this Lease. 
 7.07    Payment of Costs;
Mechanic’s Liens. Except for costs that Landlord agrees in writing to pay pursuant to Rider 101, Tenant shall pay for all costs incurred or arising out of alterations, additions or improvements in or to the Premises
and shall not permit a mechanic’s or materialman’s lien to be asserted against the Premises. On Landlord’s request, Tenant shall deliver to Landlord proof of payment reasonably satisfactory to Landlord of all costs incurred or arising
out of any such alterations, additions or improvements. 
 (a)    Lien Waivers. If Tenant contracts with a third
party for the construction of improvements in the Premises or for the supply of materials relating thereto, Tenant shall obtain validly executed and acknowledged lien waivers from any party who might assert a mechanic’s or materialman’s
lien as a result of Tenant’s contract, regardless of the probable or ultimate validity of that lien. If a lien is filed against the Premises or any interest of Landlord or Tenant in the Building, then Tenant shall cause same to be discharged of
record within ten (10) days after its filing. If Tenant fails to obtain that discharge, then, in addition to any other right or remedy of Landlord, Landlord may (but is not obligated to) discharge the lien, either by paying the amount claimed
to be due or by procuring a bond, or by any other means. Any amount paid by Landlord to obtain the discharge of the lien, with interest on that amount at the lesser of twelve percent (12%) per annum or the highest lawful rate, from the date of
Landlord’s payment to the date of repayment to Landlord, shall be paid by Tenant to Landlord on demand. 

(b)    Limitation on Authority. Notwithstanding anything to the contrary herein, neither Tenant nor any of
Tenant’s agents, employees, representatives, contractors or subcontractors shall have any power or authority to do any act or thing or to make any contract or agreement which shall result in the creation of any mechanic’s lien,
materialman’s lien or other lien or claim upon or against Landlord’s interest in the Premises or any property of Landlord, and Landlord shall have no responsibility to Tenant or Tenant’s contractors, subcontracts, suppliers,
materialmen, workmen or other person, firm or corporation who shall engage in or participate in any additions, alterations, changes or replacements of the improvements by or on behalf of Tenant. IT IS THE INTENT OF LANDLORD AND TENANT THAT
NOTWITHSTANDING ANY CONSENT OR APPROVAL BY LANDLORD OF TENANT’S ALTERATIONS, ADDITIONS, OR IMPROVEMENTS, NOTHING CONTAINED IN THIS LEASE SHALL BE CONSTRUED AS CONSTITUTING THE EXPRESS OR IMPLIED CONSENT OR PERMISSION OF LANDLORD FOR THE
PERFORMANCE OF ANY LABOR OR SERVICES FOR, OR THE FURNISHING OF ANY MATERIALS TO, TENANT THAT WOULD GIVE RISE TO ANY SUCH MECHANIC’S LIEN, MATERIALMAN’S LIEN OR ANY OTHER LIEN AGAINST LANDLORD’S INTEREST IN THE PREMISES OR ANY PROPERTY
OF LANDLORD, OR IMPOSING ANY LIABILITY ON LANDLORD FOR ANY LABOR OR MATERIALS FURNISHED TO OR TO BE FURNISHED TO TENANT UPON CREDIT. 

8.    LANDLORD’S RIGHT OF ENTRY 

8.01    Entry. In addition to its re-entry rights under
Section 14.02, Landlord and its authorized agents may, during reasonable business hours, upon not less than one (1) business day’s advance notice, subject to Tenant’s reasonable security procedures, enter the
Premises (i) to inspect their general condition and state of repair, (ii) to make repairs required or permitted under this Lease, (iii) to show the Premises to any prospective tenant, purchaser or mortgagee, or (iv) for any other
reasonable purpose. Notwithstanding the foregoing to the contrary, Landlord may enter the Premises at any time without prior notice to Tenant in the event of an emergency involving the threat of material harm to property and/or injury or death to
person(s). 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 23

 9.    INSURANCE, FIRE AND CASUALTY DAMAGE 

9.01    Landlord’s Insurance. 

(a)    Property Insurance. Landlord, at its option, shall either obtain special causes of loss (Form ISO) or
equivalent property insurance on the Building Shell, the Building Facilities, the Landlord Improvements, and the Project or self-insure against property damage to the same; but Landlord is not required to insure the Tenant Alterations or
Tenant’s personal property in the Premises. Property insurance procured by Landlord from a third party shall be maintained with an insurance company authorized to do business in Texas, for full replacement cost, and shall be deemed an Operating
Expense of the Building, and payments for losses shall be made solely to Landlord. If the annual premiums to be paid by Landlord exceed the standard rates because of Tenant’s operations, the contents of the Premises, or Tenant Alterations
beyond Building-standard, Tenant shall promptly pay the excess amount of the premium upon request by Landlord as additional Rent. Notwithstanding the foregoing to the contrary, Landlord agrees to maintain in force and effect throughout the Term a
third-party policy or policies of casualty insurance on the Project; provided further that in no case shall the self-funded deductible amount under Landlord’s self-insurance or third-party insurance policies exceed the amount of Tenant’s
“Damage to Rented Premises” coverage under Section 9.02(a)(iii). The costs of such insurance shall be deemed an Excess Operating Cost for all purposes of this Lease. 

(b)    Limitations on Landlord’s Insurance. Tenant acknowledges that Landlord is an agency of the State of
Texas and has only such authority as is granted to Landlord by state law or as may be reasonably implied by such law. Landlord shall have the right, at its option, to (i) obtain liability insurance protecting Landlord and property insurance
protecting the Premises, the Building and the Project to the extent authorized by Section 51.966 of the Texas Education Code or other law; or (ii) self-insure against any risk that may be incurred by Landlord as a result of its operations
under this Lease. Any obligation by Landlord under this Lease to obtain insurance is expressly made subject to the Landlord’s authority under state law to obtain such insurance. Tenant acknowledges that, because Landlord is an agency of the
State of Texas, liability for the tortious conduct of the agents and employees of Landlord (other than medical liability of medical staff physicians) or for injuries caused by conditions of tangible state property is provided for solely by the
provisions of the Texas Tort Claims Act (Texas Civil Practice and Remedies Code, Chapters 101 and 104) and the Workers Compensation Insurance coverage for employees of Landlord is provided by Landlord as mandated by the provisions of Texas Labor
Code, Chapter 503. 
 9.02    Tenant’s Insurance. Tenant, at its sole expense, shall maintain in effect at all times
insurance coverages with limits not less than those set forth below with financially responsible insurers licensed to do business in the State of Texas and acceptable to Landlord and under forms of policies satisfactory to Landlord. The requirements
contained herein as to types, limits or Landlord’s approval of insurance coverage to be maintained by Tenant are not intended to and shall not in any manner limit, qualify or quantify the liabilities and obligations assumed by Tenant under this
Lease or otherwise provided by law. The amounts of insurance required to be maintained by Tenant may be reasonably increased from time to time by Landlord at its reasonable discretion. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 24

 (a)    Coverage Minimum Amounts and Limits. The insurance carried
by Tenant shall have the following minimum policy amounts: 
 (i)    Property Insurance. The Property insurance
on Tenant’s Property and Tenant’s Alterations will have limits of not less than 80% of the “replacement cost,” as defined in the Replacement Cost Endorsement to be attached to the policy. The policy shall be written on a special
causes of loss form (ISO) or equivalent policy form, and endorsed to include Landlord as a Loss Payee as its interest may appear and shall include a waiver of subrogation in favor of Landlord, The University of Texas Southwestern Medical Center,
their respective officers, board members, employees, agents, independent contractors, and the invitees of such persons and entities (collectively, “Landlord Parties”). 

(ii)    Workers’ Compensation Insurance. Workers’ Compensation Insurance with statutory limits, and
Employers Liability Insurance with minimum coverage limits of not less than One Million Dollars ($1,000,000): 
 $1,000,000 Employers
Liability - Each Accident 
 $1,000,000 Employers Liability - Each Employee 

$1,000,000 Employers Liability – Policy Limit 

This policy shall include a waiver of subrogation in favor of Landlord Parties. 

(iii)    Commercial General Liability Insurance: Commercial General Liability Insurance (occurrence basis) with the
following minimum coverage limits: 
  

					
	 Each Occurrence Limit
	  	$	1,000,000	 
	 Damage to Rented Premises
	  	$	 300,000	 
	 Medical Expense (any one person)
	  	$	 10,000	 
	 Personal & Advertising Injury
	  	$	1,000,000	 
	 General Aggregate
	  	$	2,000,000	 

 This policy shall be on a form acceptable to Landlord, endorsed to include the Landlord Parties as additional
insureds, not modify the separation of insured language in the policy, delete the exclusion for liability assumed under the Lease, contain no modification that would make Tenant’s policy excess or contributory with Landlord’s liability
insurance and make this Lease a “covered contract” under the policy. 
 (iv)    Business Automobile
Liability Insurance: Business Automobile Liability Insurance (occurrence basis) with minimum coverage limits of $1,000,000. The policies shall name the Landlord Parties as additional insureds and include in its coverage all owned, hired and non-owned automobiles. The policy shall be endorsed to include Landlord Parties as an additional insured. 

(v)    Business Interruption Insurance. Business Income, Business Interruption, Extra Expense, Expediting Expense,
and Dependent Properties Time Element Coverage to cover Tenant’s loss of income or the loss of value of Tenant’s product due to any type of loss, whether or not covered under the Landlord’s insurance. Policy limits will be not less
than $2,000,000. 
 (v)    Umbrella Excess Liability Insurance. Umbrella Excess Liability Insurance with minimum
coverage limits of: 
  

			
	 Bodily Injury/
	  	$1,000,000.00 per occurrence
	Property Damage (Occurrence Basis)	  	$1,000,000.00 aggregate

 This policy shall be written on a following form umbrella excess basis above the coverages described above in
(ii) through (iv), inclusive, shall be endorsed to include Landlord Parties as additional insureds. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 25

 (b)    Primary Coverage. All of Tenant’s insurance policies
shall be primary, with the policies of all of the Landlord Parties being excess, secondary and noncontributing. Tenant shall deliver proof of the insurance coverage required to be maintained by Tenant under this Section, represented by evidence of
insurance issued by the insurance carrier(s), to Landlord prior to Tenant taking possession of the Premises. The evidence of insurance shall specify the additional insured status mentioned above as well as the required waiver of subrogation.
Landlord Parties shall be named as additional insureds on all liability policies except Worker’s Compensation, with waivers of subrogation on all property policies. Such policies of insurance shall be endorsed to require the insurance carriers
to notify Landlord in writing not less than thirty (30) days prior to any cancellation, material change, or non-renewal of insurance. Tenant shall provide to Landlord a certified copy of any and all
applicable insurance policies upon request of Landlord. In addition, Tenant shall deliver evidence of insurance to Landlord as the coverage renews and not less than ten (10) days before the expiration date of any policies. 

9.03    Casualty to Project. If any portion of the Project other than the Premises is damaged or destroyed by
any casualty, then within ninety (90) days following the date of the casualty (“Casualty Date”) Landlord shall notify Tenant in writing (“Repair Notice”) as to the date (“Repair Completion
Date”) by which Landlord estimates that Landlord, in the exercise of commercially reasonable diligence, can adjust the casualty damage with any third-party insurer of Landlord and complete the repair and reconstruction of the casualty
damage. In the event that the Repair Completion Date set forth in the Repair Notice is on or before the first anniversary of the Casualty Date, this Lease shall remain in effect and Landlord shall at its sole cost and expense proceed with reasonable
diligence to rebuild and repair such damaged areas of the Project to substantially the condition in which they existed before the damage or destruction. In the event the Repair Completion Date is after the first anniversary of the Casualty Date,
then 
 (i)    Tenant may terminate this Lease upon written notice of termination given to Landlord within twenty-one (21) calendar days following Landlord’s giving of the Repair Notice; and 

(ii)    Landlord may terminate this Lease upon written notice of termination given to Tenant within twenty-one (21) business days following Landlord’s giving of the Repair Notice, on the condition that Landlord has, in the exercise of commercially reasonable judgment in light of Landlord’s and the
Project’s then current circumstances, elected not to fully repair or replace any material part of the casualty damage within two (2) years of the Casualty Date; provided further that if Landlord and Tenant reasonably and mutually agree
that, notwithstanding such election by Landlord, the Premises can continue to be occupied and used by Tenant for the Permitted Use in a manner that is cost-effective for both Landlord and Tenant, then Landlord shall not terminate the Lease under the
provisions of this subsection (ii). In such latter event. Landlord shall, with commercially reasonable diligence, perform clean-up of the casualty damage to the Project, but shall not be obligated to repair or
replace the whole or any portion of the casualty damage to the Project. 
 Rent payable by Tenant under this Lease shall be equitably abated to the extent
that Tenant’s Permitted Use of the Premises is limited or obstructed during the Term by casualty to the Project. 

9.04    Casualty to Premises. If the Premises, or any part thereof, are damaged or destroyed by a casualty,
then within ninety (90) days following the Casualty Date Landlord shall give Tenant a Repair Notice setting forth the Repair Completion Date by which Landlord estimates that Landlord, in the exercise of commercially reasonable diligence, can
adjust the casualty damage with any third-party insurer of Landlord and complete the repair and reconstruction of the casualty damage. In the event that the Repair Completion Date is (i) within nine (9) months of the Casualty Date if the
casualty occurs other than during the last twelve (12) months of the Term; or (ii) within ninety (90) days of the Repair Notice and prior to the expiration of the Term if the casualty occurs during the last twelve (12) months of
the Term, then (except as otherwise agreed in writing by the parties) this Lease shall remain in force and effect and Landlord shall proceed with 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 26

 
commercially reasonable diligence to repair and rebuild the casualty damage to the Premises. If the conditions in the foregoing sentence requiring Landlord’s restoration of the Premises are
not met, then either party may terminate this Lease upon written notice of termination given to the other party within twenty-one (21) days of the Repair Notice. In the event that the Lease is not
terminated pursuant to the provisions of this Section 9.04, (i) Landlord shall at its sole cost and expense proceed with reasonable diligence to rebuild and repair such casualty to the Premises (other than for the Tenant
Alterations and Tenant’s personal property) to substantially the condition in which they existed before the casualty; and (ii) Tenant shall, at its sole cost and expense, proceed with reasonable diligence to rebuild, repair and/or replace
any damaged personal property of Tenant and any damaged Tenant Alterations to substantially the condition in which they existed before the casualty. Rent payable by Tenant under this Lease shall be equitably abated to the extent and for the period
that Tenant’s Permitted Use of the Premises are limited or obstructed by the casualty to the Premises. 

9.05    Discussion of Casualty Event. In the event of a casualty to the Project or Premises, upon request by
either party, representatives of the parties shall meet at a mutually convenient time and place to discuss the casualty’s implications for Tenant’s Permitted Use of the Premises and/or Landlord’s operation of the Project. 

9.06    Tenant’s Termination of Lease. Notwithstanding anything contained to the contrary in this
Article 9, if the Premises or any portion of the Project materially affecting the Permitted Use of the Premises are damaged by casualty but this Lease is not terminated pursuant to Sections 9.03 or 9.04 above,
Tenant shall nonetheless have the option to terminate this Lease if the Premises or such portion of the Project are not in fact fully restored by Landlord (other than for minor punch list items, Tenant Alterations and Tenant’s personal
property) to their prior condition by the Repair Completion Date. To exercise such right of termination, Tenant must give written notice of termination to Landlord on or before the earlier to occur of (i) the tenth (10th) business day following the Repair Completion Date; or (ii) Landlord’s completion of the casualty repairs (other than minor punch list items) for which Landlord is responsible under this
Article 9. 
 9.07    Waiver of Subrogation. Tenant and Landlord each shall immediately give to each
insurance company that has issued to it property insurance policies hereunder written notice of the terms of the waiver, and shall cause those insurance policies to be properly endorsed, if necessary, to prevent the invalidation of insurance
coverages by reason of the waiver. Notwithstanding anything to the contrary herein, the parties hereto release each other and their respective agents, employees, successors, assignees and subtenants from all liability for damage to any property that
is caused by or results from a risk which is actually insured against or which is required to be insured against with third-party policies of insurance under this Lease, without regard to the negligence or willful misconduct of the entity so
released. 
 9.08    Tenant’s Failure to Maintain Insurance. If Tenant fails to comply with the
insurance requirements of this Article 9 within the applicable notice and cure periods of Article 14, then Landlord may (in addition to having available to it all other remedies provided herein on the occurrence of an Event of Default)
obtain such insurance, and Tenant shall pay to landlord on demand, as additional Rent hereunder, the premium cost thereof plus interest at the lesser of twelve percent (12%) per annum or the highest lawful rate, from the date of payment by Landlord
until payment by Tenant. 
 9.09    Reasonable Cooperation. Landlord and Tenant agree to reasonably
cooperate with one another in connection with any casualty event to implement the provisions of this Article. 

10.    INDEMNITY 

10.01    Indemnity. Landlord is not liable to Tenant or Tenant’s employees, agents, patrons or visitors,
or to any other person whomsoever, for any injury to person or damage to property on or about the Premises, if caused by the action or inaction of Tenant, its agents, servants or employees, or of any other person entering

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 27

 
upon the Premises under the expressed or implied invitation of Tenant, or caused by the Building or the improvements located on the Premises becoming out of repair, or caused by leakage of gas,
oil, water or steam or by electricity emanating from the Premises, or due to any cause whatsoever. Tenant hereby indemnifies Landlord and agrees to hold it harmless from any loss, expense or claims, including attorney’s fees, arising out of
any such damage or injury. Notwithstanding anything to the contrary in this Lease, Landlord shall not be released or indemnified from any losses, damages, liabilities or claims arising from the negligence or willful misconduct of Landlord or a
violation of Landlord’s obligations under this Lease. 
 11.    CONDEMNATION 

11.01    Total or Substantial Condemnation. If all or a substantial part of the Premises is taken for any public or
quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain, or is sold to the condemning authority under threat of condemnation, then this Lease shall terminate and the Rent shall be abated during the
unexpired portion of the Term, effective from the date of taking of the Premises by the condemning authority. 

11.02    Partial Condemnation. If less than a substantial part of the Premises is taken for public or
quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or is sold to the condemning authority under threat of condemnation, then Landlord, at its option, may by written notice to Tenant terminate this
Lease or shall forthwith at its sole expense restore and reconstruct the building in which the Premises are located and improvements therein (other than leasehold improvements or other improvements made by Tenant or any assignee, subtenant or other
occupant of the Premises) to make the same reasonably suitable for the uses for which the Premises are leased, as provided in Section 5.01. 

11.03    Disposition of Awards. All awards arising from a total or partial taking of the Premises, whether
temporary or permanent, of Tenant’s leasehold estate, shall belong to and be the property of Landlord without any participation by Tenant, save and except that Tenant shall be entitled to any award expressly attributable to (i) the
Tenant’s Alterations, and (ii) costs of relocating Tenant’s operations to another location. Except as so provided, Tenant hereby assigns to Landlord any share of any condemnation award pertaining to the Building or the Project.
Without limitation of the foregoing, Tenant hereby waives any rights it may have with respect to the loss of its leasehold estate pursuant to this Lease and the Premises as a result of a taking. 

12.    ASSIGNMENT, TRANSFER AND SUBLEASING BY TENANT 

12.01    Assignment, Subletting or License. Upon satisfaction of the following conditions, Landlord agrees to consent
to Tenant’s assignment, sublease, license, mortgage, pledge or other transfer of this Lease, the Premises, or the estate of Tenant hereunder (hereafter collectively called a “Transfer”) to another person: (i) Tenant
provides Landlord with reasonable prior written notice (which in no event shall be less than thirty days) of the proposed Transfer; (ii) Tenant provides Landlord with such detail as Landlord may reasonably request concerning the nature of the
proposed Transfer and the identity, business, activities and reputation in the business community of the proposed transferee; (iii) such transferee assumes in written form reasonably satisfactory to Landlord the covenants and obligations of
this Lease, in so far as the same are applicable to the estate or interest being conveyed to such transferee; (iv) the proposed transferee’s business is in health care, biotechnology, medical research and/or medical education industry(ies)
not incompatible with Landlord’s educational, research and health care mission; (v) the proposed transferee provides to Landlord a current financial statement of the proposed transferee and/or the proposed transferee’s guarantor(s),
audited by a certified public accountant, indicating a net worth and working capital in amounts that Landlord reasonably determines are sufficient to assure the future performance of the proposed transferee’s obligations under this Lease; and
(vi) the implementation of the Transfer would not cause Landlord or this Lease to be in violation of either applicable law or the rules, 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 28

 
regulations and policies promulgated by the Board of Regents of The University of Texas System. A consent granted by Landlord hereunder shall be in written form reasonably acceptable to Landlord
and Tenant. Any Transfer by Tenant without the prior written consent of Landlord is an event of default under this Lease. No Transfer shall act to release Tenant of its obligations under this Lease, except as otherwise agreed in writing by Landlord.

 12.02    Transfer of Voting or Equity Interest. Notwithstanding (i), (ii) and (iii) of
Section 12.01 to the contrary, but subject to (iv) and (v) of Section 12.01, Tenant may, without Landlord’s prior written consent and without constituting an assignment or sublease hereunder, sublet the Premises or assign this
Lease to (a) an entity controlling, controlled by or under common control with Tenant, (b) an entity related to Tenant by merger, consolidation or reorganization, or (c) a purchaser of a substantial portion of Tenant’s assets,
and a transfer of Tenant’s capital stock shall not be deemed a Transfer. 
 12.03    No Release.
Notwithstanding any assignment or subletting, Tenant and any Guarantor of Tenant’s obligations under this Lease shall remain fully responsible and liable for the payment of the Rent herein specified and for compliance with all of
Tenant’s other obligations under this Lease (even if future assignments and subletting occur after the assignment or subletting by Tenant, and regardless of whether or not Tenant’s approval has been obtained for those future assignments
and sublettings). Moreover, if the Rent due and payable by a sublessee (or a combination of the rental payable by the sublessee plus any bonus or other consideration relating thereto in excess of market value of other property or services being
provided) exceeds the Rent payable under this Lease, or if with respect to a permitted assignment, permitted license or other transfer by Tenant permitted by Landlord, the consideration payable to Tenant by the assignee, licensee or other transferee
therefor exceeds the Rent payable under this Lease, then Tenant shall pay to Landlord one-half of the excess amounts within ten (10) days after receipt thereof from time to time by Tenant after first
deducting all of Tenant’s reasonable broker fees, attorneys’ fees and tenant improvement costs of effecting the Transfer. Finally, on an assignment or subletting, it is understood and agreed that all rentals paid to Tenant by
an assignee or sublessee are received by Tenant in trust for Landlord, to be forwarded immediately to Landlord without offset or reduction of any kind. On Landlord’s election, during the existence of an Event of Default, all such rentals shall
be paid directly to Landlord as specified under this Lease (to be applied as a credit against Tenant’s accrued Rent obligations). 

12.04    No Mortgage. Tenant shall not mortgage, pledge or otherwise encumber its interest in this Lease or in
the Premises. 
 12.05    Transfer of Landlord’s Interest. On a transfer and assignment by Landlord of
its interest in this Lease, or all or part of the Building, Landlord shall thereby be released from any further obligations hereunder, and Tenant shall look solely to the successor in interest of Landlord for performance of those obligations. Any
security given by Tenant to secure performance of Tenant’s obligations hereunder may be transferred by Landlord to the successor in interest, and Landlord shall thereby be discharged of any further obligation relating thereto. 

12.06    Bankruptcy. If this Lease is assigned in connection with a bankruptcy proceeding, the provisions of
Article 15 apply. 
 13.    HOLDING OVER 

13.01    Holding Over. Without in any way affecting Landlord’s rights and remedies under this Lease, if
Tenant holds over after the expiration or termination of this Lease, then Tenant shall pay as monthly Rent during each month of the holdover period an amount equal to 125% of the amount of monthly Rent due for the last month of the Term. No holding
over by Tenant after the Term of this Lease, either with or without the consent and acquiescence of Landlord, shall extend the Term for a period of longer than one month unless 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 29

 
that Term is extended in a writing executed by Landlord. Any holding over without the written consent of Landlord shall be on a
tenancy-at-sufferance basis. On an unauthorized holding over, Tenant shall indemnify Landlord against all claims for damages with respect to any other lessee or
prospective lessee to whom Landlord has leased all or any part of the Premises. 
 14.    DEFAULT AND REMEDIES

 14.01    Events of Default By Tenant. The following events (individually, an “Event of
Default,” and collectively, “Events of Default”) constitute defaults under this Lease: 

(a)    Failure of Tenant to pay when due (i) an installment of the Rent or any other amount payable to Landlord
hereunder; or (ii) any other monetary obligation or covenant of Tenant under this Lease (including, without limitation, insurance premiums owing for insurance required of Tenant hereunder), which failure is not cured within five
(5) business days of written notice thereof from Landlord; 
 (b)    Failure of Tenant to comply with any non-monetary term, condition or covenant of this Lease, which failure is not cured within fifteen (15) business days of written notice thereof from Landlord; provided, however, that in the event that such
default cannot be reasonably cured within such fifteen (15) business day period, Tenant shall not be deemed in default hereunder so long as Tenant begins efforts to cure the default within such period and thereafter diligently prosecutes the
cure of the default to completion within sixty (60) calendar days of Landlord’s written notice of default; Notwithstanding the foregoing to the contrary, in the event that Tenant fails to comply with any provision of
Section 5.03(e), it shall be an event of default if Tenant fails to cure such breach by the earlier of (i) fifteen (15) business days following written notice of breach from Landlord, or (ii) three business days
prior to the deadline for cure of any breach of applicable law imposed by any governmental entity having jurisdiction over hazardous materials in the Premises. 

(c)    Insolvency of, or the making of a transfer in fraud of creditors or a general assignment for the benefit of
creditors by, Tenant or a Guarantor of Tenant’s obligations under this Lease; 
 (d)    Filing of a petition under
any section or chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of the United States or any State thereof, by Tenant or by a Guarantor of Tenant’s obligations under this Lease, or entry of an order
for relief in a bankruptcy proceeding, against Tenant or a Guarantor; 
 (e)    Appointment of a receiver, trustee or
liquidator of Tenant or of a Guarantor or for all or substantially all of the assets of Tenant or of a Guarantor of Tenant’s obligations under this Lease; and 

(f)    So long as prior to Tenant’s abandonment or cessation of use of any substantial portion of the Premises,
Tenant has removed all animals from the vivarium and cleaned the vivarium area, Tenant shall not be in default hereunder so long as it continues to pay Rent when due hereunder and perform the other covenants of this Lease. 

14.02    Remedies of Landlord. On the occurrence of an Event of Default listed in
Section 14.01, to the extent permitted by and in accordance with applicable Law, Landlord may pursue any one or more of the following remedies without any notice or demand whatsoever except as otherwise indicated (and,
further, Tenant is liable for damages as provided in Section 14.03): 

(a)    Termination. Terminate this Lease by giving written notice of termination to Tenant, in which event Tenant
shall immediately surrender the Premises to Landlord. If Tenant fails to so surrender the Premises, then Landlord may, without prejudice to any other remedy it has for possession of the Premises or 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 30

 
arrearages in Rent or other damages, re-enter and take possession of the Premises and expel or remove Tenant and any other person occupying the Premises or
any part thereof, by any lawful means, without being liable for prosecution or claim for damages whether caused by the negligence of Landlord or otherwise. 

(b)    Continuation of Lease; Reletting of Premises. Landlord may continue this Lease in full force and effect, in
which case Tenant is liable for all rents and other amounts payable under this Lease. Landlord may, nevertheless, re-enter and take possession of the Premises, by any lawful means, without terminating this
Lease and without being liable for prosecution or for any claim for damages therefor, and relet the Premises and apply the rent received to the account of Tenant. No reletting by Landlord is considered to be for its own account unless Landlord has
notified Tenant that this Lease has been terminated. Landlord may relet the Premises for a period or periods of time equal to, lesser or greater than the remainder of the Term, and on whatever terms and conditions Landlord, in its sole discretion,
deems advisable. Landlord’s action under this Section 14.02(b) is not considered an acceptance of Tenant’s surrender of the Premises unless Landlord expressly so notifies or agrees with Tenant in writing. 

(c)    Act for Tenant. Re-enter the Premises by any lawful means, without
terminating this Lease and without being liable for any prosecution or for any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease. Tenant shall pay to Landlord, on demand, expenses incurred by
Landlord in effecting compliance with Tenant’s obligations under this Lease, plus interest thereon at the lesser of 12% per annum or the highest lawful rate, from the date expended until repaid. Landlord is not liable for any damages resulting
to Tenant from such action, whether caused by the negligence of Landlord or otherwise. 
 (d)    Change Locks.
Landlord may change the locks on doors permitting entry into the Premises and deny Tenant’s access thereto until all Events of Default have been cured. Landlord has no obligation to advise Tenant of the change of locks other than to provide
written notice at the Premises of the person whom Tenant may contact, during Landlord’s Normal Business Hours for the Building, to acquire additional information. Except as otherwise expressly provided by applicable law, after changing locks to
the Premises Landlord may thereafter refuse Tenant entry to the Premises until Landlord has accepted Tenant’s full cure of all Events of Default under this Lease. 

(e)    Recapture of Landlord Expenses. Tenant acknowledges that the Tenant Improvement Allowance and an estimated
$122,141.25 in brokerage commissions are payable by Landlord in connection with this Lease and were incurred by Landlord in reliance on Tenant’s fully performing Tenant’s obligations under this Lease during the original Term of this
Lease (without regard as to whether Tenant would exercise the option to extend the Term granted Tenant under this Lease). The final cost of the Tenant Improvement Allowance is not known at this time, but as of the Reference Date is estimated to be
approximately $2,005,873. Accordingly, in addition to the remedies set forth in Sections 14.02(a), (b), (c) and (d), inclusive, on the occurrence of an Event of
Default by Tenant under this Lease with respect to which Landlord elects either to terminate this Lease or, without terminating this Lease, to terminate Tenant’s possession of the Premises, Tenant shall pay to Landlord in cash on demand an
amount equal to the unamortized balance of the sum of the final actual Tenant Improvement Allowance and the brokerage commissions (collectively, the “Landlord Recapture Amount”), which unamortized balance shall be calculated by
multiplying the Landlord Recapture Amount by that fraction whose numerator is the number of calendar months during the Initial Term for which Tenant has not paid the full monthly installment of Rent due and payable hereunder and whose denominator is
the number of calendar months in the initial Term for which the full monthly installments of Rent are due and payable hereunder. By way of example, if Tenant is obligated to pay Rent for sixty (60) calendar months during the Initial Term, and
at the time of recapture under this Paragraph there are twenty (20) calendar months in the Initial Term for which Tenant has not paid in full the monthly installments of Rent owing under this Lease, then 20/60 of the Landlord Recapture Amount
is owing by Tenant to Landlord. Landlord and Tenant agree to execute a statement, in form reasonably agreeable to both parties, stipulating the amount of the actual Tenant Improvement Allowance expended by Landlord under this Lease prior to delivery
of the Premises to Tenant.  

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 31

 (f)    Lease Remedies Not Exclusive; Lease Supersedes Property
Code. Pursuit of any of the foregoing remedies does not constitute an irrevocable election of remedies nor preclude pursuit of any other remedy provided elsewhere in this Lease or by applicable law, and no remedy is exclusive of another remedy
unless so provided in this Lease or by applicable law. Likewise, forbearance by Landlord to enforce one or more of the remedies available to it on an Event of Default does not constitute a waiver of that default or of the right to exercise that
remedy later or of any Rent, damages or other amounts due to Landlord hereunder.    In the case of a conflict, then to the extent allowed by law, the terms of this Lease supersede and control the provisions of the Texas Property
Code. 
 (g)    Mitigation of Damages. Except to the extent required by applicable law, Landlord is under no
affirmative duty to maximize the rent collected from any replacement tenant or otherwise mitigate Landlord’s damages arising from an Event of Default by Tenant and Tenant, except to the extent prohibited by law, waives any legal or equitable
right or defense that Landlord mitigate its damages after a default by Tenant. In the event that applicable law prohibits or restricts such waiver of Landlord’s duty to mitigate its damages, Tenant agrees that (i) Landlord will have
satisfied its obligation to mitigate damages if Landlord endeavors, in good faith, to re-lease the Premises, (ii) Landlord will not be required to give preference to the Premises over other vacant space
in the Project or any other property owned or controlled by Landlord or any affiliates thereof, (iii) Landlord may reject any prospective tenant who, in Landlord’s reasonable discretion, is disreputable, whose business does not enhance the
Project, who does not have sufficient business experience, or who lacks the financial ability to perform the tenant’s obligations under Landlord’s then current offered lease terms, (iv) under no circumstances shall Landlord be
required or obligated to relet or attempt to relet the Premises for any period of time beyond the then applicable Termination Date, and (v) Landlord may reject any offer to lease the Premises at a rate which is less than the rate being charged
for comparable space in the Project or on terms that are less favorable than those contained in this Lease or which (in Landlord’s reasonable discretion) is not in the best interests of the Project. 

14.03    Tenant’s Liability For Landlord’s Damages. 

(a)    In General. In all events, Tenant is liable for all damages of whatever kind or nature, direct or indirect,
suffered by Landlord as a result of the occurrence of an Event of Default. If Tenant fails to promptly pay Landlord for the damages suffered, Landlord may pursue a monetary recovery from Tenant. Included among those damages are all expenses incurred
by Landlord in repossessing the Premises (including, among other expenses, increased insurance premiums resulting from Tenant’s vacancy), all expenses incurred by Landlord in reletting the Premises (including, among other expenses, those
incurred for repairs, remodeling, replacements, advertisements and brokerage fees), all concessions granted to a new tenant on a reletting, all losses incurred by Landlord as a result of Tenant’s default (including, among other losses, any
adverse reaction by Landlord’s mortgagee or by other tenants or prospective tenants of the Building) and a reasonable allowance for Landlord’s administrative efforts, salaries and overhead attributable directly or indirectly to
Tenant’s default and Landlord’s pursuit of the rights and remedies provided under this Lease or by applicable law. 

(b)    Termination of Lease. If Landlord terminates this Lease under Section 14.02(a),
then Tenant shall pay to Landlord on demand the amount of all loss and damage suffered by Landlord by reason of the termination, to be determined by one or a combination of the following measures of damages: 

(i)    Until Landlord is able, through good faith efforts (the nature of which shall be at Landlord’s sole
discretion), to relet the Premises, Tenant shall pay to Landlord, on or before the first day of each calendar month, the amounts required to be paid by Tenant under this Lease. After the Premises have

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 32

 
been relet by Landlord, Tenant shall pay to Landlord on the 20th day of each calendar month, the difference between the amount required to be paid by Tenant under this Lease for that calendar
month and the amount actually collected by Landlord for that month. If it becomes necessary for Landlord to bring suit to collect a deficiency, Landlord may allow the deficiency to accumulate and may bring an action on several or all of the accrued
deficiencies at one time. No suit shall prejudice in any way Landlord’s right to bring a similar action for any deficiency or deficiencies that arise later. Any amount collected by Landlord from subsequent tenants for any calendar month which
exceeds the amounts required to be paid by Tenant under this Lease shall be retained by Landlord and credited to reduce Tenant’s liability for any subsequent calendar month for which the amount collected by Landlord is less than the amount
required to be paid by Tenant, as Tenant’s sole right to that excess. 
 (ii)    When Landlord desires to do so,
including after it has elected to proceed under Section 14.03(b)(i) immediately above (that election not being exclusive under this Lease), Landlord may demand a final settlement. On that demand, Landlord is entitled to
receive from Tenant the difference between the total of all amounts required to be paid by Tenant under this Lease for the remainder of the Term minus the reasonable rental value of the Premises for that period, with such difference to be
discounted to a present value based on a rate equal to the rate of interest allowed by law in Texas when the parties to a contract have not agreed on a particular rate of interest (or, in the absence of such a stipulated rate, at the rate of 10% per
annum). 
 (iii)    Landlord’s election to proceed under Section 14.03(b)(i) above shall
not prejudice its right thereafter to cancel that election in favor of the remedy described in Section 14.03(b)(ii) above, so long as at the time of that cancellation, Tenant is still in default. 

(c)    Continuation of Lease; Reletting of Premises. If Landlord elects to continue this Lease in effect, then
Tenant is liable for the Rent and other amounts due hereunder. If Landlord relets the Premises for the account of Tenant, then the amounts actually received by Landlord shall be credited to the amounts owed by Tenant under this Lease (including the
amounts described in Section 14.03(a). 
 14.04    Defaults by Landlord and Tenant
Remedies. Landlord shall be deemed in default of its obligations under this Lease if and only if Landlord (i) breaches its obligations under this Agreement and (ii) fails to cure or correct such breach within thirty (30) days
of written notice of default and demand for cure from Tenant; provided that if such breach by Landlord cannot be reasonably cured within such thirty (30) day period, then Landlord shall not be deemed in default hereunder if Landlord begins its
cure of such breach within said thirty days and thereafter diligently prosecutes the cure of such breach to completion. In the event of a default by Landlord in the performance of its obligations hereunder, Tenant, as its sole remedy at law or in
equity for such default, may thereafter terminate this Lease upon written notice to Landlord. 
 14.05    Notice and Cure
to Landlord and Mortgagee. On any act or omission by Landlord which might give, or which Tenant claims or intends to claim gives, Tenant the right to terminate this Lease by reason of a constructive or actual eviction from all or part
of the Premises, or otherwise, Tenant shall not seek to enforce such right unless and until it has given written notice of the act or omission to Landlord and to the holder(s) of the indebtedness or other obligations secured by any mortgage or deed
of trust affecting the Premises of whom Landlord has given Tenant written notice, and a reasonable period of time for remedying the act or omission has elapsed following the giving of the notice, during which time Landlord and the lienholder(s), or
either of them, their agents or employees, may enter upon the Premises and do therein whatever is necessary to remedy the act or omission. During the period after the giving of notice and during the remedying of the act or omission, the Base Rental
payable by Tenant shall not be abated and apportioned except to the extent that the Premises are untenantable. To the extent permitted by applicable law, Tenant hereby waives the provisions of §91.004(b) of the Texas Property Code (or any
successor thereto) and any other laws that may grant to Tenant a lien upon any of Landlord’s property or upon any rental due to Landlord. 

  

			
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 15.    BANKRUPTCY OR INSOLVENCY OF TENANT 

15.01    Liquidation. If Tenant becomes a debtor under Chapter 7 of the federal Bankruptcy Code, 11 U.S.C.
§§ 101 et seq. (the “Bankruptcy Code”), and Tenant’s trustee or Tenant elects to assume this Lease for the purpose of assigning it, or otherwise, then that election and assignment may be made only if the
provisions of Sections 15.02 and 15.04 are satisfied. If Tenant or Tenant’s trustee fails to elect to assume this Lease within 60 days after an order for relief is entered against Tenant, or such additional
time as is provided by the court within that 60-day period, then this Lease shall be deemed to have been rejected. Immediately after that rejection, Landlord may repossess the Premises without further
obligation to Tenant or Tenant’s trustee and this Lease shall terminate, but Landlord’s right to be compensated for damages (including, without limitation, liquidated damages provided for under this Lease) in any such proceeding shall
survive. 
 15.02    Reorganization. If a petition for reorganization or adjustment of debts is filed
concerning Tenant under Chapter 11 of the Bankruptcy Code, or a proceeding is filed under Chapter 7 of the Bankruptcy Code and is converted to a Chapter 11 case, then Tenant’s trustee or Tenant, as debtor-in-possession, must elect to assume this Lease within 120 days after an order for relief is entered against Tenant, or Tenant’s trustee or the debtor-in-possession shall be deemed to have rejected this Lease. If Tenant, Tenant’s trustee or the debtor-in-possession
fails to perform all of Tenant’s obligations under this Lease within the time periods (excluding grace periods) required for that performance, then no election by Tenant’s trustee or the debtor-in-possession to assume this Lease, whether under Chapter 7 or Chapter 11, is effective unless each of the following conditions has been satisfied: 

(a)    Defaults Cured. Tenant’s trustee or the
debtor-in-possession cures all defaults under the Lease, or provides Landlord with Assurance (as defined below) that it will cure (i) all defaults that can be cured
by the payment of money within 10 days from the date of such assumption, and (ii) all other defaults under this Lease that can be cured by the performance of the act needed to effect the cure promptly after the date of assumption. 

(b)    Compensation For Damages. Tenant’s trustee or the debtor-in-possession and (if this Lease has been guaranteed) Guarantor compensates, or provides Landlord with Assurance that within 10 days from the date of such assumption it will compensate, Landlord for
any actual pecuniary loss incurred by Landlord arising from the default of Tenant, Tenant’s trustee, or the debtor-in-possession as indicated in any statement of
actual pecuniary loss sent by Landlord to Tenant’s trustee or the debtor-in-possession. 

(c)    Assurance of Future Performance. Tenant’s trustee or the debtor-in-possession provides Landlord with Assurance of the future performance of the obligations of Tenant under the Lease, Tenant’s trustee or the debtor-in-possession, and if that Assurance has been provided, Tenant’s trustee or the debtor-in-possession shall also
(i) deposit with Landlord, as security for the timely payment of Rent under this Lease, an amount equal to three (3) months’ Base Rental, and (ii) pay in advance to Landlord on the date that Base Rental is due and payable, one-twelfth (1/12) of Tenant’s annual obligations for any other purpose (e.g., taxes and insurance) pursuant to this Lease. The obligations imposed on Tenant’s trustee or the debtor-in-possession shall continue with respect to Tenant or any assignee of this Lease after the completion of bankruptcy proceedings. 

(d)    No Breach of Other Obligations. The assumption will not breach or cause a default under any provision of any
other lease, mortgage, financing agreement or other agreement by which Landlord is bound relating to the Premises or any larger development of which the Premises are a part. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 34

 (e)    Assurances. For purposes of this
Article 15, Landlord and Tenant acknowledge that “Assurance” means no less than (i) Tenant’s trustee or the
debtor-in-possession has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure
Landlord that sufficient funds will be available to fulfill the obligations of Tenant under this Lease and there has been deposited with Landlord, or the Bankruptcy Court has entered an order segregating, sufficient cash payable to Landlord, and/or
Tenant’s trustee or the debtor-in-possession shall have been granted a valid and perfected first lien and security interest and/or mortgage in property of Tenant,
Tenant’s trustee or the debtor-in-possession, acceptable as to value and kind to Landlord, to secure to Landlord the obligation of Tenant, Tenant’s trustee or
the debtor-in-possession to cure the defaults under this Lease, monetary and/or non-monetary, within the time periods set forth
above, and (if this Lease has been guaranteed) (ii) Guarantor has cured all defaults under this Lease that can be cured by the payment of money and has undertaken to promptly cure all other defaults under this Lease that can be cured by the
performance of any act and, if this Lease has been guaranteed, Landlord has received a duly authorized and binding undertaking of Guarantor that Guarantor remains obligated under its Guaranty to the same extent as if the circumstances giving rise to
the requirement that Assurance be provided had not occurred, together with a statement of Guarantor’s certified public accountants certifying that the net worth of Guarantor, on a consolidated basis but exclusive of any net worth of Tenant, is
in excess of five times the total remaining lease obligations of Tenant, but in no event less than $1 million. For an individual Guarantor, there shall be excluded from that Guarantor’s net worth for purposes hereof any equity in the
Guarantor’s principal residence. For a non-individual Guarantor, there shall be excluded from that Guarantor’s net worth for purposes hereof its basis in its fixed assets, including land and
buildings. 
 15.03    Subsequent Liquidation or Petition. If this Lease is assumed in accordance with
Section 15.02 and thereafter Tenant is liquidated or files a petition for reorganization or adjustment of debts under Chapter 11 of the Bankruptcy Code, Landlord may, at its option, terminate this Lease and all rights of
Tenant hereunder, by giving Tenant notice of its election so to terminate within 30 days after the occurrence of either of such events. 

15.04    Assignment. 

(a)    Adequate Assurance of Future Performance. If Tenant’s trustee or the debtor-in-possession assumes this Lease pursuant to the terms and provisions of Sections 15.01 or 15.02 for the purpose of assigning (or otherwise elects to assign) this Lease
to an assignee other than Guarantor, then this Lease may be so assigned only if the proposed assignee provides adequate assurance of future performance of all of the terms, covenants and conditions of this Lease to be performed by Tenant including,
without limitation, the obligation to pay Base Rental. As used herein, “adequate assurance of future performance” means that no less than each of the following conditions has been satisfied: 

(i)    The proposed assignee has furnished Landlord with either (A) a current financial statement audited by a
certified public accountant indicating a net worth and working capital in amounts that Landlord reasonably determines are sufficient to assure the future performance by the assignee of Tenant’s obligations under this Lease or (B) a
guaranty, or guaranties, in form and substance satisfactory to Landlord from one or more persons with a net worth and working capital in amounts that Landlord reasonably determines are sufficient to assure the future performance of Tenant’s
obligations under this Lease; 
 (ii)    The proposed assignment will not release or impair any guaranty of the
obligations of Tenant (including Guarantor and the proposed assignee) under this Lease; and 
 (iii)    The proposed
assignee and its guarantors have a demonstrated financial condition and operating performance similar or superior to that of Tenant and any Guarantor of Tenant’s obligations under this Lease at the date that Tenant became a tenant hereunder.

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 35

 (b)    Any and all monies or other considerations payable or otherwise
to be delivered in connection with the assignment referred to in Section 15.04(a)(i) above shall be paid or delivered to Landlord, shall be and remain the exclusive property of Landlord and shall not constitute property of
Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all monies or other consideration constituting Landlord’s property under the preceding sentence not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and be promptly paid to or turned over to Landlord. 
 (c)    Any person or entity to which this
Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment. Any such assignee shall on
demand execute and deliver to Landlord an instrument confirming the assumption. 
 15.05    Reasonable
Charges. When, pursuant to the Bankruptcy Code, Tenant’s trustee or the debtor-in-possession is obligated to pay reasonable use and occupancy charges
for the use of the Premises, the charges shall not be less than the Base Rental and all other amounts payable by Tenant under this Lease. 

15.06    Consent. Neither the whole nor any portion of Tenant’s interest in this Lease or its estate in
the Premises shall pass to any trustee, receiver, assignee for the benefit of creditors, or any other person or entity, or otherwise by operation of law under the laws of any state having jurisdiction of the person or property of Tenant unless
Landlord has consented to the transfer in writing. No acceptance by Landlord of Base Rental or any other payments from a trustee, receiver, assignee, person or other entity shall be deemed to constitute such consent by Landlord, nor shall it be
deemed a waiver of Landlord’s right to terminate this Lease for transfer of Tenant’s interest under this Lease without such consent. 

15.07    Intent. Landlord and Tenant acknowledge, for themselves and for each of their successors and assigns,
their intent to have the applicable provisions of §365 of the Bankruptcy Code, or any successor provisions, apply to this Lease. 

16.    STATUTORY MATTERS 

16.01    Waiver of Lien. To the maximum extent permitted by applicable law, Tenant waives all rights and liens
granted under Texas Property Code §91.004. Similarly, Landlord waives any right of distraint, distress for rent or landlord’s lien that may arise at law. 

16.02    Assessment of Charges. Tenant acknowledges and stipulates that the amount of all charges to Tenant under
this Lease are either expressly stated or are to be computed in accordance with the methods established by this Lease, in compliance with the requirements of Texas Property Code §93.012. 

16.03    OFAC. Tenant represents and certifies that (a) Tenant is not a person and/or entity with whom United
States (“U.S.”) persons or entities are restricted from doing business under U.S. law, executive power, or regulation promulgated thereunder by any regulatory body; (b) to its knowledge, no person or entity named on any U.S.
list of specially designated nationals or blocked persons has any direct interest in Tenant such that the direct investment in Tenant is prohibited by any U.S. law; (c) Tenant is not in violation of any U.S. money laundering law; and
(d) none of Tenant’s funds have been derived from unlawful activity such that the direct investment in Tenant is prohibited by U.S. law. The foregoing are ongoing covenants of Tenant, Tenant shall immediately advise Landlord of any
change in the status or accuracy of such representations, and upon request Tenant shall recertify such representations and certify in writing the identity of all entities and individuals owning or controlling Tenant. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 36

 17.    SUBORDINATION AND ATTORNMENT 

17.01    Agreement. Landlord may transfer, assign, mortgage and convey in whole or in part the Building or the
Land, and any and all of its rights under this Lease, and nothing herein shall be construed as a restriction on Landlord’s right to do so. Tenant hereby subordinates this Lease and all rights of Tenant hereunder to the lien of any mortgage or
deed of trust now or hereafter placed against the Premises, and all renewals, substitutions and extensions thereof, and all such liens are superior to and prior to this Lease. If a mortgagee or other lienholder acquires the Premises as a purchaser
at a foreclosure sale (any such mortgagee or other lienholder or purchaser at a foreclosure sale being each hereinafter referred to as the “Purchaser at Foreclosure”), then Tenant shall (at the sole and absolute election of the
Purchaser at Foreclosure) thereafter remain bound to the same effect as if a new and identical Lease between Purchaser at Foreclosure, as Landlord, and Tenant, as Tenant, had been entered into for the remainder of the Term of the Lease in effect at
the time of the foreclosure. Tenant shall, on request, execute any reasonable certificate or instrument necessary or desirable further to effect the subordination of this Lease to the mortgage or deed of trust liens, or to confirm a
lienholder’s election to continue the Lease in effect after foreclosure, as above provided. Tenant shall attorn and pay Rent to the Purchaser at Foreclosure as if that party were a signatory to this Lease. Tenant hereby constitutes and appoints
Landlord as Tenant’s attorney-in-fact to execute any such certificate or instrument for and on behalf of Tenant. Any lienholder with a lien that covers the Premises
has the absolute right at any time to subordinate its lien to this Lease and to Tenant’s rights hereunder such that a foreclosure of that lien will result in the purchase of the affected property subject to the rights of Tenant hereunder, and
Tenant has no right or ability to unilaterally prevent that result. On an act or omission by Landlord which might allow Tenant to terminate this Lease or to claim a partial or total eviction, Tenant shall not exercise any such right until
(i) it has given written notice to the holder of any mortgage, deed of trust or other lien on the Premises, of the act or omission, and (ii) a reasonable period for remedying the act or omission has elapsed following the giving of notice.
Landlord represents that there are currently no mortgages, deeds of trust or ground leases upon the Project. Notwithstanding any of the foregoing, the subordination of this Lease to a ground lease or instrument of security shall be conditioned upon
Tenant’s receipt from any such ground lessors or lenders of a non-disturbance, subordination and attornment agreement reasonably satisfactory to Tenant. 

18.    TENANT ESTOPPEL LETTER 

18.01    Estoppel Letter. On the request of Landlord made from time-to-time with at least five (5) business days’ prior notice, Tenant shall execute and deliver to Landlord, or to a mortgagee or prospective purchaser as directed by Landlord, a statement in
writing of substantially the form attached as Exhibit H. If any of the foregoing matters is not true at the time that Landlord requests the written statement, then Tenant shall specify in detail any differences. 

19.    QUIET ENJOYMENT 

19.01    Quiet Enjoyment. Landlord has neither made nor authorized any other person (including Broker or any
other brokers) to make any representations, covenants or warranties with respect to the Premises except as expressly set forth in this Lease. Landlord warrants that it has full right and power to execute and perform this Lease and to grant the
estate demised herein and that Tenant, on payment of the Rent and performance of the covenants herein contained, shall peaceably and quietly have, hold and enjoy the Premises during the full Term of this Lease, subject to the rights of lienholders
under Article 17. 
 20.    NO IMPLIED WAIVER 

20.01    No Implied Waiver. Landlord’s failure to insist at any time on the strict performance of any
covenant or agreement, or its failure to exercise any option, right, power or remedy contained in this Lease, shall not be construed as a waiver or a relinquishment thereof for the future. The waiver of or redress for any violation of any term,
covenant, agreement, or condition contained in this Lease shall not prevent a subsequent act being a violation. Landlord shall be considered to have waived a provision of this Lease only 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 37

 
if specifically expressed in a writing signed by Landlord. No expressed waiver shall affect any matter other than the one specified in the waiver and only for the time and in the manner
specifically stated. Landlord’s receipt of Rent with knowledge of the breach of a covenant or agreement contained in this Lease shall not be deemed a waiver of the breach. No payment by Tenant or acceptance by Landlord of a lesser amount than
the monthly installment of Rent due under this Lease shall be considered other than on account of the earliest Rent due hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed
an accord and satisfaction. Landlord may accept a check or payment without prejudice to Landlord’s right to recover the balance of the Rent due or to pursue any other remedy provided in this Lease. 

21.    PAYMENTS AND NOTICES 

21.01    Payments Due Landlord. All Rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord in the County in which the Building is located, at the address set forth in Section 1.01(b), or at such other address as Landlord specifies from time to time. All such payments shall,
for the purposes of this Lease, notwithstanding any other provision of this Lease, be deemed paid only when actually received by Landlord. Except as may be provided otherwise in this Lease, all amounts payable under this Lease shall be payable in
coin or currency of the United States of America that at the time of payment is legal tender for public and private debts. 

21.02    Notices. Each provision of this Lease, or any applicable governmental laws, ordinances, regulations,
and other requirements with reference to the sending, mailing or delivery of any notice, communication, request, reply or advice (hereinafter severally and collectively called “Notice”), or with reference to the making of any
payment by Tenant to Landlord, shall have been complied with when and if the following steps are taken: 

(a)    Delivery. Any Notice or document required to be delivered hereunder, or any Notice given by either party
hereto to the other party, shall be deemed to be delivered whether or not received, three (3) business days after deposit in the United States mail, postage prepaid, certified or registered mail (with or without return receipt requested), or
one (1) business day after deposit with an overnight courier, addressed to the appropriate party at its respective address set out in Section 1.01 or at such other address as that party has theretofore specified in
accordance with this Section 21.02. If a party intentionally avoids receipt of Notice, then Notice is deemed received if given by any means by which service of process can be effected under applicable law. 

(b)    Change of Addresses. The parties hereto and their respective heirs, successors, legal representatives, and
assigns may from time to time change their respective addresses by giving at least fifteen (15) days’ written notice to the other party, delivered in compliance with this Article 21. 

22.    SUBSTITUTION OF SPACE 

22.    Intentionally deleted 

23.    MISCELLANEOUS 

23.01    Attorney’s Fees. Tenant and, to the extent authorized by the statutes and Constitution of the
State of Texas, Landlord agree that the non-prevailing party shall be responsible for the actual and reasonable attorneys’ fees, court costs and costs of suit of the prevailing party in any legal action
between the parties. Subject to the foregoing, if, as a result of any breach or default by Tenant of its respective obligations under this Lease, Landlord employs an attorney to enforce or defend any of its rights or remedies hereunder, and if
Landlord prevails, then Tenant shall pay to Landlord the reasonable attorney’s fees, court costs and costs of suit incurred by Landlord in enforcing the provisions of this Lease. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 38

 23.02    Broker’s Commission. Tenant and, to the extent
authorized by the laws and Constitution of the State of Texas, Landlord hereby indemnify each other, and shall hold each other harmless from and against, all liabilities arising from any claim for a “broker’s or leasing agent’s”
commission arising by, through, or under the indemnifying party, other than with respect to the commissions which the indemnified party has agreed, in writing, to pay, including any agreed to be paid to the Broker(s) named in
Section 1.01(p). 
 23.03    Force Majeure. If the performance by Landlord of any
provision of this Lease is delayed or prevented by an act of God, strike, lockout, restriction by any governmental authority, civil riot, flood, or similar cause not within the control of Landlord, then the period for Landlord’s performance of
the provision shall be automatically extended for the same amount of time that Landlord is so delayed or hindered, provided the forgoing extension shall not affect Tenant’s abatement and termination rights. 

23.04    Use of Language.    Words of any gender used in this Lease include any other
gender, and words in the singular include the plural, unless the context otherwise requires. 

23.05    Captions. The captions or headings of paragraphs in this Lease are inserted for convenience only, and
shall not be considered in construing the provisions hereof if any question of intent arises. 

23.06    Successors. The terms, conditions and covenants contained in this Lease inure to the benefit of, and
are binding on, the parties hereto and their respective successors in interest, assigns and legal representatives, except as otherwise herein expressly provided. All rights, powers, privileges, immunities and duties of Landlord under this Lease,
including without limitation, notices required or permitted to be delivered by Landlord to Tenant hereunder, may, at Landlord’s option, be exercised or performed by Landlord’s agent or attorney. 

23.07    Severability. If any provision of this Lease is finally held by a court of competent jurisdiction to
be invalid or unenforceable, then the invalid or unenforceable provision shall be deemed severed from this Lease and the validity and enforceability of the remaining provisions of this Lease shall be unaffected. 

23.08    Charges For Services. Any amount payable by Tenant to Landlord hereunder is considered to be Rent due
and shall be included in any lien for Rent. 
 23.09    Personal Liability. Landlord’s liability to
Tenant for any default by Landlord under this Lease is limited to those remedies provided by the laws and the Constitution of the State of Texas, and Tenant agrees to look solely to Landlord’s interest in the Building for the recovery of any
judgment against Landlord, it being intended that neither Landlord nor any of its agents, components, officers or regents shall be personally liable for any judgment or deficiency. 

23.10    Damage From Certain Causes. Except as set forth in this Lease to the contrary, Landlord is not liable
or responsible to Tenant for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition, or order of governmental body or authority, or for
any damage or inconvenience that may arise through repair or alteration of any part of the Land, the Building or the Premises, or a failure to make any such repairs. 

23.11    Governing Law. This Lease and the rights and obligations of the parties hereto shall be interpreted,
construed, and enforced in accordance with the local laws of the State of Texas. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 39

 23.12    No Reduction of Rental. Except as otherwise expressly and
unequivocally provided in this Lease, Tenant shall not for any reason withhold or reduce the amounts payable by Tenant under this Lease, it being understood that the obligations of Landlord hereunder are independent of Tenant’s obligations. In
this regard, if Landlord commences any proceedings against Tenant for nonpayment of rentals or any other sum due and payable by Tenant under this Lease, Tenant shall not interpose a counterclaim or other claim against Landlord of whatever nature or
description in any such proceedings and if Tenant interposes any such counterclaim or other claim against Landlord in such proceedings, then in addition to any other lawful remedy of Landlord, on motion of Landlord the counterclaim or other claim
asserted by Tenant shall be severed out of the proceedings instituted by Landlord and those proceedings may proceed to final judgment separately and apart from and without consolidation with or reference to the status of the counterclaim or any
other claim asserted by Tenant. Furthermore, if Landlord is required by a governmental authority to reduce energy consumption, to impose a parking or similar charge with respect to the Building, to restrict the hours of operations of the Building,
limit access to or reduce parking spaces available at the Building, or take other limiting actions, then Tenant is entitled to an equitable abatement of the Rent in accordance with the degree to which the same materially interfere with Tenant’s
use of the Premises for the Permitted Use, as determined by Landlord in its reasonable judgment. 

23.13    No Partnership. Landlord is not and under no circumstances shall it be considered to be a partner of
Tenant or engaged in a joint venture with Tenant. 
 23.14    No Oral Changes. This Lease may not be changed
or terminated orally, but only in writing executed by both parties hereto. 
 23.15    ENTIRETY; NO REPRESENTATIONS AND
WARRANTIES. THIS LEASE, INCLUDING ONLY THE ATTACHMENTS HERETO SPECIFIED IN SECTION 23.19, EMBODIES THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, INCLUDING ANY LETTERS OF
INTENT, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. LANDLORD HAS NOT MADE, AND TENANT MAY NOT RELY ON, ANY REPRESENTATIONS OR WARRANTIES WITH REGARD TO THE BUILDING, PREMISES OR OTHERWISE, EXPRESSED OR IMPLIED, EXCEPT AS STATED IN THIS LEASE. IN
PARTICULAR, LANDLORD HAS NOT AUTHORIZED ANY AGENT OR BROKER TO MAKE A REPRESENTATION OR WARRANTY INCONSISTENT WITH THE TERMS OF THIS LEASE AND TENANT MAY NOT RELY ON ANY SUCH INCONSISTENT REPRESENTATION OR WARRANTY. 

23.16    HIPAA. For purposes of this Section of this Lease, “protected health information”, or PHI,
shall have the meaning defined by the Standards for Privacy of Individually Identifiable Health Information, 45 C.F.R. Part 160 and Subparts A and E of Part 164 (the “Privacy Standards”), as promulgated by the Department of Health
and Human Services (“HHS”) pursuant to the Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). In the event that Tenant has PHI in the Premises,
Tenant agrees that (i) Landlord is not responsible for, and has no duty with respect to, Tenant’s compliance with HIPAA; and (ii) Tenant shall, in accordance with all applicable law, reasonably safeguard and properly secure PHI from
any intentional or unintentional disclosure in violation of the Privacy Standards by implementing appropriate administrative, technical and physical safeguards to protect the privacy of PHI. Tenant further agrees to implement appropriate
administrative, technical and physical safeguards to limit incidental disclosures of PHI, including disclosures to Landlord, its subcontractors and agents. The parties agree that neither Landlord nor its contractors, subcontractors or agents
shall need access to any PHI of Tenant. However, in the event PHI is disclosed by Tenant or its agents to Landlord, its contractors, subcontractors or agents, regardless as to whether the disclosure is inadvertent or otherwise, the party
discovering such disclosure shall promptly notify the other party and Landlord agrees to take reasonable steps to maintain the privacy and confidentiality of such PHI. The parties agree that the foregoing does not create, and is not intended to
create, a “business associate” relationship between the parties as that term is defined by the Privacy Standards. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 40

 23.17    Special Provisions. Any special provisions to this
Lease are set out in Exhibit G attached hereto. 
 23.18    Attachments. If the box next to
any of the following documents is marked, then the document is attached to this Lease, and it, as well as all drawings and documents prepared pursuant thereto, are a part of this Lease: 

 

			
	Exhibit A – Schematic Floor Plan of Premises	  	☒
	Exhibit B – Description of Land and Building	  	☒
	Exhibit C – Rules	  	☒
	Exhibit D – Rent Commencement Date Agreement	  	☒
	Exhibit E – Operating Cost Computation	  	☒
	Exhibit F – Guaranty of Lease Agreement	  	☐
	Exhibit G – Special Provisions	  	☒
	Exhibit H – Estoppel Certificate	  	☒
	Exhibit J – Special Materials	  	☒
	Exhibit K – Tenant’s Property	  	☒
	Exhibit L – Landlord’s Maintenance	  	☒
	Rider 101 – Tenant Finish-Out	  	☒
	Rider 201 – Parking Agreement	  	☒

 23.19    Reasonable. Whenever this Lease requires an approval, consent,
selection or judgment by either Landlord or Tenant, unless conditions to consent or another standard of consent are expressly set forth, such approval, consent, selection or judgment shall be reasonable and shall not be unreasonably withheld or
delayed. 
 THIS LEASE is executed and effective this 27th day of January, 2012. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 41

							
		 		 	LANDLORD:
			
		 		 	BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM
				
	Date signed: January 27, 2012	 		 	By:	 	 /s/ Florence P. Mayne

		 		 		 	Florence P. Mayne
		 		 		 	Executive Director of Real Estate
		 		 		 	The University of Texas System
			
		 		 	Approved as to content:
			
		 		 	THE UNIVERSITY OF TEXAS SOUTHWESTERN MEDICAL CENTER
				
	Date signed: January 24, 2012	 		 	By:	 	 /s/ Arnim E. Dontes

		 		 	Name:	 	 Arnim E. Dontes

		 		 	Title:	 	 Executive VP for Business Affairs

			
		 		 	TENANT:
			
		 		 	PELOTON THERAPEUTICS, INC.
				
	Date signed: January 23, 2012	 		 	By:	 	 /s/ Tim Kutzkey

		 		 	Name:	 	 Tim Kutzkey

		 		 	Title:	 	 CEO

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 42

 EXHIBIT A 

T0 
 LEASE AGREEMENT

 SCHEMATIC FLOOR PLAN OF PREMISES 

[Schematic] 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 43

 EXHIBIT B 

TO 
 LEASE AGREEMENT

 DESCRIPTION OF LAND AND BUILDING 

LAND ON WHICH PROJECT IS LOCATED: 

The 12.828 acre tract, more or less, described by metes and bounds in that certain deed from The City of Dallas to the Board of Regents of the
University of Texas System recorded at Volume 2004-155, Page 00601 et. seq. of the Dallas County Real Property Records. 

BUILDING CONTAINING PREMISES: 

East Campus Building B, BioCenter at Southwestern Medical District, 2330 Inwood Road, Dallas, Texas 75235. 

 

	
	/s/ TK
	/s/ FM
	/s/ AD

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 44

 EXHIBIT C 

TO 
 LEASE AGREEMENT

 RULES 

1.    Tenant shall not block or obstruct any of the entries, passages, doors, hallways or stairways of the Building or permit those areas
to be used at any time except for ingress and egress. No tenant and no employee, agent or invitee of a tenant shall go onto the roof of the Building. 

2.    Tenant shall refer all contractors, contractor’s representatives and installation technicians rendering any service to Tenant
to Landlord for Landlord’s supervision, approval and control before performance of any contractual service. 
 3.    Movement in
and out of the Building of furniture, office equipment or other bulky materials or dispatch or receipt by Tenant of any merchandise or materials which requires use of elevators or stairways shall be restricted to time (between 5:00 p.m. and 7:00
a.m.), method and routing of movement as determined by Landlord. Tenant assumes all liability and risk in that movement. Without limitation of the foregoing, Tenant is liable for all costs and expenses pertaining to alterations to the Building
and/or safety or engineering studies required by Landlord that pertain to or arise out of the weight or nature of the items that Tenant desires to move in or out of the Building. Landlord is not liable for any damage or loss to any property or
persons resulting from any such act or service performed for Tenant, and Tenant hereby agrees to (a) indemnify, defend and hold Landlord harmless from and against any and all such damage, injury or loss, including attorney’s fees arising
with respect thereto, and (b) repair any damage to the Building, Common Areas, or the Premises caused by such act or service performed by or for Tenant. If Tenant is using a moving company, then before the moving company may move any equipment,
furniture or other personal property in or out of the Building or the Premises, Tenant shall deliver to Landlord a certificate of insurance evidencing that the moving company has commercial general liability insurance coverage, workers compensation
insurance coverage, and employer’s liability insurance coverage from an insurance company satisfactory to Landlord and in such amounts as Landlord may from time to time determine. 

4.    No signs, advertisements or notices are allowed in any form on windows or doors inside or outside the Premises or any other part of
the Building, without the prior written consent of Landlord, which consent Landlord may grant or withhold in its sole discretion. 

5.    No draperies, shutters, or other window coverings shall be installed on exterior windows or walls, or on windows and doors facing
public corridors or the Common Areas without Landlord’s written consent, which consent Landlord may grant or withhold in its sole discretion. 

6.    Tenant shall not place, install or operate in the Premises or the Building any engine, stove or machinery, or conduct mechanical
operations or cook thereon or therein (except for coffee machines, microwave ovens and other break room appliances of a residential nature). 

7.    Any directory of the Building provided by Landlord shall be exclusively for the display of the name and location of tenants in the
Building, and Tenant shall pay Landlord’s standard charge for Tenant’s listing and for any changes by Tenant. Landlord may at any time, in Landlord’s sole discretion, alter the directory or limit the number of specialties listed on
the directory. 
 8.    Tenant shall keep, and shall cooperate with Landlord and Landlord’s employees and agents in keeping, the
Premises in a clean and tidy condition at all times. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 45

 9.    No additional locks or access control devices shall be placed on any door in or
providing access to the Premises without obtaining the prior written consent of Landlord, which consent Landlord may grant or withhold in its reasonable discretion, and providing Landlord with a key or other means to access the Premises. Tenant
shall not have any duplicate keys made and shall return all keys to Landlord promptly on termination of this Lease. 
 10.    Tenant
shall give Landlord prompt notice of all damage to or defects in air conditioning equipment, plumbing, electrical facilities or any part or appurtenance of the Premises. 

11.    Tenant shall not use the plumbing facilities of the Premises or Building for any purpose other than that for which they were
constructed. Tenant shall pay for all damages resulting to any plumbing fixtures from misuse by Tenant and Landlord is in no way responsible therefor. NO CHEMICALS MAY BE DISPOSED OFF THROUGH THE PLUMBING SYSTEM. 

12.    Landlord may prescribe the weight and position of safes, computers and other heavy equipment which shall, in all cases, stand on
supporting devices approved by Landlord. 
 13.    Landlord may refuse admittance to the Building from 7 p.m. to 7 a.m. on
weekdays, prior to 8 a.m. or after noon on Saturdays, and on Sundays or on state, federal or other holidays recognized by Landlord, to any person or persons who cannot furnish satisfactory identification and who have not obtained prior security
clearance (which may be obtained from the Building manager’s office by calling between 8:30 a.m. and 4:30 p.m. Monday thru Friday), or to any person who, in Landlord’s judgment, should be denied access to the Premises. 

14.    Canvassing, soliciting and peddling in the Building are prohibited, and each Tenant shall cooperate to prevent the same. 

15.    No animals are allowed in the Premises or the Building, except (i) disability service animals and (ii) research animals
under conditions approved by Landlord. 
 16.    Except as permitted under the Lease, Tenant shall not install or in any manner use any
machine, instrument, or device on the Premises which might be harmful or hazardous to any person or property without the prior written consent of Landlord which consent Landlord may grant or withhold in its sole discretion. Should Tenant desire to
install or in any manner use any such possibly harmful or hazardous item, then it shall be the responsibility of Tenant to provide, at Tenant’s sole cost and expense, all due and necessary safeguards in connection with such installation and
use, and such safeguards shall be properly certified, in writing, to Landlord, as being adequate and sufficient by person or persons accepted by Landlord as being qualified to make such certification. Tenant shall at all times comply with and adhere
to such safeguard stipulations and certifications. 
 17.    Life-threatening emergencies shall be reported to the appropriate
authorities (dial 911) for paramedic assistance, and additionally to the Landlord at the Building manager’s office. 

18.    Routine or emergency maintenance matters shall be reported to Landlord at the Building manager’s office for proper
distribution, execution and follow-up. Security matters shall also be reported to the Building leasing office. 

19.    Landlord may waive any one or more of these Rules for the benefit of any particular tenant or tenants, but no waiver by Landlord
shall be construed as a waiver of such Rules in favor of any other tenant or tenants, or prevent Landlord from thereafter enforcing all Rules against any or all of the tenants of the Building. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 46

 20.    Landlord may rescind or amend any of these Rules and make other and further
reasonable rules as in its judgment are from time to time necessary and desirable. 
 21.    The Building is a non-smoking facility. Exterior smoking areas may be designated throughout the Project for Tenant, Tenant’s agents, patients, invitees, employees and contractors, in Landlord’s sole discretion. 

22.    Possession of handguns, firearms, or other weapons (whether licensed or unlicensed) in the Building or grounds is strictly
prohibited. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 47

 EXHIBIT D 

TO 
 LEASE AGREEMENT

 RENT COMMENCEMENT DATE AGREEMENT 

Landlord and Tenant agree that construction of finish-out for the Premises located at
                            , Suite             ,
has been substantially completed, that the Premises are tenantable and ready for occupancy and, except for any punch list items, Landlord has no further obligation to make any alterations to the Premises under Rider 101. The Rent
Commencement Date of the Lease is             , 20    , and the Expiration Date of the Lease is             ,
20    . 
 Landlord and Tenant further agree that the final amount of the Tenant Improvement Allowance expended by
Landlord under the Lease is $        . 
 Executed as of the      day of
            , 20    . 
  

					
	LANDLORD:	 	THE BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM

 
					
			
		 	By:	 	  

		 	Name:	 	  

		 	Title:	 	  

 
							
			
	TENANT:	 	    	 	  

 
					
			
		 	By:	 	  

		 	Name:	 	  

		 	Title:	 	  

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 48

 EXHIBIT E 

TO 
 LEASE AGREEMENT

 OPERATING COST COMPUTATION 

A.    Operating Cost Examples. The following are, without limitation, examples of costs included in Operating
Costs for the Project: 
 (1)    all taxes, assessments, and other governmental charges, whether federal, state, county
or municipal, and whether they be by taxing districts or authorities presently taxing the Premises and Building or by others, subsequently created or otherwise, and any other taxes and assessments levied or assessed against the Land, the Building
and other associated improvements situated on the Land, and the Building Facilities, including interest on installment payments, and including all costs and fees (including attorney’s fees) incurred by Landlord in contesting or negotiating with
taxing authorities, but expressly excluding taxes on Tenant’s personal property and trade fixtures, which are payable by Tenant in accordance with Section 3.05 of the Lease; 

(2)    all reasonable costs and expenses of operating, maintaining and repairing (including replacing components of)
Building Facilities, including elevators, escalators, heat, ventilation, and air conditioning systems, and all other mechanical or electrical systems (including, without limitation, Landlord’s back-up
electrical generator systems and other electrical systems) serving the Building; 
 (3)    all reasonable costs and
expenses incurred in cleaning the Building; 
 (4)    Energy Costs and costs of all other utilities for the Project,
such as the cost of water, and sewer rents or charges, for the Project. “Energy Costs” means the cost incurred by Landlord for (i) any and all forms of fuel or energy utilized in connection with the operation, maintenance, and use of
the Building, Common Areas and Service Areas, (ii) sales, use, excise and other taxes assessed by Governmental authorities on energy sources, and (iii) other reasonable costs of providing energy to the Building, Common Areas and Service
Areas (but not the costs of the energy provided to the Premises, which are sub-metered to the Premises and payable by Tenant pursuant to Section 3.01 of the Lease). 

(5)    all supplies and materials reasonably used in the operation and maintenance of the Project; 

(6)    costs of all insurance relating to the Project, including the cost of casualty and liability insurance applicable
to the Project and Landlord’s personal property used in connection therewith; 
 (7)    amortization of costs of or
rental expenses for any machinery, equipment or other improvements installed by Landlord to conform to any law, ordinance, rule, regulation, or order of any governmental authority having jurisdiction over the Project that was enacted or promulgated
after the Rent Commencement Date, or for the purpose and in reasonable anticipation of reducing energy costs in the Project or other Operating Costs; 

(8)    expenses and fees (including attorney’s fees) incurred in contesting the validity or applicability of any
governmental enactments that may affect Operating Costs; 
 (9)    general maintenance costs and expenses reasonably
incurred in connection with the Project (including, but not limited to, security, maintenance of all exterior and interior landscaping, garbage and other waste removal, non-tenant alterations and decorations,
heating and air conditioning repairs and all labor utilized and supplies consumed with respect to any general Project maintenance); 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 49

 (10)    janitorial service and window cleaning for the Building,
including the Common Areas and Service Areas (including materials, supplies, Building-standard light bulbs, equipment and tools therefor and rental and appreciation costs related to the foregoing), or contracts with third parties to provide the
same; 
 (11)    the cost of providing security to the Building and the Parking Facilities; 

(12)    reasonable management costs of the Project (including, but not limited to, any management fee payable by Landlord
with respect to the Project, audit and accounting expenses and legal fees), and Landlord’s overhead expenses directly attributable to Project management; and 

(13)    wages, salaries, fees, pension benefits, taxes, unemployment and disability insurance, worker’s compensation
insurance, social security benefits and any other expenses reasonably incurred with respect to all personnel engaged in the operation, maintenance, leasing or security of the Project. The term “personnel” shall include, but not be limited
to, employees such as superintendents, engineers, electricians, clerks, mechanics, helpers, security officers, porters, cleaners, window washers, as well as contract laborers performing services with respect to the Project. 

B.    Operating Cost Exclusions. Notwithstanding the foregoing to the contrary, the following are excluded
from the Operating Costs: 
 (1)    leasing commissions, attorney’s fees, costs and disbursements and other
expenses incurred in leasing, renovating or improving space for tenants or prospective tenants of the Building; 

(2)    costs (including permit, license and inspection fees) incurred in renovating or otherwise improving or decorating,
painting or redecorating space for tenants of vacant space; 
 (3)    Landlord’s costs of any services sold to
tenants for which Landlord is entitled to be reimbursed by such tenants as an additional charge or rental over and above the Base Rental and Operating Costs payable under the lease with the tenant or other occupant; 

(4)    any depreciation and amortization on the Building, except as expressly permitted herein; 

(5)    interest on debt or amortization payments on any mortgages or deeds of trust or any other debt for borrowed money;

 (6)    all items and services for which Tenant reimburses Landlord outside of Operating Costs or pays third persons
or which Landlord provides selectively to one or more tenants or occupants of the Building (other than Tenant); 

(7)    advertising and promotional expenditures; 

(8)    repairs or other work occasioned by fire, windstorm or other work paid for through insurance and condemnation
proceeds; 
 (9)    utilities separately metered to the Premises and directly billed to Tenant by Landlord. (Without
limitation of the foregoing, “Energy Costs” do not include charges for electrical services to the Premises that are separately metered and billed to Tenant by Landlord); 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 50

 (10)    costs of a type not included in Operating Costs in the Base
Year, save and except to the extent required by applicable law taking effect after the Reference Date of this Lease; 

(11)    costs occasioned by casualties or condemnation; 

(12)    costs to correct any construction defect in the Project or to comply with any covenant, condition, restriction,
underwriter’s requirement or law applicable to the Project on the Rent Commencement Date; 
 (13)     costs
incurred in connection with the presence of any Infectious and Hazardous Waste or Hazardous Material, except to the extent caused by the release or emission of the Infectious and Hazardous Waste or Hazardous Material in question by Tenant; 

(14)     expense reserves; 

(15)     costs which could properly be capitalized under generally accepted accounting principles, except to the extent
amortized over the useful life of the capital item in question; 
 (16)     any fee, profit or compensation retained by
Landlord or its affiliates for management and administration of the Project in excess of three percent (3%) of Base Rent; and 
 (17)
    any tax or assessment expense (a) levied on Landlord’s rental income, unless such tax or assessment is imposed in lieu of real property taxes, (b) in excess of the amount which would be payable if such tax or
assessment expense were paid in installments over the longest permitted term, (c) imposed on land and improvements other than the Project or (d) attributable to Landlord’s net income, inheritance, gift, transfer, estate or state
taxes. 
 Notwithstanding the foregoing, in no event shall Tenant be obligated to pay for any Controllable Operating Costs to the extent
they exceed the Controllable Operating Expenses payable by Tenant in the Base Year, or, thereafter, in the preceding Lease Year by more than five percent (5%) on an annual cumulative compounding basis. As used herein, Controllable Operating Expenses
shall mean all Operating Costs except insurance, utilities, taxes and minimum wage related expenses. Landlord currently estimates Operating Costs to be $8.00 per square foot per year. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 51

 EXHIBIT G 

TO 
 LEASE AGREEMENT

 SPECIAL PROVISIONS 

1.    EXTENSION OPTION 

a.    Provided no Event of Default exists and Tenant has not assigned this Lease or subleased the entire Premises to an
entity other than as permitted by Section 12.02 at the time of such election, Tenant may renew this Lease for one (1) additional period of five (5) years (“Extension Term”) on the same terms provided in this Lease
(except as set forth below), by delivering written notice of the exercise thereof to Landlord not later than nine (9) months before the expiration of the Initial Term. On or before the commencement date of the extended Term in question,
Landlord and Tenant shall execute an amendment to this Lease extending the Term on the same terms provided in this Lease, except as follows: 

1.    The Base Rent payable for each month during each such extended Term shall be the prevailing fair market rental rate
for tenants in the Building, at the commencement of such extended Term, for space of equivalent quality, size, utility, improvements installed at Landlord’s expense only and location as the Premises, with the length of the extended Term and
Tenant’s obligations to pay additional rent under the Lease and that there will be no free rent, tenant improvement allowance or other concession during the extension terms under this Lease to be taken into account (the “Market
Rate”); 
 2.    Tenant shall have no further renewal options unless expressly granted by Landlord in writing;
and 
 3.    Landlord shall lease to Tenant the Premises in their then-current condition, and Landlord shall not provide
to Tenant any allowances (e.g., moving allowance, construction allowance, and the like) or other tenant inducements unless otherwise agreed by Landlord and Tenant. 

b.    Tenant’s rights under this Exhibit G shall terminate if (1) this Lease or Tenant’s
right to possession of the Premises is terminated; (2) Tenant assigns any of its interest in this Lease or sublets all of the Premises to an entity other than as permitted by Section 12.02, or (3) Tenant fails to timely exercise its
option under this Exhibit G, time being of the essence with respect to Tenant’s exercise thereof. 

c.    If it becomes necessary to determine the Market Rate by appraisal, real estate appraiser(s), all of whom shall be
Members of the Appraisal Institute and who have at least five (5) years experience appraising research and development space located in the vicinity of the Premises shall be appointed and shall act in accordance with the following procedures:

 1    If the parties are unable to agree on the Market Rate by the
90th day prior to the expiration of the Initial Term, either party may demand an appraisal by giving written notice to the other party, which demand to be effective must state the name, address
and qualifications of an appraiser selected by the party demanding an appraisal (the “Notifying Party”). Within ten (10) days following the Notifying Party’s appraisal demand, the other party (the “Non-Notifying Party”) shall either approve the appraiser selected by the Notifying Party or select a second properly qualified appraiser by giving written notice of the name, address and qualification of
such appraiser to the Notifying Party. If the Non-Notifying Party fails to select an appraiser within the ten (10) day period, the appraiser selected by the Notifying Party shall be deemed selected by
both parties and no other appraiser shall be selected. If two appraisers are selected, they shall select a third appropriately qualified appraiser. If the two appraisers fail to select a third qualified appraiser, the third appraiser shall be
appointed by the then presiding judge of the county where the Premises are located upon application by either party. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 52

 2    If only one appraiser is selected, that appraiser shall notify the
parties in simple letter form of its determination of the Market Rate within fifteen (15) days following his selection, which appraisal shall be conclusively determinative and binding on the parties as the appraised Market Rate. If multiple
appraisers are selected, the appraisers shall meet not later than ten (10) days following the selection of the last appraiser. At such meeting the appraisers shall attempt to determine the Market Rate as of the commencement date of the extended
term by the agreement of at least two (2) of the appraisers. If two (2) or more of the appraisers agree on the Market Rate at the initial meeting, such agreement shall be determinative and binding upon the parties hereto and the agreeing
appraisers shall, in simple letter form executed by the agreeing appraisers, forthwith notify both Landlord and Tenant of the amount set by such agreement. If multiple appraisers are selected and two (2) appraisers are unable to agree on the
Market Rate, all appraisers shall submit to Landlord and Tenant an independent appraisal of the Market Rate in simple letter form within twenty (20) days following appointment of the final appraiser. The parties shall then determine the Market
Rate by averaging the appraisals; provided that any high or low appraisal, differing from the middle appraisal by more than ten percent (10%) of the middle appraisal, shall be disregarded in calculating the average. 

3    If only one appraiser is selected, then each party shall pay one-half of the
fees and expenses of that appraiser. If three appraisers are selected, each party shall bear the fees and expenses of the appraiser it selects and one-half of the fees and expenses of the third appraiser. 

2.    OPERATION OF VIVARIUM. 

a.    Tenant is granted the right to operate a vivarium of not more than 1,400 rentable square feet in the portion of the
Premises so labeled in Exhibit A. Tenant is solely responsible for all costs associated with staffing, equipping (except to the extent included in the Landlord Improvements) and operating the vivarium. (Without limitation of the
foregoing, such costs include the costs of animal care, biological waste disposal, and cleaning and maintenance of the vivarium.) The only creatures that may be housed or used in the vivarium are rats and mice. Tenant is responsible
for assuring that no vibrations, noise or smells adversely impact the Building and/or other tenants in the Building. Landlord expressly disclaims any warranties or representations that the Building or the Premises are or will continue to remain
suitable for the operation of a vivarium. 
 b.    Tenant’s safety and operating procedures and protocols
(“Vivarium Protocols”) for handling animals and operating the vivarium are subject to the prior written consent of Landlord, which consent must be obtained by Tenant prior to the actual introduction of any animals within the
Premises or Building. Thereafter, Landlord may, in its reasonable discretion, require such modifications or amendments to Tenant’s Vivarium Protocols as Landlord deems reasonably necessary for the safety of persons and property within the
Building and Premises and to prevent interference with other occupants of the Building. Tenant may not alter, modify or terminate any whole or part of Tenant’s Vivarium Protocols without the prior written consent of Landlord. Tenant agrees to
consult and cooperate with Landlord’s EHS in formulating Tenant’s Vivarium Protocols. However, neither (i) Landlord’s review of or consent to any safety procedures or protocols required of Tenant under this section, nor
(ii) any alteration modification or amendment to Tenant’s Vivarium Protocols, regardless of whether the same are suggested or required by Landlord, shall be deemed a warranty or representation by Landlord to Tenant that such are sufficient
or adequate to achieve or ensure their intended purposes. Landlord shall have no responsibility for the operation of the vivarium. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 53

 c.    Tenant will promptly notify Landlord in writing upon Tenant’s
discovery of (i) Tenant’s violation of the provisions of this Section, or (ii) any event or incident involving the Vivarium that poses an actual or potential material hazard of material harm to property or injury or death to
person(s). 
 d.    At least ninety (90) days prior to the expiration of the Term of the Lease, Tenant and
Landlord’s EHS shall meet to inspect the Vivarium to determine whether or not decommissioning is necessary. For purposes hereof, the term “decommissioning” means cleaning the vivarium area in accordance with all applicable laws
and the provisions of this Lease. If decommissioning is necessary, the Tenant shall promptly provide the Landlord with a written proposed decommissioning plan, which shall contain (i) the name, address and telephone number of the contractor
engaged by Tenant to effectuate the decommission, unless Landlord and Tenant agree that Tenant can perform such work, (ii) the cost of the decommission, (iii) a time sequence for the decommission, and (iv) Tenant’s covenant to
complete the decommission prior to a date mutually agreed upon by Landlord and Tenant. If Tenant does not timely provide the Landlord a satisfactory decommissioning plan, then the Landlord, in addition to all other rights and remedies it has
hereunder or at law or in equity, may, but shall not be obligated to, undertake the decommission on Tenant’s behalf and at Tenant’s cost and expense. Tenant hereby agrees to decommission the Premises prior to the mutually agreed date in
accordance with the decommissioning plan approved by the Landlord and in accordance with all applicable laws, without any expense to the Landlord, at Tenant’s expense. 

e.    All operating and maintenance costs of the dedicated HVAC system serving the vivarium shall be performed by
Landlord, at Tenant’s sole expense. Tenant will reimburse Landlord for such costs within thirty (30) days following submission of a statement by Landlord. Notwithstanding the foregoing to the contrary, Landlord agrees to use commercially
reasonable efforts to enforce all warranties pertaining to such back-up HVAC and other systems, and shall not bill Tenant for costs actually covered by such warranties.  

f.    Tenant may not sell or lease vivarium services or space to third parties. 

3.    OPTION TO EXPAND. 

Landlord shall use reasonable efforts to assist Tenant with its expansion needs. If, at any time during the Term, Landlord shall solicit or
receive a bona fide offer in writing (“Offer”) from a third party to lease all or any portion of space on the second floor of the Building contiguous to the Premises (“Expansion Space”), Tenant (but not any assignee
or sublessee of Tenant other than an assignee under Section 12.02 of the Lease) shall have a right of first refusal (“Right of First Refusal”) to lease the Expansion Space upon the same terms and conditions as set forth in the
Offer. Landlord, promptly following Landlord’s receipt of the Offer, shall deliver written notice to Tenant specifying the terms and conditions contained in the Offer. Tenant shall exercise its Right of First Refusal by providing Landlord with
written notice of its exercise within five (5) business days after the date of receipt of Landlord’s notice regarding the Offer. If Tenant exercises its Right of First Refusal within the five
(5) business-day period, Landlord and Tenant promptly shall execute an amendment to the Lease relating to the Expansion Space, which includes the terms and conditions set forth in the Offer. If Tenant
affirmatively elects not to exercise such Right of First Refusal within the five (5) business day period, or fails to provide Landlord with its written notice of exercise within the five (5) business day period, then Tenant shall be deemed
to have elected not to exercise its Right of First Refusal with respect to the particular Offer at issue. Notwithstanding the foregoing, if Landlord negotiates with the proposed tenant lease terms materially more favorable than those offered to
Tenant but rejected, Landlord shall be required to submit the more favorable terms to Tenant for its review. (For purposes hereof, “materially more favorable” means (i) a base rent more than 7% lower than that set forth in the Offer;
or (ii) a finish-out allowance more than 7% greater than that set forth in the Offer.) Tenant shall have three (3) business days after receipt of the more favorable terms to accept or reject the
Expansion Space. If Tenant rejects the more favorable terms, Landlord shall be free to enter a lease with the proposed tenant. Tenant’s Right of First Refusal shall be 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 54

 
continuous during the Term. Tenant’s rejection of any particular Offer shall not relieve Landlord of its obligation to again offer any Expansion Space to Tenant at any time during the Term
that the Expansion Space subsequently becomes available 
 4    SIGNAGE.

Landlord shall, at Landlord’s cost, provide Building standard signage on the entry door to the Premises and lobby directly signage. The
lobby signage shall designate Tenant’s full name and suite number. 
 5.    EARLY ENTRY. 

Landlord shall permit Tenant to enter the Premises prior to the Rent Commencement Date for purposes of preparing them for occupancy, subject to
such reasonable restrictions as Landlord may require for the purposes of (i) providing for the safety of property and persons in the Premises, and (ii) avoiding disruption or interference with prosecution of work on the Tenant
Improvements. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 55

 EXHIBIT H 

TO 
 LEASE AGREEMENT

 TENANT ESTOPPEL CERTIFICATE 

Re:    Lease dated             , 20    ,
and attached hereto as Exhibit A between Board of Regents of The University of Texas System for the use and benefit of The University of Texas Southwestern Medical Center (“Landlord”), and
                             (“Tenant”) on premises designated as Suite
     (“Premises”) located at East Campus Building B, 2330 Inwood Road, Dallas, Texas, providing for a rental of $         payable monthly in advance during the
current lease year. 
 The undersigned, as Tenant, hereby confirms to the Board of Regents of The University of Texas System and to
                                         the
following: 
  

	 	1.	 A true, complete and correct copy of the Lease and all amendments thereto (collectively, the
“Lease”) are attached to this estoppels certificate. 

  

	 	2.	 Tenant has accepted possession of the Premises pursuant to the terms of the Lease. 

 

	 	3.	 To Tenant’s actual knowledge, any and all improvements and space required to be constructed or furnished
to Tenant by Landlord according to the Lease have been completed and furnished. 

  

	 	4.	 All parking spaces to be furnished to Tenant under the Lease have been furnished. 

 

	 	5.	 The term of the Lease began             ,
20    , and ends             , 20    . 

  

	 	6.	 Tenant holds (i) no option to extend or renew the term of the Lease; and (ii) no option or right of
first refusal to lease or purchase space in East Campus Building B other than as follows:
                                         
                                

 

	 	7.	 Rental payments under the Lease commenced
            , 20    , and the current monthly Base Rental payment under the Lease is $         and Tenant’s current pro rata
share of estimated Operating Costs is $         per month. 

  

	 	8.	 To Tenant’s actual knowledge, there are currently no offsets or credits against rentals owing by Tenant
under the Lease, nor has any rental payment been made to Landlord for any period more than 30 days in advance. 

  

	 	9.	 No security or other deposit has been paid by Tenant with respect to the Lease except as follows:
                                        .

  

	 	10.	 Tenant has no actual knowledge of any default that presently exists or any condition, which, with the passage
of time or the giving of notice, or both, would become a default under the terms of the Lease by either Tenant or Landlord. 

  

	 	11.	 The Lease is in full force and effect and has not been assigned by Tenant or to Tenant’s actual knowledge,
without inquiry, by Landlord, modified, supplemented, or amended in any way except as follows:
                                         
       . 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 56

	 	12.	 Upon written notice of the sale of the Premises to Purchaser, the undersigned will recognize upon request the
Purchaser as landlord under the Lease and will thereafter pay Rent to the Purchaser or its designee in accordance with the terms of the Lease at the address specified in writing by Purchaser. 

 

							
	Date:             , 20    	 	Tenant:	 	  

				
		 		 	By:	 	  

		 		 	Name:	 	  

		 		 	Title:	 	  

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 57

 EXHIBIT J 

TO 
 LEASE AGREEMENT

 SPECIAL MATERIALS 

[to be completed by Tenant at Lease Commencement] 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 58

 EXHIBIT K 

TO 
 LEASE AGREEMENT

 TENANT’S PROPERTY 

[to be completed by Tenant at Lease Commencement] 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 59

 EXHIBIT L 

TO 
 LEASE AGREEMENT

 LANDLORD’S MAINTENANCE 

1.    The Building will not, as of the Commencement Date, have an on-site manager. Requests for
repairs, assistance with shipping and receiving and the like should be directed to the following persons, during the Office Area’s Normal Business Hours: 

Stephen Lawson 
 Landlord will address matters
raised by Tenant within a commercially reasonable time following Tenant’s notice. Unless otherwise agreed by Landlord and the Tenant, all ordinary repairs to the Premises shall be performed during Normal Business Hours and all mechanical
repairs to the Premises shall be performed after the Office Area’s Normal Business Hours. 
 2.    Landlord will maintain a 24 hour
a day, 7 day per week call center for major emergencies involving the Building or the Premises, which Tenant may contact at: 
 Stephen
Lawson 
 3.    Landlord agrees to give Tenant reasonable prior notice of Landlord’s preventative maintenance schedule(s) for the
Premises and to perform such maintenance work only after reasonable prior notice to Tenant and outside of the Office Area’s Normal Business Hours. 

4.    Landlord agrees to give Tenant reasonable prior written notice of any change to the contact information set forth in this
Exhibit I. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 60

 RIDER 101 

TO 
 LEASE AGREEMENT

 FINISH OUT 

A.    Improvements to be Completed by Landlord. Landlord shall provide the following improvements
(“Landlord Improvements”) to the Premises at its sole cost and expense up to a maximum amount not to exceed $2,005,873 (herein called the “Landlord’s Contribution”), which amount is calculated on the
basis of $155.1933 per square foot of Rentable Area of the Premises. 
 The improvements described in the plans and drawings attached to
this Rider 101 as Schedule 1. 
 1.    Landlord Improvements. Prior to Tenant’s occupancy,
Landlord shall complete the Landlord Improvements. Landlord shall use commercially reasonable efforts to complete the Landlord Improvements by the Anticipated Rent Commencement Date. 

(a)    As of November 4, 2011, after consultation with Tenant, Landlord has provided Tenant with Landlord’s
proposed plans and specifications (defined below in subpart (c))for the Landlord Improvements (such plans and specifications, as amended in accordance with the provisions of this Rider 101, are hereafter called “Plans and
Specifications”). 
 (b)    The Plans and Specifications have been accepted by both Tenant and Landlord, the
Plans and Specifications are incorporated herein by reference and made a part hereof for all purposes. 

(c)    Landlord and Tenant acknowledge that the plans dated November 4, 2011, by Page Southerland Page, LLP have been
approved by both parties and shall constitute the “Plans and Specifications.” 
 (d)    Promptly upon approval
of the Plans and Specifications, Landlord has caused general contractors to bid for construction of the Landlord Improvements.    All bids have been opened together, with Landlord selecting the general contractor with the lowest
bid to construct the Landlord Improvements (the “General Contractor”), subject to the reasonable approval of Tenant. Landlord shall enter into a guaranteed maximum price construction contract with the General Contractor in the
amount of its bid (the “Approved Bid”) and shall not modify such contract without Tenant’s consent, which shall not be unreasonably withheld, delayed or conditioned. Landlord and Tenant have reviewed the Plans and
Specifications and the bids and have agreed upon the scope of work to be constructed at a cost of construction not to exceed the Landlord’s Contribution. 

2.    Change Orders.    Any changes in the Landlord Plans requested by Tenant are subject to
approval by Landlord. Landlord shall provide Tenant with any approved changes in the form of revised Landlord Plans or a written amendment thereto, together with the amount of any additional cost in completing the Landlord Improvements as a result
thereof and any amount of any delay in Substantially Completing the Landlord Improvements beyond the Anticipated Rent Commencement Date as a result thereof. Upon review and approval by Tenant, the revised Landlord Plans shall be deemed to amend the
prior Landlord Plans and any additional cost of construction arising from such change(s) shall then be paid to Landlord by Tenant. Any approved changes to the Plans and Specifications must be evidenced by written Change Order or other writing
between the parties, signed by both parties within three (3) business days of submission of such Change Order or such Change Order shall be deemed rejected by one or both parties, with Tenant paying concurrently to Landlord any sums shown on
the approved Change Order(s) in excess of the maximum Landlord’s Contribution and the parties agreeing on any related changes to the construction time schedule. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 61

 3.    Construction. Landlord, or its contractors, shall perform
the construction of the Landlord Improvements in accordance with the approved plans and all applicable laws, in a good and workmanlike manner, substantially free of defects and using new materials and equipment of good quality. Tenant shall have the
right to submit a written “punch list” to Landlord within Thirty (30) days after Substantial Completion of the Landlord Improvements, setting forth any defective item of construction, and Landlord shall promptly cause such items to be
corrected. Landlord shall have no obligation to alter, improve, decorate or otherwise prepare the Premises for Tenant’s occupancy, except to complete the Landlord Improvements in accordance with the Plans and Specifications. Such fee shall be
payable prior to delivery of possession of the Premises to Tenant. 
 4.    Substantial Completion. Landlord
shall deliver to Tenant notice of substantial completion of the Landlord Improvements in the form of the Rent Commencement Date Agreement attached to this Lease as Exhibit D. “Substantial Completion” shall mean the
date upon which the Leasehold Improvements are substantially completed in conformity with the Landlord Plans such that Tenant can occupy the Premises and conduct its business, Landlord has obtained all approvals from the applicable governmental
authorities for the legal occupancy of the Premises and Landlord has delivered possession of the Premises to Tenant in the required condition, which date is currently anticipated to be June 1, 2012. Upon Substantial Completion, Landlord shall
deliver possession of the Premises to Tenant in good, vacant, broom clean condition, with all building systems in good working order and the roof water-tight, and in compliance with all laws applicable to Landlord or Tenant. Tenant’s execution
of the Rent Commencement Date Agreement shall constitute Tenant’s acknowledgement that the Premises are in good condition and that all work and materials are satisfactory and in accordance with the Landlord Plans, save and except as to any
punch list items and latent defects. 
 5.    Landlord’s Construction of Improvements. Landlord, at its
expense, agrees to build the Landlord Improvements in accordance with the Plans and Specifications, at a cost to Landlord not to exceed the maximum Landlord’s Contribution. Tenant shall be responsible for the payment of all costs to
complete the Landlord Improvements in accordance with this Rider 101 (the “Improvement Costs”) after Landlord has expended the maximum Landlord’s Contribution, to the extent such costs exceed the maximum amount of
the Landlord’s Contribution, in monthly installments within thirty (30) days of presentation of invoices from Landlord. Notwithstanding anything to the contrary in the Lease, the Improvements Costs shall not include, and Landlord shall be
solely responsible for (and Landlord’s Contribution shall not be applied to): (a) costs attributable to improvements installed outside the demising walls of the Premises, save and except for supplemental HVAC equipment exclusively serving
the Premises, as shown on the Plans and Specifications; (b) costs for improvements which are not shown on or described in the Plans and Specifications unless otherwise approved by Tenant; (c) costs incurred due to the presence of Hazardous
Materials in the Premises or the surrounding area; (d) attorneys’ fees incurred in connection with negotiation of construction contracts, and attorneys’ fees, experts’ fees and other costs in connection with disputes with third
parties; (e) interest and other costs of financing construction; (f) costs incurred as a consequence of delay (except Tenant Delay), construction defects or default by a contractor; (g) costs recoverable by Landlord upon account of
warranties and insurance; (h) costs as a consequence of casualties; (i) penalties and late charges attributable to Landlord’s failure to pay construction costs; (j) costs to bring the Project into compliance with applicable laws
and restrictions; (k) wages, labor and overhead for overtime and premium time; and (k) construction costs in excess of the Approved Bid, except for increases set forth in approved Change Orders. Construction management fees charged by
Landlord for its construction services hereunder shall not exceed 6% of the sum of Landlord’s Contribution and any Improvement Costs in excess thereof. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 62

 6.    Delay. Tenant shall pay all costs and expenses incurred by
Landlord in connection with any delay in the commencement or completion of the Landlord Improvements caused by (i) Tenant’s failure to timely approve plans or materials, (ii) Tenant’s specification of non-Building-standard improvements or finishes, so long as Landlord notified Tenant at the time it selected such finishes of the reasonably estimated amount of delay and/or increased cost specified by Landlord at
such time attributable to Tenant’s specification of such improvements or finishes, (iii) any change, additions or alterations to the Plans (or the Leasehold Improvements covered thereby) that are requested by Tenant (notwithstanding
Landlord’s approval of such changes) in the amount of the delay and increased costs specified by Landlord in the Change Order therefor, and (iv) any other delay requested or caused by Tenant that continues for more than one
(1) business day after notice thereof by Landlord. Tenant shall be notified in writing of such costs and expenses within thirty (30) days of the Rent Commencement Date. (Any delay to completion of the Landlord Improvements beyond the
Anticipated Rent Commencement Date that is caused by (i) Tenant’s requested changes to the Plans and Specifications, or (ii) delays attributable to Tenant under this Section 6 are hereafter called
“Tenant Delay” for all purposes of this Lease.) 
 7.    Default. A default by Tenant under this
Rider 101 shall constitute a default under this Lease and shall entitle Landlord to any remedies under this Lease (notwithstanding that the Lease Term hereof has not commenced), after the giving of any notice of breach and opportunity
to cure required under this Lease. 
 8.    Indemnity. Landlord shall not be liable to Tenant, or to
Tenant’s agents, servants, employees, customers or invitees and Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all fines, suits, claims, demands, losses, liabilities, actions, and costs (including court
costs and attorney’s fees) arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Rider 101. 

B.    Rent Commencement Date/“Ready for Occupancy”. For the purpose of this Lease, the Premises are
“ready for occupancy” on the first to occur of (i) the date that the Landlord Improvements are Substantially Completed, as evidenced by Landlord’s delivery to Tenant of a certificate of substantial completion from Landlord’s
architect, or (ii) the date on which Substantial Completion would have occurred following the Anticipated Rent Commencement Date, but for Tenant Delay in Substantial Completion of the Landlord Improvements beyond the Anticipated Rent
Commencement Date of the nature described in Section 6 of this Rider 101. 

C.    Construction Budget. The Construction Budget, which reflects the Approved Bid, is attached hereto as Schedule 1
to this Rider 101. 
 Schedule 1 

[Schematic] 
  

	
	/s/ TK
	/s/ FM
	/s/ AD

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 63

 RIDER 201 

TO 
 LEASE AGREEMENT

 PARKING AGREEMENT 

1.    Parking Spaces - Tenant’s Obligation. Subject to the provisions contained herein, Landlord grants Tenant
a permit to use as specified below, and Tenant agrees to pay Landlord for parking spaces in the Parking Facility, the following quantities during the applicable period specified below and for the Basic Parking Charge (herein so called) set forth
below for each parking space: 
  

							
	 Type of Space
	  	Number of Spaces	 	  	Charge per Space
	 Reserved
	  	 	0	 	  	$0 per month
	 Unreserved
	  	 	71	 	  	$0 per month

 To the extent required by applicable law, including but not limited to the Americans with Disabilities Act, the parking spaces
will include spaces reserved for disabled/handicapped use only. 
 2.    Basic Parking Charge. Tenant shall pay
to Landlord each month during the Term, in advance, the Basic Parking Charge specified above for each of the parking spaces required to be paid for pursuant to Section 1 above. The applicable Basic Parking Charge may not be
increased during the Term. The Basic Parking Charge includes all applicable sales tax. The Basic Parking Charge due in any partial month shall be prorated on a per diem basis but shall not be less than
one-half month’s charge. Tenant’s failure to pay any Basic Parking Charge is, after the giving of any notice and the running of any cure period required under this Lease, an Event of Default under
the Lease, giving to Landlord all rights and remedies available to it under the Lease. 
 3.    Parking Facility
Rules. Tenant and Tenant’s patrons, agents, subtenants, employees, servants, invitees, contractors, licensees and visitors shall comply fully with the parking facility Rules (herein so called), which Landlord may reasonably amend from time
to time by giving written notice to Tenant: 
 (a)    Landlord may, at its option, provide a reasonable means of
controlling access to the parking facility. 
 (b)    Landlord may designate in a manner reasonably determined by
Landlord whether the parking spaces within the parking facility are reserved or open and whether the reserved areas are general reserved parking or designated reserved parking. 

(c)    Landlord has no obligation to police the use of Tenant’s reserved spaces, if any. 

(d)    Landlord may relocate any Parking Facilities (to a location no further from the Building) or spaces from time to
time, and may also use portions of the parking facility outside the designated areas for free, visitor, or other parking needs of Landlord; provided Landlord shall not over-subscribe parking by more than ten percent (10%) of the capacity of the
Parking Facilities. Landlord also may change the size of the parking spaces. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 64

 (e)    Landlord may make, modify and enforce reasonable rules and
regulations relating to the parking of automobiles in the parking facility, and Tenant shall observe those rules and regulations. 

(f)    Tenant is responsible for ensuring that its employees, agents, servants, invitees, subtenants, licensees and
contractors do not park their automobiles in visitor parking areas or spaces, if any, established by Landlord, or in parking spaces or areas, if any, reserved or designated by Landlord for the use of other tenants or occupants of the Building, or
for other purposes (such as for retail tenants). 
 (g)    Landlord is not responsible for any loss of or to any
automobile or vehicle, or any equipment or other property therein, or damage to property or injury to person, unless the loss, damage, or injury is proximately caused by the negligence or willful misconduct of Landlord or its employees. 

(h)    Tenant and its employees are responsible for ensuring that their respective automobiles are in compliance with all
automobile emission requirements and standards and are not leaking oil or other fluids. 
 (i)    Landlord may, in its
sole discretion, from time to time designate parking spaces in the parking facility for the exclusive use of specified tenants or occupants of the Building. 

(j)    The provisions in this Parking Agreement are not deemed to create a bailment between the parties, it being agreed
and understood that the relationship created between Landlord and Tenant with regard to the parking spaces is that of licensor and licensee, respectively. 

4.    Casualty Loss. If fifty percent (50%) or more of the Parking Facility is damaged by fire or other casualty,
then Landlord may, at its option, terminate Tenant’s license to use the Parking Facility by notifying Tenant in writing of the termination within thirty (30) days after the date of the casualty so long as Landlord provides Tenant with
alternate parking that is reasonably acceptable to Tenant. If Tenant’s license is not so terminated by Landlord, then Landlord shall either (i) proceed to restore the Parking Facility and provide Tenant with alternate parking during the
restoration, or (ii) not restore the Parking Facility, but provide Tenant with alternate parking throughout the remainder of the Term that is reasonably acceptable to Tenant. 

  

			
	BIOCENTER LEASE AGREEMENT – SUITES 226 AND 227	 	PAGE 65

 FIRST AMENDMENT TO LEASE AGREEMENT 

THIS FIRST AMENDMENT TO LEASE AGREEMENT (“Amendment”) is entered into effective as of 20th day of July, 2012 (the
“Effective Date”), by and between the BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM (“Landlord”) and PELOTON THERAPEUTICS, INC. (“Tenant”). 

RECITALS 

A.    Landlord and Tenant entered into that certain Lease Agreement (“Lease”) dated effective as of
January 27, 2012, wherein Landlord leased to Tenant and Tenant leased from Landlord approximately 12,925 rentable square feet of space (“Premises”) in the building commonly known as East Campus Building B, BioCenter at
Southwestern Medical District and located at 2330 Inwood Road, Dallas, Dallas County, Texas, as more specifically described in the Lease. 

B.    Landlord and Tenant now desire to amend the Lease to modify the Permitted Use under the Lease and enter into this
First Amendment to evidence the same. 
 AGREEMENT 

In consideration of the recitals, the respective obligations of the parties set forth herein, and for other good and valuable consideration,
the receipt and legal sufficiency of which are hereby acknowledged by each of the undersigned, Landlord and Tenant hereby agree to amend the Lease as follows: 
  

	1.	 Section 1.01(t), subpart (ii) of the Lease is hereby deleted and replaced with the following:

 (ii) conduct any research in the Premises that would be required to be conducted in a Biosafety Level 2, 3 or 4 (as
defined by the U. S. Center for Disease Control and Prevention) Laboratory. Notwithstanding the foregoing, Tenant may conduct research in the Premises that would be required to be conducted in a Biosafety Level 2 (as defined by the U. S. Center
for Disease Control and Prevention) laboratory utilizing the BSL 2 materials listed on the attached Exhibit 1 so long as such Biosafety Level 2 research is conducted in compliance with the terms and conditions of this Lease and the
following requirements: 
 If Tenant uses or intends to use Biological/Infectious Agents classified as Risk Group 2-4 organisms or recombinant DNA or Recombinant Mechanisms subject to the NIH Guidelines for Research Involving Recombinant DNA Molecules (collectively, the “Restricted Materials”), Tenant must
register these activities (“Hazardous Registration”) with the Landlord’s Biosafety Officer. Each registration must be reviewed by and receive written approval from the UT Southwestern Biological and Chemical Safety Advisory
Committee (BCSAC) and/or the UT System Institutional Biosafety Committee at the UT Southwestern Medical Center (IBC) prior to Tenant using or conducting research with said agents or recombinant DNA or the Restricted Materials. Prior to Tenant’s
use of Biological/Infectious Agents classified as Risk Group 2-4 organisms or recombinant DNA or recombinant mechanisms subject to the NIH Guidelines for Research Involving Recombinant DNA Molecules, Tenant
must register these activities with the Biosafety Officer (BSO). A fee of $150.00 per Hazard Registration submitted must be paid by the leasing party to cover the cost to prepare each submission for review. 

Hazard Registrations must be submitted no less than 14 business days prior to a scheduled meeting of the UT Southwestern Biological and
Chemical Safety Advisory Committee (BCSAC) and the UT System Institutional Biosafety Committee at the UT 

  

			
	First Amendment to Lease Agreement	 	Page 1

 
Southwestern Medical Center (IBC) in order for those Hazard Registrations to appear on that month’s agenda. BCSAC and IBC meetings are held the last Tuesday of each month with exceptions for
November and December due to the holiday periods. Submissions received less than 14 business days prior to the meeting will be placed on the agenda of the next scheduled monthly meeting. Landlord shall not be responsible for any loss to
Tenant if any BCSAC and/or IBC meeting(s) is/are cancelled. 
 A yearly meeting schedule for the BCSAC and IBC will be provided to ail
leasing parties to aid in the timely submission of Hazard Registrations for committee review and approval, which approval shall not be unreasonably withheld. Notice of Hazard Registration Approval or Postponement shall be provided in writing within
48hrs following the IBC and BCSAC meetings. Hazard Registrations postponed when corrective action is needed. Such corrective actions will be stipulated in a postponement letter. 

Additionally, Tenant shall comply with Landlord’s Requirements for Safe and Compliant Operations at the UT Southwestern BioCenter,
as they may be reasonably amended from time to time. Any amendment or modification required by applicable law or regulation, as same may be adopted by federal, state or local governmental authorities shall be deemed reasonable. 

2.    Capitalized Words. All capitalized words used in this Amendment and not otherwise defined herein that shalI have the
respective meanings given to such words in the Lease. The Lease is incorporated herein by reference for all purposes. 

3.    Ratification and Compliance. Except as expressly amended or modified by this Amendment, the Lease shall continue in full
force and effect. Landlord and Tenant each hereby ratify, affirm, and agree that the Lease, as herein modified, represents the valid, binding and enforceable obligations of Landlord and Tenant respectively. Landlord and Tenant each promise and agree
to perform and comply with the terms, provisions and conditions of and the agreements in the Lease, as modified by this Amendment. In the event of any conflict or inconsistency between the provisions of the Lease and this Amendment, the provisions
of this Amendment shall control and govern. 
 4.    Entire Agreement and Amendments. The Lease, as expressly modified by this
Amendment, constitutes the sole and only agreement of the parties to the Lease and supersedes any prior agreements between the parties concerning the lease of the Premises. The lease may be amended or supplemented only by an instrument in writing
executed by the party against whom enforcement is sought. 
 5.    No Commissions. Landlord and Tenant each warrants and
represents to that other that no brokerage commission or fee is due or will be payable to any person claiming by, through or under it in connection with the negotiation and execution of this Amendment. 

6.    Authority. Tenant warrants and represents to Landlord that (i) Tenant has the full right, power and authority to enter
into this Amendment, (ii) all requisite action to authorize Tenant to enter into this Amendment and to carry out Tenant’s obligations hereunder has been taken, and (iii) the person signing on behalf of Tenant has been duly authorized
by Tenant to sign this Amendment on its behalf. 
 7.    Binding. The Amendment shall be binding binding on and inure to the
benefit of Landlord, Tenant and their respective heirs, executors, administrators, legal representatives, successors and assigns. 

  

			
	First Amendment to Lease Agreement	 	Page 2

 8.    Governing Law. This Amendment shall be construed and governed by the laws
of the State of Texas in effect from time to time. 
 9.    Paragraph Headings. The paragraph headings used herein are intended
for reference purposes only and shall not be considered in the interpretation of the terms and conditions hereof. 

10.    Construction. Each party acknowledges that it and its counsel have had the opportunity to review this Amendment; that the
normal rule of construction shall not be applicable and there shall be no presumption that any ambiguities will be resolved against the drafting party in interpretation of this Amendment. 

11.    Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one
and the same agreement, and any of the parties to this Amendment may execute the Amendment by signing any of the counterparts. 
 EXECUTED
by the authorized, respective representatives of Landlord and Tenant, to be effective as of the Effective Date. 
  

			
	LANDLORD:

 BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM

			
		
	By:	 	 /s/ Florence P. Mayne

		 	Florence P. Mayne
		 	Executive Director of Real Estate
		 	The University of Texas System
	
	Approved as to Context:

 THE UNIVERSITY OF TEXAS SOUTHWESTERN MEDICAL
CENTER 

			
		
	By:	 	 /s/ Arnim E. Dontes

		 	Arnim E. Dontes
		 	Executive Vice President for Business Affairs
	
	TENANT:
	
	PELOTON THERAPEUTICS, INC.
		
	By:	 	 /s/ Tim Kutzkey

		 	Tim Kutzkey
		 	Chief Executive Officer

 Exhibit Attached: 

Exhibit 1: List of BSL-2 Materials 

  

			
	First Amendment to Lease Agreement	 	Page 3

 EXHIBIT 1 

LIST OF BSL-2 MATERIALS 

[Schematic] 

  

			
	First Amendment to Lease Agreement	 	Page 1

 SECOND AMENDMENT TO LEASE AGREEMENT 

THIS SECOND AMENDMENT TO LEASE AGREEMENT (“Amendment”) is entered into effective as of 21 day of
March, 2014 (“Effective Date”), by and between the BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM for the use and benefit of The University of Texas Southwestern Medical Center (“Landlord”)
and PELOTON THERAPEUTICS, INC. (“Tenant”). 
 RECITALS. 

A.    Landlord and Tenant entered into that certain Lease Agreement dated effective as of January 27, 2012, wherein
Landlord leased to Tenant and Tenant leased from Landlord approximately 12,925 rentable square feet of space (“Original Premises”) in the building (“Building”) commonly known as East Campus
Building B, BioCenter at Southwestern Medical District and located at 2330 Inwood Road, Dallas, Dallas County, Texas, as more specifically described in the Lease. 

B.    Landlord and Tenant amended the Lease Agreement pursuant to that certain First Amendment ‘to Lease Agreement
dated effective as of July 20, 2012. (The Lease Agreement, as so amended, is hereafter called the “Lease.”) 

C.    Landlord and Tenant now desire to amend the Lease to reflect the addition of space to the Original Premises leased
by Tenant under the Lease. 
 AGREEMENT 

In consideration of the recitals, the respective obligations of the parties set forth herein, and for other good and valuable consideration,
the receipt and legal sufficiency of which are hereby acknowledged by each of the undersigned, Landlord and Tenant hereby agree to amend the Lease as follows: 

1.    Premises. Effective as of May 1, 2014, subject to Section 1 of
Exhibit 2 (the “Expansion Space Commencement Date”); (i) the description of the space leased to Tenant in the Lease is amended by the addition of the space
(“Expansion Space”) described in Exhibit 1 attached hereto; (ii) the Original Premises and the Expansion Space shall collectively be deemed for all purposes of the Lease to
be the Premises leased to Tenant under the Lease, for a Term expiring on June 30, 2017, subject to sooner termination or extension as provided under the Lease; and (iii) without limitation of the foregoing,
Section 1(g) and Exhibit A of the Lease are hereby amended to add the Expansion Space to the description of the Premises set forth in the Lease. 

2.    Base Rental. Effective as of the Expansion Space Commencement Date, Base Rental for the Premises (inclusive of the Expansion
Space) shall be as adjusted to be as follows: 
  

											
	 Period
	  	 Base Rental Per Rentable

Square Foot Per Annum
	  	Monthly Base
Rental for
Premises	 	  	Annual Base
Rental for
Premises	 
	 Expansion Space Commencement Date - Month 2
	  	$48.65 for the Original Premises, with no Base Rental for the Expansion Space	  	$	52,397.42	 	  	$	628,769.00	 
	 Month .3 — Lease expiration
	  	$48.65 for the Original Premises and $22.00 for the Expansion Space	  	$	58,511.50	 	  	$	702,138.00	 

  

			
	Second Amendment to Lease Agreement	 	Page 1

 3.    Rentable Area and ProRata Share. Effective as of the Expansion Space
Commencement Date, for all purposes of the Lease the Rentable Area of the Premises (inclusive of the Expansion Space) shall be deemed to be 16,260 rentable square feet and Tenant’s Pro Rata Share (of Excess Operating Costs) shall be deemed to
be 15.41%. 
 4.    Tenant Improvement Allowance. Landlord agrees to construct in the Expansion Space the improvements described
in Exhibit 2 attached hereto, in accordance with the terms of said Exhibit 2. 

5.    Parking Spaces. Section 1 of Rider 201 to the Lease is amended to provide that,
effective as of the Expansion Space Commencement Date, the number of unreserved parking spaces allocated for Tenant’s use under the Lease is 89 parking spaces, with no charge for the use of such spaces. 

6.    Base Year. The Base Year as to the Expansion Space shall be the Calendar Year 2014. 

7.    Capitalized Words. All capitalized words used in this Amendment and not otherwise defined herein shall have the respective
meanings given to such words in the Lease. The Lease is incorporated herein by reference for all purposes. 
 8.    Ratification and
Compliance. Except as expressly amended or modified by this Amendment, the Lease shall continue in full force and effect. Landlord and Tenant each hereby ratify, affirm, and agree that the Lease, as herein modified, represents the valid, binding
and enforceable obligations of Landlord and Tenant respectively. Landlord and Tenant each promise and agree to perform and comply with the terms, provisions and conditions of and the agreements in the Lease, as modified by this Amendment. In the
event of any conflict or inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall control and govern. 

9.    Entire Agreement and Amendments. The Lease, as expressly modified by this Amendment, constitutes the sole and only agreement
of the parties to the Lease and supersedes any prior agreements between the parties concerning the lease of the Premises. The Lease may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is
sought. 
 10.    No Commissions. Tenant warrants and represents to Landlord no brokerage commission or fee is due or will be
payable to any person claiming by, through or under Tenant in connection with the negotiation and execution of this Amendment. Landlord shall pay a commission to its broker (Jones, Lang, Lasalle) by separate agreement. 

11.    Authority. Tenant warrants and represents to Landlord that (i) Tenant has the full right, power and authority to enter
into this Amendment, (ii) all requisite action to authorize Tenant to enter into this Amendment and to carry out Tenant’s obligations hereunder has been taken, and (iii) the person signing on behalf of Tenant has been duly authorized
by Tenant to sign this Amendment on its behalf. 
 12.    Binding. This Amendment shall be binding on and inure to the benefit of
Landlord, Tenant and their respective heirs, executors, administrators, legal representatives, successors and assigns. 

13.    Governing Law. This Amendment shall be construed and governed by the laws of the State of Texas in effect from time to time.

  

			
	Second Amendment to Lease Agreement	 	Page 2

 14.    Paragraph Headings. The paragraph headings used herein are intended for
reference purposes only and shall not be considered in the interpretation of the terms and conditions hereof. 

15.    Construction. Each party acknowledges that it and its counsel have had the opportunity to applicable and there shall be no
presumption that any ambiguities will be resolved against the review this Amendment; that the normal rule of construction shall not be drafting party in interpretation of this Amendment. 

16.    Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one
and the same agreement, and any of the parties to this Amendment may execute the Amendment by signing any of the counterparts. 

Exhibit Attached: 

Exhibit 1: Description of Expansion Space 
 Exhibit 2:
Construction of Improvements to Expansion Space 
 EXECUTED by the authorized, respective representatives of Landlord and Tenant, to be
effective as of the Effective Date. 
 LANDLORD: BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM 

 

			
	By:	 	 /s/ Kirk S. Tames

	Name:	 	Kirk S. Tames
	Title:	 	Executive Director of Real Estate ad Interim
		 	The University of Texas System

    Approved as to Content: 

    THE UNIVERSITY OF TEXAS SOUTHWESTERN MEDICAL CENTER 

 

							
		 		 	By:	 	 /s/ Arnim E. Dontes

		 		 	Name:	 	Arnim E. Dontes
		 		 	Title:	 	Executive Vice President for Business Affairs

 TENANT: PELOTON THERAPEUTICS, INC. 
  

			
	By:	 	 /s/ John A. Josey

	Name:	 	John A. Josey
	Title:	 	Chief Executive Officer

  

			
	Second Amendment to Lease Agreement	 	Page 3

 EXHIBIT 1 

Description of Expansion Space 

The Expansion Space consists of an area deemed to consist of 3335 rentable square feet located in East Campus Building B, BioCenter at
Southwestern Medical District, at 2330 Inwood Road, Dallas, Dallas County, Texas, as shown by the cross-hatching in the drawing below: 

[Schematic] 

  

			
	Second Amendment to Lease Agreement	 	Page 4

 EXHIBIT 2 

Construction of Improvements to Expansion Space 

I.    Improvements to Expansion Space. Landlord, at its expense, shall provide the following improvements (“Landlord
Improvements”) to the Expansion Space in accordance with the Plans and Specifications described on the Schedule 2.1 attached to this Exhibit 2: 

Demising walls, electric outlets, carpet and paint, as shown in the attached drawing (the “Plans and Specifications”).

 Landlord further agrees to pay up to $41,500 for the cost of such Landlord Improvements. Any costs in excess of such amount not
caused by the negligence or misconduct of Landlord shall be payable by Tenant, within ten days following written demand by Landlord. Landlord has prepared a cost estimate for the Landlord Improvements. Landlord shall enter into a construction
contract for construction of the Landlord Improvements and shall not modify such contract without Tenant’s consent, which shall not be unreasonably withheld, delayed or conditioned. Notwithstanding anything to the contrary in the Lease,
Landlord shall be solely responsible for (and the $41,500 shall not be applied toward): (a) costs attributable to improvements installed outside the demising walls of the • Premises; (b) costs for improvements which are not shown on
or described in the Plans and Specifications unless otherwise approved by Tenant; (c) costs incurred due to the presence of Hazardous Materials in the Premises or the surrounding area; (d) attorneys’ fees incurred in connection with
negotiation of construction contracts, and attorneys’ fees, experts’ fees and other costs in connection with disputes with third parties; (e) interest and other costs of financing construction; (f) costs incurred as a consequence
of delay (except Tenant Delay), construction defects or default by a contractor; (g) costs recoverable by Landlord upon account of warranties and insurance; (h) costs as a consequence of casualties; (i) penalties and late charges
attributable to Landlord’s failure to pay construction costs; (j) costs to bring the Project into compliance with applicable laws and restrictions; (k) wages, labor and overhead for overtime and premium time; and (I) construction
costs in excess of $41,500, except for increases set forth in approved change orders. 
 1.    Landlord
Improvements. Landlord shall substantially complete the Landlord Improvements prior to Tenant’s taking occupancy of the Expansion Space. Landlord shall use commercially reasonable efforts to complete the Landlord Improvements by May 1,
2014. “Substantial Completion” shall mean the Landlord Improvements have been constructed in material accordance with the above referenced drawing, save and except for minor “punch list” items such that Tenant can
occupy the Expansion Space and conduct its business, Landlord has obtained all approvals from the applicable governmental authorities for the legal occupancy of the Expansion Space and Landlord has delivered possession of the Expansion Space to
Tenant in the required condition, which date is currently anticipated to be May 1, 2014. Upon Substantial Completion, Landlord shall deliver possession of the Expansion Space to Tenant in good, vacant, broom clean condition, with all building
systems in good working order and the roof water-tight, and in compliance with all laws applicable to Landlord or Tenant. In the event that construction of the Landlord Improvements is not substantially completed by May 1, 2014, then the
Expansion Space Commencement Date shall be automatically amended to be that date the Expansion Space is delivered to Tenant with the Landlord Improvements substantially complete. Upon Substantial Completion of the Landlord Improvements, Landlord
shall give Tenant (i) written notice (“Notice of Completion”) that the Expansion Space are ready for occupancy. Within seven (7) days following Landlord’s giving of the Notice of Completion, Landlord and Tenant
shall meet at a mutually convenient time to perform a walk-through of the Expansion Space to inspect the Landlord Improvements and to prepare a punch list of minor items needing correction and Landlord shall promptly cause such items to be
corrected. 

  

			
	Second Amendment to Lease Agreement	 	Page 5

 2.    Construction. Landlord, or its contractors, shall perform
the construction of the Landlord Improvements. Landlord shall have no obligation to alter, improve, decorate or otherwise prepare the Expansion Space for Tenant’s occupancy, except to complete the Landlord Improvements in accordance with the
Plans and Specifications and all applicable laws, in good and workmanlike manner, substantially free of defects and using new material and equipment of good quality. 

3.    Delay. Tenant shall pay all reasonable costs and expenses incurred by Landlord in connection with any delay
in the commencement or completion of the Landlord Improvements due to a Tenant Delay (as defined in the Lease). Tenant shall reimburse Landlord for such expenses upon Landlord’s written demand. 

4.    Indemnity. Landlord shall not be liable to Tenant, or to Tenant’s agents, servants, employees, customers
or invitees and Tenant shall indemnify, defend, and hold Landlord harmless from and against any and all fines, suits, claims, demands, losses, liabilities, actions, and costs (including court costs and attorney’s fees) arising from any breach
or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Section. 

5.    Default. A default by Tenant under this Exhibit, subject to the notice and opportunity to cure requirements
of Section 14.01 of the Lease, is an “Event of Default” as defined in the Lease and entitles Landlord to any remedies under the Lease (notwithstanding that the Term thereof has not commenced). 

6.    Tenant’s Right of Early Access. In the event that Landlord grants Tenant the right to access the
Expansion Space during the period between Landlord’s Notice of Completion and the Expansion Space Commencement Date for the purposes of allowing the Tenant to install telecommunications equipment, computer networks, furniture, and the
coordination of network communications, Tenant’s early access shall be subject to and in compliance with all of the terms of the Lease, including without limitation the insurance provisions. 

  

			
	Second Amendment to Lease Agreement	 	Page 6

 THIRD AMENDMENT TO LEASE AGREEMENT 

THIS THIRD AMENDMENT TO LEASE AGREEMENT (“Amendment”) is entered into effective as of 8 day of
May , 2015 (“Effective Date”), by and between the BOARD OF THE REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM for the use and benefit of The University of Texas Southwestern Medical Center
(“Landlord”) and PELOTON THERAPEUTICS, INC. (“Tenant”). 
 RECITALS 

A.    Landlord and Tenant entered into that certain Lease Agreement dated effective as of January 27, 2012, wherein
Landlord leased to Tenant and Tenant leased from Landlord approximately 12,925 rentable square feet of space (“Original Premises”) in the building (“Building”) commonly known as East Campus
Building B, BioCenter at Southwestern Medical District and located at 2330 Inwood Road, Dallas, Dallas County, Texas, as more specifically described in the Lease. 

B.    Landlord and Tenant amended the Lease Agreement pursuant to (i) that certain First Amendment to Lease Agreement
dated effective as of July 20, 2012; and (ii) that certain Second Amendment to Lease Agreement dated effective as of March 21, 2014. (The Lease Agreement, as so amended, is hereafter called the “Lease”). 

C.    The Tenant’s Premises under the Lease, after the First and Second Amendments to Lease Agreement, currently
consist of 16,260 rentable square feet (“2014 Premises”). 
 D.    Landlord and Tenant now
desire to amend the Lease to reflect the addition of space to the premises leased by Tenant under the Lease. 
 AGREEMENT 

In consideration of the recitals, the respective obligations of the parties set forth herein, and for other good and valuable consideration,
the receipt and legal sufficiency of which are hereby acknowledged by each of the undersigned, Landlord and Tenant hereby agree to amend the Lease as follows: 

1.    Premises. Effective as of May 15, 2015 (“2015 Expansion Space Commencement Date”), (i) the
description of the space leased to Tenant in the Lease is amended by the addition of the 3,232 rentable square feet of space (“2015 Expansion Space”) described in Exhibit 1
attached hereto; (ii) the 2014 Premises and the 2015 Expansion Space shall collectively be deemed for all purposes of the Lease to be the “Premises” leased to Tenant under the Lease, for a Term expiring on June 30,
2017, subject to sooner termination or extension as provided under the Lease; and (iii) without limitation of the foregoing, Section 1.01(q) and Exhibit A of the Lease are
hereby amended to add the 2015 Expansion Space to the description of the 2014 Premises set forth in the Lease, for a total of 19,492 rentable square feet in the Premises. 

2.    Base Rental. The Base Rental for the 2015 Expansion Space shall be calculated at (i) $20.00 per rentable square foot per
annum for the period of the 2015 Expansion Space Commencement Date through April 30, 2016 and (ii) $20.60 per rentable square foot per annum for the period of the May 1, 2016 through June 30, 2017. Rental for the 2015 Expansion
Space shall be payable in equal monthly installments on or before the first day of each calendar month, to the current place of payment established under the Lease. Accordingly, Landlord and Tenant 

  

			
	Third Amendment to Lease Agreement	 	Page 1

 
acknowledge and agree that from and after the 2015 Space Commencement Date, the cumulative Base Rental for the Premises (inclusive of the 2015 Expansion Space) shall be as follows: 

 

									
	 Period
	  	
Monthly Base Rental
for Premises
	 	  	
Annual Base Rental
for Premises
	 
	 2015 Expansion Space Commencement Date - April 30, 2016
	  	$	63,898.17	 	  	$	766,778.00	 
	 May 1, 2016 — Lease expiration
	  	$	64,059.77	 	  	$	768,717.20	 

 3.    Rentable Area and ProRata Share. Effective as of the 2015 Expansion Space Commencement Date,
for all purposes of the Lease the Rentable Area of the Premises (inclusive of the 2015 Expansion Space) shall be deemed to be 19,492 rentable square feet and Tenant’s Pro Rata Share (of Excess Operating Costs) shall be deemed to be 18.47%. 

4.    Tenant improvements. Except as expressly provided to the contrary in this Amendment, or in the second paragraph of
Section 4.01 of the Lease, which shall apply to the 2015 Expansion Space, Landlord is delivering the 2015 Expansion Space to Tenant in “AS IS, WHERE IS” Condition, “WITH ALL FAULTS” and without warranty
or representation of any kind or nature, express or implied. Tenant further acknowledges that all construction in the Premises required of Landlord under the Lease has been performed and completed. 

A.    Furnishings. Landlord agrees to leave the existing furniture and work stations (collectively,
“Furnishings”) in the 2015 Expansion Space in place and agrees that Tenant may use such Furnishings in the 2015 Expansion Space during the Term, all charges for such use being included within the Base Rental for the 2015
Expansion Space. Tenant is hereby granted permission to relocate and remove the existing work stations in the Premises. Any Furnishings removed from the Premises shall be delivered, at Tenant’s expense, to such area in the Building as may be
designated by Landlord. At the expiration or sooner termination of this Lease, Tenant shall deliver possession of the Furnishings to Landlord in the 2015 Expansion Space in the same condition as received, ordinary wear and tear excepted but shall
not be required to relocate or reconfigure the Furnishings to their position as of the date hereof. 
 B.    Lenell
Card Readers. Landlord, at its expense, agrees to install new Lenel card readers at each of the two entry doors to the 2015 Expansion Space on or before July 1, 2015 (the “Lenel Installation”). 

C.    Telephone and Telecommunications. Tenant shall be solely responsible for arranging and paying for all
telephone, Internet and other telecommunication services that Tenant desires in connection with its use and occupancy of the Premises. 

D.    Signage. Landlord, at Landlord’s expense, agrees to erect one building standard sign with Tenant’s
name and suite number at each of the entry door to the 2015 Expansion Space and the Building Directory. 
 5.    Electricity.
Electricity shall be provided to Tenant in the 2015 Expansion Space in accordance with the Lease, and Tenant shall pay for such service in accordance with Section 3.01 of the Lease, if the 2015 Expansion Space is separately
metered, or based on 

  

			
	Third Amendment to Lease Agreement	 	Page 2

 
Landlord’s reasonable estimates, if not separately metered. The electrical charges for the 2015 Expansion Space are estimated (but not guaranteed) to be approximately $4.50 per rentable
square foot per annum as of the 2015 Expansion Space Commencement Date. 
 6.    Parking Spaces.
Section 1 of Rider 201 to the Lease is amended to provide that, effective as of the 2015 Expansion Space Commencement Date, the number of unreserved parking spaces allocated for Tenant’s use under the
Lease is increased by 12 unreserved parking spaces, for a total of 101 parking spaces under the Lease as amended hereby, with no charge to Tenant for the use of such spaces. 

7.    Base Year. The Base Year as to the 2015 Expansion Space shall be the Calendar Year 2015. 

8.    Termination Right. Tenant shall have the right to terminate the Lease as to the 2015 Expansion Space by delivering not less
than ninety (90) days prior written notice thereof to Landlord and paying to Landlord the unamortized portion (amortized from May 1, 2015 to June 30, 2017) of the actual out of pocket costs incurred by Landlord to perform Lenel
Installation allocable to the period following the early termination date. Upon such termination, Tenant shall vacate the 2015 Expansion Space and this Amendment shall have no further force and effect. 

9.    Capitalized Words. All capitalized words used in this Amendment and not otherwise defined herein shall have the respective
meanings given to such words in the Lease. The Lease is incorporated herein by reference for all purposes. 
 10.    Ratification and
Compliance. Except as expressly amended or modified by this Amendment, the Lease shall continue in full force and effect. Landlord and Tenant each hereby ratify, affirm, and agree that the Lease, as herein modified, represents the valid, binding
and enforceable obligations of Landlord and Tenant respectively. Landlord and Tenant each promise and agree to perform and comply with the terms, provisions and conditions of and the agreements in the Lease, as modified by this Amendment. In the
event of any conflict or inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall control and govern. Without limitation of the foregoing, the parties agree that: 

A.    Security. Security services will be provided to the 2015 Expansion Space in accordance with
Section 6.05 of the Lease. 
 B.    Janitorial. Routine building janitorial services
will be provided to the 2015 Expansion Space 5 days a week [per LOI] in accordance with the Lease. 

C.    Normal Business Hours. The Normal Business hours of the Building as set forth in the Lease shall be
applicable to the 2015 Expansion Space. 
 11.    Entire Agreement and Amendments. The Lease, as expressly modified by this
Amendment, constitutes the sole and only agreement of the parties to the Lease and supersedes any prior agreements between the parties concerning the lease of the Premises. The Lease may be amended or supplemented only by an instrument in writing
executed by the party against whom enforcement is sought. 
 12.    No Commissions. Tenant warrants and represents to Landlord no
brokerage commission or fee is due or will be payable to any person claiming by, through or under Tenant in connection with the negotiation and execution of this Amendment. 

  

			
	Third Amendment to Lease Agreement	 	Page 3

 13.    Authority. Tenant warrants and represents to Landlord that (i) Tenant
has the full right, power and authority to enter into this Amendment, (ii) all requisite action to authorize Tenant to enter into this Amendment and to carry out Tenant’s obligations hereunder has been taken, and (iii) the person
signing on behalf of Tenant has been duly authorized by Tenant to sign this Amendment on its behalf. 
 14.    Binding. This
Amendment shall be binding on and inure to the benefit of Landlord, Tenant and their respective heirs, executors, administrators, legal representatives, successors and assigns. 

15.    Governing Law. This Amendment shall be construed and governed by the laws of the State of Texas in effect from time to time.

 16.    Paragraph Headings. The paragraph headings used herein are intended for reference purposes only and shall not be
considered in the interpretation of the terms and conditions hereof. 
 17.    Construction. Each party acknowledges that it and
its counsel have had the opportunity to applicable and there shall be no presumption that any ambiguities will be resolved against the review this Amendment; that the normal rule of construction shall not be drafting party in interpretation of this
Amendment. 
 18.    Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together
shall constitute one and the same agreement, and any of the parties to this Amendment may execute the Amendment by signing any of the counterparts 

Exhibit Attached: 

Exhibit 1: Description of 2015 Expansion Space 

EXECUTED by the authorized, respective representatives of Landlord and Tenant, to be effective as of the Effective Date. 

LANDLORD: BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM 
  

					
	By:	 	 /s/ Kirk S. Tames

	Name:	 	Kirk S. Tames
	Title:	 	Executive Director of Real Estate ad Interim
		 	The University of Texas System

  Approved as to Content: 

  THE UNIVERSITY OF TEXAS SOUTHWESTERN MEDICAL CENTER 
  

					
			
		 	By:	 	 /s/ Arnim E. Dontes

		 	Name:	 	Arnim E. Dontes
		 	Title:	 	Executive Vice President for Business Affairs

 TENANT: PELOTON THERAPEUTICS, INC. 
  

			
	By:	 	 /s/ John A. Josey

	Name:	 	John A. Josey
	Title:	 	Chief Executive Officer

  

			
	Third Amendment to Lease Agreement	 	Page 4

 EXHIBIT 1 

Description of 2015 Expansion Space 

The 2015 Expansion Space consists of an area deemed to consist of 3,232 rentable square feet located on the first level, Suite EB 1.220 in East Campus
Building B, BioCenter at Southwestern Medical District, at 2330 Inwood Road, Dallas, Dallas County, Texas, as shown by the cross-hatching in the drawing below: 

[Schematic] 

  

			
	Third Amendment to Lease Agreement	 	Page 1

 FOURTH AMENDMENT TO LEASE AGREEMENT 

THIS FOURTH AMENDMENT TO LEASE AGREEMENT (“Amendment”) is entered into effective as of 1st day of July, 2017 (“Effective
Date”), by and between the BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM for the use and benefit of The University of Texas Southwestern Medical Center (“Landlord”) and PELOTON THERAPEUTICS, INC.
(“Tenant”). 
 RECITALS 

A.    Landlord and Tenant entered into that certain Lease Agreement dated effective as of January 27, 2012, (“Lease
Agreement”) wherein Landlord leased to Tenant and Tenant leased from Landlord approximately 12,925 rentable square feet of space in the building (“Building”) commonly known as East Campus Building B, BioCenter at
Southwestern Medical District and located at 2330 Inwood Road, Dallas, Dallas County, Texas, as more specifically described in the Lease. 

B.    Landlord and Tenant amended the Lease Agreement pursuant to (i) that certain First Amendment to Lease Agreement dated effective
as of July 20, 2012; (ii) that certain Second Amendment to Lease Agreement dated effective as of March 21, 2014; and (iii) that certain Third Amendment to Lease Agreement dated effective as of May 8, 2015. (The Lease
Agreement, as so amended, is hereafter called the “Lease.”) All capitalized words used in this Amendment and not otherwise defined herein shall have the respective meanings given to such words in the Lease. The Lease is
incorporated herein by reference for all purposes. 
 C.    The Tenant’s Premises under the Lease (as modified through the Third
Amendment to Lease Agreement) currently consist of 19,492 rentable square feet. 
 D.    Landlord and Tenant now desire to amend the
Lease to reflect the addition of space to the premises leased by Tenant under the Lease and to modify other terms of the Lease. 

AGREEMENT 
 In
consideration of the recitals, the respective obligations of the parties set forth herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged by each of the undersigned, Landlord and
Tenant hereby agree to amend the Lease as follows: 
 1.    Modification of Premises. The description of the space leased to
Tenant pursuant to the Lease is amended as follows: 
  

	 	(1)	 Effective as of the date (“2017 Expansion Space Commencement Date”) that Landlord
delivers to Tenant, in the condition required under this Amendment and with the Tenant Improvements Substantially Complete (as defined below), the 9,353 rentable square feet of space (more or less) (“2017 Expansion Space”)
located on the second level of the Building and further described in Exhibit A attached hereto, the description of the Premises held under the Lease shall be amended by the addition of said 2017 Expansion Space. The provisions of the
second paragraph of Section 4.01 of the Lease Agreement shall apply as to the 2017 Expansion Space. The portions of the 2017 Expansion Space labeled as such on Exhibit A shall
be included in the Laboratory Area and Server Room portions of the Premises. 

  

			
	Fourth Amendment to Lease Agreement	 	Page 1

	 	(2)	 Effective as of the 2017 Expansion Space Commencement Date, the description of the Premises held under the
Lease shall be reduced by Tenant’s surrender and relinquishment to Landlord of possession of the 3,232 rentable square feet of space (more or less) on the first level in the Building that was leased to Tenant pursuant to the Third Amendment to
Lease Agreement. 

 Landlord and Tenant acknowledge and stipulate that following the modification of the Premises described in this
Section 1, the Premises consists of 25,613 rentable square feet of space (more or less) in the Building, of which 9,353 rentable square feet is the 2017 Expansion Space and 16,260 rentable square feet of space is the
“Original Premises.” Without limiting the foregoing, Section 1.01(g) and Exhibit A of the Lease are amended as of the 2017 Expansion Space Commencement
Date to reflect the foregoing modification of the Premises. 
 2.    Base Rental. 

A.    2017 Expansion Space. Effective as of the 2017 Expansion Space Commencement Date, the Base Rental for the 2017
Expansion Space shall be as follows based on a $60 per square foot tenant improvement allowance: 
  

					
	Base Rental Rate
	Year 1:	  	$28.00 per rentable square foot per annum	  	$261,884.00 per annum
	Year 2:	  	$28.84 per rentable square foot per annum	  	$269,740.52 per annum
	Year 3:	  	$29.71 per rentable square foot per annum	  	$277,877.63 per annum
	Year 4:	  	$30.60 per rentable square foot per annum	  	$286,201.80 per annum
	Year 5:	  	$31.51 per rentable square foot per annum	  	$294,713.03 per annum

 Landlord has agreed to provide up to a $100 per square foot allowance for the Tenant
build-out of the 2017 Expansion Space. If the Tenant uses the build out allowance in excess of $60 per square foot, the per annum rentable square foot charge set forth above for the 2017 Expansion Space shall
increase by $0.22645 per rentable square foot per annum during the term of the Lease for the 2017 Expansion Space for each dollar of tenant improvement allowance in excess of $60 per square foot so used. ($561,180, being 9,353 rentable square feet x
$60 per square foot.) Landlord and Tenant shall sign an amendment to this Lease setting forth the annual rents and monthly rents once the Tenant build-out has been completed and all costs related thereto
determined. Notwithstanding the other provisions of this Section 2(A), due to delay in the design and bidding of the Tenant build-out, Landlord agrees the first three
(3) month’s Base Rent for the 2017 Expansion Space will be free, but thereafter Tenant shall pay Base Rental as provided above. 
 The Base Rent
for the 2017 Expansion Space shall be payable in equal monthly installments, in the same manner and at the times set out in the Lease for the payment of Base Rent. And, from the 2017 Expansion Space Commencement Date, Tenant shall commence payment
of the Year 1 Base Rent set forth above from such date through the later of the first anniversary of the 2017 Expansion Space Commencement Date and June 30, 2018 and thereafter at the subsequent rates set forth for Years 2 through 5 as set
forth above with such Base Rent to be prorated for any partial month of occupancy if the 2017 Expansion Space Commencement Date occurs on a day other than the first of a month; in other words, Year 1 may be more than 12 months or Year
5 may be less than 12 months since the parties intend that the 2017 Expansion Space be coterminous with the Term of the Original Premises. 

  

			
	Fourth Amendment to Lease Agreement	 	Page 2

 B.    Original Premises. Commencing as of July 1, 2017, the Base Rent for
the Original Premises portion of the Premises shall be as follows: 
  

					
	Base Rental Rate
			
	Year 1:	  	$28.00 per rentable square foot per annum	  	$455,280.00 per annum
	Year 2:	  	$28.84 per rentable square foot per annum	  	$468,938.40 per annum
	Year 3:	  	$29.71 per rentable square foot per annum	  	$483,084.60 per annum
	Year 4:	  	$30.60 per rentable square foot per annum	  	$497,556.00 per annum
	Year 5:	  	$31.51 per rentable square foot per annum	  	$512,352.60 per annum

 The Base Rent for the Original Premises shall be payable in 12 equal monthly installments, in the same manner and at the times
set out in the Lease for the payment of Base Rent. 
 3.    Operating Costs. Sections 1.01(v),
3.03, 3.04, 3.06 and Exhibit E of the Lease Agreement, and all references in the Lease to Operating Costs, Excess Operating Costs and Base Year, are hereby deleted. Tenant shall
have no further obligations to pay Excess Operating Costs, taxes assessed against the Building or separately metered HVAC or gas pursuant to Sections 6.01(d) and (j), and Landlord shall be solely responsible for
payment of all such costs. 
 4.    Extension of Term. The Term of the Lease for the Original Premises is hereby extended for the
period beginning on July 1, 2017 and expiring on June 30, 2022. The Term of the Lease for the 2017 Expansion Premises shall commence on the 2017 Expansion Space Commencement Date and expire on June 30, 2022. Both parties agree and
stipulate that Tenant shall have one (1) additional option to extend the Term as to all of the Premises, as modified by this Amendment, for a period of five (5) years commencing on July 1, 2022 on the terms set forth in Section 3
of Exhibit G of the Lease Agreement. 
 5.    Deletion of Pro Rata Share.
Sections 1.01(r) and 1.02(a) are hereby deleted. 
 6.    Tenant Improvements. Landlord agrees to pay
for up to $561,180.00 ($60.00 per rentable square foot), subject to increase as set forth in 
Section 2(A) and Exhibit B, for the design and construction of improvements in
the 2017 Expansion Space. The design and construction of such improvements shall be performed in accordance with Exhibit B attached hereto. The Landlord Improvements described in
Exhibit B and in the Second Amendment shall be considered part of the “Landlord Improvements” under the Lease Agreement, and not Tenant Alterations. 

7.    Future Expansion Space. For a period of twelve (12) months after the Effective Date of this Fourth Amendment, Landlord
hereby grants to Tenant the option to lease the approximately 861 rentable square feet of space located adjacent to the east side of the Premises on the second floor of the Building, as further depicted on
Exhibit C attached hereto (“Option Space”) on the same terms and conditions as set forth in this Amendment as to the 2017 Expansion Space (including at the same rent per square
foot as is then in effect for the 2017 Expansion Space) and a Tenant Improvement Allowance of $12 per square foot per year for each year of the Term (prorated for partial years) that will be in effect after the Lease commences as to the Option
Space. Landlord shall deliver the Option Space to Tenant within ninety (90) days of written request by Tenant. The Lease shall commence as to the Option Space on the date Landlord delivers the Option Space to Tenant in the required condition
with the Tenant Improvements therein Substantially Complete. 
 8.    Parking Spaces. Section 1 of
Rider 201 to the Lease is amended to provide that, effective as of the 2017 Expansion Space Commencement Date, the number of unreserved parking spaces allocated for Tenant’s use under the Lease shall be increased to a total of 120
parking spaces, with no charge to Tenant for the use of such spaces. 
 9.    Normal Business Hours.
Section 1.01(u) of the Lease is amended to provide that the Normal Business Hours of the Office Area of the Building shall be: (i) 7:00 AM to 7:00 PM, Monday through Friday; and (ii) 7:00 AM to 1:00 PM on
Saturday. The Laboratory Area and Server Room portions of the Premises shall remain twenty-four (24) hours a day, seven (7) days a week by card-key access. 

  

			
	Fourth Amendment to Lease Agreement	 	Page 3

 10.    Security Deposit. No Security Deposit is required of Tenant in connection
with the lease of the 2017 Expansion Space. 
 11.    Telecommunications. As provided in
Section 6.02(c) of the Lease Agreement, Tenant shall be solely responsible for obtaining and paying for such telephone, internet and other telecommunication services as it desires for its use in the Premises. 

12.    On-site Security. Landlord shall provide security personnel for the Building during
Normal Business Hours. After Normal Business Hours access to the Building shall be by card reader only. 
 13.    Ratification and
Compliance. Except as expressly amended or modified by this Amendment, the Lease shall continue in full force and effect. Landlord and Tenant each hereby ratify, affirm, and agree that the Lease, as herein modified, represents the valid, binding
and enforceable obligations of Landlord and Tenant respectively. Landlord and Tenant each promise and agree to perform and comply with the terms, provisions and conditions of and the agreements in the Lease, as modified by this Amendment. In the
event of any conflict or inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall control and govern. 

14.    Entire Agreement and Amendments. The Lease, as expressly modified by this Amendment, constitutes the sole and only agreement
of the parties to the Lease and supersedes any prior agreements between the parties concerning the lease of the Premises. The Lease may be amended or supplemented only by an instrument in writing executed by the party against whom enforcement is
sought. 
 15.    No Commissions. Tenant warrants and represents to Landlord no brokerage commission or fee is due or will be
payable to any person claiming by, through or under Tenant in connection with the negotiation and execution of this Amendment. 

16.    Authority. Tenant warrants and represents to Landlord that (i) Tenant has the full right, power and authority to enter
into this Amendment, (ii) all requisite action to authorize Tenant to enter into this Amendment and to carry out Tenant’s obligations hereunder has been taken, and (iii) the person signing on behalf of Tenant has been duly authorized
by Tenant to sign this Amendment on its behalf. 
 17.    Binding. This Amendment shall be binding on and inure to the benefit of
Landlord, Tenant and their respective heirs, executors, administrators, legal representatives, successors and assigns. 

18.    Governing Law. This Amendment shall be construed and governed by the laws of the State of Texas in effect from time to time.

 19.    Paragraph Headings. The paragraph headings used herein are intended for reference purposes only and shall not be
considered in the interpretation of the terms and conditions hereof. 
 20.    Construction. Each party acknowledges that it and
its counsel have had the opportunity to review this Amendment; that the normal rule of construction shall not be applicable and there shall be no presumption that any ambiguities will be resolved against the drafting party in interpretation of this
Amendment. 
 21.    Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together
shall constitute one and the same agreement, and any of the parties to this Amendment may execute the Amendment by signing any of the counterparts. 

  

			
	Fourth Amendment to Lease Agreement	 	Page 4

 Exhibits Attached: 

Exhibit A— Description of 2017 Expansion Space 

Exhibit B — Work Letter 
 Exhibit C — Future
Expansion Space 
 EXECUTED by the authorized, respective representatives of Landlord and Tenant, to be effective as of the Effective Date.

 LANDLORD: BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM 
  

			
	By:	 	 /s/ Kirk S. Tames

	Name:	 	Kirk S. Tames
	Title:	 	Executive Director of Real Estate ad Interim
		 	The University of Texas System

   Approved as to
Content: 
   THE UNIVERSITY OF TEXAS SOUTHWESTERN MEDICAL CENTER 

 

					
			
		 	By:	 	 /s/ Arnim E. Dontes

		 	Name:	 	Arnim E. Dontes
		 	Title:	 	Executive Vice President for Business Affairs

 TENANT: PELOTON THERAPEUTICS, INC. 
  

			
	By:	 	 /s/ John A. Josey

	Name:	 	John A. Josey
	Title:	 	Chief Executive Officer

  

			
	Fourth Amendment to Lease Agreement	 	Page 5

 EXHIBIT A - DESCRIPTION OF 2017 EXPANSION SPACE 

[Schematic] 

  

			
	Fourth Amendment to Lease Agreement	 	Page 6

 EXHIBIT B — WORK LETTER 

Construction of Improvements to 2017 Expansion Space 

1.    Improvements to 2017 Expansion Space. Landlord, at its expense, shall provide the following improvements (“Landlord
Improvements”) to the 2017 Expansion Space in accordance with the Plans and Specifications described on the Schedule 1 attached to this Exhibit B: 

See Schedule 1 attached hereto. 

2.    Landlord further agrees to pay up to $561,180 for the cost of such Landlord Improvements. Any costs in excess of such amount not
caused by the negligence or misconduct of Landlord shall be payable by Tenant, within ten days following written demand by Landlord or, at Tenant’s election, be paid as additional Base Rental as provided in
Section 2(A) above. Landlord has prepared a cost estimate for the Landlord Improvements. Landlord shall enter into a construction contract for construction of the Landlord Improvements and shall not modify such contract
without Tenant’s consent, which shall not be unreasonably withheld, delayed or conditioned. Notwithstanding anything to the contrary in the Lease, Landlord shall be solely responsible for (and the $561,180 shall not be applied toward):
(a) costs attributable to improvements installed outside the demising walls of the Premises; (b) costs for improvements which are not shown on or described in the Plans and Specifications unless otherwise approved by Tenant; (c) costs
incurred due to the presence of Hazardous Materials in the Premises or the surrounding area; (d) attorneys’ fees incurred in connection with negotiation of construction contracts, and attorneys’ fees, experts’ fees and other
costs in connection with disputes with third parties; (e) interest and other costs of financing construction; (f) costs incurred as a consequence of delay (except Tenant Delay), construction defects or default by a contractor;
(g) costs recoverable by Landlord upon account of warranties and insurance; (h) costs as a consequence of casualties; (i) penalties and late charges attributable to Landlord’s failure to pay construction costs; (j) costs to
bring the Project into compliance with applicable laws and restrictions; (k) wages, labor and overhead for overtime and premium time; and (1) construction costs in excess of $561,180, except for increases set forth in approved change
orders, which shall not exceed an additional $40 per rentable square foot for the Landlord Improvements, for a total of $100 per rentable square foot in cost for the Landlord Improvements. If Tenant does not approve and sign such change orders, then
Tenant’s obligation for the Landlord Improvements is limited to $561,180.00. 
 3.    Landlord Improvements. Landlord shall
substantially complete the Landlord Improvements prior to Tenant’s taking occupancy of the 2017 Expansion Space. Landlord shall use commercially reasonable efforts to complete the Landlord Improvements by December 31, 2017.
“Substantial Completion” shall mean the Landlord Improvements have been constructed in material accordance with the above referenced drawings, save and except for minor “punch list” items such that Tenant can occupy the
2017 Expansion Space and conduct its business, Landlord has obtained all approvals from the applicable governmental authorities for the legal occupancy of the 2017 Expansion Space and Landlord has delivered possession of the 2017 Expansion Space to
Tenant in the required condition, which date is currently anticipated to be December 31, 2017. Upon Substantial Completion, Landlord shall deliver possession of the 2017 Expansion Space to Tenant in good, vacant, broom clean condition, with all
building systems in good working order and the roof water-tight, and in compliance with all laws applicable to Landlord or Tenant. In the event that construction of the Landlord Improvements is not substantially completed by December 31, 2017,
then the 2017 Expansion Space Commencement Date shall be automatically amended to be that date the 2017 Expansion Space is delivered to Tenant with the Landlord Improvements substantially complete. Upon Substantial Completion of the Landlord
Improvements, Landlord shall give Tenant written notice (“Notice of Completion”) that the 2017 Expansion Space are ready for occupancy. Within seven (7) days following Landlord’s giving of the Notice of Completion,
Landlord and Tenant shall meet at a mutually convenient time to perform a walk-through of the 2017 Expansion Space to inspect the Landlord Improvements and to prepare a punch list of minor items needing correction and Landlord shall promptly cause
such items to be corrected. 

  

			
	Fourth Amendment to Lease Agreement	 	Page 7

 4.    Construction. Landlord, or its contractors, shall perform the construction of the
Landlord Improvements. Landlord shall have no obligation to alter, improve, decorate or otherwise prepare the 2017 Expansion Space for Tenant’s occupancy, except to complete the Landlord Improvements in accordance with the Plans and
Specifications and all applicable laws, in good and workmanlike manner, substantially free of defects and using new material and equipment of good quality. 

5.    Delay. Tenant shall pay all reasonable costs and expenses incurred by Landlord in connection with any delay in the commencement or
completion of the Landlord Improvements due to a Tenant Delay (as defined in the Lease). Tenant shall reimburse Landlord for such expenses upon Landlord’s written demand. 

6.    Indemnity. Landlord shall not be liable to Tenant, or to Tenant’s agents, servants, employees, customers or invitees and Tenant
shall indemnify, defend, and hold Landlord harmless from and against any and all fines, suits, claims, demands, losses, liabilities, actions, and costs (including court costs and attorney’s fees) arising from any breach or default in the
performance of any obligation on Tenant’s part to be performed under the terms of this Section. 
 7.    Default. A default by
Tenant under this Exhibit, subject to the notice and opportunity to cure requirements of Section 14.01 of the Lease, is an “Event of Default” as defined in the Lease and entitles Landlord to any remedies under the
Lease (notwithstanding that the Term thereof has not commenced). 
 8.    Tenant’s Right of Early Access. In the event that
Landlord grants Tenant the right to access the 2017 Expansion Space during the period between Landlord’s Notice of Completion and the 2017 Expansion Space Commencement Date for the purposes of allowing the Tenant to install telecommunications
equipment, computer networks, furniture, and the coordination of network communications, Tenant’s early access shall be subject to and in compliance with all of the terms of the Lease, including without limitation the insurance provisions. 

  

			
	Fourth Amendment to Lease Agreement	 	Page 8

 SCHEDULE 1 

[Schematic] 

  

			
	Fourth Amendment to Lease Agreement	 	Page 9

 

 
 September 21, 2016 

BY OVERNIGHT COURIER 
 Real Estate Office 

UT Southwestern Medical Center 
 5323 Harry Hines Blvd. 

Dallas, TX 75390-9188 
  

	 	Re:	 Lease dated January 27, 2012, between Board of Regents of The University of Texas System for the use
and benefit of The University of Texas Southwestern Medical Center (“Landlord”) and Peloton Therapeutics, Inc. (“Peloton”), as amended by a First Amendment to Lease Agreement dated July 20, 2012, a Second Amendment to Lease
Agreement dated March 21, 2014 and a Third Amendment to Lease Agreement dated May 8, 2015 (as amended, the “Lease”) 

Dear Sir and/or Madam: 
 Peloton hereby
exercises its right under Exhibit G of the Lease (Extension Option) to renew the Lease as to all of the Premises under the Lease for the Extension Tenn. Capitalized terms used but not defined herein will have the meanings ascribed to such terms in
the Lease. 
 Please call the undersigned if you have any questions. 

 

	
	Very truly yours,
	
	/s/ John Josey
	
	John A. Josey
	CEO
	Peloton Therapeutics, Inc.

 cc: BY OVERNIGHT COURIER 

Office of General Counsel 
 c/o Real Estate Office 

University of Texas System 
 201 West 7th Street 

Austin, Texas 78701 
 Attn: Executive Director of Real Estate 

2330 Inwood Road, Suite 226 Dallas, Texas 75235-7323 

www.pelotontherapeutics.comalv-ex47_609.htm

Exhibit 4.7

 
BASE LISTING PARTICULARS
11 April 2019

 

 
 
AUTOLIV, INC.

(incorporated as a company with limited liability in the State of Delaware, U.S.A.)

EUR 3,000,000,000
Guaranteed Euro Medium Term Note Programme
Guaranteed by

AUTOLIV ASP, INC.

(incorporated as a company with limited liability in the State of Indiana, U.S.A.)

	
	
Under the Guaranteed Euro Medium Term Note Programme (the “Programme”) described in this base listing particulars (the “Base Listing Particulars”), Autoliv, Inc. (the “Issuer”), subject to compliance with all relevant laws, regulations and directives, may from time to time issue euro medium term notes (the “Notes”) guaranteed by Autoliv ASP, Inc. (the “Guarantor”). The aggregate nominal amount of Notes outstanding under the Programme will not at any time exceed EUR 3,000,000,000 (or the equivalent in other currencies at the time of issue).The Notes may be issued on a continuing basis to one or more of the Dealers specified herein or any other Dealer appointed under the Programme from time to time by the Issuer and the Guarantor (each a “Dealer” and together the “Dealers”), which appointment may be for a specific issue or on an on-going basis. References in this Base Listing Particulars to the “relevant Dealer” shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Notes. The Notes will be issued in registered form.    

Prospective investors should have regard to the factors described in the section headed “Risk Factors” herein.

This Base Listing Particulars does not constitute a prospectus for the purposes of Article 5 of Directive 2003/71/EC (as such directive may be amended or superseded from time to time, the “Prospectus Directive”) and, accordingly, no offer to the public may be made and no admission to trading may be applied for on any market in the EEA designated as a regulated market, in each case for the purposes of the Prospectus Directive. Application has been made to The Irish Stock Exchange plc trading as Euronext Dublin (“Euronext Dublin”) for its approval of this Base Listing Particulars. Application has been made to Euronext Dublin for the Notes issued under the Programme to be admitted to the official list (the “Official List”) and to trading on the Global Exchange Market of Euronext Dublin (the “GEM”) for a period of 12 months from the date of these Base Listing Particulars. The GEM is not a regulated market for the purposes of Directive 2014/65/EU on markets in financial instruments (as amended, “MiFID II”). References in this Base Listing Particulars to Notes being “listed” (and all related references) shall mean that such Notes have been admitted to the Official List and to trading on the GEM. The Programme provides that Notes may be unlisted or listed on such other or further stock exchange(s) as may be agreed between the Issuer and the relevant Dealer and as specified in the applicable pricing supplement (the “Pricing Supplement”).  

The Notes and the guarantee of the Notes by the Guarantor (the “Guarantee”) have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) or with any securities regulatory authority of any state or other jurisdiction of the United States. The Notes are being offered and sold outside the United States in offshore transactions in accordance with Regulation S under the Securities Act (“Regulation S”), and may not be offered or sold in the United States or to, for the account or benefit of, U.S. persons (as defined in Regulation S), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

The Issuer and Guarantor have each been assigned a long-term debt credit rating of A- by S&P Global Ratings Europe Limited (“S&P”). The Programme has been rated A- by S&P. 

Arranger

Morgan Stanley 

Dealers

Morgan Stanley 

 
Bank of ChinaCitigroupDNBHSBCINGJ.P. MorganMizuho SecuritiesMUFGNordeaSEBSociété Générale Corporate & Investment Banking
 

 

LIB02/1077111/9122275.18Hogan Lovells

 

TABLE OF CONTENTS

Page

	
 
	
OVERVIEW
	
1

	
 
	
RISK FACTORS
	
6

	
 
	
INFORMATION INCORPORATED BY REFERENCE
	
34

	
 
	
TERMS AND CONDITIONS OF THE NOTES
	
35

	
 
	
FORM OF NOTES
	
68

	
 
	
USE OF PROCEEDS
	
70

	
 
	
DESCRIPTION OF THE GROUP
	
71

	
 
	
TAXATION
	
87

	
 
	
SUBSCRIPTION AND SALE
	
98

	
 
	
GENERAL INFORMATION
	
100

	
 
	
PRICING SUPPLEMENT
	
103

 

 

LIB02/1077111/9122275.18– ii –Hogan Lovells

 

 

IMPORTANT INFORMATION

 

This document constitutes base listing particulars in respect of the admission of the Notes to the Official List and to trading on the GEM and for the purpose of giving information with regard to the Issuer and its subsidiaries (including the Guarantor) taken as a whole (the “Group”) and the Notes which, according to the particular nature of the Issuer, the Guarantor and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer and the Guarantor and of the rights attaching to the Notes.

Each of the Issuer and the Guarantor accept responsibility for the information contained in this Base Listing Particulars and the Pricing Supplement for each Tranche of Notes issued under the Programme and declares that, to the best of the knowledge of the Issuer and the Guarantor (each having taken all reasonable care to ensure that such is the case) the information contained in this Base Listing Particulars and the Pricing Supplement for each Tranche of Notes issued under the Programme is in accordance with the facts and does not omit anything likely to affect the import of such information.

Each Tranche of Notes will be issued on the terms set out herein under “Terms and Conditions of the Notes” (the “Conditions”) as completed by a document specific to such Tranche called the Pricing Supplement (see section entitled “Pricing Supplement”).

This Base Listing Particulars is to be read in conjunction with any supplements hereto and with any information incorporated by reference herein and in relation to any Tranche of Notes, which is the subject of a Pricing Supplement, must be read and construed together with the relevant Pricing Supplement. This Base Listing Particulars may only be used for the purposes for which it has been published.

A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product Governance rules under EU Delegated Directive 2017/593 (the “MiFID Product Governance Rules”), any Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise neither the Arranger nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the MIFID Product Governance Rules.

The Pricing Supplement will include a legend entitled “MiFID II Product Governance” which will outline the target market assessment in respect of the Notes and which channels for distribution of the Notes are appropriate. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the target market assessment) and determining appropriate distribution channels.

If the Pricing Supplement in respect of any Tranche of Notes includes a legend entitled “Prohibition of Sales to EEA Retail Investors”, the Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer within the meaning of Directive 2002/92/EC (as amended or superseded, “IMD”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended or superseded, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

Notes issued under the Programme may or may not be rated. Where a Tranche of Notes is to be rated, such rating will not necessarily be the same as the rating assigned to Notes already issued. In general, European regulated investors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit rating 

 

LIB02/1077111/9122275.18– iii –Hogan Lovells

 

agency established in the EU and registered under the CRA Regulation unless the rating is provided by a credit rating agency operating in the EU before 7 June 2010 which has submitted an application for registration in accordance with the CRA Regulation and such registration has not been refused. S&P is established in the European Union (“EU”) and is registered under Regulation (EC) No 1060/2009 as amended (the “CRA Regulation”) and is included in the list of registered credit rating agencies published on the website of the European Securities and Markets Authority (“ESMA”).

S&P's credit ratings are on a long-term debt rating scale that ranges from AAA to D, which represents the range from highest to lowest quality of such securities rated. According to the S&P rating system, an obligation rated “BBB” indicates an adequate capacity to meet financial commitments, but more subject to adverse economic conditions than obligations in higher rated categories. The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

Credit ratings are intended to provide investors with an independent assessment of the credit quality of an issue or issuer of securities and do not speak to the suitability of particular securities for any particular investor. Any credit ratings assigned to the Notes may not reflect the potential impact of all risks on the value of the Notes. A credit rating is therefore not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the relevant rating agencies. Prospective investors should consult the relevant rating agency with respect to the interpretation and implications of the ratings.

The Issuer and the Guarantor have confirmed to the Arranger and the Dealers that this Base Listing Particulars contains all material information with respect to the Issuer, the Guarantor and the Notes (including all information which, according to the particular nature of the Issuer, the Guarantor and of the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer and the Guarantor and of the rights attaching to the Notes), that the information contained or incorporated in this Base Listing Particulars is true and accurate in all material respects and is not misleading, that the opinions and intentions expressed in this Base Listing Particulars are honestly held and that there are no other facts the omission of which would make this Base Listing Particulars or any of such information or the expression of any such opinions or intentions misleading.

No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Arranger or the Dealers) as to the accuracy or completeness of the information contained in this Base Listing Particulars or any other information provided by the Issuer and/or the Guarantor. The Arranger and the Dealers have not verified the information contained herein.

No person is or has been authorised by the Issuer or the Guarantor to give any information or to make any representation not contained in or not consistent with this Base Listing Particulars or any other information supplied in connection with the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Guarantor, the Arranger or the Dealers.

Neither this Base Listing Particulars nor any other information supplied in connection with the Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by the Issuer, the Guarantor, the Arranger or the Dealers that any recipient of this Base Listing Particulars or any other information supplied in connection with the Notes should purchase any Notes. Each investor contemplating purchasing any Notes, should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and/or the Guarantor. Neither this Base Listing Particulars nor any other information supplied in connection with the Notes constitutes an offer or invitation by or on behalf of the Issuer, the Guarantor, the Dealers or the Arranger to any person to subscribe for or to purchase any Notes.

Neither the delivery of this Base Listing Particulars nor the offering, sale or delivery of any Notes shall in any circumstances imply that the information contained herein concerning the Issuer and/or the Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Notes is 

 

LIB02/1077111/9122275.18– iv –Hogan Lovells

 

correct as of any time subsequent to the date indicated in the document containing the same. The Arranger and the Dealers expressly do not undertake to review the financial condition or affairs of the Issuer or the Guarantor during the life of the Notes. 

The Notes have not been recommended, approved or disapproved by the U.S. Securities and Exchange Commission or any other federal or state securities commission or regulatory authority in the United States, nor has any such commission or regulatory authority passed comment upon the accuracy or adequacy of this Base Listing Particulars. Any representation to the contrary is a criminal offence in the United States.

The maximum aggregate principal amount of Notes outstanding at any one time under the Programme will not exceed EUR 3,000,000,000 (and for this purpose, any Notes denominated in another currency shall be converted into EUR at the date of the agreement to issue such Notes). The maximum aggregate principal amount of Notes which may be outstanding at any one time under the Programme may be increased from time to time, subject to compliance with the relevant provisions of the Programme Agreement.

IMPORTANT INFORMATION RELATING TO THE USE OF THIS BASE LISTING PARTICULARS AND OFFERS OF THE NOTES GENERALLY

The distribution of this Base Listing Particulars and the offer or sale of the Notes may be restricted by law in certain jurisdictions. The Issuer, the Guarantor, the Arranger or the Dealers do not represent that this Base Listing Particulars may be lawfully distributed, or that the Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Guarantor, the Arranger or the Dealers which would permit a public offering of the Notes or distribution of this document in any jurisdiction where action for that purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Base Listing Particulars nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations and the Dealers have represented that all offers and sales by them will be made on the same terms. Persons into whose possession this Base Listing Particulars or any Notes come must inform themselves about and observe any such restrictions. The Notes have not been registered under the Securities Act. Subject to certain exceptions, the Notes may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons. In particular, there are restrictions on the distribution of this Base Listing Particulars and the offer or sale of the Notes in the United States, the Kingdom of Sweden, the United Kingdom and the EEA (see “Subscription and Sale” below).

PRESENTATION OF INFORMATION

References in this document to “euro”, “EUR” and “€” refer to the currency introduced at the start of the third stage of the European economic and monetary union and as defined in Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, as amended, references to “US$”, “US dollars” or “dollars” are to United States dollars, references to “Sterling” and “£” are to pounds sterling and references to “SEK” and “Swedish Kronor” are to the lawful currency of the Kingdom of Sweden.

 

STABILISATION

In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the stabilisation manager (the “Stabilisation Manager”) (or persons acting on behalf of the Stabilisation Manager) in the applicable Pricing Supplement may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisation action may begin on or after the date on which adequate public disclosure of 

 

LIB02/1077111/9122275.18– v –Hogan Lovells

 

the terms of the offer of any Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted by the Stabilisation Manager (or persons acting on behalf of the Stabilisation Manager) in accordance with all applicable laws and regulations.

SUITABILITY OF INVESTMENT

The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor may wish to consider, either on its own or with the help of its financial and other professional advisers, whether it:

	
(i)
	
has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Base Listing Particulars or any applicable supplement;

	
(ii)
	
has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;

	
(iii)
	
has sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes where the currency for principal or interest payments is different from the potential investor’s currency;

	
(iv)
	
understands thoroughly the terms of the Notes and is familiar with the behaviour of financial markets; and

	
(v)
	
is able to evaluate possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

Prospective investors should consult their tax advisers as to the tax consequences of the purchase, ownership and disposition of the Notes.

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Base Listing Particulars contains or incorporates by reference forward-looking statements. The words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “may,” “likely,” “might,” “would,” “should,” “could,” or the negative of these terms and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Such forward-looking statements include those that address activities, events or developments that the Issuer or its management or the Guarantor or its management believes or anticipates may occur in the future. All forward-looking statements, including without limitation, statements regarding management’s examination of historical operating trends and data, estimates of future sales, operating margin, cash flow, effective tax rate or other future operating performance or financial results are based upon current expectations of management, various assumptions and/or data available from third parties. There can be no assurance that such forward-looking statements will materialise or prove to be correct as forward-looking statements are inherently subject to known and unknown risks, uncertainties and other factors which may cause actual future results, performance or achievements to differ materially from the future results, performance or achievements expressed in or implied by such forward-looking statements. In particular, the statements under the headings “Risk Factors” and “Description of the Group”, and regarding the Group’s strategy and other future events or prospects are forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Issuer’s present and future business strategies and the environment in which the Group will operate in the future. Forward-looking statements are not guarantees of future performance. The actual results, 

 

LIB02/1077111/9122275.18– 6 –Hogan Lovells

 

performance or achievements of the Group, or industry results, may be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In addition, even if actual performance, results of operations, internal rate of return, financial condition and the development of its financing strategies are consistent with the forward-looking statements contained in this Base Listing Particulars, those results or developments may not be indicative of results or developments in subsequent periods.

Key risks, uncertainties and other factors that could cause actual results to differ from those expected are set out more fully in the section of this Base Listing Particulars headed “Risk Factors”. Investors should specifically and carefully consider these factors, which could cause actual results to differ, before making an investment decision.

These forward-looking statements reflect the Issuer’s and/or the Guarantor’s judgement as at the date hereof and are not intended to give any assurances as to future results. The Issuer and the Guarantor are not obliged, and do not intend, to update or otherwise revise any forward-looking statements, including any projections, forecasts or estimates. This includes revisions to reflect changes in economic conditions or other circumstances arising after the date of this Base Listing Particulars or to reflect the occurrence of unanticipated events. As a result of these risks, uncertainties and assumptions, investors should not place undue reliance on these forward-looking statements.

 

LIB02/1077111/9122275.18– 7 –Hogan Lovells

 

 

PRESENTATION OF FINANCIAL INFORMATION

The Group prepares its consolidated financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and, unless otherwise stated, all financial information relating to the Group contained or incorporated by reference in this Base Listing Particulars has been prepared in accordance with U.S. GAAP.

All financial information relating to the Group contained in this Base Listing Particulars, unless otherwise stated, has been extracted from the audited consolidated financial statements of the Group as of and for the fiscal years ended 31 December 2017 and 31 December 2018, as set out in the Issuer’s Annual Report for 2018 on Form 10-K and Annual Report for 2017 on Form 10-K, respectively, which are incorporated by reference into this Base Listing Particulars. 

Percentages in tables have been rounded and accordingly may not add up to 100.0%. Certain financial data has been rounded. As a result of this rounding, the totals of data presented in this Base Listing Particulars may vary slightly from the actual arithmetic totals of such data.

Financial Information on Segments; Spin-Off

The Issuer considers its products to be components of integrated automotive safety systems. The Issuer historically had two operating segments: (i) Passive Safety (airbags, seatbelts and steering wheels) and (ii) Electronics (restraint control systems, brake control systems and active safety products, such as camera-based vision systems, night vision, automotive radars, positioning systems and related software). The Issuer completed a disposal of the Electronics segment from the Group through a spin-off of Veoneer, Inc. (“Veoneer”) which completed on 29 June 2018 (the “spin-off”). For financial reporting purposes, these two operating segments were also the Issuer’s reportable segments in accordance with Accounting Standards Codification (ASC) 280 Segment Reporting. The financial data relating to the Issuer’s businesses in these segments over the last two fiscal years is contained in consolidated financial statements incorporated into this Base Listing Particulars (see the section headed “Information Incorporated by Reference”). 

The financial results incorporated by reference herein present the performance of the Group giving effect to the spin-off of Veoneer. Historical financial results of Veoneer are reflected as “Discontinued Operations”, with the exception of cash flows, which are presented on a consolidated basis of both “Continuing Operations” and “Discontinued Operations” and net income attributable to a controlling interest (Consolidated Autoliv). The restated historical financial information reflecting the spin-off are unaudited, but have been derived from the Group’s historical audited annual reports.

 

 

 

LIB02/1077111/9122275.18– 8 –Hogan Lovells

 

OVERVIEW

The following overview must be read as an introduction to this Base Listing Particulars and any decision to invest in the Notes should be based on a consideration of the Base Listing Particulars as a whole, including any information incorporated by reference and, in relation to any particular Tranche of Notes, the applicable Pricing Supplement.

Words and expressions defined in “Form of the Notes” and “Terms and Conditions of the Notes” (the “Conditions”) shall have the same meanings in this Overview.

	
Issuer:
	
Autoliv, Inc. 

	
Guarantor:
	
Autoliv ASP, Inc.

	
Risk Factors:
	
There are certain factors that may affect the Issuer's ability to fulfil its obligations under Notes issued under the Programme.  There are also certain factors that may affect the Guarantor's ability to fulfil its obligations under the Guarantee.  In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme and risks relating to the structure of a particular Series issued under the Programme.  All of these are set out under “Risk Factors”.

	
Description:
	
Euro Medium Term Note Programme.

	
Arranger:
	
Morgan Stanley & Co. International plc.

	
Dealers:
	
 

Bank of China Limited, London Branch

Citigroup Global Markets Limited

DNB Bank ASA

HSBC Bank plc

ING Bank N.V.

J.P. Morgan Securities plc

Mizuho International plc

MUFG Securities (Europe) N.V.

Nordea Bank Abp

Skandinaviska Enskilda Banken AB (publ)

Société Générale

	
 
	
and any other Dealers appointed in accordance with the Programme Agreement.

	
Certain Restrictions:
	
Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see “Subscription and Sale”) including the following restrictions applicable at the date of this Base Listing Particulars.

	
 
	
Notes having a maturity of less than one year

 

LIB02/1077111/9122275.18– 1 –Hogan Lovells

 

	
 
	
Notes having a maturity of less than one year will, if the proceeds of 

the issue are accepted in the United Kingdom, constitute deposits for the purposes of the prohibition on accepting deposits contained in section 19 of the Financial Services and Markets Act 2000 (“FSMA”) unless they are issued to a limited class of professional investors and have a denomination of at least £100,000 or its equivalent, see “Subscription and Sale”.

	
Fiscal Agent:
	
HSBC Bank plc

	
Registrar:
	
HSBC Bank plc

	
Programme Size:
	
Up to EUR 3,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement) outstanding at any time.  The Issuer and the Guarantor may increase the amount of the Programme in accordance with the terms of the Programme Agreement.

	
Distribution:
	
Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis.

	
Currencies:
	
Subject to any applicable legal or regulatory restrictions, Notes may be denominated in any currency agreed between the Issuer and the relevant Dealer.

	
Maturities:
	
The Notes will have such maturities as may be agreed between the Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant Specified Currency.

	
Issue Price:
	
Notes may be issued on a fully-paid or a partly-paid basis and at an issue price which is at par or at a discount to, or premium over, par.

	
Form of Notes:
	
The Notes will be issued in registered form as described in “Form of the Notes”.  

	
Fixed Rate Notes:
	
Fixed interest will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer.

	
Floating Rate Notes:
	
Floating Rate Notes will bear interest at a rate determined:

	
 
	
(a)on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or

	
 
	
(b)on the basis of the reference rate (including SONIA) set out in the applicable Pricing Supplement.

 

     – 2 –

 

	
 
	
Interest on Floating Rate Notes in respect of each Interest Period, as agreed prior to issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the Issuer and the relevant Dealer.

	
 
	
The margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer for each Series of Floating Rate Notes.

	
 
	
Floating Rate Notes may also have a maximum interest rate, a minimum interest rate or both.

	
Zero Coupon Notes:
	
Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest.

	
Other types of Notes:
	
The Issuer may issue Notes which are Index Linked Notes, Dual Currency Notes, Partly Paid Notes or Notes redeemable in one or more instalments.  

	
 
	
Index Linked Notes: Payments of principal in respect of Index Linked Redemption Notes or of interest in respect of Index Linked Interest Notes will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the Issuer and the relevant Dealer may agree.

	
 
	
Dual Currency Notes: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency Notes will be made in such currencies, and based on such rates of exchange, as the Issuer and the relevant Dealer may agree.

	
 
	
Partly Paid Notes: The Issuer may issue Notes in respect of which the issue price is paid in separate instalments in such amounts and on such dates as the Issuer and the relevant Dealer may agree.

	
 
	
Notes redeemable in instalments: The Issuer may issue Notes which may be redeemed in separate instalments in such amounts and on such dates as the Issuer and the relevant Dealer may agree.

	
 
	
The Issuer and the Guarantor may agree with any Dealer that Notes may be issued in a form not contemplated by the Conditions, in which event the relevant provisions will be included in the applicable Pricing Supplement.

 

     – 3 –

 

	
Redemption:
	
The applicable Pricing Supplement will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than in specified instalments, if applicable, or for taxation reasons or following an Event of Default) or that such Notes will be redeemable at the option of (i) the Issuer pursuant to Condition 7.3 (Redemption at the option of the Issuer (Issuer Call)), and/or (ii) the Noteholders pursuant to Condition 7.4 (Redemption at the option of the Noteholders (Investor Put)) and/or Condition 7.5 (Redemption at the option of Noteholders on a Change of Control (Change of Control 

Put)), in each case, upon giving not less than the minimum period of notice nor more than the maximum period of notice (as set out in the applicable Pricing Supplement) to the Noteholders or the Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the Issuer and the relevant Dealer.  

	
 
	
Notes having a maturity of less than one year are subject to restrictions on their denomination and distribution, see “Certain Restrictions - Notes having a maturity of less than one year” above.

	
Denomination of Notes:
	
The Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer save that the minimum denomination of each Note will be such amount as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency, see “Certain Restrictions - Notes having a maturity of less than one year” above, and save that the minimum denomination of each Note will be €100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency).

	
Taxation:
	
All payments in respect of the Notes will be made without deduction for, or on account of, taxes, duties, assessments or governmental charges imposed or levied by or on behalf of any Relevant Jurisdiction as provided in Condition 8, unless such withholding or deduction is required by law.  In the event that any such withholding or deduction is made, the Issuer or, as the case may be, the Guarantor will, save in certain limited circumstances provided in Condition 8, be required to pay additional amounts to cover the amounts so withheld or deducted.

	
Negative Pledge:
	
The terms of the Notes will contain a negative pledge provision as further described in Condition 4.

	
Cross Default:
	
The terms of the Notes will contain a cross default provision as further described in Condition 10.

	
Status of the Notes:
	
The Notes will constitute direct, unconditional and (subject to the provisions of Condition 4) unsecured obligations of the Issuer and rank and will rank pari passu, without any preference among themselves with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

	
Guarantee:
	
The Notes will be unconditionally and irrevocably guaranteed by the Guarantor.  The obligations of the Guarantor under the Guarantee will be direct, unconditional and (subject to the provisions of Condition 4) unsecured obligations of the Guarantor and rank and will rank pari passu with all other outstanding unsecured and unsubordinated obligations of the Guarantor, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

 

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Rating:
	
The Programme has been rated A- by S&P. Series issued under the Programme may be rated or unrated.  Where a Series is rated, such rating will be disclosed in the applicable Pricing Supplement and will not necessarily be the same as the rating assigned to the Programme.  A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency.

	
Listing:
	
Application has been made for Notes issued under the Programme to be admitted to the Official List of Euronext Dublin and to trading on the Global Exchange Market of Euronext Dublin. Euronext Dublin’s Global Exchange Market is not a regulated market for the purposes of MiFID II. 

	
 
	
Notes may be listed or admitted, as the case may be, on other or further stock exchange(s) or markets (other than in respect of an admission to trading on any market in the EEA which has been designated as a regulated market for the purposes of the Prospectus Directive) agreed between the Issuer and the relevant Dealer in relation to the Series.  Notes which are neither listed nor admitted to trading on any market may also be issued.

	
 
	
The applicable Pricing Supplement will state whether or not the relevant Notes are to be listed and/or admitted to trading and, if so, on which stock exchanges and/or markets.

	
Governing Law:
	
The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by, and shall be construed in accordance with, English law.

	
Selling Restrictions:
	
There are restrictions on the offer, sale and transfer of the Notes in the United States, the EEA (including the United Kingdom and the Kingdom of Sweden and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes, see “Subscription and Sale”.

	
United States Selling Restrictions:
	
Regulation S, Category 2. 

 

 

 

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RISK FACTORS

Each of the Issuer and the Guarantor believe that the following factors may affect its ability to fulfil its obligations under the Notes. All of these factors are contingencies which may or may not occur and neither the Issuer nor the Guarantor is in a position to express a view on the likelihood of any such contingency occurring.

Factors which the Issuer and the Guarantor believe to be material for the purpose of assessing the market risks associated with the Notes are also described below.

Each of the Issuer and the Guarantor believe that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer and/or Guarantor to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons which may not be considered significant risks by the Issuer or Guarantor based on information currently available to them or which they may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Base Listing Particulars and reach their own views prior to making any investment decision.

Factors that may affect the Issuer’s ability to fulfil its obligations under the Notes and the Guarantor’s ability to fulfil its obligations under the Guarantee

Risks related to the Group’s business

The Issuer is a holding company and it is wholly dependent on distributions received from its subsidiaries (including from the Guarantor)

The Issuer, as a holding company, does not conduct any business other than through its subsidiaries and is dependent on dividends or distributions from its subsidiaries or order to provide the funds necessary to meet its debts and other contractual obligations. The Issuer would therefore be dependent upon receipt of funds from its subsidiaries, including from the Guarantor, in order to fulfil its obligations under the Notes. The obligations of the Issuer under the Notes are therefore structurally subordinated to any liabilities of the Issuer’s subsidiaries; other than, in the case of any senior unsecured liabilities of the Guarantor which, by virtue of the Guarantee provided by the Guarantor, would rank equally with Guarantor’s payment obligations in respect of the Notes.

All risk factors described below as being applicable to the Group, unless specifically stated otherwise, apply equally to the business of the Issuer and to that of the Guarantor.

The cyclical nature of automotive sales and production can adversely affect the Group’s business. The Group’s business is directly related to light vehicle production (“LVP”) in the global market and by the Group’s customers, and automotive sales and LVP are the most important drivers for the Group’s sales 

Automotive sales and production are highly cyclical and can be affected by general or regional economic or industry conditions, the level of consumer demand, recalls and other safety issues, labour relations issues, technological changes, fuel prices and availability, vehicle safety regulations and other regulatory requirements, governmental initiatives, trade agreements, political volatility, especially in energy producing countries and growth markets such as China, India, Brazil, Thailand, and others in Southeast Asia and South America (the “Growth Markets”), changes in interest rate levels and credit availability and other factors. Some regions around the world may at various times be more particularly impacted by these factors than other regions. Economic declines that result in a significant reduction in automotive sales and production by the Group’s customers have in the past had, and may in the future have, a material adverse effect on the Group’s business, results of operations and financial condition.

The Group’s sales are also affected by inventory levels of the Group’s customers. The Group cannot predict when the Group’s customers will decide to either increase or reduce inventory levels or whether new inventory levels will approximate historical inventory levels. This may exacerbate variability in the Group’s sales and financial 

 

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condition. Uncertainty regarding inventory levels may be exacerbated by consumer financing programmes initiated or terminated by the Group’s customers or governments as such changes may affect the timing of their sales.

Changes in automotive sales and LVP and/or customers’ inventory levels will have an impact on the Group’s earnings guidance and estimates and any significant reduction in automotive sales and/or LVP by the Group’s customers, whether due to general economic conditions or any other factors relevant to sales or LVP, could have a material adverse effect on the Group’s business, results of operations and financial condition.

Growth rates in safety content per vehicle, which can be impacted by changes in consumer trends and political decisions, could affect the Group’s results in the future

The average global content of passive safety systems per light vehicle grew slightly during the period 2016-2018 to around US$225. Vehicles produced in different markets may have various passive safety content values. For example, in developed markets such as Western Europe and North America, the premium segment have passive safety content values of more than US$300 per vehicle, whereas in Growth Markets such as China and India the average passive safety content per vehicle is approximately US$180 and US80, respectively. Due to the majority of the growth in global LVP being concentrated in Growth Markets the operating results may be impacted if the passive safety content per vehicle remains low and if the penetration of more advanced automotive safety systems does not increase in these regions. As passive safety content per vehicle is also an indicator of the Group’s sales development, should these trends continue, the average value of passive safety systems per vehicle could decline.

The Group operates in a highly competitive market

The market for occupant restraint systems is highly competitive and continues to consolidate. The Group competes with a number of other companies that produce and sell similar products. Among other factors, the Group’s products compete on the basis of price, quality, manufacturing and distribution capability, design and performance, technological innovation, delivery and service. Some of the Group’s competitors are subsidiaries (or divisions, units or similar) of companies that are larger and have greater financial and other resources than the Group. Some of the Group’s competitors may also have a “preferred status” as a result of special relationships or ownership interests with certain customers. The Group's ability to compete successfully depends, in large part, on the Group's success in continuing to innovate and manufacture products that have commercial success with consumers, differentiating the Group's products from those of the Group's competitors, continuing to deliver quality products in the time frames required by the Group's customers, and maintaining best-cost production.

The Group continues to invest in technology and innovation which the Group’s management believes will be critical to the Group's long-term growth. The Group's ability to maintain and improve existing products, while successfully developing and introducing distinctive new and enhanced products that anticipate changing customer and consumer preferences and capitalise upon emerging technologies will be a significant factor in the Group's ability to remain competitive. If the Group is unsuccessful or are less successful than the Group's competitors in predicting the course of market development, developing innovative products, processes, and/or use of materials or adapting to new technologies or evolving regulatory, industry or customer requirements, the Group may be placed at a competitive disadvantage. For example, the focus of the automotive industry on the development of advanced driver assistance technologies, with the goal of developing and introducing autonomous vehicles, and increase in consumer preferences for mobility on demand services may create demand for new and innovative products in response to Original Equipment Manufacturers (“OEMs”) and consumer preferences and the Group's success in providing such products will be critical for the Group's long-term growth. Similarly, the demand for the Group's products historically has tracked LVP and a future evolution of the automotive industry to autonomous vehicles and mobility on demand services may lead to a future reduction in annual global LVP. The Group's competitive environment continues to change, including because of recent acquisitions and divestitures by the Group's existing competitors (including Delphi and Takata) within recent years as well as increased competition from entrants outside the traditional automotive industry, creating uncertainty about the future competitive landscape. The inability to compete successfully could have a material adverse effect on the Group's business, results of operations 

 

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and financial condition.

The discontinuation, lack of commercial success, or loss of business with respect to a particular vehicle model for which the Group is a significant supplier could reduce the Group's sales and harm the Group's business

A number of the Group's customer contracts generally require the Group to supply a customer’s annual requirements for a particular vehicle model and assembly facilities, rather than for manufacturing a specific quantity of products. Such contracts range from one year to the life of the model, which is generally four to seven years. These contracts are often subject to renegotiation, sometimes as frequent as on an annual basis, which may affect product pricing, and generally may be terminated by the Group's customers at any time. Therefore, the discontinuation of, the loss of business with respect to, or a lack of commercial success of a particular vehicle model or brand for which the Group is a significant supplier could reduce the Group's sales and harm the Group's business prospects, operating results, cash flows or financial condition.

The Group may incur material losses and costs as a result of product liability, warranty and recall claims that may be brought against the Group or the Group's customers

The Group faces risks related to product liability claims, warranty claims and recalls in the event that any of the Group's products actually or allegedly are defective, fail to perform as expected or the use of the Group's products results, or is alleged to result, in bodily injury and/or property damage. For example, the Group is cooperating with Toyota Motor Corp. with respect to its voluntary safety recall of approximately 1.4 million vehicles that are equipped with a certain model of the Group's side curtain airbags (the “Toyota Recall”). The Group may not be able to anticipate all of the possible performance or reliability problems that could arise with the Group's products after they are released to the market. Additionally, increasing regulation and reporting requirements regarding potentially defective products, particularly in the U.S., may increase the possibility that the Group becomes involved in additional product liability or recall investigations or claims. See also the risk factor headed – “The Group's business may be adversely affected by changes in automotive safety regulations or concerns that drive further regulation of the automobile safety market”. Although the Group currently carries product liability and product recall insurance, no assurance can be made that such insurance will provide adequate coverage against potential claims, that such insurance is available or will continue to be available in the appropriate markets or that the Group will be able to obtain such insurance on acceptable terms in the future. Although the Group has invested and will continue to invest in the Group's engineering, design, and quality infrastructure, the Group cannot give any assurance that the Group's products will not suffer from defects or other deficiencies or that the Group will not experience material warranty claims or additional product recalls. In the future, the Group could experience additional material warranty or product liability losses and incur significant costs to process and defend these claims.

The Toyota Recall and any additional future recalls from this customer or other customers could result in costs not covered by insurance, further government inquiries, litigation and reputational harm and could divert management’s attention away from other matters. The main variables affecting the costs of a recall are the number of vehicles ultimately determined to be affected by the issue, the cost per vehicle associated with a recall, the determination of proportionate responsibility among the customer, the Group, and any relevant sub-suppliers, and actual insurance recoveries. Every vehicle manufacturer has its own practices regarding product recalls and other product liability actions relating to its suppliers, and the performance and remedial requirements vary between jurisdictions. Due to recent recall activity in the automotive industry, some vehicle manufactures have become even more sensitive to product recall risks. As suppliers become more integrally involved in the vehicle design process and assume more of the vehicle assembly functions, vehicle manufacturers are increasingly looking to their suppliers for contribution when faced with recalls and product liability claims. Product recalls in the Group's industry, even when they do not involve the Group's products, can harm the reputations of the Group's customers, competitors, and the Group, particularly if those recalls cause consumers to question the safety or reliability of products similar to those the Group produces.

 

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In addition, with global platforms and procedures, vehicle manufacturers are increasingly evaluating the Group's quality performance on a global basis; any one or more quality, warranty or other recall issue(s) (including issues affecting few units and/or having a small financial impact) may cause a vehicle manufacturer to implement measures which may have a severe impact on the Group's operations, such as a global, temporary or prolonged suspension of new orders. In addition, as the Group's products more frequently use global designs and are based on or utilise the same or similar parts, components or solutions, there is a risk that the number of vehicles affected globally by a failure or defect will increase significantly with a corresponding increase in the Group's costs. A warranty, recall or product liability claim brought against the Group in excess of the Group's available insurance may have a material adverse effect on the Group's business. Vehicle manufacturers are also increasingly requiring their outside suppliers to guarantee or warrant their products and bear the costs of repair and replacement of such products under new vehicle warranties. A vehicle manufacturer may attempt to hold the Group responsible for some or the entire repair or replacement costs of defective products under new vehicle warranties, when the product supplied did not perform as represented. Accordingly, the future costs of warranty claims by the Group's customers may be material. However, the final amounts determined to be due related to these matters could differ materially from the Group's recorded warranty estimates and the Group's business prospects, operating results, cash flows or financial condition may be materially impacted as a result.

In addition, as the Group adopts new technology, the Group faces an inherent risk of exposure to the claims of others that the Group has allegedly violated their intellectual property rights. The Group cannot assure that the Group will not experience any material warranty, product liability or intellectual property claim losses in the future or that the Group will not incur significant costs to defend such claims. See the risk factor headed “If the Group's patents are declared invalid or the Group' technology infringes on the proprietary rights of others, the Group's ability to compete may be impaired”.

Escalating pricing pressures from the Group's customers may adversely affect the Group's business

The automotive industry continues to experience aggressive pricing pressure from customers. This trend is partly attributable to the major automobile manufacturers’ strong purchasing power. As with other automotive component manufacturers, the Group is often expected to quote fixed prices or is forced to accept prices with annual price reduction commitments for long-term sales arrangements or discounted reimbursements for engineering work. Price reductions have impacted the Group's sales and profit margins and are expected to continue to do so in the future. The Group's future profitability will depend upon, among other things, the Group's ability to continuously reduce the Group's cost per unit and maintain the Group's cost structure, enabling the Group to remain cost-competitive.

The Group's profitability is also influenced by the Group's success in designing and marketing technological improvements in automotive safety systems, which helps the Group offset price reductions by the Group's customers. If the Group is unable to offset continued price reductions through improved operating efficiencies and reduced expenditures, these price reductions may have a material adverse effect on the Group's business prospects, operating results, cash flows or financial condition. 

The Group could experience disruption in its supply or delivery chain, which could cause one or more of the Group's customers to halt or delay production

The Group, as with other component manufacturers in the automotive industry, ship the Group's products to customer vehicle assembly facilities throughout the world on a “just-in-time” basis in order for the Group's customers to maintain low inventory levels. The Group's suppliers (external suppliers as well as the Group's own production sites) use a similar method in providing raw materials to the Group. However, this “just-in-time” method makes the logistics supply chain in the Group's industry very complex and vulnerable to disruption.

Disruptions in  the Group's supply chain may result for many reasons, including closures of one of the Group's own or one of the Group's suppliers’ facilities or critical manufacturing lines due to strikes or other labour disputes, 

 

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mechanical failures, electrical outages, fires, explosions, critical pollution levels, critical health and safety and other working conditions issues, natural disasters, political upheaval, as well as logistical complications due to labour disruptions, weather or natural disasters, acts of terrorism, mechanical failures and legislation or regulation regarding the transport of hazardous goods. Additionally, the Group may experience disruptions if there are delays in customs processing, including if the Group is unable to obtain government authorisation to export or import certain materials, including materials that may be viewed as dangerous such as the propellant used for the Group's inflators. As the Group continues to expand in Growth Markets, the risk of such disruptions is heightened. The unavailability of even a single small subcomponent necessary to manufacture one of the Group's products, for whatever reason, could force the Group to cease production of that product, possibly for a prolonged period. Similarly, a potential quality issue could force the Group to halt deliveries while the Group validates the products. Even where products are ready to be shipped, or have been shipped, delays may arise before they reach the Group's customer. Also, similar difficulties for other suppliers may force the Group's customers to halt production, which may in turn impact the Group's sales shipments to such customers.

When the Group fails to timely deliver, the Group may have to absorb the Group's own costs for identifying and resolving the ultimate problem as well as expeditiously producing and shipping replacement components or products. Generally, the Group must also carry the costs associated with “catching up,” such as overtime and premium freight.

If the Group is the cause of a customer being forced to halt production, the customer may seek to recoup all of its losses and expenses from the Group. These losses and expenses could be very significant and may include consequential losses such as lost profits. Where a customer halts production because of another supplier failing to deliver on time, the Group may not be fully compensated, if at all.

Thus, any such supply chain disruptions could severely impact the Group's operations and/or those of the Group's customers and force the Group to halt production for prolonged periods of time which could expose the Group to material claims for compensation and have a material adverse effect on the Group's business prospects, operating results and financial condition.

Adverse developments affecting one or more of the Group's major suppliers could harm the Group's profitability

Any significant disruption in the Group’s supplier relationships, particularly relationships with single-source suppliers, could harm the Group’s profitability. Furthermore, some of the Group’s suppliers may not be able to sufficiently manage the currency commodity cost volatility and/or sharply changing volumes while still performing as the Group expects. For example, recalls or field actions from the Group’s customers can stress the capacity of the Group’s supply chain and may inhibit the Group’s ability to timely deliver order volumes. Over time, more of the Group’s suppliers are located in Growth Markets. As such, there is an increased risk for delivery delays, production delays, production issues or delivery of non-conforming products by the Group’s suppliers. Even where these risks do not materialise, the Group may incur costs as the Group tries to make contingency plans for such risks.

Changes in the source, cost, availability of and regulations pertaining to raw materials and components may adversely affect the Group’s profit margins

The Group’s business uses a broad range of raw materials and components in the manufacture of the Group’s products, nearly all of which are generally available from a number of qualified suppliers. The Group’s industry may be affected from time to time by limited supplies or price fluctuations of certain key components and materials. Strong worldwide demand for certain raw materials has had a significant impact on prices and short-term availability in recent years. Such price increases could materially increase the Group’s operating costs and materially and adversely affect the Group’s profit margin, as direct material costs amounted to approximately 50% of the Group’s net sales in 2018, of which approximately half is the raw material cost portion.

 

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Commercial negotiations with the Group’s customers and suppliers may not always offset all of the adverse impact of higher raw material, energy and commodity costs. Even where the Group is able to pass price increases along to the Group’s customer, there may be a lapse of time before the Group is able to do so such that the Group must absorb the cost increase. In addition, no assurances can be given that the magnitude and duration of such cost increases or any future cost increases could not have a larger adverse impact on the Group’s profitability and consolidated financial position than currently anticipated.

The United States Securities and Exchange Commission (the “SEC”) requires companies that manufacture products containing certain minerals and their derivatives that are known as “conflict minerals”, originating from the Democratic Republic of Congo or adjoining countries to diligence and report the source of such materials. There are significant resources associated with complying with these requirements, including diligence efforts to determine the sources of conflict minerals used in the Group’s products and potential changes to the Group’s processes or supplies as a consequence of such diligence efforts. As there may be only a limited number of suppliers able to offer certified “conflict free” conflict minerals, there can be no assurance that the Group will be able to obtain necessary conflict free minerals from such suppliers in sufficient quantities or at competitive prices. The Group may face reputational challenges if the Group determines that certain of the Group’s products contain minerals not determined to be conflict free or if the Group is unable to sufficiently verify the origins for all conflict minerals used in the Group’s products through the procedures the Group may implement. Accordingly, these rules may adversely affect the Group’s business, prospects, operating results, cash flows or financial condition.

The Group’s business could be materially and adversely affected if the Group lost any of the Group’s largest customers or if they were unable to pay their invoices

The Group is dependent on a few large customers with strong purchasing power. This is the result of customer consolidation during the last few decades. In 2018, the Group’s top five customers represented 50% of the Group’s consolidated sales. The Group’s largest contract accounted for around 2% of the Group’s total fiscal 2018 sales and expires in 2025. Although business with any given customer is typically split into several contracts (either on the basis of one contract per vehicle model or on a broader platform basis), the loss of business from any of the Group’s major customers (whether by lower overall demand for vehicles, cancellation of existing contracts or the failure to award the Group new business) could have a material adverse effect on the Group’s business, results of operations and financial condition. Similarly, further consolidation of the Group’s customers in the future could make the Group more reliant upon a smaller group of customers for a significant portion of the Group’s consolidated sales and negatively impact the Group’s bargaining power when contracting with such customers. 

Customers may put the Group on a “new business hold” which would limit the Group’s ability to quote or be awarded all or part of their future vehicle contracts if quality or other issues arise in the vehicles for which the Group was a supplier. Such new business holds range in length and scope and are generally accompanied by a certain set of remedial conditions that must be met before the Group is eligible to bid for new business. Meeting any such conditions within the prescribed timeframe may require additional Issuer resources. A failure to satisfy any such conditions may have a materially adverse impact on the Group’s financial results in the long term.

There is a risk that one or more of the Group’s major customers may be unable to pay the Group’s invoices as they become due or that a customer will simply refuse to make such payments given its financial difficulties. If a major customer would enter into bankruptcy proceedings or similar proceedings whereby contractual commitments are subject to stay of execution and the possibility of legal or other modification, or if a major customer otherwise successfully procures protection against the Group legally enforcing its obligations, it is likely, absent special relief such as having a “preferred status”, that the Group will be forced to record a substantial loss.

Additional information concerning the Group’s major customers is included in Note 22 of the 2018 Consolidated Financial Statements.

 

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The Group’s inability to effectively manage the timing, quality and costs of new programme launches could adversely affect the Group’s financial performance

To compete effectively in the automotive supply industry, the Group must be able to launch new products to meet the Group’s customers’ timing, performance and quality standards. At times, the Group faces an uneven number of launches, and some launches for various reasons, may have shortened launch lead times. The Group cannot provide assurance that the Group will be able to install and certify the equipment needed to produce products for new programmes in time for the start of production, or that the transitioning of the Group’s manufacturing facilities and resources to full production for such new programmes will not impact production rates or other operational efficiency measures at the Group’s facilities. In addition, the Group cannot provide assurance that the Group’s customers will execute on schedule the launch of their new product programmes, for which the Group might supply products. Additionally, as a Tier 1 supplier, which provides products directly to OEMs, the Group must effectively coordinate the activities of numerous suppliers in order to launch programmes successfully. Given the complexity of new programme launches, especially involving new and innovative technologies, the Group may experience difficulties managing product quality, timeliness and associated costs. In addition, new programme launches require a significant ramp up of costs; however, the sales related to these new programmes generally are dependent upon the timing and success of the introduction of new vehicles by the Group's customers. The Group’s inability to effectively manage the timing, quality and costs of these new programme launches could adversely affect the Group’s business prospects, operating results, cash flows or financial condition.

Changes in the Group’s product mix may impact the Group’s financial performance

The Group sells products that have varying profit margins. The Group’s financial performance can be impacted depending on the mix of products the Group sells during a given period. The Group’s earnings guidance and estimates assume a certain geographic sales mix as well as a product sales mix. If actual results vary significantly from this projected geographic and product mix of sales, the Group’s operating results and financial condition could be negatively impacted.

The Group is involved from time to time in legal proceedings and the Group’s business may suffer as a result of adverse outcomes of current or future legal proceedings

The Group is, from time to time, involved in litigation, regulatory proceedings and commercial or contractual disputes that may be significant. These matters may include, without limitation, disputes with the Group’s suppliers and customers, intellectual property claims, shareholder litigation, government investigations, class action lawsuits, personal injury claims, environmental issues, antitrust, customs and VAT disputes and employment and tax issues. In such matters, government agencies or private parties may seek to recover from the Group very large, indeterminate amounts in penalties or monetary damages (including, in some cases, treble or punitive damages) or seek to limit the Group’s operations in some way. The possibility exists that claims may be asserted against the Group and their magnitude may remain unknown for long periods of time. These types of lawsuits could require significant management time and attention and a substantial legal liability or adverse regulatory outcome and the substantial expenses to defend the litigation or regulatory proceedings may have a material adverse effect on the Group’s customer relationships, business prospects, reputation, operating results, cash flows and financial condition. No assurances can be given that such proceedings and claims will not have a material adverse impact on the Group’s profitability and consolidated financial position or that the Group’s established reserves or the Group’s available insurance will mitigate such impact.

See Note 18 of the 2018 Consolidated Financial Statements. 

The Group may be subject to civil antitrust litigation that could negatively impact the Group’s business

The Issuer may be subject to civil antitrust lawsuits in the future in countries that permit such civil claims, including lawsuits or other actions by the Group’s customers. Specifically, the recent conclusion and settlement in March 2019 of the long-running European Commission investigation into anti-competitive behavior by the Issuer could result in subsequent civil disputes with non-governmental third parties and civil or stockholder litigation 

 

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stemming from the same facts and circumstances underlying the European Commission investigation.  These types of lawsuits require significant management time and attention and could result in significant expenses as well as unfavourable outcomes that could have a material adverse impact on the Group’s customer relationships, business prospects, reputation, operating results, cash flows or financial condition, and the Group’s insurance may not mitigate such impact.

The Group is, and has been, subject to investigations by other competition authorities and may be subject to investigations by additional competition authorities that could negatively impact the Group’s business

Competition authorities in Brazil, Canada, South Africa and South Korea have previously initiated investigations of certain suppliers to the automotive vehicle industry, including the Issuer. Competition authorities in additional countries may initiate similar investigations. These types of investigations require significant management time and attention. These investigations could also result in significant expenses as well as unfavourable outcomes that could have a material adverse impact on the Group’s customer relationships, business prospects, reputation, operating results, cash flows or financial condition, and the Group’s available insurance may not mitigate such impact.

The Group may have exposure to greater than anticipated tax liabilities

The determination of the Group’s worldwide provision for income taxes and other tax liabilities requires estimation and significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain. Like many other multinational corporations, the Group is subject to tax in multiple U.S. and foreign tax jurisdictions. The Group’s determination of the Group’s tax liability is always subject to audit and review by applicable domestic and foreign tax authorities, and the Group is currently undergoing a number of investigations, audits and reviews by taxing authorities throughout the world. Any adverse outcome of any such audit or review could have a negative effect on the Group’s business and the ultimate tax outcome may differ from the amounts recorded in the Group’s financial statements and may materially affect the Group’s financial results in the period or periods for which such determination is made. While the Group has established reserves based on assumptions and estimates that the Group believes are reasonable to cover such eventualities, these reserves may prove to be insufficient. In addition, the Group’s future income taxes could be adversely affected by earnings being lower than anticipated (or by the incurrence of losses) in jurisdictions that have lower statutory tax rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of the Group’s deferred tax assets and liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items. 

Work stoppages or other labour issues at the Group’s customers’ facilities or at the Group’s facilities could adversely affect the Group’s operations

As the automotive industry relies heavily on “just-in-time” delivery of components during the assembly and manufacture of vehicles, a work stoppage at one or more of the Group facilities could have material adverse effects on the Group’s business. Similarly, if any of the Group’s customers were to experience a work stoppage, that customer may halt or limit the purchase of the Group’s products. Similarly, a work stoppage at another supplier could interrupt production at one of the Group’s customers’ facilities which would have the same effect. While labour contract negotiations at the Group’s facilities historically have rarely resulted in work stoppages, no assurances can be given that the Group will be able to negotiate acceptable contracts with these unions or that the Group’s failure to do so will not result in work stoppages. A work stoppage at one or more of the Group’s facilities or the Group’s customers’ facilities could cause the Group to shut down production facilities supplying these products, which could have a material adverse effect on the Group’s business, results of operations and financial condition.

The Group’s ability to operate effectively could be impaired if the Group fails to attract and retain executive officers and other key personnel

The Group’s ability to operate the Group’s business and implement the Group’s strategies effectively depends, in 

 

     – 13 –

 

part, on the efforts of the Group’s executive officers and other key employees. In addition, the Group’s future success will depend on, among other factors, the Group’s ability to attract and retain other qualified personnel, particularly engineers and other employees with software and technical expertise. The loss of the services of any of the Group’s executive officers or other key employees or the failure to attract or retain other qualified personnel could have a material adverse effect on the Group’s business.

Restructuring initiatives and capacity alignments are complex and difficult and at any time additional restructuring steps may be necessary, possibly on short notice and at significant cost

The Group’s restructuring initiatives and capacity alignments include efforts to adjust the Group’s manufacturing capacity and cost structure to meet current and projected operational and market requirements, including plant closures, transfer of sourcing to best cost countries, consolidation of the Group’s supplier base and standardisation of products, to reduce the Group’s overhead costs and consolidate the Group’s operational centres. The successful implementation of the Group’s restructuring activities and capacity alignments will involve sourcing, logistics, technology and employment arrangements. As these restructuring initiatives and capacity alignments can be complex, there may be difficulties or delays in the implementation of any such initiatives and capacity alignments or they may not be immediately effective, resulting in an adverse material impact on the Group’s performance. In addition, there is a risk that inflation, high-turnover rates and increased competition may reduce the efficiencies now available in best-cost countries to levels that no longer allow for cost-beneficial restructuring opportunities. Therefore, there can be no assurances that any future restructurings or capacity alignments will be completed as planned or achieve the desired results.

A prolonged recession and/or a downturn in the Group’s industry could result in the Group having insufficient funds to continue the Group’s operations and external financing may not be available to the Group or available only on materially different terms than what has historically been available

The Group’s ability to generate cash from the Group’s operations is highly dependent on automotive sales and LVP, the global economy and the economies of the Group’s important markets. If LVP were to remain on low levels for an extended period of time, the Group would experience a significantly negative cash flow. Similarly, if cash losses for customer defaults rise sharply, the Group would experience a negative cash flow. Such negative cash flow could result in the Group’s having insufficient funds to continue the Group’s operations unless the Group can procure external financing, which may not be possible.

The Group’s current credit rating could be lowered as a result of the Group experiencing significant negative cash flows, increasing the Group’s indebtedness and leverage, or a dire financial outlook, which may affect the Group’s ability to procure financing. The Group may also for the same, or other reasons, find it difficult to secure new long-term credit facilities, at reasonable terms, when the Group’s principal credit facility expires in 2022. Further, even the Group’s existing unutilised credit facilities may not be available to the Group as agreed, or only at additional cost, if participating banks are unable to raise the necessary funds, where, for instance, financial markets are not functioning as expected or one or more banks in the Group’s principal credit facility syndicate were to default. If external financing is unavailable to the Group when necessary, the Group may have insufficient funds to continue the Group’s operations.

Information concerning the Group’s credit facilities and other financings are included in Note 14 to the 2018 Consolidated Financial Statements.

The Group’s indebtedness may harm the Group’s financial condition and results of operations

As at 31 December 2018, the Group had outstanding debt of US$2.2 billion. The Group may incur additional debt for a variety of reasons. Although the Group’s significant credit facilities and debt agreements do not have any financial covenants, the Group’s level of indebtedness will have several important effects on the Group’s future operations, including, without limitation:

	
•
	
a portion of the Group’s cash flows from operations will be dedicated to the payment of any interest or could 

 

     – 14 –

 

		
be used for amortisation required with respect to outstanding indebtedness;

	
•
	
increases in the Group’s outstanding indebtedness and leverage will increase the Group’s vulnerability to adverse changes in general economic and industry conditions, as well as to competitive pressure;

	
•
	
depending on the levels of the Group’s outstanding debt, the Group’s ability to obtain additional financing for working capital, acquisitions, capital expenditures, general corporate and other purposes may be limited; and

	
•
	
potential future tightening of the availability of capital both from financial institutions and the debt markets may have an adverse effect on the Group’s ability to access additional capital.

Governmental restrictions may impact the Group’s business adversely

Some of the Group’s customers are (or may be) owned by a governmental entity, receive various forms of governmental aid or support or are subject to governmental influence in other forms, which may impact the Group as a supplier to these customers. As a result, they may be required to partner with local entities or procure components from local suppliers to achieve a specific local content or be subject to other restrictions regarding localised content or ownership. The nature and form of any such restrictions or protections, whatever their basis, is very difficult to predict as is their potential impact. However, they are likely to be based on political rather than economical or operational considerations and may materially impact the Group’s business.

Impairment charges relating to the Group’s assets, goodwill and other intangible assets could adversely affect the Group's financial performance

The Group periodically reviews the carrying value of the Group’s assets, goodwill and other intangible assets for impairment indicators. If one or more of the Group’s customers’ facilities cease production or decrease their production volumes, the assets the Group carries related to the Group’s facilities serving such customers may decrease in value because the Group may no longer be able to utilise or realise them as intended. Where such decreases are significant, such impairments may have a materially adverse impact on the Group’s financial results. The Group monitors the various factors that impact the valuation of the Group’s goodwill and other intangible assets, including expected future cash flow levels, global economic conditions, market price for the Group’s stock, and trends with the Group’s customers. Impairment of goodwill and other identifiable intangible assets may result from, among other things, deterioration in the Group’s performance and especially the cash flow performance of these goodwill assets, adverse market conditions and adverse changes in applicable laws or regulations. If there are changes in these circumstances or the other variables associated with the estimates, judgments and assumptions relating to the valuation of goodwill, when assessing the valuation of the Group’s goodwill items, the Group may determine that it is appropriate to write down a portion of the Group’s goodwill or intangible assets and record related non-cash impairment charges. In the event that the Group determines that the Group is required to write-down a portion of the Group’s goodwill items and other intangible assets and thereby record related non-cash impairment charges, the Group’s financial condition and operating results would be adversely affected.

The Group faces risks related to the Group’s defined benefit pension plans and employee benefit plans, including the need for additional funding as well as higher costs and liabilities

The Group’s defined benefit pension plans or employee benefit plans may require additional funding or give rise to higher related costs and liabilities which, in some circumstances, could reach material amounts and negatively affect the Group’s operating results. The Group is required to make certain year-end assumptions regarding the Group’s pension plans. The Group’s pension obligations are dependent on several factors, including factors outside the Group’s control such as changes in interest rates, the market performance of the diversified investments underlying the pension plans, actuarial data and adjustments and an increase in the minimum funding requirements or other regulatory changes governing the plans. Adverse equity market conditions and volatility in the credit market may have an unfavourable impact on the value of the Group’s pension assets and the Group’s future estimated pension liabilities. Internal factors such as an adjustment to the level of benefits provided under the plans may also lead to an increase in the Group’s pension liability. If these or other internal and external risks were to 

 

     – 15 –

 

occur, alone or in combination, the Group’s required contributions to the plans and the costs and net liabilities associated with the plans could increase substantially and have a material effect on the Group’s business.

Information concerning the Group’s benefit plans is included in Note 20 of the 2018 Consolidated Financial Statements.

The Group’s cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact the Group’s reputation and operating results

The Group relies extensively on information technology (“IT”) networks and systems, the Group’s global data centres and services provided over the internet to process, transmit and store electronic information, and to manage or support a variety of business processes or activities across the Group’s facilities worldwide. The secure operation of the Group’s IT networks and systems and the proper processing and maintenance of this information are critical to the Group’s business operations. The Group has been, and likely will continue to be, subject to cyber-attacks. To date the Group has seen no material impact on the Group’s business from these attacks or events. Although the Group seeks to deploy comprehensive security measures to prevent, detect, address and mitigate these threats, there has been an increased level of activity, and an associated level of sophistication, in cyber-attacks against large multinational companies. The ever-evolving threats mean the Group and the Group’s third-party service providers and vendors must continually evaluate and adapt the Group’s respective systems and processes and overall security environment, as well as those of any companies the Group acquires. There is no guarantee that these measures will be adequate to safeguard against all data security breaches, system compromises or misuses of data.  

The Group’s security measures may be breached due to human error, system malfunctions or attacks from uncoordinated individuals or sophisticated and targeted measures known as advanced persistent threats, directed at the Group, its products, its customers and/or its third-party service providers. 

Disruptions and attacks on the Group’s IT systems or the systems of third parties storing the Group’s data could result in the misappropriation, loss, destruction or corruption of the Group’s critical data and confidential or proprietary information, personal information of the Group’s employees, the leakage of the Group’s or the Group’s customers’ confidential information, improper use of the Group’s systems and networks, production downtimes and both internal and external supply shortages, which could have an adverse effect on the Group’s results of operations. The potential consequences of a material cybersecurity incident include reputational damage, litigation with third parties, diminution in the value of the Group’s investment in research, development and engineering, diversion of the attention of management away from the operation of the Group’s business and increased cybersecurity protection and remediation costs, which in turn could adversely affect the Group’s competitiveness and results of operations. To the extent that any disruption or security breach results in a misappropriation, loss, destruction or corruption of the Group’s customer’s information, it could affect the Group’s relationships with the Group’s customers, create significant expense for the Group to investigate and remediate damage, lead to claims against the Group and ultimately harm the Group’s business. In addition, the Group may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to the Group’s business, compliance with those requirements could result in additional costs. Any future significant compromise or breach of the Group’s data security, whether external or internal, or misuse of customer, associate, supplier or Issuer data, could result in significant costs, lost sales, fines, lawsuits, and damage to the Group’s reputation. 

Third parties that maintain certain of the Group’s confidential and proprietary information could experience a cybersecurity incident

The Group relies on third parties to provide or maintain some of the Group’s IT systems, data centres and related services and do not exercise direct control over these systems. Despite the implementation of security measures at third party locations, these IT systems, data centres and cloud services are also vulnerable to security breaches 

 

     – 16 –

 

or other disruptions. Additionally, the Group and certain of the Group’s third-party vendors, collect and store personal information in connection with human resources operations and other aspects of the Group’s business. While the Group obtains assurances that any third parties the Group provides data to will protect this information and, where the management of the Group believes appropriate, monitor the protections employed by these third parties, there is a risk the confidentiality of data held by the Group or by third parties may be compromised and expose the Group to liability for such breach.

Global climate change could negatively affect the Group’s business

More regional and/or national requirements to reduce or mitigate the effects of greenhouse gas emissions may adversely impact the Group’s business. Today there is a lack of consistent climate legislation which results in economic and regulatory uncertainty. Any future regulations aimed at mitigating climate change may negatively impact the demand for certain of the Group’s customer’s products which could in turn impact demand for the Group’s products and impact the Group’s results of operations. The manifestations of climate change, such as extreme weather conditions or more frequent extreme weather events could disrupt the Group’s operations, damage the Group’s facilities, disrupt the Group’s supply chain or make it harder or more difficult to obtain raw materials necessary for the manufacturing of the Group’s products.

The Group’s business is exposed to risks inherent in international operations

The Group currently conducts operations in various countries and jurisdictions, including locating certain of the Group’s manufacturing and distribution facilities internationally, which subjects the Group to the legal, political, regulatory and social requirements and economic conditions in these jurisdictions. Some of these countries are considered Growth Markets. International sales and operations, especially in Growth Markets, subject the Group to certain risks inherent in doing business abroad, including:

	
•
	
exposure to local economic conditions;

	
•
	
unexpected changes in laws, regulations, trade, or monetary or fiscal policy, including interest rates, foreign currency exchange rates, and changes in the rate of inflation in the countries in which the Group does business;

	
•
	
foreign tax consequences;

	
•
	
inability to collect, or delays in collecting, value-added taxes and/or other receivables associated with remittances and other payments by subsidiaries;

	
•
	
exposure to local political turmoil and challenging labour conditions;

	
•
	
expropriation and nationalisation;

	
•
	
enforcing legal agreements or collecting receivables through foreign legal systems;

	
•
	
wage inflation in Growth Markets;

	
•
	
currency controls, including lack of liquidity in foreign currency due to governmental restrictions, trade protection policies and currency controls, which may create difficulty in repatriating profits or making other remittances;

	
•
	
compliance with the requirements of an increasing body of applicable anti-bribery laws;

	
•
	
reduced intellectual property protection in various markets;

	
•
	
investment restrictions or requirements; and

	
•
	
the imposition of product tariffs and the burden of complying with a wide variety of international and U.S. export laws.

 

     – 17 –

 

The Issuer is subject to taxation in the U.S. and numerous foreign jurisdictions. The 2017 United States Tax Cut and Jobs Act (“Tax Act”) significantly changed the taxation of U.S. based multinational corporations. The U.S. Treasury Department, the Internal Revenue Service (“IRS”), and state tax authorities have issued or will be issuing applicable guidance on how the provisions of the Tax Act will be applied or otherwise administered, and additional accounting guidance or interpretations may be issued in the future that are different from the Group’s current interpretation. The legislation could be subject to potential amendments and technical corrections, any of which could materially lessen or increase certain adverse impacts of the legislation. As regulations and guidance evolve with respect to the Tax Act, and as the Group gathers information and perform more analysis, the Group’s results may differ from previous estimates and may materially affect the Group’s financial position.

Additionally, changes in tax laws or policies by foreign jurisdictions could result in a higher effective tax rate on the Group’s worldwide earnings and such change could have a material adverse effect on the Group’s business prospects, cash flows, operating results and financial condition.

The Group’s international operations also depend upon favourable trade relations between the U.S. and those foreign countries in which the Group’s customers and suppliers have operations. The current U.S. presidential administration has created uncertainty about the future relationship between the U.S. and certain of its trading partners, including with respect to the trade policies and agreements, treaties, government regulations and tariffs that could apply to trade between the U.S. and other nations. These developments may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between these nations and the U.S. It could also impact importing certain foreign produced vehicles into the U.S. Similarly, the political situations in certain countries, specifically Brazil, China, France, Russia, Turkey, and the United Kingdom, make it difficult to predict the near-term stability of trade costs with these nations. Changes in national policy or continued uncertainty could depress economic activity and restrict the Group’s access to suppliers or customers and have a material adverse effect on the Group’s cash flows, operating results and financial condition.

Increasing the Group’s manufacturing footprint in the Growth Markets and the Group’s business relationships with automotive manufacturers in these markets are particularly important elements of the Group’s strategy. As a result, the Group’s exposure to the risks described above may be greater in the future, and the Group’s exposure to risks associated with developing countries, such as the risk of political upheaval and reliability of local infrastructure, may increase. 

The exit of the United Kingdom from membership in the European Union may adversely affect the Group’s business and profitability

The expected exit of the United Kingdom from the European Union (“EU”) (“Brexit”) could adversely affect European and worldwide economic and market conditions and contribute to instability in global financial and foreign exchange markets, including increased volatility in interest rates and foreign exchange rates.  Uncertainty over the terms of the United Kingdom’s departure from the EU could cause political and economic uncertainty in the United Kingdom and the rest of Europe. Until agreements related to Brexit are in place, it is difficult to predict the impact Brexit will have on international trade, and whether the Group needs to renegotiate any of the Group’s contractual arrangements to accommodate a new trade regime. If the United Kingdom leaves the EU without an agreement in place, there could be an adverse impact and volatility in foreign exchange markets and labour and trade practices and policy. The Group conducts business in the United Kingdom and several EU nations and the taxation policies of the United Kingdom and the EU nations may change as a result of Brexit, which could adversely impact the Group’s tax positions. The Group may be required to comply with regulatory requirements in the United Kingdom that are in addition to, or inconsistent with, the regulatory requirements of the EU. 

Although the Group is monitoring the ongoing potential impacts of Brexit and seek to minimise its impact on the Group’s business, the effects of Brexit could adversely affect the Group’s business prospects, operating results, cash flows and financial condition.

 

     – 18 –

 

Significant changes in the North American Free Trade Agreement (“NAFTA”) could adversely affect the Group’s financial performance

In October 2018, the U.S., Mexico and Canada agreed to a trade deal that would replace NAFTA, subject to legal review and ratification by each country. The new deal, known as The United States Mexico Canada Agreement (“USMCA”), includes changes to the automotive rules of origin that dictate what percentage of an automobile must be built from parts that originated from countries in the NAFTA region. The new rules would require that at least 75% of parts be made in North America and require that 40-45% of an automobile must be made by workers earning at least US$16 an hour. Reflective of the automotive industry, the Group’s vehicle parts manufacturing facilities in the U.S., Mexico and Canada are highly dependent on duty-free trade within the NAFTA region. If the USMCA is not ratified and, as a consequence, the U.S. withdraws from NAFTA, such withdrawal could have a materially adverse impact on the Group’s financial performance. The imposition of customs duties on imports into the U.S., Mexico, or Canada could negatively impact the Group’s financial performance. 

The Group’s foreign operations may subject the Group to risks relating to laws governing international relations

Due to the Group’s global operations, the Group is subject to many laws governing international relations (including, but not limited to, the Foreign Corrupt Practices Act, and other anti-bribery regulations in foreign jurisdictions where the Group does business), which prohibit improper payments to government officials and restrict where and how the Group can do business, what information or products the Group can supply to certain countries and what information the Group can provide to authorities in governmental authorities. The Group also exports components and products that are subject to certain trade-related U.S. laws, including the U.S. Export Administration Act and various economic sanctions programmes administered by the U.S. Treasury’s Office of Foreign Assets Control.

Although the Group has procedures and policies in place that should mitigate the risk of violating these laws, there is no guarantee that they will be sufficiently effective. If and when the Group acquires new businesses, the Group may not be able to ensure that the pre-existing controls and procedures meant to prevent violations of these laws were effective, and violations may occur if the Group is unable to timely implement corrective and effective controls and procedures when integrating newly acquired businesses. Any allegations of non-compliance with these laws could harm the Group’s reputation, divert management attention and result in significant expenses, and could therefore materially harm the Group’s business prospects, operating results and financial condition.

The Group’s business in China is subject to aggressive competition and is sensitive to economic and market conditions

The Group operates in the highly competitive automotive supply market in China and face competition from both international and smaller domestic manufacturers. Due to the significance of the Group’s China market for the Group’s profit and growth, the Group is exposed to risks in China. The Group anticipates that additional competitors, both international and domestic, may seek to enter the Chinese market resulting in increased competition. Increased competition may result in price reductions, reduced margins and the Group’s inability to gain or hold market share. There have been periods of increased market volatility and moderation in the levels of economic growth in China, which resulted in periods of lower automotive production growth rates in China than those previously experienced. The Group’s business in China is sensitive to economic and market conditions that drive automotive sales volumes in China and may be impacted if there are reductions in vehicle demand in China. If the Group is unable to maintain the Group’s position in the Chinese market, the pace of growth slows, or vehicle sales in China decrease, the Group’s business prospects, operating results and financial condition could be materially adversely affected.

Global integration may result in additional risks

Because of the Group’s efforts to manage costs by integrating the Group’s operations globally, the Group faces the additional risk that, should any of the other risks discussed herein materialise, the negative effects could be more 

 

     – 19 –

 

pronounced. For example, while supply delays of a component have typically only affected a few customer vehicle models, such a delay could now affect several vehicle models of several customers in several geographic areas. Similarly, any recall or warranty issue the Group faces due to a product defect or failure is now more likely to involve a larger number of units in several geographic areas. 

Exchange rate risks

As a result of the Group’s global presence, a significant portion of the Group’s revenues and expenses are denominated in currencies other than the U.S. dollar. The Group is therefore subject to foreign currency risks and foreign exchange exposure. Such risks and exposures include:

	
•
	
transaction exposure, which arises because the cost of a product originates in one currency and the product is sold in another currency;

	
•
	
revaluation effects, which arise from valuation of assets denominated in other currencies than the reporting currency of each unit;

	
•
	
translation exposure in the income statement, which arises when the income statements of non-U.S. subsidiaries are translated into U.S. dollars;

	
•
	
translation exposure in the balance sheet, which arises when the balance sheets of non-U.S. subsidiaries are translated into U.S. dollars; and

	
•
	
changes in the reported U.S. dollar amounts of cash flows.

The Group cannot predict exchange rate volatility or the extent of its impact on the Group’s future financial results. The Group typically denominates foreign transactions in foreign currencies to achieve a natural hedge. However, a natural hedge cannot be achieved for all the Group’s currency flows; therefore, a net transaction exposure remains within the group. The net exposure can be significant and creates a transaction exposure risk for the Group. The Issuer does not hedge translation exposure. However, the Group does engage in foreign exchange rate hedging from time to time related to foreign currency transactions.

The Group faces risks in connection with acquisitions and joint ventures

The Group’s growth has been enhanced through strategic opportunities, including acquisitions of businesses, products and technologies, and joint development agreements that the management of the Group believes will complement the Group’s business. The Group regularly evaluates acquisition opportunities, frequently engage in acquisition discussions, conduct due diligence activities in connection with possible acquisitions, and, where appropriate, engage in acquisition negotiations. The Group may not be able to successfully identify suitable acquisition and joint venture candidates or complete transactions on acceptable terms, integrate acquired operations into the Group’s existing operations or expand into new markets. The Group’s failure to identify suitable strategic opportunities may restrict the Group’s ability to grow the Group’s business.

These strategic opportunities also involve numerous additional risks to the Group and the Group’s investors, including:

	
•
	
risks related to retaining acquired management and employees;

	
•
	
difficulties in integrating acquired technologies, products, operations, services and personnel with the Group’s existing businesses;

	
•
	
diversion of the Group’s management’s attention from other business concerns;

	
•
	
assumption of contingent liabilities;

	
•
	
adverse financial impacts from the amortisation of expenses related to intangible assets;

	
•
	
adverse financial impacts from potential impairment of goodwill;

 

     – 20 –

 

	
•
	
incurrence of indebtedness; and

	
•
	
potential adverse financial impacts.

In the future, the Group may pursue acquisitions of businesses or products that are complementary to the Group’s business but for which the Group has historically had little or no direct experience. These transactions can involve significant challenges and risks as well as significant time and resources that may divert management’s attention from other business activities. If the Group fails to adequately manage these risks, the acquisitions may not result in revenue growth, operational synergies or service or technology enhancements, which could adversely affect the Group’s financial condition.

If the Group’s patents are declared invalid or the Group’s technology infringes on the proprietary rights of others, the Group’s ability to compete may be impaired

The Group has developed a considerable amount of proprietary technology related to automotive safety systems and rely on a number of patents to protect such technology. The Group’s intellectual property plays an important role in maintaining the Group’s competitive position in a number of the markets the Group serves. At present, the Group holds approximately 6,050 patents covering a large number of innovations and product ideas, mainly in the fields of seatbelt and airbag technologies. In addition to the Group’s in-house research and development efforts, the Group seeks to acquire rights to new intellectual property through corporate acquisitions, asset acquisitions, licensing and joint venture arrangements. The Group’s patents and licenses expire on various dates during the period from 2019 to 2038. The Group does not expect the expiration of any single patent or licence to have a material adverse effect on the Group’s business, operating results and financial condition.

Developments or assertions by or against the Group relating to intellectual property rights could negatively impact the Group’s business. The Group primarily protects the Group’s innovations with patents and vigorously protect and defend the Group’s patents, trademarks and know-how against infringement and unauthorised use. If the Group is not able to protect the Group’s intellectual property and the Group’s proprietary rights and technology, the Group could lose those rights and incur substantial costs policing and defending those rights. The Group also generates licence revenue from these patents, which the Group may lose if the Group does not adequately protect the Group’s intellectual property and proprietary rights. The Group’s means of protecting the Group’s intellectual property, proprietary rights and technology may not be adequate, and the Group’s competitors may independently develop technologies that are similar or superior to the Group’s proprietary technologies, duplicate the Group’s technologies, or design around the patents the Group s or licenses. In addition, the laws of some foreign countries do not protect the Group’s proprietary rights to as great an extent as the laws of the U.S.

The Group may not be able to protect the Group’s proprietary technology and intellectual property rights, which could result in the loss of the Group’s rights or increased costs

Although the management of the Group believes that the Group’s products and technology do not infringe the proprietary rights of others, third parties may assert infringement claims against the Group in the future. Additionally, the Group licences from third parties proprietary technology covered by patents, and the Group cannot be certain that any such patents will not be challenged, invalidated or circumvented. Such licenses may also be non-exclusive, meaning the Group’s competition may also be able to access such technology. Further, the Group expects to continue to expand the Group’s products and services and expand into new businesses, including through acquisitions, joint ventures and joint development agreements, which could increase the Group’s exposure to patent and other intellectual property claims from competitors and other parties. If claims alleging patent, copyright or trademark infringement are brought against the Group and are successfully prosecuted against the Group, they could result in substantial costs. If a successful claim is made against the Group and the Group fails to develop non-infringing technology, the Group’s business, operating results and financial condition could be materially adversely affected. In addition, certain of the Group’s products utilise components that are developed by third parties and licensed to the Group. If claims alleging patent, copyright or trademark infringement are brought against such licensors and successfully prosecuted, they could result in substantial costs, and the Group may not be 

 

     – 21 –

 

able to replace the functions provided by these licensors. Alternate sources for the technology currently licensed to the Group may not be available in a timely manner, may not provide the same functions as currently provided or may be more expensive than products currently used.

The Group may develop proprietary information through the Group’s in-house research and development efforts, consulting arrangements or research collaborations with other entities or organisations. The Group may seek to protect this proprietary information by entering into confidentiality agreements or consulting, services or employment agreements that contain non-disclosure and non-use provisions with the Group’s employees, consultants, scientific advisors and other third parties. However, the Group may fail to enter into the necessary agreements, and even if entered into, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of the Group’s proprietary information. 

The Group may not be able to respond quickly enough to changes in technology and technological risks and to develop the Group’s intellectual property into commercially viable products

Changes in legislative, regulatory or industry requirements or in competitive technologies may render certain of the Group’s products obsolete or less attractive to the Group’s customers. The Group currently licenses certain proprietary technology to third parties and, if such technology becomes obsolete or less attractive, those licensees could terminate the Group’s licence agreements, which could adversely affect the Group’s results of operations. The Group’s ability to anticipate changes in technology and regulatory standards and to successfully develop and introduce new and enhanced products on a timely basis will be a significant factor in the Group’s ability to remain competitive. The Group cannot provide assurance that the Group will be able to achieve the technological advances that may be necessary for the Group to remain competitive or that certain of the Group’s products will not become obsolete. The Group is also subject to the risks generally associated with new product introductions and applications, including lack of market acceptance, delays in product development and failure of products to operate properly. As part of the Group’s business strategy, the Group may from time to time seek to acquire businesses or assets that provide the Group with additional intellectual property. The Group may experience problems integrating acquired technologies into the Group’s existing technologies and products, and such acquired intellectual property may be subject to known or contingent liabilities such as infringement claims.

Some of the Group’s products and technologies may use “open source” software, which may restrict how the Group use or distribute the Group’s products or require that the Group releases the source code of certain products subject to those licenses

Some of the Group’s products and technologies may incorporate software licensed under so-called “open source” licenses. In addition to risks related to licence requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on origin of the software. Additionally, open source licenses typically require that source code subject to the licence be made available to the public and that any modifications or derivative works to open source software continue to be licensed under open source licenses. These open source licenses typically mandate that proprietary software, when combined in specific ways with open source software, become subject to the open source licence. If the Group combines the Group’s proprietary software in such ways with open source software, the Group could be required to release the source code of the Group’s proprietary software. The Group takes steps to ensure that the Group’s proprietary software is not combined with, and does not incorporate, open source software in ways that would require the Group’s proprietary software to be subject to an open source licence. However, few courts have interpreted open source licenses, and the manner in which these licenses may be interpreted and enforced is therefore subject to some uncertainty.

The Group’s business may be adversely affected by laws or regulations, including environmental, occupational health and safety or other governmental regulations

The Group is subject to various federal, state, local and foreign laws and regulations, including those related to the requirements of environmental, occupational health and safety, financial and other matters. The Group cannot 

 

     – 22 –

 

predict the substance or impact of pending or future legislation or regulations, or the application thereof. The introduction of new laws or regulations or changes in existing laws or regulations, or the interpretations thereof, could increase the costs of doing business for the Group or the Group’s customers or suppliers or restrict the Group’s actions and adversely affect the Group’s business prospects, operating results, cash flows or financial condition. The Group’s operations are subject to environmental and safety laws and regulations governing, among other things, emissions to air, discharges to waters and the generation, handling, storage, transportation, treatment and disposal of waste and other materials. The operation of automotive parts manufacturing facilities entails risks in these areas, and the Group cannot assure that the Group will not incur material costs or liabilities as a result. Additionally, environmental laws, regulations, and permits and the enforcement thereof change frequently and have tended to become increasingly stringent over time, which may necessitate substantial capital expenditures or operating costs or may require changes of production processes. Although the Group has no known pending material environmental issues, there is no assurance that the Group will not be adversely impacted by any environmental costs, liabilities or claims in the future either under present laws and regulations or those that may be adopted or imposed in the future. The Group’s costs, liabilities, and obligations relating to environmental matters may have a material adverse effect on the Group’s business prospects, operating results, cash flows or financial condition. 

The Group’s facilities in the U.S. are subject to regulation by the Occupational Safety and Health Administration (“OSHA”), which regulates the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires that the Group maintains information about hazardous materials used or produced in the Group’s operations and that the Group provides this information to employees, state and local governmental authorities and local residents. The Group is also subject to occupational safety regulations in other countries. The Group’s failure to comply with government occupational safety regulations, including OSHA requirements, or general industry standards relating to employee health and safety, keep adequate records or monitor occupational exposure to regulated substances could expose the Group to liability, enforcement, and fines and penalties, and could have a material adverse effect on the Group’s business prospects, operating results, cash flows and financial condition.

Although the Group employs safety procedures in the design and operation of the Group’s facilities, there is a risk that an accident or injury to one of the Group’s employees could occur in one of the Group’s facilities. Any accident or injury to the Group’s employees could result in litigation, manufacturing delays and harm to the Group’s reputation, which could negatively affect the Group’s business, operating results and financial condition.

The Group’s business may be adversely affected by changes in automotive safety regulations or concerns that drive further regulation of the automobile safety market

Government vehicle safety regulations are a key driver in the Group’s business. Historically, these regulations have imposed ever more stringent safety regulations for vehicles. Safety regulations have a positive impact on driver awareness and acceptance of automotive safety products and technology. These more stringent safety regulations often require vehicles to have more safety content per vehicle and more advanced safety products, which has thus been a driver of growth in the Group’s business.

However, these regulations are subject to change based on a number of factors that are not within the Group’s control, including new scientific or medical data, adverse publicity regarding the industry recalls and safety risks of airbags or seatbelts (for instance, to children and small adults), domestic and foreign political developments or considerations, and litigation relating to the Group’s products and the Group’s competitors’ products. Changes in government regulations in response to these and other considerations could have a severe impact on the Group’s business. Although the Group believes that over time safety will continue to be a regulatory priority, if government priorities shift and the Group is unable to adapt to changing regulations, the Group’s business may suffer material adverse effects.

The regulatory obligation of complying with safety regulations could increase as federal and local regulators impose more stringent compliance and reporting requirements in response to product recalls and safety issues in 

 

     – 23 –

 

the Group’s industry. The Group is subject to existing stringent requirements under the National Traffic and Motor Vehicle Safety Act of 1966 (the “Vehicle Safety Act”), including a duty to report, subject to strict timing requirements, safety defects with the Group’s products. The Vehicle Safety Act imposes potentially significant civil penalties for violations including the failure to comply with such reporting actions. The Group is also subject to the existing U.S. Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act, which requires equipment manufacturers, such as the Issuer, to comply with “Early Warning” requirements (“TREAD”) by reporting certain information to the National Highway Traffic Safety Administration (“NHTSA”) such as information related to defects or reports of injury related to the Group’s products. TREAD imposes criminal liability for violating such requirements if a defect subsequently causes death or bodily injury. In addition, the Vehicle Safety Act authorises NHTSA to require a manufacturer to recall and repair vehicles that contain safety defects or fail to comply with U.S. federal motor vehicle safety standards. Sales into foreign countries may be subject to similar regulations.

Due to the recent record recall of airbag inflators of one of the Group’s competitors, additional legislation has been proposed in the U.S. Congress regarding the reporting requirements for product recalls. NHTSA has also become more active in requesting information from suppliers and vehicle manufactures regarding potential product defects. For example, in connection with the Toyota Recall, the Group, in connection with Toyota Motor Corporation, have informed NHTSA of the reported incidents and Toyota Motor Corporation has discussed with NHTSA what action it will take to address the issue. 

Negative or unexpected tax developments could adversely affect the Group’s effective tax rate, operating results and financial condition 

The Group’s annual tax rate is based on the Group’s income and the tax laws in the jurisdictions in which the Group operates. Due to the Group’s global operations the Group faces uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. Significant judgment is required in determining the Group’s effective tax rate and in evaluating the Group’s tax positions. Although the Group believes that the Group’s tax estimates are reasonable, the final determination of the Group’s tax liability may be different from what is reflected in the Group’s historical income tax provisions and accruals.

The Group is regularly examined by tax authorities around the world and the Group is currently under examination in a number of jurisdictions. The outcome of such examinations remains uncertain. Although the Group periodically assesses the likelihood of adverse outcomes, negative or unexpected results from one or more of such reviews and audits, including any related interest or penalties by governmental authorities, could increase the Group’s effective tax rate and adversely impact the Group’s operating results, cash flows or financial condition.

The effective tax rates used for interim reporting are based on the Group’s projected full-year geographic earnings mix and consideration of the Group’s cash repatriation plans. Changes in currency exchange rates, earnings mix by taxing jurisdiction, or cash repatriation plans could impact the Group’s reported effective tax rates, or cause fluctuations in the tax rate from quarter to quarter. Any anti-trust judgements or settlements may not be tax deductible, which could have a material negative impact to the Group’s annual tax rate. 

A number of other factors may also increase the Group’s effective tax rate, which could have an adverse impact on the Group’s profitability and operating results. Due to the Group’s numerous foreign operations, the Group’s tax rate may be impacted by the Group’s global mix of earnings if the Group's pre-tax income is lower than anticipated in countries with lower statutory tax rates and/or is higher than anticipated in countries with higher statutory tax rates. Based on U.S. regulatory rules, the Group does not record current or deferred tax liabilities on permanent investments in the Issuer's foreign subsidiaries and foreign earnings that are indefinitely reinvested. However, if the Group’s non-U.S. subsidiaries were to distribute cash to the Issuer's U.S. parent or make a cash outlay, such transactions may result in an increase to the Group’s effective tax rate. See Note 6 to the 2018 Consolidated Financial Statements.

Changes in, or changes in the application of, U.S. or foreign tax laws, regulations or accounting principles with 

 

     – 24 –

 

respect to matters such as tax rates, transfer pricing, dividends and restrictions on certain forms of tax relief or limitations on favourable tax treatment could affect the carrying value of the Group’s deferred tax assets and/or the Group’s effective tax rate.

The Group may not be able to fully realise the Group’s deferred tax assets

The Group currently carries deferred tax assets, net of valuation allowances, resulting from deductible temporary differences and tax loss carry-forwards, both of which will reduce taxable income in the future. However, deferred tax assets may only be realised against taxable income. The amount of the Group’s deferred tax assets could be reduced, from time to time, due to adverse changes in the Group’s operations or in estimates of future taxable income from operations during the carry-forward period as a result of deterioration in market conditions or other circumstances. Any such reduction would adversely affect the Group’s income in the period of the adjustment. Additional information on the Group’s deferred tax assets is included in Note 6 to the 2018 Consolidated Financial Statements. 

The Group may not achieve some or all of the expected benefits of the separation of Veoneer 

Although the Group believes that the separation of Veoneer has provided financial, operational, managerial and other benefits to the Group and the Group’s stockholders, it may not provide results on the scope or scale the Group anticipated, or such benefits may be delayed or not occur at all. Following the completion of the spin-off, the Issuer is a smaller, less diversified company with a narrower business focus and may be more vulnerable to changing market conditions, which could materially adversely affect the Group’s business, operating results and financial condition. 

The Group could incur significant liability if the separation is determined to be a taxable transaction

The Group has received an opinion of outside counsel to the effect that, for U.S. federal income tax purposes, the spin-off should qualify, for both the Issuer and its stockholders, as a reorganisation within the meaning of Sections 368(a)(1)(D) and 355 of the U.S. Internal Revenue Code of 1986, as amended. The opinion is based on and relies on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of the Issuer and Veoneer, including those relating to the past and future conduct of the Issuer and Veoneer. If any of these facts, assumptions, representations, statements or undertakings is, or becomes, inaccurate or incomplete, reliance on the opinion may be affected. An opinion of outside counsel represents their legal judgment but is not binding on the IRS or any court. Accordingly, there can be no assurance that the IRS will not challenge the conclusions reflected in the opinion or that a court would not sustain such a challenge. 

Potential indemnification obligations to Veoneer or a refusal of Veoneer to indemnify the Group pursuant to the agreements executed in connection with the internal reorganisation and spin-off could materially adversely affect the Group

The transaction agreements the Issuer entered into with Veoneer in connection with the internal reorganisation and the spin-off provide for cross-indemnities that require the Issuer and Veoneer to bear financial responsibility for each company’s business prior to the internal reorganisation or spin-off, as applicable, and to indemnify the other party in connection with a breach of such party of the transaction agreements; provided, however, certain warranty, recall and product liabilities for electronics products manufactured prior to the completion of the internal reorganisation have been retained by the Group and the Group will indemnify Veoneer for any losses associated with such warranty, recall or product liabilities pursuant to the distribution agreement entered into as part of the spin-off. Any indemnities that the Group is required to provide to Veoneer may be significant and could negatively affect the Group’s business. In addition, there can be no assurance that the indemnities from Veoneer will be sufficient to protect the Group against the full amount of any potential liabilities. Even if the Group does succeed in recovering from Veoneer any amounts for which the Group is held liable, the Group may be temporarily required to bear these losses ourselves. In addition, each of these risks could have a material adverse effect on the Group’s business, operating results and financial condition.

 

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The audited consolidated financial information included in this Base Listing Particulars includes both the Guarantor and non-guarantor companies

The audited consolidated financial information incorporated by reference and/or appearing herein includes and consolidates both Guarantor and non-guarantor companies and, accordingly, the financial information may be of limited use in assessing the financial position of the Guarantor. See “General Information – Information relating to the Guarantor” for further information.

Factors which are material for the purpose of assessing the market risks associated with the Notes

Risks applicable to all Notes 

If the Issuer has the right to redeem any Notes at its option, this may limit the market value of the Notes concerned and an investor may not be able to reinvest the redemption proceeds in a manner which achieves a similar effective return

An optional redemption feature is likely to limit the market value of Notes. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed.  This also may be true prior to any redemption period.

The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes.  At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time.

If the Notes include a feature to convert the interest basis from a fixed rate to a floating rate, or vice versa, this may affect the secondary market and the market value of the Notes concerned

Fixed/Floating Rate Notes are Notes which bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate.  Such a feature to convert the interest basis, and any conversion of the interest basis, may negatively affect the secondary market in, and the market value of, such Notes as the change of interest basis may result in a lower interest return for Noteholders.  Where the Notes convert from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable floating rate debt securities based on the same reference rate (and with otherwise comparable terms).  In addition, the new floating rate at any time may be lower than the rates on other Notes.  Where the Notes convert from a floating rate to a fixed rate, the fixed rate may be lower than then prevailing rates on those Notes and could affect the market value of an investment in the relevant Notes.

The Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg, meaning investors will have to rely on their procedures for transfer, payment and communication with the Issuer

The Global Notes will initially be deposited with a common depositary or the common safekeeper, as applicable for Euroclear and Clearstream, Luxembourg and registered in the name of the nominee for such common depository or common safekeeper. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. Global Notes held on behalf of Euroclear and Clearstream, Luxembourg will be transferable only in accordance with the rules and procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be.

While the Notes are represented by the Global Notes, the Issuer will discharge its payment obligations under the Notes by making payments to or to the order of the person shown on the Register as the registered holder of the Global Notes. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Notes. None of the Issuer, the Guarantor, any Paying Agent or the Registrar will have any responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes. Holders of beneficial interests in the Global Notes will not have 

 

     – 26 –

 

a direct right to vote in respect of the Notes. Instead, such Noteholders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg. 

Risks applicable to certain types of Notes 

There are particular risks associated with an investment in certain types of Notes, such as Index Linked Notes and Dual Currency Notes.  In particular, an investor might receive less interest than expected or no interest in respect of such Notes and may lose some or all of the principal amount invested by it

The Issuer may issue Notes with principal or interest determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors (each, a “Relevant Factor”).  In addition, the Issuer may issue Notes with principal or interest payable in one or more currencies which may be different from the currency in which the Notes are denominated.  Potential investors should be aware that:

	
(i)
	
the market price of such Notes may be volatile;

	
(ii)
	
they may receive no interest;

	
(iii)
	
payment of principal or interest may occur at a different time or in a different currency than expected;

	
(iv)
	
they may lose all or a substantial portion of their principal;

	
(v)
	
a Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices;

	
(vi)
	
if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely will be magnified; and

	
(vii)
	
the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations.  In general, the earlier the change in the Relevant Factor, the greater the effect on yield.

The historical experience of an index or other Relevant Factor should not be viewed as an indication of the future performance of such Relevant Factor during the term of any Notes.  Accordingly, each potential investor should consult its own financial and legal advisers about the risk entailed by an investment in any Notes linked to a Relevant Factor and the suitability of such Notes in light of its particular circumstances.

Where Notes are issued on a partly-paid basis, an investor who fails to pay any subsequent instalment of the issue price could lose all of its investment

The Issuer may issue Notes where the issue price is payable in more than one instalment. Any failure by an investor to pay any subsequent instalment of the issue price in respect of its Notes could result in such investor losing all of its investment.

Notes which are issued with variable interest rates or which are structured to include a multiplier or other leverage factor are likely to have more volatile market values than more standard securities

Notes with variable interest rates can be volatile investments.  If they are structured to include multipliers or other leverage factors, or caps or floors, or any combination of those features or other similar related features, their market values may be even more volatile than those for securities that do not include those features.

Inverse Floating Rate Notes will have more volatile market values than conventional Floating Rate Notes

 

     – 27 –

 

Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as LIBOR.  The market values of those Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of those Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of those Notes.

Notes issued at a substantial discount or premium may experience price volatility in response to changes in market interest rates 

The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities.

Movements in market interest rates can adversely affect the value of Notes which bear interest at a fixed rate

The Notes may bear interest at a fixed interest rate. A holder of a security with a fixed interest rate is exposed to the risk that the value of such security could fall as a result of changes in the market interest rate. While the nominal compensation rate of a security with a fixed interest rate is fixed during the life of such security or during a certain period of time, the current interest rate on the capital market (market interest rate) typically changes on a daily basis. If the market interest rate increases, the value of such a security typically falls, until the yield of such security is approximately equal to the market interest rate. If the market interest rate falls, the value of a security with a fixed interest rate typically increases, until the yield of such a security is approximately equal to the market interest rate. Consequently, the Noteholders should be aware that movements of the market interest rate can adversely affect the value of the Notes and can lead to losses for the Noteholders if they sell their Notes.

The regulation and reform of benchmarks may adversely affect the value of Notes linked to or referencing such benchmarks

Interest rates and indices which are deemed to be benchmarks, (such as, in the case of Floating Rate Notes, a reference rate) are the subject of recent national and international regulatory guidance and proposals for reform. Some of these reforms are already effective whilst others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, to disappear entirely, or have other consequences which cannot be predicted. Any such consequence could have a material adverse effect on any Notes linked to or referencing such a benchmark.  Regulation (EU) 2016/1011 (the “Benchmarks Regulation”) was published in the Official Journal of the EU on 29 June 2016 and has applied since 1 January 2018.  The Benchmarks Regulation applies to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark within the EU. It will, among other things, (i) require benchmark administrators to be authorised or registered (or, if non-EU-based, to be subject to an equivalent regime or otherwise recognised or endorsed) and (ii) prevent certain uses by EU supervised entities of benchmarks of administrators that are not authorised or registered (or, if non-EU based, not deemed equivalent or recognised or endorsed). 

The Benchmarks Regulation could have a material impact on any Notes linked to or referencing a benchmark, in particular, if the methodology or other terms of the benchmark are changed in order to comply with the requirements of the Benchmarks Regulation. Such changes could, among other things, have the effect of reducing, increasing or otherwise affecting the volatility of the published rate or level of the benchmark.

More broadly, any of the international or national reforms, or the general increased regulatory scrutiny of benchmarks, could increase the costs and risks of administering or otherwise participating in the setting of a benchmark and complying with any such regulations or requirements. Such factors may have the following effects on certain benchmarks (including LIBOR and EURIBOR):  (i) discourage market participants from continuing to administer or contribute to the benchmark; (ii) trigger changes in the rules or methodologies used in the benchmark 

 

     – 28 –

 

or (iii) lead to the disappearance of the benchmark. Any of the above changes or any other consequential changes as a result of international or national reforms or other initiatives or investigations, could have a material adverse effect on the value of and return on any Notes linked to or referencing a benchmark.

Investors should consult their own independent advisers and make their own assessment about the potential risks imposed by the Benchmarks Regulation and similar or related reforms in making any investment decision with respect to any Notes linked to or referencing a benchmark. 

Future discontinuance of certain benchmarks (for example, LIBOR or EURIBOR) may adversely affect the value of Notes linked to or referencing any such benchmark

On 27 July 2017, the Chief Executive of the United Kingdom Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it does not intend to continue to persuade, or use its powers to compel, panel banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. The announcement indicates that the continuation of LIBOR on the current basis is not guaranteed after 2021. It is not possible to predict whether, and to what extent, panel banks will continue to provide LIBOR submissions to the administrator of LIBOR going forward. This may cause LIBOR to perform differently than it did in the past and may have other consequences which cannot be predicted. In a further speech on 12 July 2018, the FCA emphasised that market participants should not rely on the continued publication of LIBOR after the end of 2021.

Separate workstreams are also underway in Europe to reform EURIBOR using a hybrid methodology and to provide a fallback by reference to a euro risk-free rate (based on a euro overnight risk-free rate as adjusted by a methodology to create a term rate). On 13 September 2018, the working group on euro risk-free rates recommended Euro Short-term Rate (ESTER) as the new risk free rate. ESTER is expected to be published by the ECB by October 2019. In addition, on 21 January 2019, the euro risk free rate working group published a set of guiding principles for fallback provisions in new euro denominated cash products (including bonds). The guiding principles indicate, among other things, that continuing to reference EURIBOR in relevant contracts may increase the risk to the euro area financial system.

Investors should be aware that, if a benchmark were discontinued or otherwise unavailable, the rate of interest on Floating Rate Notes which are linked to or which reference such benchmark will be determined for the relevant period by the fall-back provisions applicable to such Notes. 

The Conditions provide for certain arrangements in the event that a published benchmark, such as LIBOR or EURIBOR, (including any page on which such benchmark may be published (or any successor service)) becomes unavailable.

If the circumstances described in the preceding paragraph occur and, in the case of Floating Rate Notes, Screen Rate Determination and Reference Rate Replacement are each specified in the applicable Pricing Supplement as applicable (any such Notes, “Relevant Notes”), such arrangements will include the possibility that:

	
 
	
(a)
	
the relevant rate of interest could be set or, as the case may be, determined by reference to a successor rate or an alternative rate (as applicable) determined by an Independent Adviser; and

	
 
	
(b)
	
such successor rate or alternative rate (as applicable) may be adjusted (if required) by the relevant Independent Adviser in order to reduce or eliminate, to the extent reasonably practicable in the circumstances, any economic prejudice or benefit (as applicable) to investors arising out of the replacement of the relevant benchmark, 

in any such case, acting in good faith and in a commercially reasonable manner as described more fully in the Conditions.

In addition, the relevant Independent Adviser may also determine (acting in good faith and in a commercially reasonable manner) that other amendments to the Conditions are necessary in order to follow market practice in 

 

     – 29 –

 

relation to the relevant successor rate or alternative rate (as applicable) and to ensure the proper operation of the relevant successor rate or alternative rate (as applicable). 

No consent of the Noteholders shall be required in connection with effecting any relevant successor rate or alternative rate (as applicable) or any other related adjustments and/or amendments described above. 

If (i) the Issuer is not able to appoint an Independent Adviser, (ii) the Independent Adviser appointed by the Issuer fails to make the necessary determination or (iii) the Notes are not Relevant Notes, the ultimate fallback of interest for a particular Interest Period (as defined in the Conditions) may result in the rate of interest for the last preceding Interest Period being used. This may result in the effective application of a fixed rate for Floating Rate Notes based on the rate which was last observed on the relevant screen page. In addition, due to the uncertainty concerning the availability of successor rates and alternative rates and the involvement of an Independent Adviser, the relevant fallback provisions may not operate as intended at the relevant time. 

Any such consequences could have a material adverse effect on the value and return on any such Notes. Moreover, any of the above matters or any other significant change to the setting or existence of any relevant rate could affect the ability of the Issuer and the Guarantor to meet their obligations under the Floating Rate Notes or could have a material adverse effect on the value or liquidity of, and the amount payable under, the Floating Rate Notes. Investors should note that, in the case of Relevant Notes, the relevant Independent Adviser will have discretion to adjust the relevant successor rate or alternative rate (as applicable) in the circumstances described above. Any such adjustment could have unexpected commercial consequences and there can be no assurance that such an adjustment will be made or, due to the particular circumstances of each Noteholder, any such adjustment will be favourable to each Noteholder. 

The market continues to develop in relation to SONIA as a reference rate for Floating Rate Notes

On 29 November 2017, the Bank of England and the FCA announced that, from January 2018, the Bank of England's Working Group on Sterling Risk-Free Rates has been mandated with implementing a broad-based transition to the Sterling Overnight Index Average (SONIA) over the next four years across sterling bond, loan and derivatives markets, so that SONIA is established as the primary sterling interest rate benchmark by the end of 2021. Investors should be aware that the market continues to develop in relation to SONIA as a reference rate in the capital markets and its adoption as an alternative to Sterling LIBOR. In particular, market participants and relevant working groups are exploring alternative reference rates based on SONIA, including term SONIA reference rates (which seek to measure the market's forward expectation of an average SONIA rate over a designated term). The market or a significant part thereof may adopt an application of SONIA that differs significantly from that set out in the Conditions and used in relation to Floating Rate Notes that reference a SONIA rate issued under this Programme. As SONIA is published and calculated by the Bank of England based on data received from other sources, the Issuer has no control over its determination, calculation or publication. There can be no guarantee that SONIA will not be discontinued or fundamentally altered in a manner that is materially adverse to the interests of investors in Floating Rate Notes linked to SONIA. If the manner in which SONIA is calculated is changed, that change may result in a reduction of the amount of interest payable on such Notes and the trading prices of such Notes.   

The Issuer may in the future also issue Notes linked to or referencing SONIA that differ materially in terms of interest determination when compared with any previous SONIA linked/referenced Notes issued under the Programme. The nascent development of Compounded Daily SONIA as an interest reference rate for the Eurobond markets, as well as continued development of SONIA-based rates for such markets and market infrastructure for adopting such rates, could result in reduced liquidity or increased volatility or otherwise affect the market price of any SONIA-referenced Notes issued under the Programme. Interest on Notes referencing Compounded Daily SONIA is only capable of being determined at the end of the relevant Interest Period and immediately prior to the relevant Interest Payment Date. It may be difficult for investors in Notes that reference a SONIA rate to reliably estimate the amount of interest that will be payable on such Notes. Further, if the Notes become due and payable 

 

     – 30 –

 

under Condition 10, the Rate of Interest applicable to the Notes shall be determined on the date the Notes became due and payable and shall not be reset thereafter. In addition, the manner of adoption or application of SONIA reference rates in the Eurobond markets may differ materially compared with the application and adoption of SONIA in other markets, such as the derivatives and loan markets. 

Investors should carefully consider how any mismatch between the adoption of SONIA reference rates across these markets may impact any hedging or other financial arrangements which they may put in place in connection with any acquisition, holding or disposal of any Notes referencing a SONIA rate. Investors should consider these matters when making their investment decision with respect to any such Notes.

Further, if SONIA does not prove to be widely used in securities like the Notes, the trading prices of Notes linked to or referencing SONIA may be lower than those of securities linked to reference rates that are more widely used. Investors in such Notes may not be able to sell such Notes at all or may not be able to sell such Notes at prices that will provide them with a yield comparable to similar investments that have a developed secondary market and may consequently suffer from increased pricing volatility and market risk.

Investors should consider all of these matters when making their investment decision with respect to the relevant Notes. 

A Dealer's potential conflict of interest whilst acting as a Calculation Agent

The Issuer may appoint a Dealer as Calculation Agent in respect of an issuance of Notes under the Programme.  In such a case, the Calculation Agent is likely to be a member of an international financial group that is involved, in the ordinary course of its business, in a wide range of banking activities out of which conflicting interests may arise.  Whilst such a Calculation Agent will, where relevant, have information barriers and procedures in place to manage conflicts of interest, it may in its other banking activities from time to time be engaged in transactions involving an index or related derivatives which may affect amounts receivable by Noteholders during the term and on the maturity of the Notes or the market price, liquidity or value of the Notes and which could be deemed to be adverse to the interests of the Noteholders.

Risks related to the Notes generally

Set out below is a brief description of certain risks relating to the Notes generally:

The Conditions contain provisions which may permit their modification without the consent of all investors

The Conditions of the Notes and the Agency Agreement (as defined in the Conditions) contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit certain defined majorities to make decisions that modify the conditions applicable to a particular Series (as defined in the Conditions) and that bind the holders of Notes issued under that Series including those holders who did not attend and/or vote at the relevant meeting and those Noteholders who voted in a manner contrary to the majority.

The value of the Notes could be adversely affected by a change in law or administrative practice

The Conditions are based on English law in effect as at the date of this Base Listing Particulars and the Issuer and Guarantor are incorporated in the United States. Any new statutes, ordinances and regulations, amendments to the legislation or changes in application of any relevant law (including any amendments to or changes in application of tax laws or regulations) after the date of this Base Listing Particulars may affect the Notes and/or have a material adverse effect on the Issuer’s and/or the Guarantor’s business, financial condition, results of operations and future prospects, and, thereby, on the Issuer’s and/or the Guarantor’s ability to fulfil its obligations under the Notes as well as the market price and value of the Notes.

 

     – 31 –

 

Investors who hold less than the minimum Specified Denomination may be unable to sell their Notes and may be adversely affected if definitive Notes are subsequently required to be issued

In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts in excess of the minimum Specified Denomination that are not integral multiples of such minimum Specified Denomination. In such a case a Noteholder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in its account with the relevant clearing system would not be able to sell the remainder of such holding without first purchasing a principal amount of Notes at or in excess of the minimum Specified Denomination such that its holding amounts to a Specified Denomination. Further, a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in its account with the relevant clearing system at the relevant time may not receive a definitive Note in respect of such holding (should definitive Notes be issued) and would need to purchase a principal amount of Notes at or in excess of the minimum Specified Denomination such that its holding amounts to a Specified Denomination.

If such Notes in definitive form are issued, Noteholders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade.

Risks related to the market generally

Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk and legal risk:

An active secondary market in respect of the Notes may never be established or may be illiquid and this would adversely affect the value at which an investor could sell its Notes

The Notes may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market.  This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors.  These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities.

The value of the Notes depends on a number of economic, financial and political factors

The value of the Notes depends on a number of interrelated factors, including economic, financial and political events in the United States or elsewhere, including factors affecting capital markets generally and the stock exchanges on which the Notes are traded. The price at which a Noteholder will be able to sell the Notes prior to maturity may be at a discount, which could be substantial, from the issue price or the purchase price paid by such Noteholder.

If an investor holds Notes which are not denominated in the investor's home currency, he will be exposed to movements in exchange rates adversely affecting the value of its holding. In addition, the imposition of exchange controls in relation to any Notes could result in an investor not receiving payments on those Notes

The Issuer will pay principal and interest on the Notes and the Guarantor will make any payments under the Guarantee in the Specified Currency.  This presents certain risks relating to currency conversions if an investor's financial activities are denominated principally in a currency or currency unit (the “Investor's Currency”) other than the Specified Currency.  These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor's Currency) and the risk that authorities with jurisdiction over the Investor's Currency may impose or modify exchange controls. An appreciation in the value of the Investor's Currency relative to the Specified Currency would decrease (1) the 

 

     – 32 –

 

Investor's Currency-equivalent yield on the Notes, (2) the Investor's Currency equivalent value of the principal payable on the Notes and (3) the Investor's Currency equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate or the ability of the Issuer or the Guarantor to make payments in respect of the Notes.  As a result, investors may receive less interest or principal than expected, or no interest or principal.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) the Notes are legal investments for it, (2) the Notes can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of the Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of the Notes under any applicable risk-based capital or similar rules.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to the structure of the Notes and additional factors discussed in this Base Listing Particulars or any other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised, suspended or withdrawn by the rating agency at any time.

In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the EU and registered under the CRA Regulation (and such registration has not been withdrawn or suspended), subject to transitional provisions that apply in certain circumstances whilst the registration application is pending. Such general restriction will also apply in the case of credit ratings issued by non-EU credit rating agencies, unless the relevant credit ratings are endorsed by an EU-registered credit rating agency or the relevant non-EU rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended).

The list of registered and certified rating agencies published by ESMA on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list.

 

 

     – 33 –

 

INFORMATION INCORPORATED BY REFERENCE

The following information shall be deemed to be incorporated in, and to form part of, this Base Listing Particulars provided however that any statement contained in any document incorporated by reference in, and forming part of, this Base Listing Particulars shall be deemed to be modified or superseded for the purpose of this Base Listing Particulars to the extent that a statement contained herein modifies or supersedes such statement:

	
1.
	
the audited annual consolidated financial statements of the Issuer for the fiscal year ended 31 December 2017 (the “2017 Consolidated Financial Statements”) together with the audit report, which appears on pages 60 to 103 of the Issuer’s Annual Report on Form 10-K; and

	
2.
	
the audited annual consolidated financial statements of the Issuer for the fiscal year ended 31 December 2018, together with the audit report, which appears on pages 55 to 97 of the Issuer’s Annual Report on Form 10-K, (the “2018 Consolidated Financial Statements” and together with the 2017 Consolidated Financial Statements, the “Consolidated Financial Statements”)

	

	
(together, the “Documents Incorporated by Reference”)

The Documents Incorporated by Reference are available to view electronically at https://www.autoliv.com/investors/reports-presentations-transcripts.

Any documents themselves incorporated by reference in the Documents Incorporated by Reference shall not form part of this Base Listing Particulars. The Documents Incorporated by Reference have been filed with Euronext Dublin. 

Electronic copies of the Documents Incorporated by Reference may be inspected, free of charge, during usual business hours at the Issuer’s office, World Trade Centre Klarabergsviadukten 70, Sec E, 107 24 Stockholm, Sweden. Any information contained in any of the documents specified above which is not incorporated by reference in this Base Listing Particulars is either not relevant to investors or covered elsewhere in this Base Listing Particulars.

 

     – 34 –

 

TERMS AND CONDITIONS OF THE NOTES

The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below) and each definitive Note, in the latter case only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Note will have endorsed thereon or attached thereto such Terms and Conditions.  The applicable Pricing Supplement in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes.  The applicable Pricing Supplement (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note.  Reference should be made to “Applicable Pricing Supplement” for a description of the content of the applicable Pricing Supplement which will specify which of such terms are to apply in relation to the relevant Notes.

This Note is one of a Series (as defined below) of Notes issued by Autoliv, Inc. (the “Issuer”) pursuant to the Agency Agreement (as defined below).

References herein to the Notes shall be references to the Notes of this Series and shall mean:

	
(a)
	
in relation to any Notes represented by a global Note (a “Global Note”), units of each Specified Denomination in the Specified Currency;

	
(b)
	
any Global Note; and

	
(c)
	
any definitive Notes (whether or not issued in exchange for a Global Note).

The Notes have the benefit of an Agency Agreement (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the “Agency Agreement”) dated 11 April 2019 and made between the Issuer, Autoliv ASP, Inc. (the “Guarantor”) as guarantor, HSBC Bank plc as issuing and fiscal agent (the “Fiscal Agent”, which expression shall include any successor fiscal agent) and the other paying agents named therein (together with the Fiscal Agent, the “Paying Agents”, which expression shall include any additional or successor paying agents), HSBC Bank plc as registrar (the “Registrar”, which expression shall include any successor registrar) and a transfer agent and the other transfer agents named therein (together with the Registrar, the “Transfer Agents”, which expression shall include any additional or successor transfer agents).  The Fiscal Agent, the Calculation Agent (if any is specified in the applicable Pricing Supplement), the Registrar, the Paying Agents and other Transfer Agents are together referred to as the “Agents”.

The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Pricing Supplement attached to or endorsed on this Note which supplement these Terms and Conditions (the “Conditions”) and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the Conditions, replace or modify the Conditions for the purposes of this Note.  References to the “applicable Pricing Supplement” are, unless otherwise stated, to Part A of the Pricing Supplement (or the relevant provisions thereof) attached to or endorsed on this Note.  

The payment of all amounts in respect of this Note have been guaranteed by the Guarantor pursuant to a Guarantee (such Guarantee, as modified and/or supplemented and/or restated from time to time, the “Guarantee”) dated 11 April 2019 and executed by the Guarantor.  The original of the Guarantee is held by the Fiscal Agent on behalf of the Noteholders at its specified office.

Any reference to “Noteholders” or “holders” in relation to any Notes shall mean the persons in whose name the Notes are registered and shall, in relation to any Notes represented by a Global Note, be construed as provided below.  

 

     – 35 –

 

As used herein, “Tranche” means Notes which are identical in all respects (including as to listing and admission to trading) and “Series” means a Tranche of Notes together with any further Tranche or Tranches of Notes which (a) are expressed to be consolidated and form a single series and (b) have the same terms and conditions or terms and conditions which are the same in all respects save for the amount and date of the first payment of interest thereon and the date from which interest starts to accrue.

The Noteholders are entitled to the benefit of the Deed of Covenant (such Deed of Covenant as modified and/or supplemented and/or restated from time to time, the “Deed of Covenant”) dated 11 April 2019 and made by the Issuer.

Copies of the Agency Agreement, the Guarantee and the Deed of Covenant are available for inspection during normal business hours at the specified office of each of the Paying Agents.  Copies of the applicable Pricing Supplement will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the Issuer and the relevant Agent as to its holding of such Notes and identity.  The Noteholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency Agreement, the Guarantee, the Deed of Covenant and the applicable Pricing Supplement which are applicable to them. The statements in the Conditions include summaries of, and are subject to, the detailed provisions of the Agency Agreement.

Words and expressions defined in the Agency Agreement or used in the applicable Pricing Supplement shall have the same meanings where used in the Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the applicable Pricing Supplement, the applicable Pricing Supplement will prevail.

In the Conditions, euro means the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty on the Functioning of the European Union, as amended.

	
1.
	
FORM, DENOMINATION AND TITLE

The Notes are in registered form in the currency (the “Specified Currency”) and the denominations (the “Specified Denomination(s)”) specified in the applicable Pricing Supplement.  Notes of one Specified Denomination may not be exchanged for Notes of another Specified Denomination.

This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note, a Dual Currency Interest Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Pricing Supplement.

This Note may also be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Redemption Note, a Partly Paid Note or a combination of any of the foregoing, depending upon the Redemption/Payment Basis shown in the applicable Pricing Supplement.

Subject as set out below, title to the Notes will pass upon registration of transfers in accordance with the provisions of the Agency Agreement.  The Issuer, the Guarantor and any Agent will (except as otherwise required by law) deem and treat the registered holder of any Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph.

For so long as any Note is represented by a Global Note held on behalf of Euroclear Bank SA/NV (“Euroclear”) and/or Clearstream Banking S.A. (“Clearstream, Luxembourg”), each person (other than Euroclear or Clearstream, Luxembourg) who is for the time being shown in the records of Euroclear or of Clearstream, Luxembourg as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear or Clearstream, Luxembourg as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer, the Guarantor and the Agents as 

 

     – 36 –

 

the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the registered holder of the relevant Global Note shall be treated by the Issuer, the Guarantor and any Agent as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions “Noteholder” and “holder of Notes” and related expressions shall be construed accordingly.

Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear and Clearstream, Luxembourg, as the case may be.  References to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in Part B of the applicable Pricing Supplement.

	
2.
	
Transfers of Notes 

	
2.1
	
Transfers of interests in Global Notes

Transfers of beneficial interests in Global Notes will be effected by Euroclear or Clearstream, Luxembourg, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in such clearing systems acting on behalf of transferors and transferees of such interests.  A beneficial interest in a Global Note will, subject to compliance with all applicable legal and regulatory restrictions, be transferable for Notes in definitive form or for a beneficial interest in another Global Note of the same series only in the authorised denominations set out in the applicable Pricing Supplement and only in accordance with the rules and operating procedures for the time being of Euroclear or Clearstream, Luxembourg, as the case may be, and in accordance with the terms and conditions specified in the Agency Agreement.  

	
2.2
	
Transfers of Notes in definitive form

Subject as provided in paragraph 2.3 below, upon the terms and subject to the conditions set forth in the Agency Agreement, a Note in definitive form may be transferred in whole or in part (in the authorised denominations set out in the applicable Pricing Supplement).  In order to effect any such transfer (a) the holder or holders must (i) surrender the Note for registration of the transfer of the Note (or the relevant part of the Note) at the specified office of any Transfer Agent, with the form of transfer thereon duly executed by the holder or holders thereof or his or their attorney or attorneys duly authorised in writing and (ii) complete and deposit such other certifications as may be required by the relevant Transfer Agent and (b) the relevant Transfer Agent must, after due and careful enquiry, be satisfied with the documents of title and the identity of the person making the request. Any such transfer will be subject to such reasonable regulations as the Issuer and the Registrar may from time to time prescribe (the initial such regulations being set out in Schedule 8 to the Agency Agreement).  Subject as provided above, the relevant Transfer Agent will, within three business days (being for this purpose a day on which banks are open for business in the city where the specified office of the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations), authenticate and deliver, or procure the authentication and delivery of, at its specified office to the transferee or (at the risk of the transferee) send by uninsured mail, to such address as the transferee may request, a new Note in definitive form of a like aggregate nominal amount to the Note (or the relevant part of the Note) transferred.  In the case of the transfer of part only of a Note in definitive form, a new Note in definitive form in respect of the balance of the Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the transferor.

	
2.3
	
Registration of transfer upon partial redemption

In the event of a partial redemption of Notes under Condition 7, the Issuer shall not be required to register the transfer of any Note, or part of a Note, called for partial redemption.

 

     – 37 –

 

	
2.4
	
Costs of registration

Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration.

	
3.
	
STATUS OF THE NOTES AND THE GUARANTEE

	
3.1
	
Status of the Notes

The Notes are direct, unconditional and (subject to the provisions of Condition 4) unsecured obligations of the Issuer and rank and will rank pari passu, without any preference among themselves, with all other outstanding unsecured and unsubordinated obligations of the Issuer, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights.

	
3.2
	
Status of the Guarantee

The obligations of the Guarantor under the Guarantee are direct, unconditional and (subject to the provisions of Condition 4) unsecured obligations of the Guarantor and rank and will rank pari passu with all other outstanding unsecured and unsubordinated obligations of the Guarantor, present and future, but, in the event of insolvency, only to the extent permitted by applicable laws relating to creditors’ rights. 

	
4.
	
Negative Pledge

So long as any Note remains outstanding (as defined in the Agency Agreement) neither the Issuer nor the Guarantor will, and each will procure that none of its Subsidiaries (as defined below) will, create or have outstanding any mortgage, charge, lien, pledge or other security interest (each a “Security Interest”) upon, or with respect to, any of its or their present or future business, undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness (as defined below), unless the Issuer or the Guarantor, as the case may be, in the case of the creation of a Security Interest, before or at the same time and, in any other case, promptly, takes any and all action necessary to ensure that (a) all amounts payable by it under the Notes (and/or the Guarantee, as the case may be) are secured by the Security Interest equally and rateably with the Relevant Indebtedness; or (b) such other Security Interest or other arrangement (whether or not it includes the giving of a Security Interest) shall be provided as is approved by an Extraordinary Resolution (as defined in the Agency Agreement) of the Noteholders; provided that, the foregoing provisions shall not apply to any Security Interest (i) arising by operation of law or (ii) created by an entity which becomes a Subsidiary after the date of creation of such Security Interest where the Security Interest was not created in connection with or in contemplation of such entity becoming a Subsidiary and does not extend to or cover any undertaking, assets or revenues (including any uncalled capital) of the Issuer, the Guarantor or any of their respective other Subsidiaries. 

In these Conditions:

“Relevant Indebtedness” means (i) any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of any notes, bonds, debentures, debenture stock, loan stock or other securities which are for the time being or are or are intended by the issuer thereof to be quoted, listed or ordinarily dealt in on any stock exchange, over-the-counter or other securities market and (ii) any guarantee or indemnity in respect of any such indebtedness; and

“Subsidiary” means in relation to any person (the “first person”) at any particular time, any other person (the “second person”):

	
 
	
(i)
	
whose affairs and policies the first person controls or has power to control, whether by ownership or share capital, contract, the power to appoint or remove members of the governing body of the second person or otherwise; or

 

     – 38 –

 

	
 
	
(ii)
	
whose financial statements are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the first person. 

	
5.
	
Interest 

	
5.1
	
Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest.  Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date.

Except as provided in the applicable Pricing Supplement, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount.  Payments of interest on any Interest Payment Date will, if so specified in the applicable Pricing Supplement, amount to the Broken Amount so specified.

As used in the Conditions, “Fixed Interest Period” means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

Except in the case of Notes where an applicable Fixed Coupon Amount or Broken Amount is specified in the applicable Pricing Supplement, interest shall be calculated in respect of any period by applying the Rate of Interest to the Calculation Amount (or, if they are Partly Paid Notes, the aggregate amount paid up) and multiplying such sum by the applicable Day Count Fraction and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding.

 “Day Count Fraction” means, in respect of the calculation of an amount of interest, in accordance with this Condition 5.1:

	
 
	
(i)
	
if “Actual/Actual (ICMA)” is specified in the applicable Pricing Supplement:

	
 
	
(A)
	
in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the “Accrual Period”) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in the applicable Pricing Supplement) that would occur in one calendar year; or

	
 
	
(B)
	
in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:

	
 
	
(1)
	
the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and

	
 
	
(2)
	
the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination 

 

     – 39 –

 

	
 
		
Period and (y) the number of Determination Dates that would occur in one calendar year; and

	
 
	
(ii)
	
if “30/360” is specified in the applicable Pricing Supplement, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.

In these Conditions:

“Determination Period” means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and

“sub-unit” means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent.

	
5.2
	
Interest on Floating Rate Notes

	
(a)
	
Interest Payment Dates

Each Floating Rate Note bears interest from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:

	
 
	
(i)
	
the Specified Interest Payment Date(s) in each year specified in the applicable Pricing Supplement; or

	
 
	
(ii)
	
if no Specified Interest Payment Date(s) is/are specified in the applicable Pricing Supplement, each date (each such date, together with each Specified Interest Payment Date, an “Interest Payment Date”) which falls the number of months or other period specified as the Specified Period in the applicable Pricing Supplement after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.

Such interest will be payable in respect of each Interest Period.  In these Conditions, “Interest Period” means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date or the relevant payment date if the Notes become payable on a date other than an Interest Payment Date.

If a Business Day Convention is specified in the applicable Pricing Supplement and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:

	
 
	
(A)
	
in any case where Specified Periods are specified in accordance with Condition 5.2(a)(ii) above, the Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (ii) below shall apply mutatis mutandis or (b) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (i) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (ii) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or

	
 
	
(B)
	
the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or

 

     – 40 –

 

	
 
	
(C)
	
the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or

	
 
	
(D)
	
the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.

In these Conditions, “Business Day” means:

	
 
	
(a)
	
a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in each Additional Business Centre (other than TARGET2 System) specified in the applicable Pricing Supplement; 

	
 
	
(b)
	
if TARGET2 System is specified as an Additional Business Centre in the applicable Pricing Supplement, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System (the “TARGET2 System”) is open; and

	
 
	
(c)
	
either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (2) in relation to any sum payable in euro, a day on which the TARGET2 System is open.

	
(b)
	
Rate of Interest

The Rate of Interest payable from time to time in respect of Floating Rate Notes will be determined in the manner specified in the applicable Pricing Supplement.

	
 
	
(i)
	
ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any).  For the purposes of this subparagraph (i), “ISDA Rate” for an Interest Period means a rate equal to the Floating Rate that would be determined by the Fiscal Agent or the Calculation Agent, as applicable, under an interest rate swap transaction if the Fiscal Agent or the Calculation Agent, as applicable, were acting as Calculation Agent (as defined in the ISDA Definitions (as defined below)) for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. and as amended and updated as at the Issue Date of the first Tranche of the Notes (the “ISDA Definitions”) and under which:

	
 
	
(A)
	
the Floating Rate Option is as specified in the applicable Pricing Supplement;

	
 
	
(B)
	
the Designated Maturity is a period specified in the applicable Pricing Supplement; and

	
 
	
(C)
	
the relevant Reset Date is the day specified in the applicable Pricing Supplement.

For the purposes of this subparagraph (i), “Floating Rate”, “Floating Rate Option”, “Designated Maturity” and “Reset Date” have the meanings given to those terms in the ISDA Definitions.

 

     – 41 –

 

Unless otherwise stated in the applicable Pricing Supplement the Minimum Rate of Interest shall be deemed to be zero.

	
 
	
(ii)
	
Screen Rate Determination for Floating Rate Notes other than Floating Rate Notes referencing SONIA

Where Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, and the applicable Pricing Supplement specifies that the Reference Rate is not Compounded Daily SONIA, the Rate of Interest for each Interest Period will, subject as provided below, be either:

	
 
	
(A)
	
the offered quotation; or

	
 
	
(B)
	
the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for the Reference Rate (being either LIBOR or EURIBOR, as specified in the applicable Pricing Supplement) which appears or appear, as the case may be, on the Relevant Screen Page (or such replacement page on that service which displays the information) as at 11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Pricing Supplement) the Margin (if any), all as determined by the Fiscal Agent or the Calculation Agent, as applicable.  If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Fiscal Agent or the Calculation Agent, as applicable, for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.

If the Relevant Screen Page is not available or if, in the case of Condition 5.2(b)(ii)(A), no such offered quotation appears or, in the case of Condition 5.2(b)(ii)(B), fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph (the “Specified Time”), the Fiscal Agent or the Calculation Agent, as applicable, shall request each of the Reference Banks to provide the Fiscal Agent or the Calculation Agent, as applicable, with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate at approximately the Specified Time on the Interest Determination Date in question.  If two or more of the Reference Banks provide the Fiscal Agent or the Calculation Agent, as applicable, with offered quotations, the Rate of Interest for the Interest Period shall be the arithmetic mean (rounded if necessary to the fifth decimal place with 0.000005 being rounded upwards) of the offered quotations plus or minus (as appropriate) the Margin (if any), all as determined by the Fiscal Agent or the Calculation Agent, as applicable.

If on any Interest Determination Date one only or none of the Reference Banks provides the Fiscal Agent or the Calculation Agent, as applicable, with an offered quotation as provided in the preceding paragraph, the Rate of Interest for the relevant Interest Period shall be the rate per annum which the Fiscal Agent or the Calculation Agent, as applicable, determines as being the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the rates, as communicated to (and at the request of) the Fiscal Agent or the Calculation Agent, as applicable, by the Reference Banks or any two or more of them, at which such banks were offered, at approximately the Specified Time on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in the London inter-bank market (if the Reference Rate is LIBOR) or the Euro-zone inter-bank market (if the Reference Rate is 

 

     – 42 –

 

EURIBOR) plus or minus (as appropriate) the Margin (if any) or, if fewer than two of the Reference Banks provide the Fiscal Agent or the Calculation Agent, as applicable, with offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean (rounded as provided above) of the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, at approximately the Specified Time on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Issuer suitable for the purpose) informs the Fiscal Agent or the Calculation Agent, as applicable, it is quoting to leading banks in the London inter-bank market (if the Reference Rate is LIBOR) or the Euro-zone inter-bank market (if the Reference Rate is EURIBOR) plus or minus (as appropriate) the Margin (if any), provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant Interest Period in place of the Margin relating to that last preceding Interest Period).

If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Pricing Supplement as being other than LIBOR or EURIBOR, the Rate of Interest in respect of the Notes will be determined as provided in the applicable Pricing Supplement.

In the Conditions:

“Reference Banks” means, in the case of a determination of LIBOR, the principal London office of four major banks in the London inter-bank market, and in the case of a determination of EURIBOR, the principal Euro-zone office of four major banks in the Euro-zone inter-bank market, in each case selected by the Fiscal Agent or the Calculation Agent, as applicable.

Unless otherwise stated in the applicable Pricing Supplement the Minimum Rate of Interest shall be deemed to be zero.

	
 
	
(iii)
	
Screen Rate Determination for Floating Rate Notes referencing SONIA

Where Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined, and the applicable Pricing Supplement specifies that the Reference Rate is Compounded Daily SONIA, the Rate of Interest for each Interest Period will, subject as provided below, be the sum of Compounded Daily SONIA and the Margin, on the Interest Determination Date for such Interest Period, all as determined by the Fiscal Agent or the Calculation Agent, as applicable.

If, in respect of any London Banking Day in the relevant Observation Period, the SONIA rate is not available on the Relevant Screen Page (or such replacement page on that service which displays the information) or has not otherwise been published by the relevant authorised distributors, such SONIA rate shall be the sum of (A) the Bank of England’s Bank Rate (the “Bank Rate”) prevailing at close of business on such London Banking Day; plus (B) the mean of the spread of the SONIA rate to the Bank Rate over the previous five days on which a SONIA rate has been published, excluding the highest spread (or, if there is more than one highest spread, one only of those highest spreads) and lowest spread (or, if there is more than one lowest spread, one only of those lowest spreads). 

If the Rate of Interest cannot be determined in accordance with the foregoing provisions, the Rate of Interest shall be (1) that determined as at the last preceding Interest Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant 

 

     – 43 –

 

Interest Period, in place of the Margin relating to that last preceding Interest Period) or (2) if there is no such preceding Interest Determination Date, the initial Rate of Interest which would have been applicable to the Notes for the first Interest Period had the Notes been in issue for a period equal in duration to the scheduled first Interest Period but ending on (and excluding) the Interest Commencement Date (but applying the Margin applicable to the first Interest Period).

If the Notes become due and payable in accordance with Condition 10, the final Interest Determination Date shall, notwithstanding any Interest Determination Date specified in the applicable Pricing Supplement, be deemed to be the date on which the Notes became due and payable and the Rate of Interest applicable to the Notes shall, for so long as any such Note remains outstanding, be that determined on such date. 

In the Conditions:

“Compounded Daily SONIA” means, in relation to an Interest Period, the rate of return of a daily compound interest investment (with the daily Sterling overnight reference rate as reference rate for the calculation of interest) and will be calculated by the Fiscal Agent or the Calculation Agent, as applicable, as follows, and the resulting percentage will be rounded, if necessary, to the fifth decimal place, with 0.000005 being rounded upwards:

Where:

“d” means, in relation to any Interest Period, the number of calendar days in such Interest Period;

“d0” means, in relation to any Interest Period, the number of London Banking Days in such Interest Period;

“i” means, in relation to any Interest Period, a series of whole numbers from one to d0, each representing the relevant London Banking Day in chronological order from (and including) the first London Banking Day in such Interest Period to (but excluding) the last London Banking Day in such Interest Period;

“London Banking Day” or “LBD” means any day on which commercial banks are open for general business (including dealing in foreign exchange and foreign currency deposits) in London;

“ni” means, in relation to any London Banking Day “i”, the number of calendar days from (and including) such London Banking Day “i” up to (but excluding) the following London Banking Day;

“Observation Period” means, in relation to an Interest Period, the period from (and including) the date which is “p” London Banking Days prior to the first day of such Interest Period and ending on (but excluding) the date which is “p” London Banking Days prior to the Interest Payment Date for such Interest Period (or the date falling “p” London Banking Days prior to such earlier date, if any, on which the Notes become due and payable);

“p” means the whole number specified as the Observation Look-back Period in the applicable Pricing Supplement, such number representing a number of London Banking Days, or if no such number is specified, five London Banking Days;

“SONIAi” means, in relation to any London Banking Day, “i”, a reference rate equal to the daily Sterling Overnight Index Average (“SONIA”) rate for such London Banking Day as provided by 

 

     – 44 –

 

the administrator of SONIA to authorised distributors and as then published on the Relevant Screen Page (or such replacement page on that service which displays the information) (or, if the Relevant Screen Page (or such replacement page on that service which displays the information) is unavailable, as otherwise published by such authorised distributors) on the London Banking Day immediately following such London Banking Day; and

“SONIAi-pLBD” means, in relation to any London Banking Day “i” falling in the relevant Interest Period, the SONIA rate for the London Banking Day falling “p” London Banking Days prior to such London Banking Day “i”. 

	
(c)
	
Minimum Rate of Interest and/or Maximum Rate of Interest

If the applicable Pricing Supplement specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.

If the applicable Pricing Supplement specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.

	
(d)
	
Determination of Rate of Interest and calculation of Interest Amounts

The Fiscal Agent or the Calculation Agent, as applicable, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period.  

The Fiscal Agent or the Calculation Agent, as applicable, will calculate the amount of interest (the “Interest Amount”) payable on the Floating Rate Notes for the relevant Interest Period by applying the Rate of Interest to the Calculation Amount (or, if they are Partly Paid Notes, the aggregate amount paid up) and multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention.  Where the Specified Denomination of a Floating Rate Note is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination without any further rounding.

“Day Count Fraction” means, in respect of the calculation of an amount of interest in accordance with this Condition 5.2:

	
 
	
(i)
	
if “Actual/Actual (ISDA)” or “Actual/Actual” is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (I) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (II) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);

	
 
	
(ii)
	
if “Actual/365 (Fixed)” is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365;

	
 
	
(iii)
	
if “Actual/365 (Sterling)” is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366;

 

     – 45 –

 

	
 
	
(iv)
	
if “Actual/360” is specified in the applicable Pricing Supplement, the actual number of days in the Interest Period divided by 360;

	
 
	
(v)
	
if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction = 

where:

“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;

	
 
	
(vi)
	
if “30E/360” or “Eurobond Basis” is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

Day Count Fraction = 

where:

“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“D1” is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D2 will be 30;

	
 
	
(vii)
	
if “30E/360 (ISDA)” is specified in the applicable Pricing Supplement, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

 

     – 46 –

 

Day Count Fraction = 

where:

“Y1” is the year, expressed as a number, in which the first day of the Interest Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“D1” is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30.

	
(e)
	
Reference Rate Replacement

If:

	
 
	
(i)
	
Reference Rate Replacement is specified in the applicable Pricing Supplement as being applicable and Screen Rate Determination is specified in the applicable Pricing Supplement as the manner in which the Rate of Interest is to be determined; and

	
 
	
(ii)
	
notwithstanding the provisions of Condition 5.2(b)(ii) and 5.2(b)(iii), a Benchmark Event occurs in relation to the Original Reference Rate when any Rate of Interest (or any component part thereof) remains to be determined by reference to such Original Reference Rate, 

then the following provisions shall apply:

	
 
	
(A)
	
the Issuer shall use reasonable endeavours to appoint an Independent Adviser, as soon as reasonably practicable, to determine (acting in good faith and in a commercially reasonable manner): 

	
 
	
(1)
	
a Successor Reference Rate; or

	
 
	
(2)
	
if such Independent Adviser determines that there is no Successor Reference Rate, an Alternative Reference Rate,

and, in each case, an Adjustment Spread (if any) (in any such case, acting in good faith and in a commercially reasonable manner) no later than five Business Days prior to the Interest Determination Date relating to the next Interest Period (the “IA Determination Cut-off Date”) for the purposes of determining the Rate of Interest applicable to the Notes for such next Interest Period and for all other future Interest Periods (subject to the subsequent operation of this Condition 5.2(e) during any other future Interest Period(s));

	
 
	
(B)
	
if a Successor Reference Rate, or, failing which, an Alternative Reference Rate (as applicable) is determined by the relevant Independent Adviser in accordance with this Condition 5.2(e);

 

     – 47 –

 

	
 
	
(1)
	
such Successor Reference Rate or Alternative Reference Rate (as applicable) shall be used in place of the Original Reference Rate for all future Interest Periods (subject to the subsequent operation of, and adjustment as provided in, this Condition 5.2(e));

	
 
	
(2)
	
if the relevant Independent Adviser:

	
 
	
(x) 
	
determines that an Adjustment Spread is required to be applied to such Successor Reference Rate or Alternative Reference Rate (as applicable) and determines the quantum of, or a formula or methodology for determining, such Adjustment Spread, then such Adjustment Spread shall be applied to such Successor Reference Rate or Alternative Reference Rate (as applicable) for all future Interest Periods (subject to the subsequent operation of, and adjustment as provided in, this Condition 5.2(e); or

	
 
	
(y) 
	
is unable to determine the quantum of, or a formula or methodology for determining, an Adjustment Spread, then such Successor Reference Rate or Alternative Reference Rate (as applicable) will apply without an Adjustment Spread for all future Interest Periods (subject to the subsequent operation of, and adjustment as provided in, this Condition 5.2(e); and

	
 
	
(3)
	
the relevant Independent Adviser (acting in good faith and in a commercially reasonable manner) may in its discretion specify:

	
 
	
(x) 
	
changes to these Conditions and/or the Agency Agreement in order to ensure the proper operation of such Successor Reference Rate or Alternative Reference Rate and/or Adjustment Spread (as applicable), including, but not limited to, (a) the Additional Business Centre(s), Business Day, Business Day Convention, Day Count Fraction, Interest Determination Date, Reference Banks, Additional Financial Centre(s) and/or Relevant Screen Page applicable to the Notes and (b) the method for determining the fallback to the Rate of Interest in relation to the Notes if such Successor Reference Rate or Alternative Reference Rate (as applicable) is not available; and

	
 
	
(y)
	
any other changes which the relevant Independent Adviser determines are reasonably necessary to ensure the proper operation and comparability to the Reference Rate of such Successor Reference Rate or Alternative Reference Rate (as applicable),

which changes shall apply to the Notes for all future Interest Periods (subject to the subsequent operation of this Condition 5.2(e)); and

	
 
	
(4)
	
promptly following the occurrence of a Benchmark Event and the determination of (i) any Successor Reference Rate or Alternative Reference Rate (as applicable) and (ii) if applicable, any Adjustment Spread, the Issuer shall give notice thereof and of any changes (and the effective date thereof) pursuant to Condition 5.2(e)(C)(3) to the Fiscal Agent and the Calculation Agent (if applicable) and the Noteholders in accordance with Condition 13.

No consent of the Noteholders shall be required in connection with effecting the relevant Successor Reference Rate or Alternative Reference Rate (as applicable) as described in this Condition 5.2(e) or such 

 

     – 48 –

 

other relevant changes pursuant to Condition 5.2(e)(C)(3), including for the execution of any documents or the taking of other steps by the Issuer or any of the parties to the Agency Agreement (if required).

For the avoidance of doubt, if the Issuer is not able to appoint an Independent Advisor or a Successor Reference Rate or an Alternative Reference Rate is not determined pursuant to the operation of this Condition 5.2(e) prior to the relevant IA Determination Cut-off Date, then the Rate of Interest for the next Interest Period shall be determined by reference to the fallback provisions of Condition 5.2(b)(ii) or 5.2(b)(iii), as applicable.

For the avoidance of doubt, this Condition 5(e) shall apply to the relevant next succeeding Interest Period only and any subsequent Interest Periods are subject to the subsequent operation of, and to adjustment as provided in, Condition 5.2(b)(ii) or 5.2(b)(iii), as applicable.

In the Conditions:

“Adjustment Spread” means a spread (which may be positive or negative) or formula or methodology for calculating a spread, which the relevant Independent Adviser determines is required to be applied to a Successor Reference Rate or an Alternative Reference Rate (as applicable) in order to reduce or eliminate, to the extent reasonably practicable in the circumstances, any economic prejudice or benefit (as applicable) to Noteholders as a result of the replacement of the Reference Rate with such Successor Reference Rate or Alternative Reference Rate (as applicable) and is the spread, formula or methodology which:

	
 
	
(i)
	
in the case of a Successor Reference Rate, is formally recommended in relation to the replacement of the Reference Rate with such Successor Reference Rate by any Relevant Nominating Body; or

	
 
	
(ii)
	
in the case of a Successor Reference Rate for which no such recommendation has been made or in the case of an Alternative Reference Rate, the relevant Independent Adviser determines is recognised or acknowledged as being in customary market usage in international debt capital markets transactions which reference the Reference Rate, where such rate has been replaced by such Successor Reference Rate or Alternative Reference Rate (as applicable); or

	
 
	
(iii)
	
if no such customary market usage is recognised or acknowledged, the relevant Independent Adviser in its discretion determines (acting in good faith and in a commercially reasonable manner) to be appropriate; 

“Alternative Reference Rate” means the rate that the relevant Independent Adviser determines has replaced the Reference Rate in customary market usage in the international debt capital markets for the purposes of determining floating rates of interest in respect of notes denominated in the Specified Currency and of a comparable duration to the relevant Interest Periods, or, if such Independent Adviser determines in its discretion is most comparable to the Reference Rate;

“Benchmark Event” means:

	
 
	
(i)
	
the Original Reference Rate ceasing to exist or be published; or 

	
 
	
(ii)
	
a public statement by the administrator of the Original Reference Rate that it will, by a specified date within the following six months, cease publishing the Original Reference Rate permanently or indefinitely (in circumstances where no successor administrator has been appointed that will continue publication of the Original Reference Rate); or

	
 
	
(iii)
	
a public statement by the supervisor or the administrator of the Original Reference Rate that the Original Reference Rate has been or will, by a specified date within the following six months, be permanently or indefinitely discontinued; or

 

     – 49 –

 

	
 
	
(iv)
	
a public statement by the supervisor of the administrator of the Original Reference Rate that means the Original Reference Rate will be prohibited from being used or that its use will be subject to restrictions or adverse consequences, in each case within the following six months; or

	
 
	
(v)
	
it has become unlawful for the Fiscal Agent or the Calculation Agent, as applicable, the Issuer or any other party to calculate any payments due to be made to any Noteholder using the Original Reference Rate;

“Independent Adviser” means an independent financial institution of international repute or an independent financial adviser with appropriate expertise appointed by the Issuer under this Condition 5.2(e);

“Original Reference Rate” means the originally-specified benchmark or screen rate (as applicable) used to determine the Rate of Interest (or any component part thereof) on the Notes;

“Relevant Nominating Body” means, in respect of a reference rate:

	
 
	
(i)
	
the central bank for the currency to which such reference rate relates, or any central bank or other supervisory authority which is responsible for supervising the administrator of such reference rate; or

	
 
	
(ii)
	
any working group or committee sponsored by, chaired or co-chaired by or constituted at the request of (a) the central bank for the currency to which such reference rate relates, (b) any central bank or other supervisory authority which is responsible for supervising the administrator of such reference rate, (c) a group of the aforementioned central banks or other supervisory authorities, or (d) the Financial Stability Board or any part thereof; and

“Successor Reference Rate” means the rate that the relevant Independent Adviser determines is a successor to or replacement of the Reference Rate which is formally recommended by any Relevant Nominating Body. 

	
(f)
	
Linear Interpolation

Where Linear Interpolation is specified as applicable in respect of an Interest Period in the applicable Pricing Supplement, the Rate of Interest for such Interest Period shall be calculated by the Fiscal Agent or the Calculation Agent, as applicable, by straight line linear interpolation by reference to two rates based on the relevant Reference Rate (where Screen Rate Determination is specified as applicable in the applicable Pricing Supplement) or the relevant Floating Rate Option (where ISDA Determination is specified as applicable in the applicable Pricing Supplement), one of which shall be determined as if the Designated Maturity were the period of time for which rates are available next shorter than the length of the relevant Interest Period and the other of which shall be determined as if the Designated Maturity were the period of time for which rates are available next longer than the length of the relevant Interest Period provided however that if there is no rate available for a period of time next shorter or, as the case may be, next longer, then the Fiscal Agent or the Calculation Agent, as applicable, shall determine such rate at such time and by reference to such sources as it determines appropriate. 

“Designated Maturity” means, in relation to Screen Rate Determination, the period of time designated in the Reference Rate.

	
(g)
	
Notification of Rate of Interest and Interest Amounts

The Fiscal Agent or the Calculation Agent, as applicable, will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer and any stock exchange on which the relevant Floating Rate Notes are for the time being listed and notice thereof to be published in accordance with Condition 13 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter.  Each Interest Amount and Interest 

 

     – 50 –

 

Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period.  Any such amendment will promptly be notified to each stock exchange on which the relevant Floating Rate Notes are for the time being listed and to the Noteholders in accordance with Condition 13. For the purposes of this paragraph, the expression “London Business Day” means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London.

	
(h)
	
Certificates to be final

All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 5.2 by the Fiscal Agent or the Calculation Agent, as applicable, shall (in the absence of wilful default or fraud) be binding on the Issuer, the Guarantor, the Fiscal Agent, the other Agents and all Noteholders and (in the absence of wilful default or fraud) no liability to the Issuer, the Guarantor, or the Noteholders shall attach to the Fiscal Agent or the Calculation Agent, as applicable, in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.

	
5.3
	
Other interest-bearing Notes

The rate or amount of interest payable in respect of interest-bearing Notes which are not Fixed Rate Notes or Floating Rate Notes shall be determined in the manner specified in the applicable Pricing Supplement, provided that where such Notes are Index Linked Interest Notes the provisions of Condition 5.2 shall, save to the extent amended in the applicable Pricing Supplement, apply as if the references therein to Floating Rate Notes and to the Agent were references to Index Linked Interest Notes and the Calculation Agent, respectively, and provided further that the Calculation Agent will notify the Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.

In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid up nominal amount of such Notes and otherwise as specified in the applicable Pricing Supplement.

	
5.4
	
Accrual of interest

Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless payment of principal is improperly withheld or refused.  In such event, interest will continue to accrue until whichever is the earlier of:

	
 
	
(a)
	
the date on which all amounts due in respect of such Note have been paid; and

	
 
	
(b)
	
five days after the date on which the full amount of the moneys payable in respect of such Note has been received by the Fiscal Agent or the Registrar, as the case may be, and notice to that effect has been given to the Noteholders in accordance with Condition 13.

	
6.
	
Payments

	
6.1
	
Method of payment

Subject as provided below:

	
 
	
(a)
	
payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency maintained by the payee with a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively); and

	
 
	
(b)
	
payments will be made in euro by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee.

 

     – 51 –

 

Payments will be subject in all cases to (i) any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 8 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 (inclusive) of the Code, any United States Treasury Regulations or agreements thereunder, any official interpretations thereof, any successor or substitute or similar legislation or law or any law implementing an intergovernmental approach thereto.

	
6.2
	
Payments in respect of Notes

Payments of principal (other than instalments of principal prior to the final instalment) in respect of each Note (whether or not in global form) will be made against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the Note at the specified office of the Registrar or any of the Paying Agents.  Such payments will be made by transfer to the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Note appearing in the register of holders of the Notes maintained by the Registrar (the “Register”) (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business) before the relevant due date, and (ii) where in definitive form, at the close of business on the third business day (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar is located) before the relevant due date.  For these purposes, “Designated Account” means the account (which, in the case of a payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a Designated Bank and identified as such in the Register and “Designated Bank” means (in the case of payment in a Specified Currency other than euro) a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney and Auckland, respectively) and (in the case of a payment in euro) any bank which processes payments in euro.

Payments of interest and payments of instalments of principal (other than the final instalment) in respect of each Note (whether or not in global form) will be made by transfer on the due date to the Designated Account of the holder (or the first named of joint holders) of the Note appearing in the Register (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business) before the relevant due date, and (ii) where in definitive form, at the close of business on the fifteenth day (whether or not such fifteenth day is a business day) before the relevant due date (the “Record Date”).  Payment of the interest due in respect of each Note on redemption and the final instalment of principal will be made in the same manner as payment of the principal amount of such Note.

No commissions or expenses shall be charged to the holders by the Registrar in respect of any payments of principal or interest in respect of Notes.

None of the Issuer, the Guarantor or the Agents will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

	
6.3
	
General provisions applicable to payments

The holder of a Global Note shall be the only person entitled to receive payments in respect of Notes represented by such Global Note and the Issuer or, as the case may be, the Guarantor will be discharged by payment to, or to the order of, the holder of such Global Note in respect of each amount so paid. Each of the persons shown in the records of Euroclear or Clearstream, Luxembourg as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear, or 

 

     – 52 –

 

Clearstream, Luxembourg, as the case may be, for his share of each payment so made by the Issuer or, as the case may be, the Guarantor to, or to the order of, the holder of such Global Note.

	
6.4
	
Payment Day

If the date for payment of any amount in respect of any Note is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay.  For these purposes, “Payment Day” means any day which (subject to Condition 9) is:

	
 
	
(a)
	
a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits):

	
 
	
(i)
	
in the case of Notes in definitive form only, in the relevant place of presentation; and

	
 
	
(ii)
	
in each Additional Financial Centre (other than TARGET2 System) specified in the applicable Pricing Supplement; 

	
 
	
(b)
	
if TARGET2 System is specified as an Additional Financial Centre in the applicable Pricing Supplement, a day on which the TARGET2 System is open; and

	
 
	
(c)
	
either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney and Auckland, respectively) or (2) in relation to any sum payable in euro, a day on which the TARGET2 System is open.

	
6.5
	
Interpretation of principal and interest

Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as applicable:

	
 
	
(a)
	
any additional amounts which may be payable with respect to principal under Condition 8;

	
 
	
(b)
	
the Final Redemption Amount of the Notes;

	
 
	
(c)
	
the Early Redemption Amount of the Notes;

	
 
	
(d)
	
the Optional Redemption Amount(s) (if any) of the Notes;

	
 
	
(e)
	
in relation to Notes redeemable in instalments, the Instalment Amounts; and 

	
 
	
(f)
	
any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.

Any reference in the Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 8.

	
7.
	
Redemption and Purchase

	
7.1
	
Redemption at maturity

Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the Issuer at its Final Redemption Amount specified in the applicable Pricing Supplement in the relevant Specified Currency on the Maturity Date specified in the applicable Pricing Supplement.

 

     – 53 –

 

	
7.2
	
Redemption for tax reasons

Subject to Condition 7.6, the Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is not a Floating Rate Note) or on any Interest Payment Date (if this Note is a Floating Rate Note), on giving not less than the minimum period nor more than the maximum period of notice specified in the applicable Pricing Supplement to the Fiscal Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if:

	
 
	
(a)
	
on the occasion of the next payment due under the Notes, as a result of any change in, or amendment to, the laws or regulations of a Relevant Jurisdiction (as defined in Condition 8), or any change in the application or official interpretation of the laws or regulations of a Relevant Jurisdiction, which change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes, either (i) the Issuer has or will be required to pay additional amounts as provided or referred to in Condition 8 or (ii) the Guarantor would be unable for reasons outside its control to procure payment by the Issuer and in making payment itself would be required to pay such additional amounts; and 

	
 
	
(b)
	
such obligation cannot be avoided by the Issuer or, as the case may be, the Guarantor taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or, as the case may be, the Guarantor would be obliged to pay such additional amounts were a payment in respect of the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Fiscal Agent to make available at its specified office to the Noteholders (i) a certificate signed by two authorised signatories of the Issuer or, as the case may be, two authorised signatories of the Guarantor stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred and (ii) an opinion of independent legal advisers of recognised standing to the effect that the Issuer or, as the case may be, the Guarantor has or will become obliged to pay such additional amounts as a result of such change or amendment.

Notes redeemed pursuant to this Condition 7.2 will be redeemed at their Early Redemption Amount referred to in Condition 7.6 below together (if appropriate) with interest accrued to (but excluding) the date of redemption.

	
7.3
	
Redemption at the option of the Issuer (Issuer Call)

If Issuer Call is specified as being applicable in the applicable Pricing Supplement, the Issuer may, having given not less than the minimum period nor more than the maximum period of notice specified in applicable Pricing Supplement to the Noteholders in accordance with Condition 13 (which notice shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in the applicable Pricing Supplement together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date.  Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Pricing Supplement.  The Optional Redemption Amount will either be: 

	
 
	
(i)
	
the specified amount or percentage of the Calculation Amount of the Notes stated in the applicable Pricing Supplement; or 

	
 
	
(ii)
	
if either Spens Amount or Make-whole Amount is specified in the applicable Pricing Supplement, will be:

 

     – 54 –

 

	
 
	
(A)
	
if Spens Amount is specified as being applicable in the applicable Pricing Supplement, the higher of (x) 100% of the nominal amount outstanding of the Notes to be redeemed and (y) the nominal amount outstanding of the Notes to be redeemed multiplied by the price, as reported to the Issuer by the Determination Agent, at which the Gross Redemption Yield on such Notes on the Reference Date is equal to the Gross Redemption Yield (determined by reference to the middle market price) at the Quotation Time specified in the applicable Pricing Supplement on the Reference Date of the Reference Bond, plus the specified Redemption Margin; or 

	
 
	
(B)
	
if Make-whole Amount is specified as applicable in the applicable Pricing Supplement, the higher of (x) 100% of the nominal amount outstanding of the Notes to be redeemed and (y) the sum of the present values of the nominal amount outstanding of the Notes to be redeemed and the Remaining Term Interest on such Notes (exclusive of interest accrued to the date of redemption) and such present values shall be calculated by discounting such amounts to the date of redemption on an annual basis (assuming a 360-day year consisting of twelve 30-day months or, in the case of an incomplete month, the number of days elapsed) at the Reference Bond Rate, plus the specified Redemption Margin,

all as determined by the Determination Agent.

In the case of a partial redemption of Notes, the Notes to be redeemed (“Redeemed Notes”) will (i) in the case of Redeemed Notes represented by definitive Notes, be selected individually by lot, not more than 30 days prior to the date fixed for redemption and (ii) in the case of Redeemed Notes represented by a Global Note, be selected in accordance with the rules of Euroclear and/or Clearstream, Luxembourg, (to be reflected in the records of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction in nominal amount, at their discretion).  In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than 15 days prior to the date fixed for redemption.

In this Condition:

“DA Selected Bond” means a government security or securities selected by the Determination Agent as having an actual or interpolated maturity comparable with the remaining term of the Notes that would be utilised, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities denominated in the Specified Currency and of a comparable maturity to the remaining term of the Notes; 

“Determination Agent” means an investment bank or financial institution of international standing selected by the Issuer and appointed by the Issuer at its own expense and notified to the Fiscal Agent and the Noteholders;

“Gross Redemption Yield” means, with respect to a security, the gross redemption yield on such security, expressed as a percentage and calculated by the Determination Agent on the basis set out by the United Kingdom Debt Management Office in the paper “Formulae for Calculating Gilt Prices from Yields”, page 4, Section One: Price/Yield Formulae “Conventional Gilts”; Double dated and Undated Gilts with Assumed (or Actual) Redemption on a Quasi-Coupon Date” (published 8 June 1998, as amended or updated from time to time) on a semi-annual compounding basis (converted to an annualised yield and rounded up (if necessary) to five decimal places);

“Quotation Time” shall be as set out in the applicable Pricing Supplement;

“Redemption Margin” shall be as set out in the applicable Pricing Supplement;

 

     – 55 –

 

“Reference Bond” shall be as set out in the applicable Pricing Supplement or, if no such bond is set out or if such bond is no longer outstanding, shall be the DA Selected Bond;

“Reference Bond Price” means, with respect to any date for redemption, (a) the arithmetic average of the Reference Government Bond Dealer Quotations for such date of redemption, after excluding the highest and lowest such Reference Government Bond Dealer Quotations, or (b) if the Determination Agent obtains fewer than four such Reference Government Bond Dealer Quotations, the arithmetic average of all such quotations; 

“Reference Bond Rate” means, with respect to any date for redemption, the rate per annum equal to the annual or semi-annual yield (as the case may be) to maturity or interpolated yield to maturity (on the relevant day count basis) of the Reference Bond, assuming a price for the Reference Bond (expressed as a percentage of its nominal amount) equal to the Reference Bond Price for such date of redemption;

“Reference Date” will be set out in the relevant notice of redemption;

“Reference Government Bond Dealer” means each of the five banks selected by the Issuer after consultation with the Determination Agent, or their affiliates, which are (a) primary government securities dealers, or (b) market makers experienced in pricing corporate bond issues; 

“Reference Government Bond Dealer Quotations” means, with respect to each Reference Government Bond Dealer and any date of redemption, the arithmetic average, as determined by the Determination Agent, of the bid and offered prices for the Reference Bond (expressed in each case as a percentage of its nominal amount) at the Quotation Time on the Reference Date quoted in writing to the Determination Agent by such Reference Government Bond Dealer; and

“Remaining Term Interest” means, with respect to any Note, the aggregate amount of scheduled payment(s) of interest on such Note for the remaining term of such Note determined on the basis of the rate of interest applicable to such Note from and including the date on which such Note is to be redeemed by the Issuer pursuant to this Condition 7.3. 

	
7.4
	
Redemption at the option of the Noteholders (Investor Put)

If Investor Put is specified as being applicable in the applicable Pricing Supplement, upon the holder of any Note giving to the Issuer in accordance with Condition 13 not less than the minimum period nor more than the maximum period of notice specified in the applicable Pricing Supplement, the Issuer will, upon the expiry of such notice, redeem such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date.

To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified office of the Registrar at any time during normal business hours of the Registrar falling within the notice period, a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of the Registrar (a “Put Notice”) and in which the holder must specify a bank account to which payment is to be made under this Condition 7.4 and the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Notes so surrendered is to be redeemed, an address to which a new Note in respect of the balance of such Notes is to be sent subject to and in accordance with the provisions of Condition 2.2.  

If this Note is represented by a Global Note or is in definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Fiscal Agent of such exercise in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on such holder’s instruction by Euroclear, Clearstream, Luxembourg or any common depositary or 

 

     – 56 –

 

common safekeeper, as the case may be for them to the Fiscal Agent by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time.

Any Put Notice or other notice given in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg by a holder of any Note pursuant to this Condition 7.4 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and is continuing, in which event such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 7.4 and instead to declare such Note forthwith due and payable pursuant to Condition 10.1.

	
7.5
	
Redemption at the option of Noteholders on a Change of Control (Change of Control Put)

If Change of Control Put Option is specified as being applicable in the applicable Pricing Supplement and if, at any time while any of the Notes remains outstanding, a Change of Control Put Event (as defined below) occurs, then the holder of each such Note will have the option (a “Change of Control Put Option”) (unless prior to the giving of the Change of Control Exercise Notice (as defined below) the Issuer shall have given notice under Condition 7.2 or 7.3 (if applicable)) to require the Issuer to redeem or, at the Issuer’s option, purchase (or procure the purchase of) that Noteholder’s Notes at the Early Redemption Amount specified hereon together with interest accrued to but excluding the Change of Control Settlement Date (as defined below). 

A “Change of Control Put Event” will be deemed to occur if:

	
 
	
(i)
	
a person or persons, acting together, other than a holding company whose shareholders are or are to be substantially similar to the pre-existing shareholders of the Issuer or any holding company of the Issuer, acquire (i) the beneficial ownership (directly or indirectly) of more than 50% of the total voting rights represented by shares of the Issuer, or (ii) have the power to appoint or remove the majority of the members of the board of directors of the Issuer (each such event being, a “Change of Control”);

	
 
	
(ii)
	
on the date (the “Relevant Announcement Date”) that is the earlier of (1) the date of the first public announcement of the relevant Change of Control and (2) the date of the earliest Relevant Potential Change of Control Announcement (as defined below) (if any) the Notes have been assigned:

	
 
	
(A)
	
an investment grade rating (Baa3/BBB-/BBB- or equivalent or better) from any Rating Agency (provided by such Rating Agency at the invitation or with the consent of the Issuer) and such rating from any Rating Agency is, within the Change of Control Period, either downgraded to a non-investment grade rating (Ba1/BB+/BB+ or equivalent or worse) or withdrawn and is not, within the Change of Control Period, subsequently (in the case of a downgrade) upgraded or (in the case of a withdrawal) reinstated to an investment grade credit rating by such Rating Agency; or

	
 
	
(B)
	
a non-investment grade credit rating (Ba1/BB+/BB+ or equivalent or worse) from any Rating Agency (provided by such Rating Agency at the invitation or with the consent of the Issuer) and such Rating from any Rating Agency is, within the Change of Control Period, downgraded by one or more notches (for illustration, Ba1/BB+/BB+ to Ba2/BB/BB being one notch) or withdrawn and is not, within the Change of Control Period, subsequently (in the case of a downgrade) upgraded or (in the case of a withdrawal) reinstated to its earlier credit rating or better by such Rating Agency; or

	
 
	
(C)
	
no credit rating from any Rating Agency and a Negative Rating Event also occurs within the Change of Control Period,

 

     – 57 –

 

provided that, if at the time of the occurrence of the Change of Control the Notes carry a credit rating from more than one Rating Agency, at least one of which is investment grade, then sub-paragraph (A) will apply; and

	
 
	
(iii)
	
in making any decision(s) referred to in (A) and (B) above the relevant Rating Agency announces publicly or confirms in writing to the Issuer that such decision(s) resulted, in whole or in part, from the occurrence of the Change of Control or the Relevant Potential Change of Control Announcement (whether or not the Change of Control shall have occurred at the time such rating is downgraded and/or withdrawn).

If a Change of Control Put Event occurs then, within 14 days of the Issuer becoming aware that a Change of Control Put Event has occurred, the Issuer shall give notice (a “Change of Control Notice”) to the Noteholders in accordance with Condition 13 specifying the nature of the Change of Control Put Event and the procedure for exercising the Change of Control Put Option.

To exercise the Change of Control Put Option, the holder of this Note must, if this Note is in definitive form and held outside Euroclear and Clearstream, Luxembourg, deliver, at the specified office of the Registrar at any time during normal business hours of the Registrar falling within the period (the “Put Period”) of 30 days after the Change of Control Notice is given by the Issuer, a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of the Registrar (a “Change of Control Exercise Notice”) and in which the holder must specify a bank account to which payment is to be made under this Condition 7.5 and the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Notes so surrendered is to be redeemed, an address to which a new Note in respect of the balance of such Notes is to be sent subject to and in accordance with the provisions of Condition 2.2.  

If this Note is represented by a Global Note or is in definitive form and held through Euroclear or Clearstream, Luxembourg, to exercise the Change of Control Put Option the holder of this Note must, within the Put Period, give notice to the Fiscal Agent of such exercise in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg (which may include notice being given on such holder’s instruction by Euroclear, Clearstream, Luxembourg or any common depositary or common safekeeper, as the case may be for them to the Fiscal Agent by electronic means) in a form acceptable to Euroclear and Clearstream, Luxembourg from time to time.

Any Change of Control Exercise Notice or other notice given in accordance with the standard procedures of Euroclear and Clearstream, Luxembourg by a holder of any Note pursuant to this Condition 7.5 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and is continuing, in which event such holder, at its option, may elect by notice to the Issuer to withdraw the Change of Control Exercise Notice given pursuant to this Condition 7.5 and instead to declare such Note forthwith due and payable pursuant to Condition 10.1.

If 80% or more in nominal amount of the Notes then outstanding have been redeemed or purchased pursuant to this Condition 7.5, the Issuer may, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (such notice being given within 30 days after the Change of Control Settlement Date), redeem or purchase (or procure the purchase of), at its option, all but not some only of the remaining outstanding Notes at their Early Redemption Amount, together with interest (if any) accrued to (but excluding) the date fixed for such redemption or purchase.

Any Note which is the subject of a Change of Control Exercise Notice which has been delivered to the Registrar or any of the Paying Agents, as the case may be, prior to the expiry of the Change of Control Put Period shall be redeemed or, as the case may be, purchased (or on behalf of) the Issuer on the date which is the seventh day immediately following the last day of the Change of Control Put Period (the “Change of Control Settlement Date”).

 

     – 58 –

 

If the rating designations employed by any of S&P, Moody’s and Fitch are changed from those which are described in this Condition 7.5 above, or if a rating is procured from a Substitute Rating Agency, the Issuer shall determine the rating designations of S&P or Moody’s or Fitch or such Substitute Rating Agency (as appropriate) as are most equivalent to the prior rating designations of S&P or Moody’s or Fitch and this Condition 7.5 shall be read accordingly. 

In these Conditions:

“Change of Control Period” means the period commencing on the Relevant Announcement Date and ending 90 days after the Change of Control (or such longer period for which the Issuer is under consideration (such consideration having been announced publicly within the period ending 90 days after the Change of Control) for rating review or, as the case may be, rating by a Rating Agency, such period not to exceed 60 days after the public announcement of such consideration);

“Fitch” means Fitch Ratings Limited;

“Moody’s” means Moody’s Investors Services Limited;

“Negative Rating Event” shall be deemed to have occurred if at such time as there is no rating assigned to the Notes by a Rating Agency (at the invitation or with the consent of the Issuer), either (i) the Issuer does not, prior to or not later than 21 days after the occurrence of the relevant Change of Control, seek, and thereafter throughout the Change of Control Period use all reasonable endeavours to obtain, a rating of the Notes or (ii) if the Issuer does so seek and use such endeavours, it is unable to obtain such rating of at least investment grade (Baa3/BBB-/BBB- or equivalent or better) by the end of the Change of Control Period and the relevant Rating Agency announces publicly or confirms in writing to the Issuer and/or the Guarantor that the failure to issue a rating of at least investment grade (Baa3/BBB-/BBB- or equivalent or better) was as a result, in whole or in part, of the Change of Control or the Relevant Potential Change of Control Announcement (whether or not the Change of Control had occurred at such time);

“Rating Agency” means S&P, Moody’s, Fitch or any of their respective successors or any other internationally recognised rating agency (a “Substitute Rating Agency”) substituted for any of them by the Issuer from time to time;

“Relevant Potential Change of Control Announcement” means any public announcement or statement by the Issuer, any actual or potential bidder or any adviser acting on behalf of any actual or potential bidder relating to any potential Change of Control where within 180 days following the date of such announcement or statement, a Change of Control occurs; and 

“S&P” means S&P Global Ratings Europe Limited.

	
7.6
	
Early Redemption Amounts

For the purpose of Condition 7.2, and 7.5 above and Condition 10: 

	
 
	
(a)
	
each Note (other than a Zero Coupon Note) will be redeemed at its Early Redemption Amount as specified in the applicable Pricing Supplement; and

	
 
	
(b)
	
each Zero Coupon Note will be redeemed at its Early Redemption Amount calculated in accordance with the following formula:

Early Redemption Amount = RP x (1 + AY)y

where:

“RP”means the Reference Price;

“AY”means the Accrual Yield expressed as a decimal; and

 

     – 59 –

 

	
 
	
“y”
	
is the Day Count Fraction specified in the applicable Pricing Supplement which will be either (i) 30/360 (in which case the numerator will be equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 360) or (ii) Actual/360 (in which case the numerator will be equal to the actual number of days from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 360) or (iii) Actual/365 (in which case the numerator will be equal to the actual number of days from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator will be 365). 

	
7.7
	
Specific redemption provisions applicable to certain types of Notes

The Final Redemption Amount, any Optional Redemption Amount and the Early Redemption Amount in respect of Index Linked Redemption Notes and Dual Currency Redemption Notes may be specified in, or determined in the manner specified in, the applicable Pricing Supplement.  For the purposes of Condition 7.2, Index Linked Interest Notes and Dual Currency Interest Notes may be redeemed only on an Interest Payment Date.  

Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates specified in the applicable Pricing Supplement.  In the case of early redemption, the Early Redemption Amount of Instalment Notes will be determined in the manner specified in the applicable Pricing Supplement.

Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition and the applicable Pricing Supplement.

	
7.8
	
Purchases

The Issuer, the Guarantor or any other Subsidiary of the Issuer may at any time purchase Notes at any price in the open market or otherwise.  Such Notes may be held, reissued, resold or, at the option of the Issuer or the Guarantor, surrendered to any Paying Agent and/or the Registrar for cancellation.

	
7.9
	
Cancellation

All Notes which are redeemed will forthwith be cancelled.  All Notes so cancelled and any Notes purchased and cancelled pursuant to Condition 7.8 above shall be forwarded to the Fiscal Agent and cannot be reissued or resold.

	
7.10
	
Late payment on Zero Coupon Notes

If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to Condition 7.1, 7.2, 7.3, 7.4 or 7.5 above or upon its becoming due and repayable as provided in Condition 10 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in Condition 7.6(b) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of:

	
 
	
(a)
	
the date on which all amounts due in respect of such Zero Coupon Note have been paid; and

	
 
	
(b)
	
five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes has been received by the Fiscal Agent or the Registrar and notice to that effect has been given to the Noteholders in accordance with Condition 13.

 

     – 60 –

 

	
8.
	
Taxation

All payments of principal and interest in respect of the Notes by or on behalf of the Issuer or the Guarantor shall be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature (“Taxes”) imposed or levied by or on behalf of any of the Relevant Jurisdictions, unless the withholding or deduction of the Taxes is required by law.  In such event, the Issuer or, as the case may be, the Guarantor will pay such additional amounts as may be necessary in order that the net amounts received by the holders of the Notes after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes, in the absence of such withholding or deduction; except that no such additional amounts shall be payable with respect to any Note:

	
 
	
(a)
	
the holder of which is liable for Taxes in respect of such Note by reason of having some connection with the Relevant Jurisdiction other than a mere holding of the Note; or

	
 
	
(b)
	
presented for payment in the United States; or

	
 
	
(c)
	
presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by satisfying any statutory or procedural requirements (including, without limitation, the provision of information or an Internal Revenue Service Form W-8 or Form W-9 (or a successor form)); or

	
 
	
(d)
	
presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to an additional amount on presenting the same for payment on such thirtieth day assuming that day to have been a Payment Day (as defined in Condition 6.4). 

 Notwithstanding the foregoing, no additional amount shall be payable for or on account of (i) any taxes, duties, assessments or governmental charges that are imposed otherwise than by deduction or withholding from payments made under or with respect to the Notes, (ii) any taxes, duties, assessments or governmental charges that are imposed on or with respect to any payment on any Notes to a Noteholder who is a fiduciary, partnership, limited liability company, or person other than the Beneficial Owner of such payment to the extent that the Beneficial Owner with respect to such payment (or portion thereof) would not have been entitled to the additional amounts had the payment (or the relevant portion thereof) been made directly to such Beneficial Owner and (iii) any deduction or withholding imposed or required pursuant to an agreement described in Section 1471(b) of the Code, or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations thereunder or official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation therefore (or any fiscal or regulatory legislation, rules or practices implementing such an intergovernmental agreement). As used in clause (ii) above, “Beneficial Owner” means the person who is required by the laws of the relevant tax jurisdiction to include the payment in income for tax purposes.

As used herein:

	
 
	
(i)
	
“Relevant Date” means the date on which such payment first becomes due, but, if the full amount of the money payable has not been duly received by the Fiscal Agent or the Registrar, as the case may be, on or prior to such due date, it means the date on which, the full amount of such money having been so received, notice to that effect has been duly given to the Noteholders in accordance with Condition 13; and

	
 
	
(ii)
	
“Relevant Jurisdiction” means the United States or any political subdivision or any authority thereof or therein having power to tax or any other jurisdiction or any political subdivision or any authority thereof or therein having power to tax to which the Issuer or the Guarantor, as the case 

 

     – 61 –

 

	
 
		
may be, to which payments of principal and interest on the Notes or payments made under the Guarantee become generally subject.

	
9.
	
Prescription

The Notes will become void unless claims in respect of principal and/or interest are made within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 8) therefor.

	
10.
	
EVENTS OF DEFAULT

	
10.1
	
Events of Default 

The holder of any Note may give notice to the Issuer to declare any Note held by it to be forthwith due and payable whereupon the same shall become forthwith due and payable at its Early Redemption Amount, together with accrued interest (if any) to the date of repayment, without presentment, demand, protest or other notice of any kind, if any one or more of the following events (each an “Event of Default”) shall occur and be continuing:  

	
 
	
(a)
	
if default is made in the payment in the Specified Currency of any principal or interest due in respect of the Notes or any of them and the default continues for a period of 7 days in the case of principal and 14 days in the case of interest; or

	
 
	
(b)
	
if the Issuer or the Guarantor fails to perform or observe any of its other obligations under these Conditions or the Guarantee and (except in any case where the failure is incapable of remedy, when no continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 30 days following the service by a Noteholder on the Issuer or the Guarantor (as the case may be) of notice requiring the same to be remedied; or

	
 
	
(c)
	
if (i) any Indebtedness for Borrowed Money (as defined below) of the Issuer, the Guarantor or any Material Subsidiary becomes due and repayable prematurely by reason of any event of default (however described); (ii) the Issuer, the Guarantor or any Material Subsidiary fails to make any payment in respect of any Indebtedness for Borrowed Money on the due date for payment or, as the case may be, within any originally applicable grace period; or (iii) any security given by the Issuer, the Guarantor or any Material Subsidiary for any Indebtedness for Borrowed Money becomes enforceable; or (iv) default is made by the Issuer, the Guarantor or any Material Subsidiary in making any payment due or, as the case may be, within any originally applicable grace period under any guarantee and/or indemnity given by it in relation to any Indebtedness for Borrowed Money of any other person; provided that, the aggregate amount of the relevant Indebtedness for Borrowed Money in respect of which one or more of the events mentioned above in this Condition 10.1(c) have occurred and are continuing exceeds €40 million or its equivalent in any other currency; or

	
 
	
(d)
	
if any final order is made by any competent court or resolution is passed for the winding up or dissolution of the Issuer, the Guarantor or any Material Subsidiary, save for the purposes of reorganisation (i) on terms previously approved by an Extraordinary Resolution of the Noteholders or (ii) in the case of a Material Subsidiary, whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the Issuer or another of its Subsidiaries; or

	
 
	
(e)
	
if the Issuer, the Guarantor or any Material Subsidiary ceases or threatens, through (i) an official action of the board of directors of the Issuer, the Guarantor or any Material Subsidiary, or (ii) action by a majority of the shareholders of the Issuer, the Guarantor or any Material Subsidiary, to cease to carry on the whole or substantially all of its business (except a cessation (i) for the purposes of reorganisation or similar arrangement on terms previously approved by an 

 

     – 62 –

 

	
 
		
Extraordinary Resolution of the Noteholders, (ii) in the case of the Guarantor, in connection with the transfer of the whole or substantially all of its business to one or more Subsidiaries of the Guarantor or (iii) in the case of a Material Subsidiary, in connection with the transfer of the whole or substantially all of its business to the Issuer, the Guarantor or any other Subsidiary of either of them which is or thereby becomes a Material Subsidiary, and provided that a bona fide disposal for full value on an arm’s length basis of the whole or substantially all of the business of the Issuer, the Guarantor or a Material Subsidiary shall be deemed not to be a cessation for the purposes of this paragraph) or the Issuer, the Guarantor or any Material Subsidiary stops or threatens to stop payment, or is unable to, or admits inability to pay, its debts (or any class of its debts) as they fall due, or is adjudicated bankrupt or insolvent by a court of competent jurisdiction; or

	
 
	
(f)
	
if (i) proceedings are initiated against the Issuer, the Guarantor or any Material Subsidiary under any applicable liquidation, insolvency, composition, reorganisation or other similar laws or an application is made (or documents filed with a court) for the appointment of an administrative or other receiver, manager, administrator, liquidator or other similar official, or an administrative or other receiver, manager, administrator, liquidator or other similar official is appointed, in relation to the Issuer, the Guarantor or any Material Subsidiary or, as the case may be, in relation to the whole or substantially all of the undertaking or assets of any of them or an encumbrancer takes possession of the whole or substantially all of the undertaking or assets of any of them, or a distress, execution, attachment, sequestration or other process is levied, enforced upon, sued out or put in force against the whole or substantially all of the undertaking or assets of any of them (except in any such case for the purpose of a reconstruction, merger, consolidation, amalgamation or other similar arrangement the terms of which have previously been approved by an Extraordinary Resolution of Noteholders or, in the case of a Material Subsidiary, in connection with the transfer of all or the major part of its business, undertaking and assets to the Issuer, Guarantor or another Subsidiary of either of them which thereby becomes a Material Subsidiary), and (ii) in any such case is not discharged within 45 days; or 

	
 
	
(g)
	
if the Issuer, the Guarantor or any Material Subsidiary initiates or consents to judicial proceedings relating to itself under applicable liquidation, insolvency, composition, reorganisation or other similar laws (including the obtaining of a moratorium) or makes a conveyance or assignment for the benefit of, or enters into any composition or other arrangement with, its creditors generally (or any class of its creditors) or convenes a meeting to consider a proposal for an arrangement or composition with its creditors generally (or any class of its creditors); or

	
 
	
(h)
	
 if the Guarantee ceases to be, or is claimed by the Issuer or the Guarantor not to be, in full force and effect.

	
10.2
	
Definitions

For the purposes of the Conditions:

“Indebtedness for Borrowed Money” means any indebtedness (whether being principal, premium, interest or other amounts) for or in respect of any borrowed money or any liability under or in respect of any acceptance or acceptance credit or any notes, bonds, debentures, debenture stock, loan stock or other securities;

“Material Subsidiary” means each Subsidiary of the Issuer (other than the Guarantor) the EBITDA of which (on an unconsolidated basis) as at the date at which its latest audited financial statements were prepared or, as the case may be, for the financial period to which those financial statements relate accounts for 10% or more of the Consolidated EBITDA (all as calculated by reference to the latest audited consolidated financial statements of the Issuer), provided that if a Subsidiary has been acquired since the 

 

     – 63 –

 

date as at which the latest audited consolidated financial statements of the Issuer were prepared, the financial statements shall be deemed to be adjusted in order to take into account the acquisition of that Subsidiary (that adjustment being certified by the auditors as representing an accurate reflection of the Consolidated EBITDA of the Issuer); and

“Consolidated EBITDA” means, for any financial period, the consolidated profit or loss of the Issuer and its Subsidiaries (the “Group”), as shown in the income statement:

	
 
	
(i)
	
before deducting any income tax expense, as shown in the income statement;

	
 
	
(ii)
	
before deducting any finance costs and excluding any finance income, as shown in the income statement;

	
 
	
(iii)
	
after adding back any amount attributable to the amortisation or depreciation of assets of the Group or any members of the Group;

	
 
	
(iv)
	
before taking into account any exceptional items of a one-off or non-recurring nature (including, without limitation, the costs associated with any restructuring programme or with any disposal not made in the ordinary course of business);

	
 
	
(v)
	
after adding back or deducting, as the case may be, the amount of any loss or gain against book value arising on a disposal of any asset (other than in the ordinary course of trading) and any loss or gain arising on any upward or downward revaluation of any asset (including without limitation any impairment of goodwill);

	
 
	
(vi)
	
before taking in to account any unrealised gains or loss on any derivative instrument;

	
 
	
(vii)
	
after deducting the amount of profit (or adding back the amount of any loss) of any member of the Group which is attributable to non-controlling interests; and

	
 
	
(viii)
	
after excluding any amortisation or gains or losses under IAS 39 arising from the discontinuation of hedging agreements,

where, for the purposes of this definition, the exchange rate to be used shall be the exchange rate used in the financial statements of the Group for the relevant financial period.

In relation to any Subsidiary of the Issuer (or the Guarantor, as the case may be), “EBITDA” in relation to such Subsidiary shall be assessed on an unconsolidated basis but otherwise consistent with the manner in which Consolidated EBITDA is assessed.

Consolidated EBITDA shall be adjusted by including (or excluding), on a pro-forma basis, EBITDA attributable to companies or businesses acquired (or divested) during the relevant financial period as if they had been acquired (or divested) on the first day of the relevant financial period.

	
10.3
	
Reports

A report by any two authorised signatories of the Issuer that in their opinion a Subsidiary of the Issuer (or the Guarantor, as the case may be) is or is not or was or was not at any particular time or throughout any specified period a Material Subsidiary shall, in the absence of manifest error, be conclusive and binding on all parties. 

	
11.
	
REPLACEMENT OF NOTES

Should any Note be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Registrar upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require.  Mutilated or defaced Notes must be surrendered before replacements will be issued.

 

     – 64 –

 

	
12.
	
AGENTS

The initial Agents are set out above.  If any additional Paying Agents are appointed in connection with any Series, the names of such Paying Agents will be specified in Part B of the applicable Pricing Supplement.

The Issuer is entitled to vary or terminate the appointment of any Agent and/or appoint additional or other Agents and/or approve any change in the specified office through which any Agent acts, provided that:

	
 
	
(a)
	
there will at all times be a Fiscal Agent and a Registrar; 

	
 
	
(b)
	
so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be a Transfer Agent with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority; and

	
 
	
(c)
	
there will at all times be a Paying Agent in a jurisdiction within Europe. 

Notice of any variation, termination, appointment or change in Agents will be given to the Noteholders promptly by the Issuer in accordance with Condition 13.

In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and the Guarantor and do not assume any obligation to, or relationship of agency or trust with, any Noteholder.  The Agency Agreement contains provisions permitting any entity into which any Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor agent.

	
13.
	
Notices

All notices regarding the Notes will be deemed to be validly given if sent by first class mail or (if posted to an address overseas) by airmail to the holders (or the first named of joint holders) at their respective addresses recorded in the Register and will be deemed to have been given on the fourth day after mailing and, in addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published on the website of the relevant stock exchange or relevant authority and/or in a daily newspaper of general circulation in the place or places required by those rules.

Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of Euroclear and/or Clearstream, Luxembourg, be substituted for such publication in such newspaper(s) or such websites or such mailing the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the Notes and, in addition, for so long as any Notes are listed on a stock exchange or are admitted to trading by another relevant authority and the rules of that stock exchange or relevant authority so require, such notice will be published on the website of the relevant stock exchange or relevant authority and/or in a daily newspaper of general circulation in the place or places required by those rules.  Any such notice shall be deemed to have been given to the holders of the Notes on the second day after the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg.

Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Registrar.  Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Registrar through Euroclear and/or Clearstream, Luxembourg, as the case may be, in such manner as the Registrar and Euroclear and/or Clearstream, Luxembourg, as the case may be, may approve for this purpose.

 

     – 65 –

 

	
14.
	
MEETINGS OF NOTEHOLDERS AND MODIFICATION

The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the modification by Extraordinary Resolution of any of these Conditions or the Guarantee or any of the provisions of the Agency Agreement. The quorum at any meeting for passing an Extraordinary Resolution will be one or more persons present holding or representing more than 50% in nominal amount of the Notes for the time being outstanding, or at any adjourned such meeting one or more persons present whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes any matter defined in the Agency Agreement as a Basic Terms Modification, including the modification of the Guarantee or certain of these Conditions (including the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes), the necessary quorum for passing an Extraordinary Resolution will be one or more persons present holding or representing not less than two-thirds, or at any adjourned meeting not less than one-third, of the nominal amount of the Notes for the time being outstanding. The Agency Agreement provides that (i) a resolution passed at a meeting duly convened and held in accordance with the Agency Agreement by a majority consisting of not less than three-fourths of the votes cast on such resolution, (ii) a resolution in writing signed by or on behalf of the holders of not less than three-fourths in nominal amount of the Notes for the time being outstanding or (iii) consent given by way of electronic consents through the relevant clearing system(s) (in a form satisfactory to the Fiscal Agent) by or on behalf of the holders of not less than three-fourths in nominal amount of the Notes for the time being outstanding, shall, in each case, be effective as an Extraordinary Resolution of the Noteholders. An Extraordinary Resolution passed by the Noteholders will be binding on all Noteholders, whether or not they are present at any meeting and whether or not they voted on the resolution.

The Fiscal Agent and the Issuer may agree, without the consent of the Noteholders, to:

	
 
	
(a)
	
any modification (except a Basic Terms Modification (being a matter in respect of which an increased quorum is required as mentioned above) of the Notes, the Deed of Covenant or the Agency Agreement which is not materially prejudicial to the interests of the Noteholders; or

	
 
	
(b)
	
any modification of the Notes, the Deed of Covenant or the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest error or to comply with mandatory provisions of the law.

Any such modification shall be binding on the Noteholders and, unless the Fiscal Agent agrees otherwise, any modification shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 13.

	
15.
	
FURTHER ISSUES

The Issuer shall be at liberty from time to time without the consent of the Noteholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and the date from which interest starts to accrue and so that the same shall be consolidated and form a single Series with the outstanding Notes.

	
16.
	
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any term or condition of this Note under the Contracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

 

     – 66 –

 

	
17.
	
GOVERNING LAW AND SUBMISSION TO JURISDICTION

	
17.1
	
Governing law

The Agency Agreement, the Guarantee, the Deed of Covenant, the Notes and any non-contractual obligations arising out of or in connection with the Agency Agreement, the Guarantee, the Deed of Covenant and the Notes are governed by, and construed in accordance with, English law. 

	
17.2
	
Submission to jurisdiction

	
 
	
(a)
	
Subject to Condition 17.2(c) below, the English courts have exclusive jurisdiction to settle any dispute arising out of or in connection with the Notes, including any dispute as to their existence, validity, interpretation, performance, breach or termination or the consequences of their nullity and any dispute relating to any non-contractual obligations arising out of or in connection with the Notes (a “Dispute”) and accordingly each of the Issuer and any Noteholders in relation to any Dispute submits to the exclusive jurisdiction of the English courts.

	
 
	
(b)
	
For the purposes of this Condition 17.2, the Issuer waives any objection to the English courts on the grounds that they are an inconvenient or inappropriate forum to settle any Dispute. 

	
 
	
(c)
	
To the extent allowed by law, the Noteholders may, in respect of any Dispute or Disputes, take (i) proceedings in any other court with jurisdiction; and (ii) concurrent proceedings in any number of jurisdictions.

	
17.3
	
Appointment of Process Agent

The Issuer irrevocably appoints Airbags International Limited at Viking Way, Congleton, Cheshire CW12 1TT as its agent for service of process in any proceedings before the English courts in relation to any Dispute and agrees that, in the event of Airbags International Limited being unable or unwilling for any reason so to act, it will immediately appoint another person as its agent for service of process in England in respect of any Dispute.  The Issuer agrees that failure by a process agent to notify it of any process will not invalidate service.  Nothing herein shall affect the right to serve process in any other manner permitted by law.

	
17.4
	
Waiver of trial by jury

WITHOUT PREJUDICE TO CONDITION 17.2 THE ISSUER WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN CONNECTION WITH THE NOTES.  THESE CONDITIONS MAY BE FILED AS A WRITTEN CONSENT TO A BENCH TRIAL.

	
17.5
	
Other documents and the Guarantor

The Issuer and, where applicable, the Guarantor have in the Agency Agreement, the Guarantee and the Deed of Covenant submitted to the jurisdiction of the English courts and appointed an agent for service of process in terms substantially similar to those set out above.

 

     – 67 –

 

FORM OF NOTES

The Notes of each Series will be in registered form, without interest coupons attached.  Notes will be issued outside the United States in reliance on the exemption from registration provided by Regulation S.

The Notes of each Tranche will initially be represented by a global note in registered form (a “Global Note”). 

Global Notes will be deposited with a common depositary or, if the Global Notes are to be held under the new safe-keeping structure (the “NSS”), a common safekeeper, as the case may be for Euroclear and Clearstream, Luxembourg, and registered in the name of the nominee for the common depositary of, Euroclear and Clearstream, Luxembourg or in the name of a nominee of the common safekeeper, as specified in the applicable Pricing Supplement.  Persons holding beneficial interests in Global Notes will be entitled or required, as the case may be, under the circumstances described below, to receive physical delivery of definitive Notes in fully registered form.

Where the Global Notes issued in respect of any Tranche is intended to be held under the NSS, the applicable Pricing Supplement will indicate whether or not such Global Notes are intended to be held in a manner which would allow Eurosystem eligibility. Any indication that the Global Notes are to be so held does not necessarily mean that the Notes of the relevant Tranche will be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any time during their life as such recognition depends upon satisfaction of the Eurosystem eligibility criteria. The common safekeeper for a Global Note held under the NSS will either be Euroclear or Clearstream, Luxembourg or another entity approved by Euroclear and Clearstream, Luxembourg. 

Payments of principal, interest and any other amount in respect of the Global Notes will, in the absence of provision to the contrary, be made to the person shown on the Register (as defined in Condition 6.2) as the registered holder of the Global Notes. None of the Issuer, the Guarantor, any Paying Agent or the Registrar will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Payments of principal, interest or any other amount in respect of the Notes in definitive form will, in the absence of provision to the contrary, be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 6.2) immediately preceding the due date for payment in the manner provided in that Condition.

Interests in a Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Notes only upon the occurrence of an Exchange Event.  For these purposes, Exchange Event means that (i) an Event of Default has occurred and is continuing, (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and, in any such case, no successor clearing system is available or (iii) the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Global Note in definitive form.  The Issuer will promptly give notice to Noteholders in accordance with Condition 13 if an Exchange Event occurs. In the event of the occurrence of an Exchange Event, Euroclear and/or Clearstream, Luxembourg or any person acting on their behalf (acting on the instructions of any holder of an interest in such Global Note) may give notice to the Registrar requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the Issuer may also give notice to the Registrar requesting exchange.  Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.

No beneficial owner of an interest in a Global Note will be able to transfer such interest, except in accordance with the applicable procedures of Euroclear and Clearstream, Luxembourg, in each case to the extent applicable. 

General

Pursuant to the Agency Agreement (as defined under “Terms and Conditions of the Notes”), the Fiscal Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing 

 

     – 68 –

 

Tranche of Notes at a point after the Issue Date of the further Tranche, the Notes of such further Tranche shall be assigned a common code and ISIN which are different from the common code and ISIN assigned to Notes of any other Tranche of the same Series, which shall not be prior to the expiry of the distribution compliance period (as defined in Regulation S under the Securities Act) applicable to the Notes of such Tranche.  

Any reference herein to Euroclear and/or Clearstream, Luxembourg shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Pricing Supplement.

A Note may be accelerated by the holder thereof in certain circumstances described in Condition 10.  In such circumstances, where any Note is still represented by a Global Note and the Global Note (or any part thereof) has become due and repayable in accordance with the Conditions and payment in full of the amount due has not been made in accordance with the provisions of the Global Note then from 8.00 p.m. (London time) on such day holders of interests in such Global Note credited to their accounts with Euroclear and/or Clearstream, Luxembourg, as the case may be, will become entitled to proceed directly against the Issuer on the basis of statements of account provided by Euroclear and/or Clearstream, Luxembourg on and subject to the terms of a deed of covenant (the “Deed of Covenant”) dated 11 April 2019 and executed by the Issuer. 

 

 

 

     – 69 –

 

USE OF PROCEEDS

The net proceeds of issues of Notes will be used for general corporate purposes of the Issuer. If, in respect of any particular issue, there is a particular identified use of proceeds, this will be stated in the applicable Pricing Supplement.

 

     – 70 –

 

DESCRIPTION OF THE GROUP

General

The Issuer is a Delaware corporation with its principal executive offices in Stockholm, Sweden. The Issuer was created in 1997 from the merger of Autoliv AB and the automotive safety products business of Morton International, Inc. The Issuer functions as a holding corporation and owns two principal subsidiaries, Autoliv Holding AB and the Guarantor.

On 29 June 2018, Autoliv completed the spin-off of its former Electronics segment through the distribution of all of the issued and outstanding stock of Veoneer, Inc. The spin-off is described in more detail in Note 1 to the 2018 Consolidated Financial Statements.

Group Structure Chart

The following diagram shows the Issuer’s key subsidiaries, including depicting the Guarantor’s position within the Group as at the date of this Base Listing Particulars:

Autoliv, Inc. 

(Delaware)

Autoliv Safety Technology, Inc. (Delaware)

Autoliv AB (Sweden)

Autoliv Holding AB (Sweden)

Autoliv ASP, Inc. (Indiana)

OEA, Inc. (Deleware)

Autoliv Holding, Inc. (Delaware)

Issuer and Guarantor

 

 

 

 

 

 

 

 

 
 
Business

The Group is a leading developer, manufacturer and supplier of automotive safety systems to the automotive industry with a broad range of product offerings, primarily passive safety systems.

The Issuer was incorporated in the State of Delaware on 1 October 1996 under the General Corporation Law of the State of Delaware with file number 2668672. The address of the Issuer is Klarabergsviadukten 70, Section B, 7th Floor, Box 70381, SE-107 24, Stockholm, Sweden and its telephone number is +46 8 587 20 600. The address of the Issuer’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange St, Wilmington, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

Passive safety systems are primarily meant to improve vehicle safety. Passive safety systems include modules and components for frontal-impact airbag protection systems, side-impact airbag protection systems, seatbelts, steering wheels, inflator technologies, battery cable cutters, pedestrian protection systems and child seats.

 

     – 71 –

 

Including joint venture operations, the Group has approximately 64 production facilities in 25 countries and its customers include the world’s largest car manufacturers. The Group's consolidated net sales in 2018 were US$8.7 billion, approximately 66% of which consisted of sales of airbag and steering wheel products and approximately 34% of which consisted of sales of seatbelt products. The Issuer's business is conducted in the following geographical regions: Europe, the Americas, China, Japan and the Rest of Asia.

The Issuer's head office is located in Stockholm, Sweden, where the Issuer currently employs approximately 70 people. At 31 December 2018, the Group had approximately 58,000 employees worldwide, and a total headcount, including 9,000 temporary personnel, of approximately 67,000.

Additional information regarding developments in the Group's business during 2018 is contained under Item 7 of the 2018 Consolidated Financial Statements.

Financial Information on Segments

The Group considers its products to be components of integrated automotive safety systems. Following completion of the spin-off of Veoneer on 29 June 2018, the Group has one reportable segment, based on the way the Group evaluates its financial performance and manages its operations. Prior to the completion of the spin-off, the Group had two reportable segments, Electronics and Passive Safety. The Group’s single operating segment includes its airbag (including steering wheels) and seatbelt products and components. For financial reporting purposes, the single operating segment is also the Group’s reportable segment in accordance with Accounting Standards Codification (ASC) 280 Segment Reporting under U.S. GAAP. The financial data relating to the Group’s businesses in this segment over the last two fiscal years is contained in the Consolidated Financial Statements. A statement of net sales by product group and region for the last three years is contained in Note 22 of the Notes to the 2018 Consolidated Financial Statements.

Products, Market and Competition

Products

Saving more lives on the road is a key health priority as the world grows and develops. However, population expansion in Growth Markets and the rise of megacities creates new complexities. To meet this challenge, the Group develops automotive safety solutions that work in real-life situations. 

The Group's passive safety systems such a seatbelts and airbags substantially mitigate the human consequences of traffic accidents.

The airbag module is designed to inflate extremely rapidly then quickly deflate during a collision or impact. It consists of the container, an airbag cushion and an inflator. The purpose of the airbag is to provide the occupants cushioning and restraint during a crash event to prevent any impact or impact-caused injuries between the occupant and the interior of the vehicle. 

Seatbelts can reduce the overall risk of serious injuries in frontal crashes by as much as 60% thanks to advanced seatbelt technologies such as pretensioners and load limiters.

The Issuer also manufactures steering wheels which are crafted to ensure they meet safety requirements and are functional as well as stylish.

Market and Competition

Consumer research clearly shows that people want safe cars, and several significant trends are likely to have a positive influence on overall safety content per vehicle (“CPV”). These include:

	
 
	
1)
	
Society becoming increasingly focused on Vision Zero (see below), which includes a goal of reducing traffic fatalities and their associated costs,

 

 

     – 72 –

 

	
 
	
2)
	
Demographic trends of increased urbanisation, aging driver populations and increased safety focus in the Growth Markets, and

 

	
 
	
3)
	
Evolving government regulations and test rating systems to improve the safety of vehicles in various markets, such as the updated Euro NCAP (see below), China NCAP and USNCAP.

 

Vision Zero is a multi-national road traffic safety project that aims to achieve a highway system with no fatalities or serious injuries involving road traffic. It started in Sweden and was approved by their parliament in October 1997. A core principle of the vision is that 'Life and health can never be exchanged for other benefits within the society' rather than the more conventional comparison between costs and benefits, where a monetary value is placed on life and health, and then that value is used to decide how much money to spend on a road network towards the benefit of decreasing how much risk.

The European New Car Assessment Programme (“Euro NCAP”) is a European car safety performance assessment programme (i.e. a New Car Assessment Programme) based in Brussels (Belgium) and founded in 1997 by the Transport Research Laboratory for the United Kingdom Department for Transport and backed by several European governments, as well as by the EU.

The automotive safety market is driven by two primary factors: global light vehicle production (“LVP”) and CPV.

The first growth driver, LVP, has increased at an average annual growth rate of around 2.6% since the incorporation of the Issuer in 1997 despite the cyclical nature of the automotive industry. LVP is expected to grow to close to 97 million vehicles in 2021 from approximately 91 million vehicles in 2018, according to IHS Markit. Almost all of this expansion will be in the Growth Markets, predominantly in China, India, Southeast Asia and South America.

Unlike LVP, where the Group can only aim to be on the best-selling platforms, the Group can influence safety CPV more directly by continuously developing and introducing new technologies with higher value-added features. Over the long-term, this increases average safety CPV and has caused the Group's markets to grow faster than the LVP. 

Since the incorporation of the Issuer in 1997, the Group’s net sales compound annual growth rate (“CAGR”) for passive safety has been 5.6% compared to the market rate of around 3% which includes an LVP growth of around 2.6%. The Group's outperformance is a result of a steady flow of new passive safety technologies, strong focus on quality and a superior global footprint both in products and engineering. This has enabled the Group to increase its market share from 27% in 1997 to around 40% in 2018.

In the developed markets, such as Western Europe, North America, Japan and South Korea, the safety CPV is around US$280. CPV growth in these regions will mainly come from new passive safety systems such as active seatbelts, knee airbags, front-center airbags along with improved protection for pedestrians and rear-seat occupants like bag-in-belt. 

In the Growth Markets the Group sees great opportunities for CPV growth from more airbags and advanced seatbelt products. Average CPV in the Growth Markets is around US$170, approximately US$110 less than in the developed markets. 

Despite a negative LVP-mix effect from higher growth in low safety CPV markets, the passive safety market (seatbelts and airbags, including steering wheels) is expected to grow at a CAGR of 4% until 2021 to about US$23 billion, based on the current macro-economic outlook and the Group's internal market intelligence and estimates. The highest growth rate is expected in steering wheels, where the Group has global market share of more than 30%, generated by the trend toward higher-value steering wheels with leather and additional features.

 

     – 73 –

 

The Growth Markets are expected to outgrow the developed markets substantially for the period between 2018 and 2021, as the Growth Markets are supported by a higher LVP and increasing safety CPV resulting from higher penetration of airbags and more advanced seatbelt products.

In seatbelts, the Group has reached a global market share of around 40% in 2018, primarily due to being the technology leader with several important innovations such as pretensioners and active seatbelts. The Group's strong market position is also a reflection of its superior global footprint. Seatbelts are the primary life-saving safety product and are also an important requirement in low-end vehicles for the Growth Markets. This provides the Group with an excellent opportunity to benefit from the expected growth in this segment of the market.

The global market for airbags is expected to grow slightly slower than the global passive safety market. This is related to the dilutive effect from new low-end vehicles in the Growth Markets, with relatively low installation rates for airbags.

The Group’s Competitors

The Issuer is the clear market leader with an estimated global market share of around 40%.  The Issuer's major competitors have traditionally been Takata and ZF.

During 2017 Takata, a family-controlled Japanese company whose shares were listed on the Tokyo Stock Exchange, filed for bankruptcy protection in the U.S. and Japan. The bankruptcy came after an accumulation of recall-costs and liabilities related to malfunctioning airbag inflators. U.S.-based Key Safety Systems (“KSS”), owned by Chinese company Joyson, subsequently acquired Takata’s assets in April 2018 for approximately US$1.6 billion. The new company is named Joyson Safety Systems (“JSS”). JSS holds a global market share of 24% in automotive passive safety product, including Joyson’s Chinese subsidiary YFK. 

ZF is a global leader in driveline and chassis technology, as well as in passive safety technologies, is one of the largest global automotive suppliers and is estimated by the Group to have a global market share of 17% in automotive passive safety products.

In Japan, Brazil, South Korea and China there are a number of local suppliers that have close ties with the domestic vehicle manufacturers. For example, Toyota uses “keiretsu” (in-house) suppliers Tokai Rika for seatbelts and Toyoda Gosei for airbags and steering wheels. These suppliers generally receive most of the Toyota business in Japan, in the same way, Mobis, a major supplier to Hyundai/Kia in South Korea generally receives a significant part of their business.

Other competitors include Nihon Plast and Ashimori of Japan, Jinheng of China, Samsong in South Korea and Chris in South America. Collectively, these competitors account for the majority of the remaining 19% global market share in passive safety.

Manufacturing and Production

Including joint-venture operations, the Group has approximately 64 production facilities located in 25 countries, consisting of both component factories and assembly factories. See the “Properties” section below. The component factories manufacture inflators, propellant, initiators, textile cushions, webbing, pressed steel parts, springs and overmoulded steel parts used in seatbelt and airbag assembly and steering wheels. The assembly factories source components from a number of parties, including the Group’s own component factories, and assemble complete restraint systems for “just-in-time” delivery to customers. The products manufactured by the Group in 2018 consisted of approximately 151 million complete seatbelt systems (of which approximately 79 million were fitted with pretensioners), approximately 99 million side airbags (including curtain airbags), approximately 56 million frontal airbags and approximately 20 million steering wheels.

The Group’s “just-in-time” delivery systems have been designed to accommodate the specific requirements of each customer for low levels of inventory and rapid stock delivery service. “Just-in-time” deliveries require final assembly or, at least, distribution centres in geographic areas close to customers to facilitate rapid delivery. The 

 

     – 74 –

 

fact that the major automobile manufacturers are continually expanding their production activities into more countries and require the same or similar safety systems as those produced in Europe, Japan or the U.S. increases the importance for suppliers to have assembly capacity in several countries. Consolidation among the Group's customers also supports this trend.

The Group’s assembly operations generally are not constrained by capacity considerations unless there is a disruption in the supply of raw materials and components. When dramatic shifts in LVP occur, the Group can generally adjust capacity in response to any changes in demand within a few days by adding or removing work shifts and within a few months by adding or removing standardised production and assembly lines. Most of the Group’s assembly factories can make sufficient space available to accommodate additional production lines to satisfy foreseeable increases in capacity. As a result, the Group can usually adjust its manufacturing capacity faster than its customers can adjust their capacity as a result of fluctuations in the general demand for vehicles or in the demand for a specific vehicle model, provided that customers promptly notify the Group when they become aware of such changes in demand.

When dramatic shifts in LVP occur or when there is a shift in regional LVP, the capacity adjustments can take more time and be more costly. Additionally, when there is a significant demand for a given product due to a major recall of a competitor’s product, like certain of the Group's customers have experienced, capacity adjustments may take more time.

The Group could experience disruption in its supply or delivery chain, which could cause one or more of its customers to halt or delay production. For more information, see Risk Factors section, “The Group could experience disruption in its supply or delivery chain, which could cause one or more of the Group's customers to halt or delay production”.

Properties 

The Group’s principal executive offices are located at Klarabergsviadukten 70, Section B7, SE-111 64, Stockholm, Sweden. The Group’s various businesses operate in a number of production facilities and offices. The Group believes that its properties are adequately maintained and suitable for their intended use and that the Group’s production facilities have adequate capacity for the Group’s current and foreseeable needs. All of the Group’s production facilities and offices are owned or leased by operating (either subsidiary or joint venture) companies.

 

     – 75 –

 

AUTOLIV MANUFACTURING FACILITIES

 

								
	
Country/ Company
	
 
	
Location of Facility
	
 
	
 
	
Items Produced at Facility
	
 
	
Owned/ Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Brazil
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv do Brasil Ltda.
	
 
	
Taubaté
	
 
	
 
	
Seatbelts, airbags, steering wheels and seatbelt webbing
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Canada
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Canada, Inc.
	
 
	
Tilbury
	
 
	
 
	
Airbag cushions
	
 
	
Owned

	
VOA Canada, Inc.
	
 
	
Collingwood
	
 
	
 
	
Seatbelt webbing
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
China
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv (Baoding) Vehicle Safety Systems Co., Ltd
	
 
	
Baoding
	
 
	
 
	
Airbags
	
 
	
Leased

	
Autoliv (Changchun) Vehicle Safety Systems Co., Ltd.
	
 
	
Changchun
	
 
	
 
	
Airbags and seatbelts
	
 
	
Owned

	
Autoliv (China) Steering Wheel Co., Ltd.
	
 
	
Fengxian/Shanghai
	
 
	
 
	
Steering wheels
	
 
	
Owned

	
Autoliv (Guangzhou) Vehicle Safety Systems Co., Ltd.
	
 
	
Guangzhou
	
 
	
 
	
Airbags and seatbelts
	
 
	
Owned

	
Autoliv (Nanjing) Vehicle Safety Systems Co., Ltd.
	
 
	
Nanjing
	
 
	
 
	
Seatbelts
	
 
	
Owned

	
Autoliv Shenda (Nanjing) Automotive Components Co., Ltd.
	
 
	
Nanjing
	
 
	
 
	
Seatbelt webbing
	
 
	
Owned

	
Autoliv (Shanghai) Vehicle Safety Systems Co., Ltd.
	
 
	
Shanghai
	
 
	
 
	
Airbags
	
 
	
Owned

	
Autoliv Shenda (Tai Cang) Automotive Safety Systems Co., Ltd.
	
 
	
Shanghai
	
 
	
 
	
Seatbelt webbing
	
 
	
Owned

	
Autoliv (Jiangsu) Automotive Safety Components Co., Ltd.
	
 
	
Jintan
	
 
	
 
	
Propellant, Airbag initiators and Airbag inflators
	
 
	
Owned

	
Autoliv (China) Automotive Safety Systems Co., Ltd.
	
 
	
Nantong
	
 
	
 
	
Airbag cushions
	
 
	
Owned

	
Mei-An Autoliv Co., Ltd.
	
 
	
Taipei
	
 
	
 
	
Seatbelts and airbags
	
 
	
Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Estonia
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
AS Norma
	
 
	
Tallinn
	
 
	
 
	
Seatbelts and belt components
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
France
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv France SNC
	
 
	
Gournay-en-Bray
	
 
	
 
	
Seatbelts and airbags
	
 
	
Owned

	
Autoliv Isodelta SAS
	
 
	
Chiré-en-Montreuil
	
 
	
 
	
Steering wheels and covers
	
 
	
Owned

	
Livbag SAS
	
 
	
Pont-de-Buis
	
 
	
 
	
Airbag inflators
	
 
	
Owned

	
N.C.S. Pyrotechnie et Technologies SAS
	
 
	
Survilliers
	
 
	
 
	
Airbag initiators and seatbelt micro gas generators
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Germany
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv B.V. & Co. KG
	
 
	
Dachau 

Elmshorn
	
 
	
 
	
Airbags

Seatbelts
	
 
	
Leased

Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Hungary
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Kft.
	
 
	
Sopronkövesd
	
 
	
 
	
Seatbelts
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
India
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv India Private Ltd.
	
 
	
Bangalore
	
 
	
 
	
Seatbelts, airbags and steering wheels
	
 
	
Leased

	
 
	
 
	
Mysore
	
 
	
 
	
Seatbelt webbing
	
 
	
Owned

	
 
	
 
	
Delhi
	
 
	
 
	
Seatbelts, airbags and steering wheels
	
 
	
Leased

	
 
	
 
	
Chennai
	
 
	
 
	
Airbags, Seatbelts
	
 
	
Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Indonesia
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
P.T. Autoliv Indonesia
	
 
	
Jakarta
	
 
	
 
	
Seatbelts and steering wheels
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Japan
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Japan Ltd.
	
 
	
Atsugi
	
 
	
 
	
Steering wheels
	
 
	
Owned

	
 
	
 
	
Hiroshima

Taketoyo

Tsukuba
	
 
	
 
	
Airbags and steering wheels

Airbag inflators

Airbags and seatbelts
	
 
	
Owned

Owned

Owned

 

     – 76 –

 

								
	
Country/ Company
	
 
	
Location of Facility
	
 
	
 
	
Items Produced at Facility
	
 
	
Owned/ Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 

 

Malaysia
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv-Hirotako Sdn Bhd
	
 
	
Kuala Lumpur
	
 
	
 
	
Seatbelts, airbags and steering wheels
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Mexico
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Mexico East S.A. de C.V.
	
 
	
Matamoros
	
 
	
 
	
Steering wheels
	
 
	
Owned

	
Autoliv Mexico S.A. de C.V.
	
 
	
Lerma
	
 
	
 
	
Seatbelts
	
 
	
Owned

	
Autoliv Safety Technology de

Mexico S.A. de C.V.
	
 
	
Tijuana
	
 
	
 
	
Seatbelts
	
 
	
Leased

	
Autoliv Steering Wheels Mexico S. de R.L. de C.V.
	
 
	
Querétaro

Querétaro
	
 
	
 
	
Airbag cushions

Airbags
	
 
	
Leased

Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Philippines
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Cebu Safety Manufacturing, Inc.
	
 
	
Cebu
	
 
	
 
	
Steering wheels
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Poland
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Poland Sp. zo.o.
	
 
	
Olawa
	
 
	
 
	
Airbag cushions
	
 
	
Owned

	
 
	
 
	
Jelcz-Laskowice
	
 
	
 
	
Airbags and seatbelts
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 

Romania
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Romania S.R.L. 
	
 
	
Brasov

 

 

 

Lugoj
	
 
	
 
	
Seatbelts, seatbelt webbing, airbags, airbag inflators, springs for retractors and seatbelt components

 

Airbag cushions
	
 
	
Owned

 

 

 

Owned

	
 
	
 
	
Resita
	
 
	
 
	
Airbag cushions
	
 
	
Leased

	
 
	
 
	
Sfantu Georghe
	
 
	
 
	
Steering wheels
	
 
	
Owned

	
 
	
 
	
Onesti
	
 
	
 
	
Steering wheels
	
 
	
Leased

	
Russia
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
OOO Autoliv
	
 
	
Togliatti
	
 
	
 
	
Airbags, seatbelts and steering wheels
	
 
	
Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
South Africa
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Southern Africa (Pty) Ltd.
	
 
	
Krügersdorp
	
 
	
 
	
Seatbelts and airbags
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
South Korea
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Corporation
	
 
	
Hwasung

Wonju
	
 
	
 
	
Airbags

Seatbelts
	
 
	
Owned

Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Spain
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv BKI S.A.U.
	
 
	
Valencia
	
 
	
 
	
Airbags
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Sweden
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Sverige AB
	
 
	
Vårgårda
	
 
	
 
	
Airbag inflators 
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Thailand
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Thailand Ltd.
	
 
	
Chonburi

Chonburi
	
 
	
 
	
Seatbelts

Airbags, airbag cushions, steering wheels
	
 
	
Owned

Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Tunisia
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
SWT1 SARL

 

ASW3 SARL
	
 
	
El Fahs

 

Nadhour
	
 
	
 
	
Leather wrapping of steering wheels

 

PU Molding andLeather wrapping of steering wheels
	
 
	
Owned & Leased Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Turkey
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Cankor Otomotiv Emniyet Sistemleri Sanayi Ve Ticaret A.S.
	
 
	
Gebze-Kocaeli
	
 
	
 
	
Airbags and seatbelts
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Teknoloji Urunleri Sanayi ve Ticaret Ltd. Sti.
	
 
	
Gebze-Kocaeli
	
 
	
 
	
Steering wheels
	
 
	
Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv Metal Pres Sanayi ve Ticaret A.S.
	
 
	
Gebze-Kocaeli
	
 
	
 
	
Seatbelt components
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
United Kingdom
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Airbags International Ltd
	
 
	
Congleton
	
 
	
 
	
Airbag cushions
	
 
	
Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
USA
	
 
	
 
	
 
	
 
	
 
	
 
	
 

 

     – 77 –

 

								
	
Country/ Company
	
 
	
Location of Facility
	
 
	
 
	
Items Produced at Facility
	
 
	
Owned/ Leased

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Autoliv ASP, Inc.
	
 
	
Brigham City

Ogden

Ogden

Promontory

Tremonton
	
 
	
 
	
Airbag inflators

Airbags

Airbags and service parts

Propellant

Airbag initiators and seatbelt micro gas generators
	
 
	
Owned

Owned

Leased

Owned

Owned

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

 

 

     – 78 –

 

TECHNICAL CENTERS AND CRASH TEST TRACKS

 

						
	
Country / Company
	
 
	
Location
	
 
	
 
	
Product(s) Supported

	
 
	
 
	
 
	
 
	
 
	
 

	
China
	
 
	
 
	
 
	
 
	
 

	
Autoliv (Shanghai) Vehicle Safety System Technical Center Co., Ltd.
	
 
	
Shanghai
	
 
	
 
	
Airbags and seatbelts customer applications and platform development with full-scale test laboratory

	
France
	
 
	
 
	
 
	
 
	
 

	
Autoliv France SNC
	
 
	
Gournay-en-Bray
	
 
	
 
	
Airbags and seatbelts customer applications and platform development with full-scale test laboratory

	
Livbag SAS
	
 
	
Pont-de-Buis
	
 
	
 
	
Inflator and pyrotechnic development

	
 
	
 
	
 
	
 
	
 
	
 

	
Germany
	
 
	
 
	
 
	
 
	
 

	
Autoliv B.V. & Co. KG
	
 
	
Dachau
	
 
	
 
	
Customer applications and platform development, airbags with full-scale test laboratory

	
 
	
 
	
Elmshorn
	
 
	
 
	
Seatbelts with full-scale test laboratory

	
 
	
 
	
 
	
 
	
 
	
 

	
India
	
 
	
 
	
 
	
 
	
 

	
Autoliv India Private Ltd.
	
 
	
Bangalore
	
 
	
 
	
Airbags and seatbelts with sled testing

	
 

Japan
	
 
	
 
	
 
	
 
	
 

	
Autoliv Japan Ltd.
	
 
	
Tsukuba
	
 
	
 
	
Airbags and seatbelts customer applications and platform development with sled test laboratory

	
 
	
 
	
 
	
 
	
 
	
 

	
Poland
	
 
	
 
	
 
	
 
	
 

	
Autoliv Poland Sp.z.o.o.
	
 
	
Olawa
	
 
	
 
	
Airbags applications and platform development

	
 
	
 
	
 
	
 
	
 
	
 

	
Romania
	
 
	
 
	
 
	
 
	
 

	
Autoliv Romania S.R.L.
	
 
	
Brasov
	
 
	
 
	
Seatbelts with sled test laboratory

	
 
	
 
	
 
	
 
	
 
	
 

	
South Korea
	
 
	
 
	
 
	
 
	
 

	
Autoliv Corporation
	
 
	
Seoul
	
 
	
 
	
Airbags and seatbelts customer applications and platform development with sled test laboratory

	
Sweden
	
 
	
 
	
 
	
 
	
 

	
Autoliv Development AB
	
 
	
Vårgårda
	
 
	
 
	
Research center

	
Autoliv Sverige AB
	
 
	
Vårgårda
	
 
	
 
	
Airbags customer applications and platform development with full-scale test laboratory

	
USA
	
 
	
 
	
 
	
 
	
 

	
Autoliv ASP Inc.
	
 
	
Auburn Hills
	
 
	
 
	
Airbags, steering wheels, and seatbelts customer applications and platform development with full-scale test laboratory

	
 
	
 
	
Ogden
	
 
	
 
	
Airbags, inflators and pyrotechnics customer applications and platform development

 

Quality Management

The Group's management believes that superior quality is a prerequisite to being considered a leading global supplier of automotive safety systems and is key to its financial performance, because quality excellence is critical for winning new orders, preventing recalls and maintaining low scrap rates. The Group has for many years emphasised a “zero-defect” proactive quality policy and continues to strive to improve its working methods. This means both that the Group’s products are expected to always meet performance expectations, and that the Group’s products are expected to be delivered to its customers at the right times and in the right amounts. Furthermore, the Group's management believes its continued quality improvements further enhance its reputation among its customers, employees and governmental authorities.

 

     – 79 –

 

Although quality has always been paramount in the automotive industry, especially for safety products, automobile manufacturers have become increasingly focused on quality with even less tolerance for any deviations. This intensified focus on quality is partially due to an increase in the number of vehicle recalls for a variety of reasons (not just safety), including a few high-profile vehicle recalls. This trend is likely to continue as automobile manufacturers introduce even stricter quality requirements and regulating agencies and other authorities increase the level of scrutiny given to vehicle-safety issues. The Group has not been immune to the recalls that have been impacting the automotive industry.

The Group continues to drive its quality initiative called “Q5” which was initiated in the summer of 2010. It is an integral part of the Group's strategy of shaping a proactive quality culture of zero defects. It is called “Q5” because it addresses quality in five dimensions: products, customers, growth, behaviour and suppliers. The goal of Q5 is to firmly tie together quality with value within all of the Group's processes and employees, thereby leading to the best value for the Group's customers. Since 2010, the Group has continually expanded this quality initiative to provide additional skills training to more employees and suppliers. These activities have made a significant contribution to the reduction in occurrences of non-conforming events.

In its pursuit of excellence in quality, the Group has developed a chain of four “defence lines” against potential quality issues. These defence lines consist of: 1) robust product designs, 2) flawless components from suppliers and the Group's own in-house component companies, 3) manufacturing flawless products with a system for verifying that the Group's products conform with specifications and 4) an advanced traceability system in the event of a recall.

The Group's pursuit of excellence extends from the earliest phases of product development to the proper disposal of a product following many years of use in a vehicle. The Group’s comprehensive Autoliv Product Development System includes several key check points during the process of developing new products that are designed to ensure that such products are well-built and have no hidden defects. Through this process, the Group works closely with its suppliers and customers to set clear standards that help to ensure robust component design and lowest cost for function in order to proactively prevent problems and ensure it delivers only the best designs to the market.

The Autoliv Production System (“APS”), based on the goals of improving quality and efficiency, is at the core of the Group’s manufacturing philosophy. APS integrates essential quality elements, such as mistake proofing, statistical process control and operator involvement, into the manufacturing processes so all the Group's associates are aware of and understand the critical connection between themselves and the Group's lifesaving products. This “zero-defect” principle extends beyond the Group to the entire supplier base. All of the Group's suppliers must accept the strict quality standards in the global Autoliv Supplier Manual, which defines the Group's quality requirements and focuses on preventing bad parts from being produced by the Group's suppliers and helps eliminate defective intermediate products in the Group's assembly lines as early as possible. In addition, the One Product One Process (“1P1P”) initiative is the Group's strategy for developing and managing standardisation of both core products and customer-specific features, leading not only to improved quality, but also greater cost efficiency and more efficient supply chain management.

IATF 16949:2016 is the most rigorous global automotive quality requirements and all the Group's facilities shipping to OEMs are regularly certified according to IAFT standards.

Environmental and Safety Regulations

For information on how environmental and safety regulations impact the Group's business, see “Risk Factors – The Group's business may be adversely affected by laws or regulations, including environmental, occupational health and safety or other governmental regulations”.

Raw Materials

Approximately 50% of the Group's revenues are spent on materials purchased directly from external suppliers. The Group mainly purchases manufactured components and raw materials for the Group’s operations. The Group takes 

 

     – 80 –

 

several actions to mitigate higher raw material prices, such as competitive sourcing and looking for alternative materials.

For information on the sources and availability of raw materials, see “Risk Factors – Changes in the source, cost, availability of and regulations pertaining to raw materials and components may adversely affect the Group's profit margins”.

Intellectual Property

The Group has developed a considerable amount of proprietary technology related to automotive passive safety systems and relies on many patents to protect such technology. The Group's intellectual property plays an important role in maintaining its competitive position in a number of the markets it serves. For information on the Group's use of intellectual property and its importance to the Group, see “Risk Factors – If the Group's patents are declared invalid or the Group's technology infringes on the proprietary rights of others, the Group's ability to compete may be impaired”.

Seasonality and Backlog

The Group’s business is not subject to significant seasonal fluctuations. The Group has frame contracts with automobile manufacturers and such contracts are typically entered into up to three years before the start of production of the relevant car model or platform and provide for a term covering the life of such car model or platform including service parts after a vehicle model is no longer produced. However, typically these contracts do not provide minimum quantities, firm prices or exclusivity but instead permit the automobile manufacturer to resource the relevant products at given intervals (or at any time) from other suppliers.

Dependence on Customers

In 2018, the Group's top five customers represented around 50% of sales and the ten largest customers represented 79%. This reflects the concentration of manufacturers in the automotive industry. The five largest OEMs in 2018 accounted for 49% of global LVP and the ten largest OEMs for 74%. A delivery contract is typically for the lifetime of a vehicle model, which is normally between 4 and 6 years depending on customer platform sourcing preferences and strategies. 

	
Customer
	
 
	
% of the Group

Net Sales
	
 
	
 
	
% of Global

LVP
	
 

	
Renault/Nissan/Mitsubishi
	
 
	
 
	
15
	
%
	
 
	
 
	
11
	
%

	
VW
	
 
	
 
	
10
	
%
	
 
	
 
	
12
	
%

	
Hyundai/Kia
	
 
	
 
	
8
	
%
	
 
	
 
	
8
	
%

	
Ford
	
 
	
 
	
8
	
%
	
 
	
 
	
6
	
%

	
Honda
	
 
	
 
	
8
	
%
	
 
	
 
	
6
	
%

	
FCA
	
 
	
 
	
8
	
%
	
 
	
 
	
5
	
%

	
Toyota
	
 
	
 
	
7
	
%
	
 
	
 
	
11
	
%

	
Daimler
	
 
	
 
	
6
	
%
	
 
	
 
	
3
	
%

	
GM
	
 
	
 
	
4
	
%
	
 
	
 
	
7
	
%

	
BMW
	
 
	
 
	
4
	
%
	
 
	
 
	
3
	
%

 

	
1)
	
IHS Markit, 17 January 2019

 

     – 81 –

 

Customer Sales Trends

Asian vehicle producers have steadily become increasingly more important to the Group and represented around 45% of global sales compared to 35% five years ago. Of the Asian OEMs, the Japanese OEMs represented 32% of the Group’s net sales in 2018 compared to 24% in 2013. This reflects their increasing share of the global LVP and the Group's stronger market position based on its local presence in Japan. European OEMs accounted for 33% of sales in 2018, virtually unchanged since 2013. The Detroit-3 (which include General Motors, Ford, and Fiat Chrysler (FCA US)) now account for 19% of the Group's global sales, down from 30% in 2013 this is in part due to GM’s divestiture of Opel and the lingering effects of new business hold-back in 2011 and 2012. 

For information on the Group's dependence on customers, see “Risk Factors – The Group's business could be materially and adversely affected if the Group lost any of its largest customers or if they were unable to pay their invoices”.

Research, Development and Engineering

No single customer project accounted for more than 2% of the Group’s total R,D&E spending during 2018. To fuel the Group’s product portfolio, additional expertise is brought in-house via technology partnerships and licensing agreements.

Regulatory Costs

The fitting of seatbelts in most types of motor vehicles is mandatory in almost all countries and many countries have strict laws regarding the use of seatbelts while in vehicles. In addition, most developed countries require that seats in intercity buses and commercial vehicles be fitted with seatbelts. In the U.S, federal legislation requires frontal airbags on the driver-side and the passenger-side of all new passenger cars and in all new light vehicles, which are defined as vehicles with an unloaded vehicle weight of approximately 7,700 pounds or less.

For information concerning the material effects on the Group's business relating to the Group's compliance with government safety regulations, see “Risk Factors – ‘The Group's business may be adversely affected by laws or regulations, including environmental, occupational health and safety or other governmental regulations’ and ‘The Group's business may be adversely affected by changes in automotive safety regulations or concerns that drive further regulation of the automobile safety market’”.

The Group's Personnel 

As of 31 December 2018, the Group and its subsidiaries had approximately 58,000 employees and approximately 9,000 temporary personnel. The Group's management considers its relationship with its personnel to be good. While there were a small number of minor labour disputes during 2018, such disputes have not had a significant or lasting impact on the Group's relationship with its employees, customer perception of the Group's employee practices or its business results.

Major unions to which some of the Group’s employees belong in Europe include: IG Metall in Germany; Unite the union in the United Kingdom; Confédération Générale des Travailleurs, Confédération Française Démocratique du Travail, Confédération Française de l’Encadrement Confédération Générale des cadres, Force Ouvrière and Confédération Française des Travailleurs Chrétiens and Solidaires, Unitaires, Démocratiques (SUD) in France; Union General de Trabajadores, Union Sindical Obrera, Comisiones Obereras and Confederacion General de Trabajadores in Spain; If Metall, Unionen, Sveriges Ingenjörer and Ledarna in Sweden; Industriaal- ja Metallitöötajate Ametiühingute Liit in Estonia, Vasas Szakszervezeti Szövetség (Hungarian Metallworkers‘ Federation) in Hungary, Samorządny NiezaleĪny Związek Zawodowy Pracowników and Zakáadowa Organizacja Związkowa NSZZ SolidarnoĞü in Poland, Union Générale des Travailleurs Tunisiens and Union des travailleurs Tunisiens  in Tunisia; and Türk Metal Sendikasi in Turkey.

In addition, the Group’s employees in other regions are represented by the following unions: Unifor and the International Association of Machinists and Aerospace Workers in Canada; Sindicato de Jornaleros y Obreros Industriales y de la Industria Maquiladora; Sindicato Nacional de Trabajadores de la Industria Metalúrgica y 

 

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Similares; Sindicato Industrial de Trabajadores de la Pequeña y Mediana Industria, Talleres, Maquiladoras, Negociaciones Mercantiles y Comercios, Similares, Anexos y Conexos del Estado de Querétaro; “Nueva Cultura Laboral” “de trabajadores de la fabricación, manufactura, ensamble de partes y componentes de la industria Automotriz de la Republica Mexicana” in Mexico; Sindicato dos Metalúrgicos de Taubaté e Região in Brazil; Autoliv India Employees Association, Bangalore in India; the Korean Metal Workers Union in Korea; and Autoliv Japan Roudou Kumiai in Japan and Federasi Perjuangan Buruh Indonesia (FPBI) in Indonesia.

In many European countries, Canada, Mexico, Brazil and Korea, wages, salaries and general working conditions are negotiated with local unions and/or are subject to centrally negotiated collective bargaining agreements. The terms of the Group's various agreements with unions typically range between 1-3 years. Some of the Group subsidiaries in Europe, Canada, Brazil and Korea must negotiate with the applicable local unions with respect to important changes in operations, working and employment conditions. Twice a year, members of the management of those subsidiaries conduct a meeting with the European Works Council  to provide employee representatives with important information about the Group and a forum for the exchange of ideas and opinions.

In many Asia Pacific countries, the central or regional governments provide guidance each year for salary adjustments or statutory minimum wage for workers.

The Group’s employees may join associations in accordance with local legislation and rules, although the level of unionisation varies significantly throughout the Group's operations.

Joint Ventures

Historically, the Group established joint ventures to promote its geographical expansion and technology development and to gain assistance in marketing its full product line to automobile manufacturers. While joint ventures are of less importance to the Group's overall business today than in the past, joint ventures remain a potential business model in the Group's strategy. 

For information on how the joint ventures are accounted for, including the Group’s percentage of ownership, see Note 9 of the Notes to the 2018 Consolidated Financial Statements.

Available information

The Issuer files or furnishes with the SEC periodic reports and amendments thereto, which include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information. Such reports, amendments, proxy statements and other information are made available free of charge on the Issuer's corporate website at www.autoliv.com and are available as soon as reasonably practicable after they are electronically filed with the SEC. The Issuer's Corporate Governance Guidelines, committee charters, code of conduct and other documents governing the Issuer are also available on the Issuer's corporate website at www.autoliv.com. The SEC maintains an internet site that contains reports, proxy statements and other information at www.sec.gov. Hard copies of the above-mentioned documents can be obtained free of charge from the Issuer by contacting the Issuer at: Autoliv, Inc., P.O. Box 70381, SE-107 24, Stockholm, Sweden. 

The Issuer’s Board of Directors

The Issuer has a 9 member board of directors (the “Board”). All the directors, except for Mr Mikael Bratt and Mr Jan Carlson, are independent directors.

Brief details of each Issuer board member as of the date of this Base Listing Particulars, including a description of their relevant outside interests and activities, is as follows: 

Mikael Bratt, age 52, was appointed a director of the Issuer in September 2018 shortly after becoming President and Chief Executive Officer of the Issuer on 29 June 2018. Mr. Bratt previously served as President, Passive Safety from May 2016 until his promotion. Prior to joining the Issuer, Mr. Bratt spent approximately 30 years with the Volvo Group, including most recently as EVP Group Trucks Operations, part of the group executive management team since 2008, in which role he managed a team of 35,000 people, 50 factories, 60 distribution centers and an 

 

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annual turnover of approximately US$18 billion. Prior to this, he served as Chief Financial Officer of the Volvo Group. Mr. Bratt studied business administration at the University of Gothenburg, Sweden. 

Jan Carlson, age 58, has been a director of the Issuer since May 2007 after becoming President and Chief Executive Officer of the Issuer on April 1, 2007, and has been Chairman of the Board since May 2014. Mr. Carlson served as President and Chief Executive Officer until resigning upon the completion of the spin-off of Veoneer, Inc. from the Issuer on 29 June 2018 when he became President and Chief Executive of Veoneer, Inc. Since the completion of the spin-off, Mr. Carlson has also served as Chairman of the Board of Directors of Veoneer. Since July 2010, Mr. Carlson has served on the board of directors and compensation committee of BorgWarner Inc., a product leader in highly engineered components and systems for vehicle powertrain applications worldwide. Mr. Carlson was elected to the Board of Telefonaktiebolaget LM Ericsson in February 2017, and serves on its Technology and Science Committee. In addition, Mr. Carlson served on the board of Trelleborg AB from 2013 through 2017, and served on the board of directors of Zenuity AB, a private joint venture owned 50-50 by Veoneer Inc. and Volvo Car Corporation, between April 2017 and June 2018. Prior to joining the Issuer, Mr. Carlson was President of Saab Combitech, a division within the Saab aircraft group specialising in commercialising military technologies. Mr. Carlson has a Master of Science degree in Physics and Electrical Engineering from the University of Linköping in Sweden. 

Hasse Johansson, age 69, was appointed a director of the Issuer in March 2018 and is a member of the Audit Committee and Risk and Compliance Committee. Since 2010, Mr. Johansson has been managing director of Johansson Teknik & Form AB, a technology consulting company which he founded. From 2001 to 2009, Mr. Johansson was the Executive Vice President of Research & Development at Scania, a major automotive industry manufacturer of heavy trucks, buses, and other commercial vehicles. Prior to his time at Scania, Mr. Johansson worked for nearly 20 years at Mecel AB, an automotive software and systems development company he co-founded and in 1994 became a wholly-owned subsidiary of Delphi Corporation. Mr. Johansson currently serves as a member of the boards of directors of Electrolux AB, PowerCell Sweden AB, DevPort AB, and Swedish Electromagnet Investment AB, which are all Swedish public companies. Additionally, Mr. Johansson is a member of the Business Executives Council of the Royal Swedish Academy of Engineering Sciences. Mr. Johansson holds a Master of Science in Electrical Engineering from Chalmers University of Technology in Gothenburg, Sweden and holds more than 20 patents in combustion engine control and automotive electronics. 

Leif Johansson, age 67, has been a director of the Issuer since February 2016, and is a member of the Leadership Development and Compensation Committee and Chairman of the Nominating and Corporate Governance Committee. From 1997 to 2011, Mr. Johansson served as President and Chief Executive Officer of The Volvo Group. Before joining Volvo, Mr. Johansson held various positions at AB Electrolux, and served as its President and Chief Executive Officer from 1994 to 1997. Mr. Johansson is the Chairman of the Board of Astra Zeneca PLC, a position he has held since June 2012, and he previously served as Chairman of the Board of Telefonaktiebolaget LM Ericsson between 2011 and March 2018. In addition to his service on public company boards, Mr. Johansson is a board member of Ecolean AB (a private corporation), a member of the Royal Swedish Academy of Engineering Science, a board member of the European Round Table of Industrialists, a Delegate of the China Development Forum, and a member of the Council of Advisors of the Boao Forum for Asia. Mr. Johansson holds a Master of Science in Engineering from Chalmers University of Technology in Gothenburg, Sweden.

David E. Kepler, age 66, has been a director of the Issuer since February 2015 and is a member of the Audit Committee and Chairman of the Risk and Compliance Committee. Mr. Kepler was an Executive Vice President of the Dow Chemical Company, a multinational chemical, advanced materials, agrosciences and plastics company, from March 2008 through January 2015, and held the roles of Chief Sustainability Officer and Chief Information Officer. Mr. Kepler joined Dow in 1975, and was appointed its Vice President and CIO in 1998, Corporate Vice President in 2001, assumed responsibility for Business Services in 2004, and was appointed Senior Vice President in 2006. He has also been a member of the boards of directors of TD Bank Group since December 2013 and Teradata Corporation since November 2007. Mr. Kepler graduated from the University of California, Berkeley with a bachelor’s degree in Chemical Engineering, and serves as a trustee of the University. 

 

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Franz-Josef Kortüm, age 68, has been a director of the Issuer since March 2014 and is a member of the Nominating and Corporate Governance Committee. Prior to joining the Issuer, Mr. Kortüm was Chief Executive Officer of Webasto SE, a producer of automobile roof systems and climate control systems for automobiles, boats and other vehicles, from 1998 to 2012, after joining the company in 1994. Mr. Kortüm was Chief Executive Officer of Audi AG from 1993 to 1994 and, prior to joining Audi, had a 16-year career with what is today Daimler AG in a variety of positions. In addition to his extensive management experience, Mr. Kortüm has served as Vice Chairman of the Supervisory Board of Webasto SE since 2013 and as its Chairman since 2018, as a Member of the Advisory Board of Brose Fahrzeugteile GmbH & Co. KG since 2005 and as its Chairman since 2013, as a Member of the Supervisory Board of Wacker Chemie since 2003, and as a Member of the Supervisory Board of Schaeffler AG from 2010 to March 2014. From 2004 to 2012, Mr. Kortüm was a Member of the Managing Board of the VDA (German Association of the Automotive Industry). Mr. Kortüm has an MBA-equivalent degree in Business Administration from the University of Regensburg in Germany.

Xiaozhi Liu, age 63, has been a director of the Issuer since November 2011 and is a member of the Leadership Development and Compensation Committee and the Nominating and Corporate Governance Committee. Dr. Liu began her career in the automotive industry in General Motor’s (“GM”) Delphi operations and has since worked in various executive positions in Germany, China and the U.S., where she rose to the position of Director of Electronics, Controls & Software for GM in Detroit, Chief Engineer and Chief Technology Officer of GM in China and Chairman and Chief Executive Officer of GM Taiwan. Between 2005 and 2006, she was the Chief Executive Officer and Vice Chairman of Fuyao Glass Industry Group Co. Ltd., a public company listed in Shanghai, and has been an independent director of Fuyao Glass Industry Group, a public company listed in Shanghai and Hong Kong, since October 2013. In 2007, she became the President and Chief Executive Officer of NeoTek China, a supplier of automotive chassis and transmission parts, and served as Chairman of the company’s board of directors from 2008 through 2011. In 2009, she founded, and is the Chief Executive Officer of, her own company, ASL Automobile Science & Technology (Shanghai) Co., Ltd., which introduces and implements globally advanced technologies to Chinese companies. She has a Ph.D. and master’s degree in Chemical Engineering and Electrical Engineering, respectively, from Friedrich-Alexander University in Erlangen-Nuremburg, Germany and a bachelor’s degree in Electrical Engineering from the Jiaotong University in Xian, China.

James M. Ringler, age 73, has been a director of the Issuer since January 2002 and is the Chairman of the Leadership Development and Compensation Committee and a member of the Nominating and Corporate Governance Committee. Mr. Ringler has also been the Lead Independent Director since May 2017. He was, prior to his retirement, Vice Chairman of Illinois Tool Works Inc. between 1999 and 2004. Prior to joining Illinois Tool Works, Mr. Ringler was Chairman, President and Chief Executive Officer of Premark International, Inc., which merged with Illinois Tool Works in 1999. He serves on the Boards of Directors of the following public companies: Veoneer (since June 2018), TechnipFMC plc (since January 2017), and JBT Corporation (since June 2008), and he is the Chairman of the Board of Teradata Corporation (joining the Board in September 2007). Mr. Ringler has previously served on the Board of Directors of DowDuPont Inc. between 2001 and his retirement in March 2019. He is also a member of the board of directors of Reynolds Metals Company, a private company. Mr. Ringler holds a Bachelor of Science degree in Business Administration and an M.B.A. degree in Finance from the State University of New York.

Thaddeus J. “Ted” Senko, age 63, was appointed a director of the Issuer in March 2018. Prior to joining the Issuer’s Board of Directors, Mr. Senko had an extensive career at KPMG LLP from 1978 to 2017, providing enterprise risk management, compliance, and audit services to various public companies. At KPMG, he served as Audit Partner and SEC Reviewing Partner for eight years, Chief Audit Executive for four years, Global and National Partner in Charge of Internal Audit, Risk & Compliance Services for eight years, and Global Engagement Partner and Client Services Partner for seven years. Mr. Senko served on the Board of Duquesne University, a private university with approximately 10,000 students, from 2007 to 2016, chairing the Audit and Finance Committee and serving on the Executive and University Advancement Committee. Mr. Senko continues to serve 

 

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on the university’s Business Advisory Council. Mr. Senko received a bachelor’s degree in business administration from Duquesne University.

The business address of each director is Klarabergsviadukten 70, Section B, 7th Floor, Box 70381, SE-107 24, Stockholm, Sweden.

As previously disclosed, the Issuer completed the Spin-Off on 30 June 2018. Mr. Jan Carlson, the Issuer’s Chairman of the Board of Directors, also serves as the President, Chief Executive, and Chairman of Veoneer. Mr. James M. Ringler, the Issuer’s Lead Independent Director and Chair of the Board’s Leadership Development and Compensation Committee, also serves as a Board of Directors member and the Lead Independent Director of Veoneer. To the extent there is a dispute between any member of the Group and Veoneer, there is a potential conflict of interest between Messrs. Carlson’s and Ringler’s duties to the Issuer and their individual duties to, and private interests in, Veoneer.

 

 

 

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TAXATION

The statements below are general in nature and neither these statements nor any other statements in this Base Listing Particulars are to be regarded as advice on the tax position of any holder of the Notes or any person purchasing, selling or otherwise dealing in Notes. Prospective holders of the Notes and holders of the Notes who are in doubt about their tax position should consult their own professional advisers.

United States

U.S. Federal Income Taxation 

The Issuer generally intends to treat Notes issued under the Programme as debt for U.S. federal income tax purposes. Certain Notes, however, such as certain Index Linked Notes or Notes with extremely long maturities, may be treated as equity for U.S. federal income tax purposes. The following disclosure applies only to Notes that are treated as debt for U.S. federal income tax purposes. 

U.S. Holders 

The following is a summary of certain U.S. federal income tax considerations relevant to U.S. Holders (as defined below) acquiring, holding and disposing of Notes. This summary addresses only the U.S. federal income tax considerations for initial purchasers of Notes at their issue price (as defined below) that will hold the Notes as capital assets (generally, property held for investment). This summary is based on the U.S. Internal Revenue Code of 1986 (the “Code”), final, temporary and proposed U.S. Treasury regulations, and administrative and judicial interpretations in effect as of the date of this Base Listing Particulars, all of which are subject to change, possibly with retroactive effect. 

As used herein, the term “U.S. Holder” means a beneficial owner of a Note that is for U.S. federal income tax purposes:

	
 
	
•
	
a citizen or individual resident of the United States;

	
 
	
•
	
a corporation created or organised in or under the laws of the United States or of any state thereof or the District of Columbia;

	
 
	
•
	
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

	
 
	
•
	
a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust.

 

If an entity that is classified as a partnership for U.S. federal income tax purposes holds Notes, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Partners of partnerships holding Notes should consult with their tax advisers regarding the U.S. federal tax consequences of an investment in the Notes.

This summary does not address the material U.S. federal income tax consequences of every type of Note which may be issued under the Programme, such as Notes that are treated as equity for U.S. federal income tax purposes. This summary does not discuss all aspects of U.S. federal income taxation that may be relevant to investors in light of their particular circumstances, such as investors subject to special tax rules (including, without limitation: (i) financial institutions; (ii) insurance companies; (iii) dealers or traders in stocks, securities, currencies or notional principal contracts; (iv) regulated investment companies; (v) real estate investment trusts; (vi) tax-exempt organisations; (vii) partnerships, pass-through entities or persons that hold Notes through pass- through entities; (viii) investors that hold Notes as part of a straddle, hedge, conversion, constructive sale or other integrated transaction for U.S. federal income tax purposes; (ix) investors that have a functional currency other than the U.S. dollar; and (x) U.S. expatriates and former long-term residents of the United States), all of whom may be subject to 

 

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tax rules that differ significantly from those summarised below. This summary does not address U.S. federal estate, gift, net investment or alternative minimum tax considerations, or non-U.S., state or local tax considerations.

 Persons considering the purchase of the Notes should consult the relevant Pricing Supplement for any additional discussion regarding U.S. federal income taxation and should consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

Special Rules Applicable to Certain Accrual Method Taxpayers 

Pursuant to recent legislation, for taxable years beginning after 31 December 2017 (or, in the case of Notes issued with original issue discount, taxable years beginning after 31 December 2018), an accrual method taxpayer that reports revenues on an “applicable financial statement” generally must recognise income for U.S. federal income tax purposes no later than the taxable year in which such income is taken into account as revenue in the applicable financial statements of the taxpayer. Thus, this rule could potentially require such a taxpayer to recognise income for U.S. federal income tax purposes with respect to Notes prior to the time such income would be recognised pursuant to the rules described below. A U.S. Holder holding Notes should consult their tax advisers regarding the potential applicability of these rules to their investment in the Notes. 

Payments of Interest 

General. Interest on a Note, including the payment of any additional amounts (whether payable in U.S. dollars or a currency, composite currency or basket of currencies other than U.S. dollars (a “foreign currency”)), other than interest on a “Discount Note” that is not “qualified stated interest” (each as defined below under “Original Issue Discount – General”), will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued, in accordance with the U.S. Holder’s regular method of accounting for tax purposes. Interest paid on the Notes issued under the Programme and OID (as defined below), if any, accrued with respect to such Notes (as described below under “Original Issue Discount”) and payments of any additional amounts will generally constitute income from sources within the United States. 

Foreign Currency Denominated Interest. If a qualified stated interest payment is denominated in, or determined by reference to, a foreign currency, the amount of income recognised by a cash basis U.S. Holder will be the U.S. dollar value of the interest payment, based on the exchange rate in effect on the date of receipt, regardless of whether the payment is in fact converted into U.S. dollars. 

An accrual basis U.S. Holder may determine the amount of income recognised with respect to an interest payment denominated in, or determined by reference to, a foreign currency in accordance with either of two methods. Under the first method, the amount of income accrued will be based on the average exchange rate in effect during the interest accrual period (or, with respect to an accrual period that spans two taxable years of a U.S. Holder, the part of the period within the taxable year). 

Under the second method, the U.S. Holder may elect to determine the amount of income accrued on the basis of the exchange rate in effect on the last day of the accrual period or, in the case of an accrual period that spans two taxable years, the exchange rate in effect on the last day of the part of the period within the taxable year. Additionally, if a payment of interest is actually received within five business days of the last day of the accrual period or taxable year, an electing accrual basis U.S. Holder may instead translate the accrued interest into U.S. dollars at the exchange rate in effect on the day of actual receipt. Any such election will apply to all debt instruments held by the U.S. Holder at the beginning of the first taxable year to which the election applies or thereafter acquired by the U.S. Holder and will be irrevocable without the consent of the IRS. 

Upon receipt of the interest payment (including a payment attributable to accrued but unpaid interest upon the sale or other disposition of a Note) denominated in, or determined by reference to, a foreign currency, the U.S. Holder will recognise U.S. source exchange gain or loss (taxable as ordinary income or loss) equal to the difference, if any, 

 

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between the amount received (translated into U.S. dollars at the spot rate on the date of receipt) and the amount previously accrued, regardless of whether the payment is in fact converted into U.S. dollars. 

Original Issue Discount 

General. The following is a summary of the principal U.S. federal income tax consequences of the ownership of Notes issued with original issue discount (“OID”). 

A Note, other than a Note with a term of one year or less (a “Short-Term Note”), will be treated as issued with OID (a “Discount Note”) if the excess of the Note’s “stated redemption price at maturity” over its issue price is greater than or equal to a de minimis amount (0.25% of the Note’s stated redemption price at maturity multiplied by the number of complete years to its maturity). An obligation that provides for the payment of amounts other than qualified stated interest before maturity (an “instalment obligation”) will be treated as a Discount Note if the excess of the Note’s stated redemption price at maturity over its issue price is equal to or greater than 0.25% of the Note’s stated redemption price at maturity multiplied by the weighted average maturity of the Note. A Note’s weighted average maturity is the sum of the following amounts determined for each payment on a Note (other than a payment of qualified stated interest): (i) the number of complete years from the issue date until the payment is made multiplied by; (ii) a fraction, the numerator of which is the amount of the payment and the denominator of which is the Note’s stated redemption price at maturity. Generally, the “issue price” of a Note will be the first price at which a substantial amount of such Notes included in the issue of which the Note is a part is sold to persons other than bond houses, brokers or similar persons or organisations acting in the capacity of underwriters, placement agents or wholesalers. The “stated redemption price at maturity” of a Note is the total of all payments provided by the Note that are not payments of “qualified stated interest”. A “qualified stated interest” payment is generally any one of a series of stated interest payments on a Note that are unconditionally payable at least annually at a single fixed rate (with certain exceptions for lower rates paid during some periods) or a variable rate (in the circumstances described below under “Original Issue Discount – Variable Interest Rate Notes”), applied to the outstanding principal amount of the Note. Solely for the purpose of determining whether a Note has OID, the Issuer will be deemed to exercise any call option that has the effect of decreasing the yield on the Note, and the U.S. Holder will be deemed to exercise any put option that has the effect of increasing the yield on the Note. If a Note has de minimis OID, a U.S. Holder must include the de minimis amount in income as stated principal payments are made on the Note, unless the holder makes the election described below under “Original Issue Discount – Election to Treat All Interest as Original Issue Discount”. A U.S. Holder can determine the includible amount with respect to each such payment by multiplying the total amount of the Note’s de minimis OID by a fraction equal to the amount of the principal payment made divided by the stated principal amount of the Note.

U.S. Holders holding Discount Notes must generally include OID in income calculated on a constant-yield method before the receipt of cash attributable to the income and will generally have to include in income increasingly greater amounts of OID over the life of the Discount Notes. The amount of OID includible in income by a U.S. Holder with respect to a Discount Note is the sum of the daily portions of OID with respect to the Discount Note for each day during the taxable year or portion of the taxable year on which the U.S. Holder holds the Discount Note (“accrued OID”). The daily portion is determined by allocating to each day in any “accrual period” a pro rata portion of the OID allocable to that accrual period. Accrual periods with respect to a Discount Note may be of any length selected by the U.S. Holder and may vary in length over the term of the Discount Note as long as (i) no accrual period is longer than one year and (ii) each scheduled payment of interest or principal on the Discount Note occurs on either the final or first day of an accrual period. The amount of OID allocable to an accrual period equals the excess of (a) the product of the Discount Note’s adjusted issue price at the beginning of the accrual period and the Discount Note’s yield to maturity (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period) over (b) the sum of the payments of qualified stated interest on the Discount Note allocable to the accrual period. The “adjusted issue price” of a Discount Note at the beginning of any accrual period is the issue price of the Note increased by (x) the amount of accrued OID for each prior accrual period and decreased by (y) the amount of any payments previously made on the Note that were not qualified stated interest payments. 

 

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Acquisition Premium. A U.S. Holder that purchases a Discount Note for an amount less than or equal to the sum of all amounts payable on the Note after the purchase date, other than payments of qualified stated interest, but in excess of its adjusted issue price (any such excess being “acquisition premium”) and that does not make the election described below under “Original Issue Discount – Election to Treat All Interest as Original Issue Discount”, is permitted to reduce the daily portions of OID by a fraction, the numerator of which is the excess of the U.S. Holder’s adjusted basis in the Note immediately after its purchase over the Note’s adjusted issue price and the denominator of which is the excess of the sum of all amounts payable on the Note after the purchase date, other than payments of qualified stated interest, over the Note’s adjusted issue price.

Market Discount. A Note, other than a Short-Term Note, will generally be treated as purchased at a market discount (a “Market Discount Note”) if the Note’s stated redemption price at maturity or, in the case of a Discount Note, the Note’s “revised issue price” exceeds the amount for which the U.S. Holder purchased the Note by at least 0.25% of the Note’s stated redemption price at maturity or revised issue price, respectively, multiplied by the number of complete years to the Note’s maturity (or, in the case of a Note that is an instalment obligation, the Note’s weighted average maturity). If this excess is not sufficient to cause the Note to be a Market Discount Note, then the excess constitutes “de minimis market discount” and such Note is not subject to the rules discussed in the following paragraphs. For this purpose, the “revised issue price” of a Note generally equals its issue price, increased by the amount of any OID that has accrued on the Note and decreased by the amount of any payments previously made on the Note that were not qualified stated interest payments. 

Any gain recognised on the maturity or disposition of a Market Discount Note (including any payment on a Note that is not qualified stated interest) will be treated as ordinary income to the extent that the gain does not exceed the accrued market discount on the Note. Alternatively, a U.S. Holder holding a Market Discount Note may elect to include market discount in income currently over the life of the Note. This election shall apply to all debt instruments with market discount acquired by the electing U.S. Holder on or after the first day of the first taxable year to which the election applies. This election may not be revoked without the consent of the IRS. A U.S. Holder holding a Market Discount Note that does not elect to include market discount in income currently will generally be required to defer deductions for interest on borrowings incurred to purchase or carry a Market Discount Note that is in excess of the interest and OID on the Note includible in the U.S. Holder’s income, to the extent that this excess interest expense does not exceed the portion of the market discount allocable to the days on which the Market Discount Note was held by the U.S. Holder.  Market discount will accrue on a straight-line basis unless the U.S. Holder elects to accrue the market discount on a constant-yield method. This election applies only to the Note with respect to which it is made and is irrevocable. 

Election to Treat All Interest as Original Issue Discount. A U.S. Holder may elect to include in gross income all interest that accrues on a Note using the constant-yield method described above under “Original Issue Discount – General” with certain modifications. For purposes of this election, interest includes stated interest, OID, de minimis OID, market discount, de minimis market discount, as adjusted by any amortisable bond premium (described below under “Notes Purchased at a Premium”) or acquisition premium. If a U.S. Holder makes this election for a Note, then, when the constant-yield method is applied, the issue price of the Note will equal its cost, the issue date of the Note will be the date of acquisition, and no payments on the Note will be treated as payments of qualified stated interest. This election will generally apply only to the Note with respect to which it is made and may not be revoked without the consent of the IRS. However, if the Note has amortisable bond premium, the U.S. Holder will be deemed to have made an election to apply amortisable bond premium against interest for all debt instruments with amortisable bond premium, other than debt instruments the interest on which is excludible from gross income, held as of the beginning of the taxable year to which the election applies or any taxable year thereafter. If the election to apply the constant-yield method to all interest on a Note is made with respect to a Market Discount Note, the electing U.S. Holder will be treated as having made the election discussed above under “Original Issue Discount – Market Discount” to include market discount in income currently over the life of all debt instruments with market discount held or thereafter acquired by the U.S. Holder. 

 

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Variable Interest Rate Notes. Notes that provide for interest at variable rates (“Variable Interest Rate Notes”) will generally bear interest at a “qualified floating rate” and thus will be treated as “variable rate debt instruments” under U.S. Treasury regulations governing accrual of OID. A Variable Interest Rate Note will qualify as a “variable rate debt instrument” if: (a) its issue price does not exceed the total non-contingent principal payments due under the Variable Interest Rate Note by more than a specified de minimis amount; and (b) it provides for stated interest, paid or compounded at least annually, at: (i) one or more qualified floating rates; (ii) a single fixed rate and one or more qualified floating rates; (iii) a single objective rate; or (iv) a single fixed rate and a single objective rate that is a qualified inverse floating rate. 

A “qualified floating rate” is any variable rate where variations in the value of the rate can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the Variable Interest Rate Note is denominated. A fixed multiple of a qualified floating rate will constitute a qualified floating rate only if the multiple is greater than 0.65 but not more than 1.35. A variable rate equal to the product of a qualified floating rate and a fixed multiple that is greater than 0.65 but not more than 1.35, increased or decreased by a fixed rate, will also constitute a qualified floating rate. In addition, two or more qualified floating rates that can reasonably be expected to have approximately the same values throughout the term of the Variable Interest Rate Note (e.g., two or more qualified floating rates with values within 25 basis points of each other as determined on the Variable Interest Rate Note’s issue date) will be treated as a single qualified floating rate. Notwithstanding the foregoing, a variable rate that would otherwise constitute a qualified floating rate but which is subject to one or more restrictions such as a maximum numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a floor) may, under certain circumstances, fail to be treated as a qualified floating rate unless the cap or floor is fixed throughout the term of the Note. 

An “objective rate” is a rate that is not itself a qualified floating rate but which is determined using a single fixed formula and which is based on objective financial or economic information (e.g., one or more qualified floating rates or the yield of actively traded personal property). Other variable interest rates may be treated as objective rates if so designated by the U.S. Internal Revenue Service (the “IRS”) in the future. Despite the foregoing, a variable rate of interest on a Variable Interest Rate Note will not constitute an objective rate if it is reasonably expected that the average value of the rate during the first half of the Variable Interest Rate Note’s term will be either significantly less than or significantly greater than the average value of the rate during the final half of the Variable Interest Rate Note’s term. A “qualified inverse floating rate” is any objective rate where the rate is equal to a fixed rate minus a qualified floating rate, as long as variations in the rate can reasonably be expected to inversely reflect contemporaneous variations in the qualified floating rate. If a Variable Interest Rate Note provides for stated interest at a fixed rate for an initial period of one year or less followed by a variable rate that is either a qualified floating rate or an objective rate for a subsequent period and if the variable rate on the Variable Interest Rate Note’s issue date is intended to approximate the fixed rate (e.g., the value of the variable rate on the issue date does not differ from the value of the fixed rate by more than 25 basis points), then the fixed rate and the variable rate together will constitute either a single qualified floating rate or objective rate, as the case may be. 

A qualified floating rate or objective rate in effect at any time during the term of the instrument must be set at a “current value” of that rate. A “current value” of a rate is the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.

If a Variable Interest Rate Note that provides for stated interest at either a single qualified floating rate or a single objective rate throughout the term thereof qualifies as a “variable rate debt instrument”, then any stated interest on the Note which is unconditionally payable in cash or property (other than debt instruments of the Issuer) at least annually will constitute qualified stated interest and will be taxed accordingly. Thus, a Variable Interest Rate Note that provides for stated interest at either a single qualified floating rate or a single objective rate throughout the term thereof and that qualifies as a “variable rate debt instrument” will generally not be treated as having been issued with OID unless the Variable Interest Rate Note is issued at a “true” discount (i.e., at a price below the Note’s stated principal amount) in excess of a specified de minimis amount. OID on a Variable Interest Rate Note arising from “true” discount is allocated to an accrual period using the constant yield method described above by 

 

     – 91 –

 

assuming that the variable rate is a fixed rate equal to: (i) in the case of a qualified floating rate or qualified inverse floating rate, the value, as of the issue date, of the qualified floating rate or qualified inverse floating rate; or (ii) in the case of an objective rate (other than a qualified inverse floating rate), a fixed rate that reflects the yield that is reasonably expected for the Variable Interest Rate Note. 

In general, any other Variable Interest Rate Note that qualifies as a “variable rate debt instrument” will be converted into an “equivalent” fixed rate debt instrument for purposes of determining the amount and accrual of OID and qualified stated interest on the Variable Interest Rate Note. Such a Variable Interest Rate Note must be converted into an “equivalent” fixed rate debt instrument by substituting any qualified floating rate or qualified inverse floating rate provided for under the terms of the Variable Interest Rate Note with a fixed rate equal to the value of the qualified floating rate or qualified inverse floating rate, as the case may be, as of the Variable Interest Rate Note’s issue date. Any objective rate (other than a qualified inverse floating rate) provided for under the terms of the Variable Interest Rate Note is converted into a fixed rate that reflects the yield that is reasonably expected for the Variable Interest Rate Note. In the case of a Variable Interest Rate Note that qualifies as a “variable rate debt instrument” and provides for stated interest at a fixed rate in addition to either one or more qualified floating rates or a qualified inverse floating rate, the fixed rate is initially converted into a qualified floating rate (or a qualified inverse floating rate, if the Variable Interest Rate Note provides for a qualified inverse floating rate). Under these circumstances, the qualified floating rate or qualified inverse floating rate that replaces the fixed rate must be such that the fair market value of the Variable Interest Rate Note as of the Variable Interest Rate Note’s issue date is approximately the same as the fair market value of an otherwise identical debt instrument that provides for either the qualified floating rate or qualified inverse floating rate rather than the fixed rate. Subsequent to converting the fixed rate into either a qualified floating rate or a qualified inverse floating rate, the Variable Interest Rate Note is converted into an “equivalent” fixed rate debt instrument in the manner described above. 

Once the Variable Interest Rate Note is converted into an “equivalent” fixed rate debt instrument pursuant to the foregoing rules, the amount of OID and qualified stated interest, if any, are determined for the “equivalent” fixed rate debt instrument by applying the general OID rules to the “equivalent” fixed rate debt instrument and a U.S. Holder holding the Variable Interest Rate Note will account for the OID and qualified stated interest as if the U.S. Holder held the “equivalent” fixed rate debt instrument. In each accrual period, appropriate adjustments will be made to the amount of qualified stated interest or OID assumed to have been accrued or paid with respect to the “equivalent” fixed rate debt instrument in the event that these amounts differ from the actual amount of interest accrued or paid on the Variable Interest Rate Note during the accrual period. 

If a Variable Interest Rate Note, such as a Note the payments on which are determined by reference to an index, does not qualify as a “variable rate debt instrument”, then the Variable Interest Rate Note will be treated as a contingent payment debt obligation. In general, final regulations that govern the U.S. federal income tax treatment of contingent payment debt obligations will cause the timing and character of income, gain or loss reported on a contingent payment debt instrument to substantially differ from the timing and character of income, gain or loss reported on a conventional non-contingent payment debt instrument. More specifically, the final regulations generally require a U.S. Holder of such an instrument to include future contingent and non-contingent interest payments in income as such interest accrues based upon a projected payment schedule and comparable (i.e., estimated) yield. Moreover, in general, any gain recognised by a U.S. Holder on the sale, exchange, or retirement of a contingent payment debt instrument will be treated as ordinary income and all or a portion of any loss realised could be treated as ordinary loss as opposed to capital loss (depending upon the circumstances). A U.S. Holder who holds a Note that is treated as a contingent payment debt obligation should consult with their tax advisers for additional details, and the potential application of special rules.

Short-Term Notes. In general, an individual or other cash basis U.S. Holder holding a Short-Term Note is not required to accrue OID (calculated as set forth below for the purposes of this paragraph) for U.S. federal income tax purposes unless it elects to do so (but may be required to include any stated interest in income as the interest is received). Accrual basis U.S. Holders and certain other U.S. Holders are required to accrue OID on Short-Term Notes on a straight-line basis or, if the U.S. Holder so elects, under the constant-yield method (based on daily 

 

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compounding). In the case of a U.S. Holder not required and not electing to include OID in income currently, any gain realised on the sale or other disposition of the Short-Term Note will be ordinary income to the extent of the OID accrued on a straight-line basis (unless an election is made to accrue the OID under the constant-yield method) through the date of sale or other disposition. U.S. Holders who are not required and do not elect to accrue OID on Short-Term Notes will be required to defer deductions for interest on borrowings allocable to Short-Term Notes in an amount not exceeding the deferred income until the deferred income is realised. 

For purposes of determining the amount of OID subject to these rules, all interest payments on a Short-Term Note are included in the Short-Term Note’s stated redemption price at maturity. A U.S. Holder may elect to determine OID on a Short-Term Note as if the Short-Term Note had been originally issued to the U.S. Holder at the U.S. Holder’s purchase price for the Short-Term Note. This election shall apply to all obligations with a maturity of one year or less acquired by the U.S. Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS. 

Foreign Currency Notes. OID for any accrual period on a Discount Note that is denominated in, or determined by reference to, a foreign currency will be determined in the foreign currency and then translated into U.S. dollars in the same manner as stated interest accrued by an accrual basis U.S. Holder, as described above under “Payments of Interest”. Upon receipt of an amount attributable to OID (whether in connection with a payment of interest or the sale or other disposition of a Note), a U.S. Holder will generally recognise exchange gain or loss, which will be ordinary gain or loss measured by the difference between the amount received (translated into U.S. dollars at the exchange rate on the date of receipt) and the amount previously accrued, regardless of whether the payment is in fact converted into U.S. dollars. 

Market discount on a Note that is denominated in, or determined by reference to, a foreign currency will be accrued by a U.S. Holder in the foreign currency. If the U.S. Holder elects to include market discount in income currently, the accrued market discount will be translated into U.S. dollars at the average exchange rate for the accrual period (or portion thereof within the U.S. Holder’s taxable year). Upon the receipt of an amount attributable to accrued market discount, the U.S. Holder will generally recognise U.S. source exchange gain or loss (which will be taxable as ordinary income or loss) determined in the same manner as for accrued interest or OID. A U.S. Holder that does not elect to include market discount in income currently will recognise, upon the disposition or maturity of the Note, the U.S. dollar value of the amount accrued, calculated at the spot rate in effect on that date, and no part of this accrued market discount will be treated as exchange gain or loss. 

Notes Purchased at a Premium 

A U.S. Holder that purchases a Note for an amount in excess of its principal amount or for a Discount Note, its stated redemption price at maturity, may elect to treat the excess as “amortisable bond premium”, in which case the amount required to be included in the U.S. Holder’s income each year with respect to interest on the Note will be reduced by the amount of amortisable bond premium allocable (based on the Note’s yield to maturity) to that year. In the case of a Note that is denominated in, or determined by reference to, a foreign currency, bond premium (including acquisition premium) will be computed in units of foreign currency, and any such bond premium that is taken into account currently will reduce interest income in units of the foreign currency. On the date bond premium offsets interest income, a U.S. Holder will generally recognise U.S. source exchange gain or loss (taxable as ordinary income or loss) measured by the difference between the spot rate in effect on that date, and on the date the Notes were acquired by the U.S. Holder. Any election to amortise bond premium shall apply to all bonds (other than bonds the interest on which is excludable from gross income for U.S. federal income tax purposes) held by the U.S. Holder at the beginning of the first taxable year to which the election applies or thereafter acquired by the U.S. Holder, and is irrevocable without the consent of the IRS. See also “Original Issue Discount – Election to Treat All Interest as Original Issue Discount”. A U.S. Holder that does not elect to take bond premium (other than acquisition premium) into account currently will decrease the amount of gain or increase the amount of loss otherwise recognised on the disposition of the Note.

 

 

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Sale, Redemption, Retirement or Other Disposition of Notes 

A U.S. Holder’s adjusted tax basis in a Note will generally be its cost, increased by the amount of any OID or market discount included in the U.S. Holder’s income with respect to the Note and the amount, if any, of income attributable to de minimis OID and de minimis market discount included in the U.S. Holder’s income with respect to the Note, and reduced by: (i) the amount of any payments that are not qualified stated interest payments; and (ii) the amount of any amortisable Note premium applied to reduce interest on the Note. A U.S. Holder’s adjusted tax basis in a Note that is denominated in, or determined by reference to, a foreign currency (a “Foreign Currency Note”) will be determined by reference to the U.S. dollar cost of the Notes. The U.S. dollar cost of a Note purchased with a foreign currency will generally be the U.S. dollar value of the purchase price on the date of purchase or, in the case of Notes traded on an established securities market, as defined in the applicable U.S. Treasury regulations, that are purchased by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the purchase. 

A U.S. Holder will generally recognise gain or loss on the sale, redemption, retirement or other disposition of a Note equal to the difference between the amount realised on the sale, redemption, retirement or other disposition and the U.S. Holder’s adjusted tax basis of the Note. For these purposes, the amount realised does not include any amount attributable to accrued but unpaid qualified stated interest on the Note. Amounts attributable to accrued but unpaid qualified stated interest are treated as payments of interest as described under “—Payments of Interest.” The amount realised on a sale or other disposition for an amount in foreign currency will be the U.S. dollar value of this amount on the date of sale, redemption, retirement or other disposition or, in the case of Notes traded on an established securities market, as defined in the applicable U.S. Treasury regulations, sold by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the sale. Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent of the IRS. Except to the extent described above under “Original Issue Discount – Market Discount” or “Original Issue Discount – Short-Term Notes” or attributable to accrued but unpaid interest or changes in exchange rates, gain or loss recognised on the sale, redemption, retirement or other disposition of a Note will be capital gain or loss and will generally be treated as from U.S. sources for purposes of the U.S. foreign tax credit limitation. In the case of a U.S. Holder that is an individual, estate or trust, the maximum marginal federal income tax rate applicable to capital gains is currently lower than the maximum marginal rate applicable to ordinary income if the Notes are held for more than one year. The deductibility of capital losses is subject to significant limitations. 

Gain or loss recognised by a U.S. Holder on the sale, redemption, retirement or other disposition of a Note that is attributable to changes in exchange rates will be treated as U.S. source ordinary income or loss. However, exchange gain or loss is taken into account only to the extent of total gain or loss realised on the transaction. 

Disposition of Foreign Currency 

Foreign currency received as interest on a Note or on the sale, redemption, retirement or other disposition of a Note will have a tax basis equal to its U.S. dollar value at the time the interest is received or at the time of the sale, redemption, retirement or other disposition. Foreign currency that is purchased will generally have a tax basis equal to the U.S. dollar value of the foreign currency on the date of purchase. Any gain or loss recognised on a sale, redemption, retirement or other disposition of a foreign currency (including its use to purchase Notes or an exchange for U.S. dollars) will be U.S. source ordinary income or loss. 

Backup Withholding and Information Reporting 

In general, payments of principal, interest and accrued OID on, and the proceeds of a sale, redemption, retirement or other disposition of, the Notes, payable to a U.S. Holder by a U.S. paying agent or other U.S. intermediary will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup withholding will apply to these payments if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of exempt status or otherwise to comply with the applicable backup withholding requirements. Certain 

 

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U.S. Holders are not subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from a payment to a U.S. Holder under the backup withholding rules will be allowed as a credit against such person’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided that the required information is timely furnished to the IRS. 

Disclosure Requirements 

U.S. Treasury regulations meant to require the reporting of certain tax shelter transactions (“Reportable Transactions”) could be interpreted to cover transactions generally not regarded as tax shelters, including certain foreign currency transactions. Under the U.S. Treasury regulations, certain transactions with respect to the Notes may be characterised as Reportable Transactions including, in certain circumstances, a sale, redemption, retirement or other taxable disposition of a Foreign Currency Note. Persons considering the purchase of such Notes should consult with their tax advisers to determine the tax return obligations, if any, with respect to an investment in such Notes, including any requirement to file IRS Form 8886 (Reportable Transaction Disclosure Statement). 

Foreign Account Tax Compliance Act 

Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a foreign financial institution (as defined by FATCA) may be required to withhold on certain payments it makes to persons that fail to meet certain certification, reporting or related requirements. This withholding tax could apply to all interest on Notes unless the Note holder and each non-U.S. person or entity in the chain of payment complies with the applicable information reporting, account identification, withholding certification and other FATCA-related requirements. 

A number of jurisdictions have entered into, or have agreed in substance to, intergovernmental agreements with the United States to implement FATCA (“IGAs”), which modify the way in which FATCA applies in their jurisdictions. While the existence of such agreements will not eliminate the risk that the Notes will be subject to the withholding described above, these agreements are expected to reduce the risk of the withholding for investors in (or investors that hold Notes indirectly through financial institutions in) those countries. 

Holders should consult their own tax advisers regarding how these rules may apply to their investment in Notes. In the event any withholding would be required pursuant to FATCA or an IGA with respect to payments on the Notes, no person will be required to pay additional amounts as a result of the withholding. 

Non-U.S. Holders 

The following is a summary of certain U.S. federal income tax consequences to a Non-U.S. Holder (as defined below) of the ownership and disposition of Notes. 

As used herein, the term “Non-U.S. Holder” means a beneficial owner of a Note that is for U.S. federal income tax purposes: (i) a non-resident alien individual; (ii) a foreign corporation; or (iii) a foreign estate or trust.

Under U.S. federal income tax law now in effect, and subject to the discussion below concerning information reporting and backup withholding: 

	
 
	
(a)
	
payments of principal and interest (including OID) on a Note by the Issuer or any of its paying agents to any Non-U.S. Holder will not be subject to U.S. federal withholding tax; provided, however, that in the case of amounts treated as interest on a Note other than a Note with a maturity of 183 days or less: (i) such holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Issuer entitled to vote within the meaning of Section 871(h)(3) of the Code; (ii) such holder is not a controlled foreign corporation for U.S. federal income tax purposes that is related, directly or indirectly, to the Issuer through stock ownership; (iii) such holder is not a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code; (iv) such amounts are not considered payments of “contingent interest” 

 

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described in Section 871(h)(4) of the Code (relating primarily to interest based on or determined by reference to income, profits, cash flow, sales, dividends or other comparable attributes of the obligor or a party related to the obligor); (v) the Non-U.S. Holder provides the Issuer, or its paying agent, with an IRS Form W-8BEN or W-8BEN-E (or other appropriate type of IRS Form W-8 or other documentation as permitted by official IRS guidance); and (vi) the Non-U.S. Holder provides the Issuer, or its paying agent, any required information with respect to its direct and indirect U.S. owners as required pursuant to FATCA or, if the Notes are held through, or such holder is, a foreign financial institution (as defined under FATCA), such foreign financial institution complies with its obligations under FATCA (either pursuant to an agreement with the U.S. government or in accordance with local law) or is otherwise exempt from FATCA; 

	
 
	
(b)
	
a Non-U.S. Holder of a Note will not be subject to U.S. federal income tax on any gain realised on the sale, redemption, retirement or other disposition of a Note unless: (i) such gain or income is effectively connected with a trade or business in the United States of the Non-U.S. Holder; or (ii) in the case of a Non-U.S. Holder who is an individual, the Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of such sale, redemption, retirement or other disposition and either such individual has a “tax home” (as defined in Section 911(d)(3) of the Code) in the United States or the gain is attributable to an office or other fixed place of business maintained by such individual in the United States; and 

	
 
	
(c)
	
a Note held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a result of such individual’s death if at the time of death: (i) the individual did not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Issuer entitled to vote; (ii) payments with respect to the Note would not have been effectively connected with a U.S. trade or business of such individual; and (iii) no amount payable on the Note would be considered to be a payment of “contingent interest” as set forth in Section 871(h)(4) of the Code (as described in paragraph (a) above). 

If a Non-U.S. Holder of a Note is engaged in a trade or business in the United States and interest on the Note is effectively connected with the conduct of such trade or business, the Non-U.S. Holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be subject to regular U.S. federal income tax on such interest in the same manner as if it were a U.S. Holder. In addition, if such a holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to adjustments. 

Backup Withholding and Information Reporting 

 

Generally, the amount of interest and principal paid to a Non-U.S. Holder by the Issuer and the amount of tax, if any, withheld with respect to those payments must be reported annually to the IRS and to the Non-U.S. Holder. Copies of the information returns reporting such interest and withholding may also be made available to the tax authorities in the country in which a Non-U.S. Holder resides under the provisions of an applicable income tax treaty. 

In general, a Non-U.S. Holder will not be subject to backup withholding or additional information reporting requirements with respect to payments of interest that the Issuer makes, provided certain certification requirements have been satisfied and the applicable withholding agent does not have actual knowledge or reason to know that the holder is a U.S. person, as defined under the Code, that is not an exempt recipient. As part of the certification requirements, a Non-U.S. Holder must provide its name and address, and certify, under penalties of perjury, that it is not a U.S. person (which certification may be made on an IRS Form W-8BEN, W-8BEN-E or other applicable form) or, if a Non-U.S. Holder holds the Notes through certain foreign intermediaries or certain foreign partnerships, the Non-U.S. Holder and the foreign intermediary or foreign partnership must satisfy the certification requirements of applicable Treasury regulations. 

 

     – 96 –

 

In addition, payments on the sale, redemption, retirement or other disposition of a Note to a Non-U.S. Holder generally will be subject to information reporting and, depending on the circumstances, backup withholding with respect to payments of the proceeds of the sale or other disposition (including a retirement or redemption) of a note within the United States or conducted through certain U.S. Middlemen, as defined below, unless the certification requirements described above have been satisfied and the payor does not have actual knowledge or reason to know that the holder is a U.S. person, as defined under the Code, that is not an exempt recipient, or a Non-U.S. Holder otherwise establishes an exemption. 

Non-U.S. Holders of Notes should consult their tax advisers regarding the application of information reporting and backup withholding to their particular situations, the availability of an exemption therefrom and the procedure for obtaining such an exemption, if available. Any amounts withheld from a payment to a Non-U.S. Holder under the backup withholding rules will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS. 

“U.S. Middleman” means: (i) a U.S. person; (ii) a controlled foreign corporation for U.S. tax purposes; (iii) a foreign person 50% or more of whose gross income is derived from its conduct of a U.S. trade or business for a specified three-year period; (iv) a foreign partnership engaged in a U.S. trade or business or in which U.S. persons hold more than 50% of the income or capital interests; or (v) certain U.S. branches of foreign banks or insurance companies. 

The Proposed Financial Transactions Tax (“FTT”)

On 14 February 2013, the European Commission published a proposal (the “Commission’s Proposal”) for a Directive for a common FTT is Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”). However, Estonia has since stated that it will not participate.

The Commission’s Proposal has very broad scope and could, if introduced, apply to certain dealings in Notes (including secondary market transactions) in certain circumstances.

Under the Commission’s Proposal the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.

However, the FTT proposal remains subject to negotiation between participating Member States. It may therefore be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate.

Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT.

 

 

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SUBSCRIPTION AND SALE

Notes may be sold from time to time by the Issuer to any one or more of the Dealers. The arrangements under which Notes may from time to time be agreed to be sold by each Issuer to, and subscribed by, Dealers are set out in a Programme Agreement dated 11 April 2019 (the “Programme Agreement”) and made between each Issuer, the Guarantor and the Dealers. If in the case of any Tranche of Notes the method of distribution is an agreement between each Issuer, the Guarantor and a single Dealer for that Tranche to be issued by the Issuer and subscribed by that Dealer, the method of distribution will be described in the relevant Pricing Supplement as “Non-Syndicated” and the name of that Dealer and any other interest of that Dealer which is material to the issue of that Tranche beyond the fact of the appointment of that Dealer will be set out in the relevant Pricing Supplement. If in the case of any Tranche of Notes the method of distribution is an agreement between the Issuer, the Guarantor (where applicable) and more than one Dealer for that Tranche to be issued by the Issuer and subscribed by those Dealers, the method of distribution will be described in the relevant Pricing Supplement as “Syndicated”, the obligations of those Dealers to subscribe the relevant Notes will be joint and several and the names of those Dealers and any other interests of any of those Dealers which is material to the issue of that Tranche beyond the fact of the appointment of those Dealers (including whether any of those Dealers has also been appointed to act as Stabilisation Manager in relation to that Tranche) will be set out in the relevant Pricing Supplement.

United States

The Notes and the Guarantee have not been and will not be registered under the Securities Act or the securities law of any U.S. state, and may not be offered or sold, directly or indirectly, in the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.

Each of the Dealers has represented and agreed that:

	
 
	
(i)
	
it has not offered or sold, and will not offer or sell, the Notes (a) as part of their distribution at any time or (b) otherwise until 40 days after the later of the commencement of the offering and the issue date of the Notes, within the United States or to, or for the account or benefit of, U.S. persons; and

	
 
	
(ii)
	
it will have sent to each distributor or Dealer to which it sells Notes during such 40-day period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.

In addition, until 40 days after the commencement of the offering of the Notes, an offer or sale of Notes within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with an available exemption from registration under the Securities Act.

Terms used in the preceding three paragraphs and not otherwise defined in this Base Listing Particulars have the meanings given to them in Regulation S.

Kingdom of Sweden 

This Base Listing Particulars is not a prospectus and has not been prepared in accordance with the prospectus requirements provided for in the Swedish Financial Instruments Trading Act (lag (1991:980) om handel med finansiella instrument), European Prospectus Regulation ((EU) 2017/1129) nor any other Swedish enactment. Neither the Swedish Financial Supervisory Authority (Finansinspektionen) nor any other Swedish public body has examined, approved or registered this Base Listing Particulars or will examine, approve or register this Base Listing Particulars. 

Each Dealer has represented and agreed that it will not, directly or indirectly, offer for subscription or purchase or issue invitations to subscribe for or buy or sell any Notes or distribute any draft or definite document in relation to any such offer, invitation or sale in the Kingdom of Sweden except in circumstances that will not result in a 

 

     – 98 –

 

requirement to prepare a prospectus pursuant to the provisions of the Swedish Financial Instruments Trading Act, European Prospectus Regulation ((EU) 2017/1129) nor any other Swedish enactment.

United Kingdom

Each of the Dealers has represented and agreed that:

	
 
	
(i)
	
in relation to any Notes having a maturity of less than one year, it is a person whose ordinary activities involve it acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business and it has not offered or sold and will not offer or sell any Notes other than to persons:

	
 
	
(a)
	
whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of its business; or

	
 
	
(b)
	
who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal or agent) for the purposes of its business, where the issue of the Notes would otherwise constitute a contravention of section 19 of the Financial Services and Markets Act 2000, as amended (the “FSMA”) by the Issuer;

	
 
	
(ii)
	
it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer or the Guarantor; and

	
 
	
(iii)
	
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

 

Prohibition of Sales to EEA Retail Investors

Unless the Pricing Supplement in respect of any Notes specifies "Prohibition of Sales to EEA Retail Investors" as "Not Applicable", each of the Dealers has represented and agreed that it has not offered, sold or otherwise made available and will not offer, sell or otherwise make available any Notes to any retail investor in the European Economic Area. For the purposes of this provision the expression “retail investor” means a person who is one (or more) of the following:

(i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or

	
 
	
(ii)
	
a customer within the meaning of the IMD, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.

General

Each of the Dealers has agreed to observe, to the best of its knowledge and belief, all applicable laws and regulations in each jurisdiction in or from which it may acquire, offer, sell or deliver Notes or has in its possession or distribute this Base Listing Particulars or any other offering material relating to the Notes.

No action has been, or will be, taken in any country or jurisdiction that would permit a public offering of the Notes, or the possession or distribution of this Base Listing Particulars or any other offering material relating to the Notes, in any country or jurisdiction where action for that purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Base Listing Particulars nor any circular, form of application, advertisement or other offering material relating to the Notes may be distributed in or from, or published in, any country or jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations and all offers and sales of Notes by it will be made on the same terms.

 

     – 99 –

 

GENERAL INFORMATION

Authorisation

The establishment of the Programme and the issue of Notes was authorised by the Board of Directors of the Issuer on 18 February 2019 and by the Board of Directors of the Guarantor on 22 February 2019. The Issuer and the Guarantor have obtained or will obtain from time to time all necessary consents, approvals and authorisations in connection with the issue of and performance of their obligations under the Notes and the giving of the guarantee relating to them.

Listing

Application has been made for Notes issued under the Programme to be listed on the Official List and admitted to trading on GEM for a period of 12 months from the date of these Base Listing Particulars. Walker Listing Services Limited is acting solely in its capacity as listing agent for the Issuer (and not on its own behalf) in connection with the application. 

Legal Entity Identifier (“LEI”)

The LEI code of the Issuer is A23RUXWKASG834LTMK28.

Clearing of the Notes

The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriate common code and International Securities Identification Number (ISIN), Financial Instrument Short Name (FISN) and Classification of Financial Instruments (CFI) code (as applicable) for each issue allocated by Euroclear and Clearstream, Luxembourg and details of any other relevant clearance system(s) will be contained in the applicable Pricing Supplement.

The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels and the address of Clearstream, Luxembourg is Clearstream Banking, S.A., 42 Avenue JF Kennedy, L-1855 Luxembourg.

Documents Available

For so long as the Notes are listed on the Official List and admitted to trading on GEM, copies of the following documents may be inspected in physical form during normal business hours at the registered office of the Issuer at Klarabergsviadukten 70, Section B, 7th Floor, Box 70381, SE-107 24, Stockholm, Sweden:

	
(a)
	
the constitutive documents of the Issuer and the Guarantor;

	
(b)
	
the Documents Incorporated by Reference;

	
(c)
	
the Agency Agreement (which contains the forms of the Notes in global and definitive forms);

	
(d)
	
the Guarantee; and

	
(e)
	
the Deed of Covenant.

Issue Price and Yield

Notes may be issued at any price. The issue price of each Tranche of Notes to be issued under the Programme will be determined by the Issuer, the Guarantor and the relevant Dealer(s) at the time of issue in accordance with prevailing market conditions and the issue price of the relevant Notes or the method of determining the price and the process for its disclosure will be set out in the applicable Pricing Supplement.

In relation to any Tranche of Fixed Rate Notes, an indication of yield of each Tranche of such Notes will be set out in the applicable Pricing Supplement and will be calculated as of the relevant issue date on an annual or semi-annual basis using the relevant issue price. It will not be an indication of future yield. 

 

     – 100 –

 

Significant or Material Change

There has been no significant change in the financial or trading position of the Issuer, the Guarantor or the Group, and no material adverse change in the prospects of the Issuer, the Guarantor or the Group since 31 December 2018.

Material Contracts

There are, at the date of this Base Listing Particulars, no material contracts that are not entered into in the ordinary course of the Group business, which could result in any member of the Group being under an obligation or entitlement that is material to the Issuer’s or the Guarantor’s ability to meet its obligations to Noteholders in respect of the Notes being issued.

Legal and Administrative Proceedings

Neither the Issuer nor the Guarantor nor any other member of the Group is or has been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer or the Guarantor is aware) in the 12 months preceding the date of this Base Listing Particulars which may have or have in such period had a significant effect on the financial position or profitability of the Issuer, the Guarantor or the Group.

Information relating to the Guarantor

The Guarantor, a wholly-owned subsidiary of the Issuer, was incorporated on 4 April 1989 under the laws of the State of Indiana with registered number 1989040123. The address of the Guarantor is 3350 Airport Road, Ogden, Utah 84405 and its telephone number is +1 801 625 8200. The address of the Guarantor’s registered office in the State of Indiana is 150 West Market Street, Suite 800, Indianapolis, IN, 46204.

The Guarantor is an operating company within the Group owning certain assets and subsidiaries comprising part of the Group’s Passive Safety business segment, and the Guarantor contributes in excess of 20% of both consolidated EBITDA and total consolidated assets of the Group (as illustrated in the following paragraphs).

The Guarantor will, pursuant to the Guarantee, unconditionally and fully guarantee, the due and punctual payment of all sums from time to time payable by the Issuer in respect of the Notes. The financial information presented in the Base Listing Particulars is the audited consolidated financial information of the Issuer, which includes both Guarantor and non-guarantor subsidiaries.

Based on the consolidated financial information of the Group as at and for the year ended 31 December 2018:

	
(i)
	
the Guarantor recorded an EBITDA of US$273.1 million and total assets of US$3,191.8 million, representing 22.3%. and 47.5%, respectively, of the Group’s EBITDA and total consolidated assets. The Guarantor recorded total assets of US$875.3 million excluding intercompany assets amounting to US$2,316.5 million, representing 13% of the Group's total consolidated assets;

	
(ii)
	
the members of the Group other than the Issuer and the Guarantor (the “Non-obligors”) collectively recorded an aggregate EBITDA of U.S.$952.5 million and total assets of US$3,529.8 million (excluding total Guarantor assets of US$3,191.8 million), representing 77.7% and 52.5%, respectively, of the Group’s EBITDA and total consolidated assets. The Non-obligors recorded total assets of US$5,846.3 million (excluding Guarantor total assets of 3,191.8 million less intercompany assets amounting to US$2,316.5 million) representing 87.0% of the Group's total consolidated assets;

	
(iii)
	
the Guarantor recorded total liabilities of US$2,020.7 million, representing  41.9% of the Group’s total consolidated liabilities. The Guarantor recorded total liabilities of US$1,962.1 million excluding intercompany liabilities amounting to US$58.6 million, representing 40.7% of the Group’s total consolidated liabilities;

	
(iv)
	
the Non-obligors collectively recorded total liabilities of US$2,804.1 million, representing 58.1% of the Group’s total consolidated liabilities. The Non-obligors collectively recorded total liabilities of 

 

     – 101 –

 

		
US$2,862.7 million (excluding Guarantor total liabilities of US$2,020.7 million less intercompany liabilities amounting to US$58.6 million), representing 59.3% of the Group’s total consolidated liabilities;

	
(v)
	
the Issuer recorded EBITDA of US$1,435.3 million and total assets of US$485.6 million, representing 117.1% and 7.2%, respectively, of the Group’s EBITDA and total consolidated assets. The Issuer recorded total assets of US$30.3 million excluding intercompany assets amounting to US$455.3 million, representing 0.5% of the Group's total consolidated assets; and

	
(vi)
	
the Issuer recorded total liabilities of US$2,894.9 million, representing 60.0% of the Group’s total consolidated liabilities. The Issuer recorded total assets of US$629.8 million excluding intercompany liabilities amounting to US$2,265.1 million, representing 13.1% of the Group's total consolidated liabilities. 

Other than as disclosed in this Base Listing Particulars, there are currently no encumbrances on the Guarantor's assets that could materially affect its ability to meet its obligations under the Guarantee. Although the Guarantor may be affected by some or all the general risks set out in “Risk Factors — Risks Relating to the Group’s Business”, the Issuer and the Guarantor do not believe there are any risks specific to the Guarantor that could adversely impact on its Guarantee.

Auditors

The auditors of the Issuer are Ernst & Young AB (independent auditors, authorised and regulated by the Supervisory Board of Public Accountants — Revisorsnämnden), with Erik Sandström (member of FAR, the institute for the accountancy profession in Sweden) as the auditor-in-charge, who have audited the Issuer's accounts, without qualification, in accordance with the Public Company Accounting Oversight Board Standards for the fiscal years ended on 31 December 2017 and 31 December 2018. Ernst & Young AB has no financial interest in the Group.

Conflicts

The Arranger, Dealers and their affiliates may have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform services to, the Issuer and/or the Guarantor and their respective affiliates in the ordinary course of business. The Arranger, the Dealers and their affiliates may have positions, deal or make markets in the Notes, related derivatives and reference obligations, including (but not limited to) entering into hedging strategies on behalf of the Issuer and its affiliates, investor clients, or as principal in order to manage their exposure, their general market risk, or other trading activities.

In addition, in the ordinary course of their business activities, the Arranger, the Dealers and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer, the Guarantor or their respective affiliates. The Arranger, the Dealers or their affiliates that have a lending relationship with the Issuer and the Guarantor routinely hedge their credit exposure to the Issuer and the Guarantor consistent with their customary risk management policies. Typically, the Arranger, the Dealers and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in securities, including potentially the Notes. Any such short positions could adversely affect future trading prices of Notes. The Arranger, the Dealers and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

 

     – 102 –

 

PRICING SUPPLEMENT

Form of Pricing Supplement

 

The Pricing Supplement in respect of each Tranche of Notes will be substantially in the following form, duly completed to reflect the particular terms of the relevant Notes and their issues. Text in this section appearing in italics does not form part of the form of the Pricing Supplement but denotes directions for completing the Pricing Supplement. 

[PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”) or (ii) a customer within the meaning of Directive 2002/92/EC (as amended or superseded), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II. Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.]1

[MIFID II product governance / Professional investors and ECPs only target market – Solely for the purposes of [the/each] manufacturer’s product approval process, the target market assessment in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible counterparties and professional clients only, each as defined in [Directive 2014/65/EU (as amended, “MiFID II”)][MiFID II]; and (ii) all channels for distribution of the Notes to eligible counterparties and professional clients are appropriate. [Consider any negative target market]. Any person subsequently offering, selling or recommending the Notes (a “distributor”) should take into consideration the manufacturer[‘s/s’] target market assessment; however, a distributor subject to MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting or refining the manufacturer[‘s/s’] target market assessment) and determining appropriate distribution channels.] 

NO PROSPECTUS IS REQUIRED IN ACCORDANCE WITH DIRECTIVE 2003/71/EC FOR THE ISSUE OF NOTES DESCRIBED BELOW.

 [Date]

Autoliv, Inc. 

Legal entity identifier (LEI): A23RUXWKASG834LTMK28 

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]

Guaranteed by Autoliv ASP, Inc. 

under the €3,000,000,000

Euro Medium Term Note Programme

PART A – CONTRACTUAL TERMS

This document constitutes the Pricing Supplement for the Notes described herein.  This document must be read in conjunction with the Base Listing Particulars dated 11 April 2019 [as supplemented by the supplement[s] dated [date[s]]] (the “Base Listing Particulars”).  Full information on the Issuer, the Guarantor and the offer of the 

	
	 

	
1
	
 Legend to be included on front of the Pricing Supplement if the Notes potentially constitute “packaged” products and no key information document will be prepared or the issuer wishes to prohibit offers to EEA retail investors for any other reason, in which case the selling restriction should be specified to be “Applicable”.

 

LIB02/1077111/9122275.18– 103 –Hogan Lovells

 

 

Notes is only available on the basis of the combination of this Pricing Supplement and the Base Listing Particulars.  Copies of the Base Listing Particulars may be obtained during normal business hours at the Issuer’s registered office at Klarabergsviadukten 70, Section B, 7th Floor, Box 70381, SE-107 24, Stockholm, Sweden.

[Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the “Conditions”) set forth in the Base Listing Particulars [dated [original date] [and the supplement dated [date]] which are incorporated by reference in the Base Listing Particulars].2

[Include whichever of the following apply or specify as “Not Applicable”.  Note that the numbering should remain as set out below, even if “Not Applicable” is indicated for individual paragraphs or subparagraphs.  Italics denote directions for completing the Pricing Supplement.]

[If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination may need to be £100,000 or its equivalent in any other currency.] 

[When completing this Pricing Supplement or adding any other terms and conditions or information, consideration should be given as to whether such terms or information constitute a significant change affecting any matter contained in the Base Listing Particulars or a significant new matter, the inclusion of information in respect of which would have been so required if it had arisen at the time when the Base Listing Particulars were prepared and consequently trigger the need for a supplement to the Base Listing Particulars under the rules of Euronext Dublin]. 

 

	
1.(a)         Series Number:
	
[         ]

	
(b)Tranche Number:
	
[         ]

	
(c)Date on which the Notes will be consolidated and form a single Series:
	
[The Notes will be consolidated and form a single Series with [identify earlier Tranches] on [the Issue Date/ [date]][Not Applicable] 

	
2.Specified Currency or Currencies:
	
[         ]

	
3.Aggregate Nominal Amount:
	
 

	
(a)Series:
	
[         ]

	
(b)Tranche:
	
[         ]

	
4.Issue Price:
	
[         ]% of the Aggregate Nominal Amount [plus accrued interest from [insert date] (if applicable)]

	
5.(a)          Specified Denominations:
	
[         ]

	
(b)Calculation Amount (in relation to calculation of interest in global form see Conditions):
	
[         ]

	
 
	
(If only one Specified Denomination, insert the Specified Denomination.  If more than one Specified Denomination, insert the highest common factor.  Note: There must be a common factor in the case of two or more Specified Denominations.) 

	
	 

	
2  
	
Only include this language where it is a fungible issue and the original Tranche was issued under Base Listing Particulars with a different date.

     – 104 –     

 

 

	
6.(a)          Issue Date:
	
[         ]

	
(b)Interest Commencement Date:
	
[specify/Issue Date/Not Applicable]

	
 
	
(N.B. An Interest Commencement Date will not be relevant for certain Notes, for example Zero Coupon Notes.)

	
7.Maturity Date:
	
[Specify date or for 

	
 
	
Floating Rate Notes - Interest Payment Date falling in or nearest to [specify month and year]]

	
8.Interest Basis:
	
[[         ]% Fixed Rate]

	
 
	
[[specify Reference Rate] +/- [         ]% Floating Rate]

	
 
	
[Zero Coupon]

	
 
	
[Index Linked Interest]

	
 
	
[Dual Currency Interest]

	
 
	
[specify other]

	
 
	
(further particulars specified below)

	
9.Redemption/Payment Basis:
	
[Redemption at par]

	
 
	
[Index Linked Redemption]

	
 
	
[Dual Currency Redemption]

	
 
	
[Partly Paid]

	
 
	
[Instalment]

	
 
	
[specify other]

	
10.Change of Interest Basis or Redemption/Payment Basis:
	
[Specify details of any provision for change of Notes into another Interest Basis or Redemption/Payment Basis][Not Applicable]

	
11.Put/Call Options:
	
[Investor Put]

	
 
	
[Change of Control Put]

	
 
	
[Issuer Call]

	
 
	
[(further particulars specified below)]

	
12.[Date [Board] approval for issuance of Notes [and Guarantee] obtained:
	
[         ] [and [         ], respectively]]

(N.B. Only relevant where Board (or similar) authorisation is required for the particular tranche of Notes or related Guarantee)

	
PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

	
13.Fixed Rate Note Provisions
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

     – 105 –     

 

 

	
(a)Rate[(s)] of Interest:
	
[         ]% per annum payable in arrear on each Interest Payment Date

	
(b)Interest Payment Date(s):
	
[         ] in each year up to and including the Maturity Date

	
 
	
(Amend appropriately in the case of irregular coupons)

	
(c)Fixed Coupon Amount(s) for Notes in definitive form (and in relation to Notes in global form see Conditions):
	
[[         ] per Calculation Amount][Not Applicable]

	
(d)Broken Amount(s) for Notes in definitive form (and in relation to Notes in global form see Conditions):

 
	
[[         ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [         ]][Not Applicable]

	
(e)Day Count Fraction:
	
[30/360/Actual/Actual (ICMA)/specify other]

	
(f)[Determination Date(s):
	
[[         ] in each year][Not Applicable]

	
 
	
(Only relevant where Day Count Fraction is Actual/Actual (ICMA).  In such a case, insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon]

	
(g)Other terms relating to the method of calculating interest for Fixed Rate Notes:
	
[None/Give details]

	
14.Floating Rate Note Provisions
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

	
(a)Specified Period(s)/Specified Interest Payment Dates:
	
[         ][, subject to adjustment in accordance with the Business Day Convention set out in (b) below/, not subject to any adjustment, as the Business Day Convention in (b) below is specified to be Not Applicable] 

	
(b)Business Day Convention:
	
[Floating Rate Convention/Following
Business Day Convention/Modified Following Business Day Convention/ Preceding Business Day Convention/[specify other]] [Not Applicable] 

	
(c)Additional Business Centre(s):
	
[         ]

	
(d)Manner in which the Rate of Interest and Interest Amount is to be determined:
	
[Screen Rate Determination/ISDA Determination/specify other]

	
(e)Party responsible for calculating the Rate of Interest and Interest Amount (if not the Agent):
	
[         ] (the “Calculation Agent”) 

	
(f)Screen Rate Determination:
	
 

     – 106 –     

 

 

	
•Reference Rate:
	
[         ] month [LIBOR/EURIBOR/specify other Reference Rate] (Additional information is required if other Reference Rate, including fallback provisions.)[Compounded Daily SONIA]

	
•Interest Determination Date(s):
	
[         ]

(Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR. Specify date prior to end of each Interest Period if SONIA)

	
•Relevant Screen Page:
	
[         ]

	
 
	
(In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately)

	
•Observation Look-back Period:
	
[        ][Not Applicable]

	
•Reference Rate Replacement:
	
[Applicable/Not Applicable]

	
(g)ISDA Determination:
	
 

	
•Floating Rate Option:
	
[         ]

	
•Designated Maturity:
	
[         ]

	
•Reset Date:
	
[         ]

	
 
	
(In the case of a LIBOR or EURIBOR based option, the first day of the Interest Period)

 

(N.B. The fall-back provisions applicable to ISDA Determination under the 2006 ISDA Definitions are reliant upon the provision by reference banks of offered quotations for LIBOR and/or EURIBOR which, depending on market circumstances, may not be available at the relevant time)

	
(h)Linear Interpolation:
	
[Not Applicable/Applicable – the Rate of Interest for the [long/short] [first/last] Interest Period shall be calculated using Linear Interpolation (specify for each short or long interest period)] 

	
(i)Margin(s):
	
[+/-] [         ]% per annum

	
(j)Minimum Rate of Interest:
	
[         ]% per annum

	
(k)Maximum Rate of Interest:
	
[         ]% per annum

	
(l)Day Count Fraction:
	
[Actual/Actual (ISDA)][Actual/Actual]

     – 107 –     

 

 

	
 
	
[Actual/365 (Fixed)]

	
 
	
[Actual/365 (Sterling)]

	
 
	
[Actual/360]

	
 
	
[30/360][360/360][Bond Basis]

	
 
	
[30E/360][Eurobond Basis]

	
 
	
[30E/360 (ISDA)]

	
 
	
[Other]

	
(m)Fallback provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions:
	
[         ]

	
15.Zero Coupon Note Provisions
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

	
(a)Accrual Yield:
	
[         ]% per annum

	
(b)Reference Price:
	
[         ]

	
(c)Any other formula/basis of determining amount payable for Zero Coupon Notes:
	
[         ]

	
(d)Day Count Fraction in relation to Early Redemption Amounts:
	
[30/360]

[Actual/360]

	
 
	
[Actual/365] 

	
16.Index Linked Interest Note
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

	
(a)Index/Formula:
	
[give or annex details]

	
(b)Calculation Agent
	
[give name]

	
(c)Party responsible for calculating the Rate of Interest (if not the Calculation Agent) and Interest Amount (if not the Agent):
	
[         ] 

	
(d)Provisions for determining Coupon where calculation by reference to Index and/or Formula is impossible or impracticable:
	
[need to include a description of market disruption or settlement disruption events and adjustment provisions]

	
(e)Specified Period(s)/Specified Interest Payment Dates:
	
[         ]

     – 108 –     

 

 

	
(f)Business Day Convention:
	
[Floating Rate Convention/Following Business Day Convention/Modified Following Business Day Convention/ Preceding Business Day Convention/specify other]

	
(g)Additional Business Centre(s):
	
[         ]

	
(h)Minimum Rate of Interest:
	
[         ]% per annum

	
(i)Maximum Rate of Interest:
	
[         ]% per annum

	
(j)Day Count Fraction:
	
[         ]

	
(k)Index Information:
	
[index information to be obtained/indication of past and future index performance/volatility]

	
17.Dual Currency Interest Note Provisions
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

	
(a)Rate of Exchange/method of calculating Rate of Exchange:
	
[give or annex details]

	
(b)Party, if any, responsible for calculating the principal and/or interest due (if not the Agent):
	
[         ] (the “Calculation Agent”)

	
(c)Provisions applicable where calculation by reference to Rate of Exchange impossible or impracticable:
	
[need to include a description of market disruption or settlement disruption events and adjustment provisions]

	
(d)Person at whose option Specified Currency(ies) is/are payable:
	
[         ]

	
PROVISIONS RELATING TO REDEMPTION

	
18.Notice periods for Condition 7.2:
	
Minimum period: [30] days

Maximum period: [60] days

	
19.Issuer Call:
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

	
(a)Optional Redemption Date(s):
	
[date]/[Any date from and including [date] to but excluding [date]] 

	
(b)Optional Redemption Amount and method, if any, of calculation of such amount(s):
	
[[         ] per Calculation Amount/[Spens Amount/Make-whole Amount] specify other/see Appendix]  

(If Spens Amount or Make-whole Amount is selected, include items (i) to (iii) below or relevant options as are set out in the Conditions)

	
(i)Redemption Margin:
	
[         ]%

     – 109 –     

 

 

	
(ii)Reference Bond:
	
[         ]

	
(iii)Quotation Time:
	
[         ]

	
(c)If redeemable in part:
	
 

	
(i)Minimum Redemption Amount:
	
[         ]

	
(ii)Maximum Redemption Amount:
	
[         ]

	
(d)Notice periods:
	
Minimum period: [15] days

	
 
	
Maximum period: [30] days

 

	
 
	
(N.B. When setting notice periods, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems (which require a minimum of 5 clearing system business days' notice for a call) and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent.)

	
20.Investor Put:
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

	
(a)Optional Redemption Date(s):
	
[         ]

	
(b)Optional Redemption Amount and method, if any, of calculation of such amount(s):
	
[[         ] per Calculation Amount/specify other/see Appendix]

	
(c)Notice periods:
	
Minimum period: [15] days

	
 
	
Maximum period: [30] days

	
 
	
(N.B. When setting notice periods, the Issuer is advised to consider the practicalities of distribution of information through intermediaries, for example, clearing systems (which require a minimum of 15 clearing system business days' notice for a put) and custodians, as well as any other notice requirements which may apply, for example, as between the Issuer and the Agent [or Trustee].)

	
21.Change of Control Put:
	
[Applicable/Not Applicable]

	
 
	
 

	
22.Final Redemption Amount:
	
[[         ] per Calculation Amount/specify other/see Appendix]

     – 110 –     

 

 

	
23.Early Redemption Amount payable on redemption for taxation reasons, 

redemption following a Change of Control or on event of default and/or the method of calculating the same (if required):
	
[[         ] per Calculation Amount/specify other/see Appendix]

 

(N.B. If the Final Redemption Amount is 100% of the nominal value (i.e. par), the Early Redemption Amount is likely to be par (but consider).  If, however, the Final Redemption Amount is other than 100% of the nominal value, consideration should be given as to what the Early Redemption Amount should be.)

	
GENERAL PROVISIONS APPLICABLE TO THE NOTES

	
24.Form of Notes:
	
Registered Notes

	
 
	
[Global Note registered in the name of a nominee for [a common depositary for Euroclear and Clearstream, Luxembourg/a common safekeeper for Euroclear and Clearstream, Luxembourg (that is held under the NSS)] 

	
25.Additional Financial Centre(s):
	
[Not Applicable/give details]

	
 
	
(Note that this paragraph relates to the date of payment and not the end dates of Interest Periods for the purposes of calculating the amount of interest, to which sub-paragraphs 14(c) and 16(g) relate)

	
26.Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences (if any) of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment.
	
[Not Applicable/give details, including relevant further conditions relating to the Partly Paid Notes (e.g. interest, early redemption, redemption, subscription procedures, subscription amounts and/or timings) and annex to this Pricing Supplement, where appropriate, any related notices including any form of subscription amount notice]

	
27.Details relating to Instalment Notes:
	
[Applicable/Not Applicable]

	
 
	
(If not applicable, delete the remaining subparagraphs of this paragraph)

	
(a)Instalment Amount(s):
	
[give details]

	
(b)Instalment Date(s):
	
[give details]

	
28.Other terms or special conditions:
	
[Not Applicable/give details]

 

     – 111 –     

 

 

RESPONSIBILITY

The Issuer and the Guarantor accept responsibility for the information contained in this Pricing Supplement.  [[Relevant third party information] has been extracted from [specify source].  Each of the Issuer and the Guarantor confirms that such information has been accurately reproduced and that, so far as it is aware and is able to ascertain from information published by [specify source], no facts have been omitted which would render the reproduced information inaccurate or misleading.

 

	
Signed on behalf of Autoliv, Inc.:
	
Signed on behalf of Autoliv ASP, Inc.:

	
By: 
	
By: 

	
Duly authorised
	
Duly authorised

 

     – 112 –     

 

 

PART B – OTHER INFORMATION

 

	
1.LISTING
	
[Application [has been made/is expected to be made] by the Issuer (or on its behalf) to [The Irish Stock Exchange plc trading as Euronext Dublin (“Euronext Dublin”) for the Notes to be admitted to the official list and to trading on the Global Exchange Market of Euronext Dublin] [specify market – note this must not be a regulated market] with effect from [         ].] 

[Not Applicable]

	
2.RATINGS
	
 

	
Ratings:
	
[The Notes to be issued [[have been]/[are expected to be]] rated [insert details] by [insert the legal name of the relevant credit rating agency entity(ies)]. 

	
 
	
(The above disclosure is only required if the ratings of the Notes are different to those stated in the Base Listing Particulars) 

	
3.INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE

	
[Save for any fees payable to the [Managers /Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer.  The [Managers/Dealers] and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform other services for, the Issuer and the Guarantor and their affiliates in the ordinary course of business – Amend as appropriate if there are other interests] 

	
4.OPERATIONAL INFORMATION

	
(i)ISIN:
	
[         ]

	
(ii)Common Code:
	
[         ]

	
(iii)CFI:
	
[[         ]/Not Applicable]

	
(iv)FISN:
	
[[         ]/Not Applicable]

(If the CFI and/or FISN is not required, requested or available, it/they should be specified to be “Not Applicable”)

	
(v)Any clearing system(s) other than Euroclear and Clearstream, Luxembourg and the relevant identification number(s):
	
[Not Applicable/give name(s) and number(s)]

	
(vi)Delivery:
	
Delivery [against/free of] payment

	
(vii)Names and addresses of additional Paying Agent(s) (if any):
	
[         ]

     – 113 –     

 

 

	
(viii)Intended to be held in a manner which would allow Eurosystem eligibility: 
	
[Yes.  Note that the designation “yes” simply means that the Notes are intended upon issue to be deposited with one of the ICSDs as common safekeeper [, and 

registered in the name of a nominee of one of the ICSDs acting as common safekeeper] [include this text for Notes which are to be held under the NSS] and does not necessarily mean that the Notes will be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem either upon issue or at any or all times during their life.  Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]/

	
 
	
[No.  Whilst the designation is specified as “no” at the date of this Pricing Supplement, should the Eurosystem eligibility criteria be amended in the future such that the Notes are capable of meeting them the Notes may then be deposited with one of the ICSDs as common safekeeper, and registered in the name of a nominee of one of the ICSDs acting as common safekeeper.  Note that this does not necessarily mean that the Notes will then be recognised as eligible collateral for Eurosystem monetary policy and intra day credit operations by the Eurosystem at any time during their life.  Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteria have been met.]] 

	
5.DISTRIBUTION

	
(i)Method of distribution:
	
[Syndicated/Non-syndicated]

	
(ii)If syndicated, names of Managers:
	
[Not Applicable/give names]

	
(iii)Stabilisation Manager(s) (if any):
	
[Not Applicable/give name]

	
(iv)If non-syndicated, name of relevant Dealer:
	
[Not Applicable/give name]

	
(v)U.S. Selling Restrictions:
	
Reg. S Compliance Category 2 

	
(vi)Additional selling restrictions:
	
[Not Applicable/give details]

	
 
	
(Additional selling restrictions are only likely to be relevant for certain structured Notes, such as commodity-linked Notes)

	
(vii)Prohibition of Sales to EEA Retail Investors:
	
[Applicable/Not Applicable] 

(If Notes clearly do not constitute “packaged” products or the Notes do constitute “packaged” products and a key information document will be prepared, “Not Applicable” should be specified. If the Notes may constitute “packaged” products and no key information document will be prepared, “Applicable” should be specified.)

 

 

 

     – 114 –     

 

 

		
		
	
ISSUER
	
GUARANTOR

	
Autoliv, Inc.
World Trade Centre 
Klarabergsviadukten 70, Sec E
107 24 Stockholm
Sweden
	
Autoliv ASP, Inc.
3350 Airport Road
Ogden
Utah

United States

	
 

	
FISCAL AGENT AND REGISTRAR

	
HSBC Bank plc
8 Canada Square
London, E14 5HQ
United Kingdom

	
ARRANGER

	
Morgan Stanley & Co. International plc
25 Cabot Square 
Canary Wharf
London E14 4QA

United Kingdom

 

DEALERS 

	
Morgan Stanley & Co. International plc
25 Cabot Square 
Canary Wharf
London E14 4QA

United Kingdom
	
Bank of China Limited, London Branch

1 Lothbury

London EC2R 7DB

United Kingdom

	
Citigroup Global Markets Limited

Citigroup Centre

Canada Square
London E14 5LB

United Kingdom

 
	
DNB Bank ASA

P.O. Box 1600 Sentrum

N-0021 Oslo

Norway

	
HSBC Bank plc

8 Canada Square

London E14 5HQ

United Kingdom
	
ING Bank N.V.

Foppingadreef 7

1102 BD Amsterdam

The Netherlands

	
J.P. Morgan Securities plc

25 Bank Street

Canary Wharf

London E14 5JP

United Kingdom

 
	
Mizuho International plc

Mizuho House

30 Old Bailey

London EC4M 7AU

United Kingdom

     – 115 –     

 

 

		
	
MUFG Securities (Europe) N.V.

World Trade Center, Tower H, 11th Floor

Zuidplein 98 

1077 XV Amsterdam

The Netherlands

 
	
Nordea Bank Abp

Satamaradankatu 5

Helsinki

FI-00020 Nordea

Finland

 

	
Skandinaviska Enskilda Banken AB (publ)

Kungsträdgårdsgatan 8

SE-106 40 Stockholm

Sweden
	
Société Généralé

29 Boulevard Haussmann

75009 Paris

France

	
 

	
LEGAL ADVISERS

	
To the Issuer and the Guarantor as to English law
	
To the Arranger and Dealers as to English law

	
Hogan Lovells International LLP
Atlantic House 
Holborn Viaduct 
EC1A 2FG
United Kingdom
	
Allen & Overy LLP
One Bishops Square
London E1 6AD
United Kingdom

	
 
	
 

	
To the Issuer and the Guarantor as to United States laws

	
Hogan Lovells US LLP
Columbia Square
555 Thirteenth Street, NW
Washington, D.C. 20004
United States

 

	
AUDITORS TO THE ISSUER
	
LISTING AGENT

	
Ernst & Young AB
Jakobsbergsgatan 24
111 44 Stockholm
Sweden
	
Walkers Listing Services Limited
5th Floor, The Exchange
George’s Dock, IFSC
Dublin 1 D01 W3P9
Ireland

 

     – 116 –

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