Elanco Animal Health Inc (Form: S-1/A, Received: 09/06/2018 06:10:00)

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INDEX TO FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on September 6, 2018

Registration No. 333-226536

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 2 To

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Elanco Animal Health Incorporated
(Exact name of registrant as specified in its charter)


Indiana (State or Other Jurisdiction of Incorporation or Organization)		2834 (Primary Standard Industrial Classification Code Number)		82-5497352 (I.R.S. Employer Identification Number)

2500 Innovation Way
Greenfield, Indiana
46140
(877) 352-6261
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)

Michael-Bryant Hicks, Esq.
2500 Innovation Way
Greenfield, Indiana
46140
(877) 352-6261
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)


Corey R. Chivers, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 (212) 310-8000 (Phone) (212) 310-8007 (Fax)		Patrick O'Brien Paul Kinsella Tara Fisher Ropes & Gray LLP Prudential Tower 800 Boylston Street Boston, Massachusetts 02199 (617) 951-7000 (Phone)

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý		Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities Offered	Amount to be Registered (1)	Proposed maximum offering price per share	Proposed maximum aggregate offering price (2)	Amount of registration fees (3)




Common stock, no par value	72,335,000	$23.00	$1,663,705,000	$207,132

(1): Includes shares of common stock that may be issuable upon exercise of an option to purchase additional shares granted to the underwriters.
(2): Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) promulgated under the Securities Act of 1933, as amended.
(3): Of this amount, $12,450 of the registration fee has previously been paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, Dated September 6, 2018

62,900,000 Shares

Elanco Animal Health Incorporated

Common Stock

This is an initial public offering of shares of common stock of Elanco Animal Health Incorporated. We are offering 62,900,000 shares of our common stock in this offering.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $20.00 and $23.00. We have been authorized to list our common stock on the New York Stock Exchange ("NYSE") under the symbol "ELAN."

Following this offering, we will be a "controlled company" within the meaning of the corporate governance rules of the NYSE. See "Management — Director Independence and Controlled Company Exemption."

See "Risk Factors" beginning on page 22 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.


	Per Share	Total

Initial public offering price	$	$
Underwriting discount ⁽¹⁾	$	$
Proceeds, before expenses, to Elanco	$	$

(1): We have agreed to reimburse the underwriters for certain expenses in connection with this offering. We refer you to "Underwriting," beginning on page 194 of this prospectus, for additional information regarding total underwriter compensation.

To the extent that the underwriters sell more than 62,900,000 shares of common stock, the underwriters have the option to purchase up to an additional 9,435,000 shares from us at the initial price to the public less the underwriting discount.

The underwriters expect to deliver the shares to investors against payment in New York, New York on , 2018.


Goldman Sachs & Co. LLC		J.P. Morgan		Morgan Stanley


Barclays		BNP PARIBAS		BofA Merrill Lynch		Citigroup		Credit Suisse		Deutsche Bank Securities


				Evercore ISI		Cowen


Academy Securities		Drexel Hamilton		Mischler Financial Group, Inc.		Ramirez & Co., Inc.		The Williams Capital Group, L.P.

Prospectus dated , 2018

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Prospectus


			Page

PROSPECTUS SUMMARY			1
RISK FACTORS			22
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			54
USE OF PROCEEDS			55
DIVIDEND POLICY			56
CAPITALIZATION			57
DILUTION			59
SELECTED HISTORICAL COMBINED FINANCIAL DATA			61
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			63
THE SEPARATION AND DISTRIBUTION TRANSACTIONS			71
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			73
INDUSTRY			96
BUSINESS			100
MANAGEMENT			125
EXECUTIVE AND DIRECTOR COMPENSATION			131
PRINCIPAL SHAREHOLDER			166
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			168
DESCRIPTION OF MATERIAL INDEBTEDNESS			180
DESCRIPTION OF CAPITAL STOCK			182
SHARES ELIGIBLE FOR FUTURE SALE			188
MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS FOR NON-U.S. HOLDERS			190
UNDERWRITING			194
LEGAL MATTERS			200
EXPERTS			200
WHERE YOU CAN FIND MORE INFORMATION			200
INDEX TO FINANCIAL STATEMENTS			F-1

Through and including , 2018 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

You should rely only on the information contained in this prospectus or in any free writing prospectus we may specifically authorize to be delivered or made available to you. Neither we nor the underwriters (nor any of our or their respective affiliates) have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters (nor any of our or their respective affiliates) take any responsibility for, and neither we nor they provide any assurance as to the reliability of, any other information that others may give you. Neither we nor the underwriters (nor any of our or their respective affiliates) are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any free writing prospectus is only accurate as of its date, regardless of its time of delivery or the time of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Unless the context requires otherwise: (a) references to "Elanco," our "company," "we," "us" or "our" refer to Elanco Animal Health Incorporated, an Indiana corporation, and its subsidiaries after giving effect to the transactions described under "The Separation and Distribution Transactions — The Separation" or for periods prior to such transactions, the combined businesses operating within Lilly's Elanco animal health division that have been or will be contributed to Elanco as part of such transactions, and (b) references to "Lilly" refer to Eli Lilly and Company, an Indiana corporation, and its subsidiaries other than Elanco.

Market and Industry Information

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from third-party sources and management estimates. Certain statements, where indicated, are based on information published by Vetnosis Limited ("Vetnosis"), a research and consulting firm specializing in global animal health and veterinary medicine, and management estimates. Our management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Our management estimates have not been verified by any independent source. In addition, assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause future performance to differ materially from our assumptions and estimates. See "Cautionary Note Regarding Forward-Looking Statements."

Trademarks and Trade Names

The name and mark, Elanco, and other trademarks, trade names and service marks of Elanco appearing in this prospectus are the property of Elanco or, as applicable, licensed to Elanco, or, as applicable, prior to the completion of this offering, are the property of Lilly. The name and mark, Eli Lilly and Company, and other trademarks, trade names and service marks of Lilly appearing in this prospectus are the property of Lilly. This prospectus also contains additional trade names, trademarks and service marks belonging to other companies. We do not intend our use or display of other parties' trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

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PROSPECTUS SUMMARY

This summary highlights information included elsewhere in this prospectus and does not contain all of the information you should consider in making an investment decision. You should read this entire prospectus carefully, including the sections entitled "Risk Factors," "Cautionary Note Regarding Forward-Looking Statements," "Selected Historical Combined Financial Data," "Unaudited Pro Forma Condensed Combined Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our combined financial statements and the notes thereto before making an investment decision regarding our common stock.

Overview

Founded in 1954 as part of Eli Lilly and Company, Elanco is a premier animal health company that innovates, develops, manufactures and markets products for companion and food animals. Headquartered in Greenfield, Indiana, we are the fourth largest animal health company in the world, with revenue of $2.9 billion for the year ended December 31, 2017. Globally, we are #1 in medicinal feed additives, #2 in poultry and #3 in cattle, measured by 2017 revenue, according to Vetnosis. We also have one of the broadest portfolios of pet parasiticides in the companion animal sector. We offer a diverse portfolio of more than 125 brands that make us a trusted partner to veterinarians and food animal producers in more than 90 countries.

Our vision is to enrich the lives of people through food — making protein more accessible and affordable — and through pet companionship — helping pets live longer, healthier lives. We advance our vision by offering products in four primary categories:

•: Companion Animal Disease Prevention ("CA Disease Prevention") : We have one of the broadest parasiticide portfolios in the companion animal sector based on indications, species and formulations, with products that protect pets from worms, fleas and ticks. Combining our parasiticide portfolio with our vaccines presence, we are a leader in the U.S. in the disease prevention category based on share of revenue.
•: Companion Animal Therapeutics ("CA Therapeutics") : We have a broad pain and osteoarthritis portfolio across species, modes of action, indications and disease stages. Pet owners are increasingly treating osteoarthritis in their pets, and our Galliprant product is one of the fastest growing osteoarthritis treatments in the U.S. We also have treatments for otitis (ear infections), as well as cardiovascular and dermatology indications.
•: Food Animal Future Protein & Health ("FA Future Protein & Health") : Our portfolio in this category, which includes vaccines, nutritional enzymes and animal-only antibiotics, serves the growing demand for protein and includes innovative products in poultry and aquaculture production, where demand for animal health products is outpacing overall industry growth. We are focused on developing functional nutritional health products that promote food animal health, including enzymes, probiotics and prebiotics. We are a leader in providing vaccines as alternatives to antibiotics to promote animal health based on share of revenue.
•: Food Animal Ruminants & Swine ("FA Ruminants & Swine") : We have developed a range of food animal products used extensively in ruminant (e.g., cattle, sheep and goats) and swine production. We also deliver value to producers beyond our products through our technical expertise and support.

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We have a top four presence in all four key industry geographic regions: North America ("NA"); Europe, the Middle East and Africa ("EMEA"); Latin America ("LATAM"); and Asia-Pacific ("APAC"), as measured by 2017 revenue, according to Vetnosis. The following graphs demonstrate our revenue for the year ended December 31, 2017 by product category, geography and our highest revenue products:

Percentage of 2017 Revenue
By Product Category ⁽¹⁾

(1): Certain percentages may reflect rounding adjustments.
(2): Strategic Exits includes revenue from third-party manufacturing, distribution and other contractual arrangements, as well as an equine product not core to our business, which we have either exited or made the decision to exit.



Percentage of 2017 Revenue By Region ⁽¹⁾		Percentage of 2017 Revenue By Highest Revenue Products ⁽¹⁾

(1): Certain percentages may reflect rounding adjustments.
(2): LATAM includes aquaculture in all regions.

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Through our global sales force of approximately 1,530 sales representatives, our veterinary consultants and our key distributors, we seek to build strong customer relationships and fulfill demand for our food animal products primarily with food animal producers, veterinarians and nutritionists, and for our companion animal products primarily with veterinarians and, in some markets, pet owners. We are also expanding into retail channels in order to meet pet owners where they want to purchase.

Our inclusive approach to sourcing innovation helps us identify, attract, fund and develop new ideas that enhance our pipeline and reduce risk as compared to an in-house only approach. Through this process, we launched nine products from 2015 to 2017 that delivered $143.8 million of revenue in 2017 and $136.6 million of revenue in the first half of 2018.

We believe we have an experienced leadership team that fosters an adaptive, purpose-driven culture among approximately 5,880 employees worldwide as of June 30, 2018 and that our employees share a deep conviction for achieving our vision of food and companionship, enriching life.

For the six months ended June 30, 2018 and 2017, our revenue was $1.5 billion and $1.4 billion, respectively, and for each of the years ended December 31, 2017, 2016 and 2015, our revenue was $2.9 billion. For the six months ended June 30, 2018 and 2017, our net income (loss) was $9.9 million and $(128.5) million, respectively, our adjusted EBITDA was $306.2 million and $278.4 million, respectively, and our adjusted net income was $219.0 million and $156.4 million, respectively. For the years ended December 31, 2017, 2016 and 2015, our net income (loss) was $(310.7) million, $(47.9) million and $(210.8) million, respectively, our adjusted EBITDA was $498.9 million, $540.4 million and $393.7 million, respectively, and our adjusted net income was $250.5 million, $332.7 million and $208.7 million, respectively. For a reconciliation of adjusted EBITDA and adjusted net income to net income (loss), see "— Summary Historical Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Data."

Industry

Animal Health Industry Overview

Global animal health industry revenue is projected to grow nominally at a compound annual growth rate ("CAGR") of 5% from 2017 to 2023, according to Vetnosis. Importantly, this growing industry, which includes both food and companion animals, benefits billions of people worldwide. The food animal sector focuses on species raised to provide animal protein, such as cattle, other ruminants (e.g., sheep and goats), swine, poultry and aqua. The companion animal — or pet — sector focuses primarily on dogs and cats.

Animal health medicines, vaccines and functional nutritionals represent an estimated global market of $34.3 billion, based on 2017 revenue, according to industry sources. Medicines and vaccines represent a global market of $32.0 billion, based on 2017 revenue, and grew at a CAGR of 4% from 2007 to 2017, according to Vetnosis. Management expects this trend to continue through at least 2023 based on industry projections. Functional nutritionals (specifically enzymes, probiotics and prebiotics) used in food animal production represent a global market of $2.3 billion, according to industry sources. Based on industry projections, management expects functional nutritionals to grow faster than the medicines and vaccines market.

Food Animal. Food animal medicines and vaccines, including aquaculture, represented $21.2 billion of revenue in 2017 and grew at a CAGR of 4% from 2007 to 2017, according to Vetnosis.

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Factors influencing growth in demand for food animal medicines and vaccines include:

•: one in three people needs improved nutrition;
•: increased global demand for protein, particularly poultry and aquaculture;
•: natural resource constraints, such as scarcity of arable land, fresh water and increased competition for cultivated land, driving the need for more efficient food production;
•: loss of productivity due to food animal disease and death;
•: increased focus on food safety and food security; and
•: human population growth, increased standards of living, particularly in many emerging markets, and increased urbanization.

Functional nutritionals used in food animal production represent an additional market estimated at $2.3 billion. Growth in functional nutritionals is influenced, among other factors, by demand for antibiotic alternatives that can promote animal health and increase productivity.

Companion Animal. Companion animal medicines and vaccines represented $10.8 billion of revenue in 2017 and grew at a CAGR of 4% from 2007 to 2017, according to Vetnosis.

Factors influencing growth in demand for companion animal medicines and vaccines include:

•: increased pet ownership globally;
•: pets living longer; and
•: increased pet spending as pets are viewed as members of the family by owners.

Key Structural Characteristics of the Animal Health Industry

•: Brands often have long, sustainable value. Branded animal health products often retain significant, and occasionally increased, market share after many years on the market, even after the loss of patent protection. As an example, five of our top 10 products, based on 2017 revenue, have been on the market for over 25 years. In the food animal sector, the level of competition is influenced by macro-economic factors, brand loyalty, distribution models and the absence of governmental or third-party payer systems. In the companion animal sector, competition is influenced by brand loyalty, new innovation, relationships with veterinarians, channel expansion and the overall growth in pet ownership.
•: Diversified product portfolios. Animal health companies often derive their revenue from dozens, if not hundreds, of products and are frequently not dependent on a select few flagship products. For example, our top 10 products accounted for only 41% of revenue in 2017. We believe companies with diversified global companion and food animal product portfolios can be more resilient to changing market dynamics and are structured to better balance potential geographic, product and species volatility.
•: Deep customer relationships. Direct customer models allow animal health sales representatives and veterinary consultants to develop a deep understanding of customer needs, which often facilitate strong and impactful relationships. Representatives and consultants frequently partner with customers through product support and analytics, driving additional value for the customer.
•: Fast and efficient R&D model. Product approvals typically require a limited number of targeted studies in animals, which moderates research expenses. The approval process is generally predictable given the number of studies required, leading to average timelines

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from initiation of development to approval of three to seven years at a cost of $50 million to $100 million.

•: Self-pay market. Food animal producers, pet owners and veterinarians typically pay for products out of pocket, making them the primary decision makers. This results in manufacturers being able to price products based primarily on the end customer's realized value.

Our Competitive Strengths

We believe the following strengths create sustainable competitive advantages that will enable us to continue to grow as a leader in the animal health industry.

•: Established leader with a global presence and diversified product portfolio. We are the fourth largest animal health company in the world, with revenue of $2.9 billion for the year ended December 31, 2017. Globally, we are #1 in medicinal feed additives, #2 in poultry and #3 in cattle, as measured by 2017 revenue, according to Vetnosis. We also have one of the broadest portfolios of pet parasiticides in the companion animal sector, based on indications, species and formulations. We have a top four presence in all four key geographic regions (NA, EMEA, LATAM and APAC), as measured by 2017 revenue, according to Vetnosis, including a strong presence in the emerging markets of Brazil, Thailand, China and Mexico. We have a comprehensive and diversified product portfolio, with more than 125 brands sold in more than 90 countries. In 2017, our top 10 products accounted for 41% of our revenue, with our top selling product accounting for approximately 10% of our revenue. Our global footprint includes a direct commercial presence in 62 countries, which we have plans to reduce to fewer than 50 countries, and third-party distribution relationships serving other relevant markets. Of our approximately 1,530 sales representatives as of June 30, 2018, two-thirds were based outside of North America.
•: Strategically positioned to drive innovation and growth in our three targeted growth categories. Over the past 10 years, we have intentionally transformed Elanco from a food animal focused company into a diversified global company. In addition to our FA Ruminants & Swine category, we now have established positions in our three targeted growth categories: CA Disease Prevention, CA Therapeutics and FA Future Protein & Health. To achieve this, among other steps, we have made strategic acquisitions to expand our product portfolio, increase our sales presence globally and obtain R&D and manufacturing capabilities in these categories. Recent acquisitions include the animal health business of Janssen Pharmaceutica NV, a subsidiary of Johnson and Johnson Company ("Janssen Animal Health"), ChemGen Corp. ("ChemGen"), Lohmann SE ("Lohmann Animal Health"), the animal health business of Novartis AG ("Novartis Animal Health") and the U.S. feline and canine vaccines portfolio of Boehringer Ingelheim Vetmedica, Inc. (the "BI Vetmedica U.S. vaccines portfolio"). See "Business — Company History." As a result of these acquisitions as well as organic growth, we have grown our companion animal categories, from a minimal presence in 2007 to more than $900 million in revenue in 2017. We believe that as a result of establishing a strong presence in our targeted growth categories, which feature favorable industry dynamics, we are strategically positioned to grow our revenue and increase profitability.
•: Strength of brands and relationships in our FA Ruminants & Swine category. We provide a range of products for use in ruminant and swine production that we believe have created strong, long-standing customer relationships and provide an important revenue source for our business and for investment capital to support future growth. We have well-established Elanco brands in this category such as Rumensin , a leading cattle feed additive that has

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been used for more than 40 years to improve feed efficiency and control coccidiosis. In addition, our technical expertise and analytics help us deliver value to our customers beyond our products. Our analytics help producers analyze large amounts of health and production data, turning that data into actionable information that helps them improve the health of their animals and, as a result, their productivity and profitability. We believe our brands and additional customer support have helped us create broad name recognition and a high level of trust among target customers, which is important to the success of our food animal products. We expect to continue to be a leader in FA Ruminants & Swine.

•: Proven track record of innovation and product launches. We have developed in-house R&D capabilities in the chemical sciences and life sciences, which enable us to discover and develop vaccines and small and large molecules in our targeted areas. We also have an R&D platform that enables us to discover, develop and evaluate future nutritional health opportunities in enzymes, probiotics and prebiotics. Beyond our strong in-house R&D, we also access ideas and innovation from a broad array of sources. This inclusive approach to innovation allows us to identify, attract, fund and develop new ideas in a manner that enhances our pipeline while, we believe, reducing the risk associated with an in-house only innovation model. As a result, we launched nine products from 2015 to 2017 that delivered revenue of $24.7 million in 2015, $97.9 million in 2016, $143.8 million in 2017 and $136.6 million in the first half of 2018. We believe our new products will be an important source of future revenue.

New Launches by Quarter

(1): We suspended commercialization of Imrestor in the second quarter of 2018 and plan to pursue additional indications. Revenues from Imrestor were $6.5 million for the year ended December 31, 2017 and $1.0 million for the six months ended June 30, 2018.

Three of these products were developed following the traditional in-house model, while the other products were obtained through an acquisition or venture capital investment. These launches are evidence of our ability to identify innovation from diverse sources and develop them into distinctive products in our targeted categories. They include: Credelio , for the treatment and elimination of fleas and ticks in dogs and puppies; Interceptor Plus , for the prevention of heartworm disease and treatment and control of other endoparasite infections

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in dogs and puppies; Galliprant , for the treatment of canine osteoarthritis pain and inflammation; Osurnia , for the treatment of otitis externa in dogs; Clynav , for the immunization of Atlantic salmon against pancreas disease; Imvixa , for the prevention and control of sea lice; Inteprity , for the prevention of mortality caused by necrotic enteritis in broiler chickens; Kavault , for the reduction of diarrhea in weaned pigs; and Imrestor , which we suspended commercialization of in the second quarter of 2018, for the reduction of incidence of clinical mastitis in periparturient dairy cows. In 2017, Clynav and Galliprant were named best food animal and companion animal products, respectively, by Animal Pharm . We currently have R&D projects relating to 36 potential new product innovations (which we define as new chemical entities, new combinations or significant line extensions), which we are investigating as candidates for potential new product launches through 2023. We believe our approach to innovation will enable us to create and maintain an attractive pipeline of novel products.

•: Expertise in driving cost efficiencies and productivity. In the last 10 years, we have successfully integrated 10 businesses, including businesses acquired within the last four years with an aggregate of 4,500 full-time employees, 12 manufacturing sites and eight R&D sites. These acquisitions had a negative impact on operating margins and over the last three years, we have identified and executed a number of initiatives which improved our operational efficiency and positively impacted our operating margins. Through the reduction of manufacturing and R&D sites, headcount rationalization, focused procurement initiatives, sales force organizational design and the establishment of an integration center of excellence, we estimate that we delivered more than $500 million in annualized cost savings from the beginning of 2015 through the end of 2017. Since 2015, in manufacturing we have closed three sites, reduced headcount from approximately 3,500 to approximately 2,330 employees and eliminated over 2,600 stock keeping units, or SKUs (we currently supply approximately 4,400 SKUs). Drawing on these experiences, we are currently executing additional productivity initiatives throughout the organization that we believe will materially strengthen the margin profile of our business over time.
•: Experienced management team and dedicated employees. Our executive management team is comprised of a group of leaders with diverse backgrounds and extensive experience across global animal health and related industries. We believe their experience has provided organizational capabilities to support our targeted growth strategies and helped us create a legacy of growth and transformation in a dynamic industry. Our executives have taken an active role in important initiatives shaping the animal health industry. We also believe we have a loyal, highly engaged, customer-focused and cause-oriented professional workforce. We have recently strengthened our management team by adding executive officers with extensive public company experience.

Our Targeted Value-Generating Strategies

We intend to continue to grow our business and create value for our shareholders through a targeted value-generating strategy with three key pillars: a Portfolio Strategy for our marketed

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products, an Innovation Strategy for our R&D pipeline and a Productivity Strategy for our margin expansion initiatives.

Portfolio Strategy

•

Invest in categories with the greatest potential for growth. We are focusing the majority of our resources, including more than 75% of our R&D funding, on our three targeted growth categories: CA Disease Prevention, CA Therapeutics and FA Future Protein & Health, where we believe we are well positioned to grow faster than the market. These categories represented 54% of our revenue in 2017.

•: CA Disease Prevention — Parasiticides and vaccines are fundamental to preventing disease in companion animals. We have a strong vaccines portfolio as well as products that protect pets from a broad spectrum of parasites, such as fleas, ticks, heartworms, roundworms, hookworms, whipworms and tapeworms. We believe we are well positioned to drive additional growth through continued product innovation and sales channel expansion.
•: CA Therapeutics — Pets are living longer and owners increasingly seek treatments for chronic diseases in their pets. To capitalize on these trends, we are focused on driving growth in our CA Therapeutics category by building on our broad base of pain and osteoarthritis products.
•: FA Future Protein & Health — We expect to drive revenue growth through our poultry and aquaculture portfolios. Poultry and aquaculture are expected to be among the fastest growing animal health protein sources over the next 10 years. We also are focused on nutritional health products and antibiotic stewardship that address market trends in this category.

•

Reinforce our strong presence in our FA Ruminants & Swine category. We plan to continue fortifying our long-standing FA Ruminants & Swine category to meet our customers' needs through targeted product investment and by continuing to strengthen our deep business-to-business relationships through sales force excellence and leadership in industry coalitions. We also plan to continue to utilize analytics, social media and other support to provide value to our customers beyond our products.

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Innovation Strategy

•

Maximize opportunities to innovate within targeted platforms. Our R&D efforts focus on six areas across our companion and food animal categories where science and our capabilities best match market opportunities and meet customer needs.

•

Companion Animal — We are targeting therapeutics, vaccines and parasiticides.

•: Therapeutics — We are focused on continuing to discover and develop products in areas where we currently compete such as dermatology, otitis and pain. We are also pursuing novel targets to address unmet needs for chronic conditions in dogs and cats.
•: Vaccines — We have a competitive line of core canine, feline and rabies vaccines that we are developing for expansion into geographies outside the U.S. We are also developing novel delivery technologies for companion animal vaccines, building on the success of the formulation innovation of our current product line.
•: Parasiticides — We leverage proprietary active ingredients to develop and commercialize novel products with endoparasite and ectoparasite efficacy through combinations and novel formulations. We are also actively pursuing products with novel mechanisms of action to introduce innovation in this category.

•

Food Animal — We are targeting pharmaceuticals, vaccines and the emerging nutritional health space.

•: Pharmaceuticals — We focus efforts in discovery and development of novel pharmaceutical and biopharmaceutical products that could be effective alternatives to antibiotics or address other health challenges encountered in livestock production.
•: Vaccines — We have active vaccine R&D programs to discover and develop products to address bacterial and viral threats in poultry, swine, cattle and fish.
•: Nutritional Health — Building on our enzyme product platform and the success of Hemicell , we are targeting R&D efforts in nutritional health to deliver new products that improve gut health and performance in livestock. We focus on the role and composition of the microbiome on the health and digestive performance of the animal and look to introduce new products that are enzymes, probiotics or prebiotics.

•

Inclusive approach to sourcing innovation. We have a build, buy or ally strategy to identify, attract and develop new ideas in our six R&D focus areas in a manner intended to reduce risk and sustain our pipeline. In addition to traditional corporate R&D, we pursue in-licensing and partnering activities, actively and selectively engaging in funding models that include venture capital, project financing and crowdsourced innovation. This strategy gives us access to a wider range of novel ideas and increases our ability to bring innovative products to market compared to an in-house only model.

Productivity Strategy

•: Leverage our productivity capabilities to improve operating margins. We estimate that from the beginning of 2015 through the end of 2017, we generated more than $500 million in annualized cost savings through our productivity initiatives, including the integration of three major acquisitions. Leveraging this track record of productivity improvements and cost

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savings, we aim to significantly increase our operating margins over time through our initiatives in manufacturing and SG&A. Our productivity strategies include:

•: Manufacturing efficiency and cost savings. We plan to continue to execute on initiatives we have identified to improve manufacturing processes, reduce our manufacturing footprint, advance lean initiatives, consolidate our contract manufacturing organization ("CMO") network, strategically insource projects and pursue cost savings opportunities for raw materials through a new procurement process. We also plan to leverage our extensive integration experience to continue identifying cost-savings and delivering on our margin expansion objectives.
•: SG&A excellence. Our sales strategy is focused on achieving growth in our targeted product categories while increasing productivity within our sales force. We plan to utilize both our sales force's strong customer relationships and our strategic distributor partnerships to efficiently grow demand for our products. We also have a targeted procurement initiative and are in the process of implementing a G&A steady state organizational design to reduce overhead costs and simplify infrastructure following the termination of our transitional service agreement with Lilly.

Risks Associated with Investing in Our Common Stock

Investing in our common stock involves a number of risks. These risks include, but are not limited to, challenges related to the Separation (as defined below in "—The Separation"), the successful implementation of our strategy and the ability to grow our business. Some of these risks are:

Risks Related to the Separation

•: We will incur significant charges in connection with this offering and the Separation and incremental costs as a standalone public company, including due to replicating or replacing certain functions, systems and infrastructure to which we will no longer have the same access after this offering. When we begin to operate these functions separately, if we do not have our own adequate systems and business functions in place, or are unable to obtain them from other providers, we may not be able to operate our business effectively or at comparable costs to the costs of services received under our transitional services agreement with Lilly. See "Certain Relationships and Related Party Transactions — Transitional Services Agreement."
•: Our historical combined financial data is not necessarily representative of the results we would have achieved as a standalone company and may not be a reliable indicator of our future results. For example, our historical combined financial data reflects expense allocations for certain support functions that are provided on a centralized basis within Lilly, such as expenses for executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations that may be higher or lower than the comparable expenses we would have actually incurred, or will incur in the future, as a standalone company.
•: We may not be able to replace the services provided by Lilly under the transitional services agreement or enter into appropriate third-party agreements on terms and conditions, including cost, comparable to those that we will receive from Lilly under our transitional services agreement. Additionally, after the transitional services agreement terminates, we may be unable to sustain the services at the same levels or obtain the same benefits as when we were receiving such services and benefits from Lilly. Due to the scope and complexity of the underlying projects relative to these efforts, the amount of total costs

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could be materially higher than our estimate, and the timing of the incurrence of these costs is subject to change.

•: As a result of the Separation, we will lose Lilly's brand, reputation, capital base and other resources, and may experience difficulty operating as a standalone company. The loss of Lilly's scale, capital base and financial strength may prompt suppliers to reprice, modify or terminate their relationships with us, and Lilly's reduction of its ownership of our company could potentially cause some of our existing agreements and licenses to be terminated.
•: We may not be able to achieve the full strategic and financial benefits expected to result from the Separation.

Risks Related to Our Relationship with Lilly

•: Following the completion of the offering, Lilly will continue to have significant control over us for a period of time, which could continue indefinitely, preventing you and other shareholders from influencing significant decisions. For so long as Lilly controls the majority of the voting power of our outstanding common stock, it will determine the outcome of all corporate actions requiring shareholder approval.
•: Lilly's interests may differ from our interests and the interests of our public shareholders, and therefore actions Lilly takes with respect to us, as a controlling or significant shareholder, including under the master separation agreement, may not be favorable to us or our public shareholders.
•: For so long as Lilly controls a majority of the voting power of our outstanding common stock, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of companies that are subject to such requirements. For example, we may not have a majority of independent directors or corporate governance and compensation committees consisting entirely of independent directors.

Risks Related to Our Business and Industry

•: The animal health industry is highly competitive. Our competitors include standalone animal health businesses, the animal health businesses of large pharmaceutical companies, specialty animal health businesses and companies that mainly produce generic products. These competitors may have access to greater financial, marketing, technical and other resources. As a result, they may be able to devote more resources to developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions or other opportunities.
•: Disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein, could negatively affect the market for our products. For example, the market for our companion animal therapeutics has been particularly affected by innovation in new molecules and delivery formulations in recent years.
•: Regulatory restrictions and bans on the use of antibiotics and productivity products in food animals, as well as changing market demand, may continue to negatively affect demand for certain of our food animal products. For example, in certain markets, including the U.S., sales of certain of our food animal products have been negatively affected by an increase in consumer sentiment for "clean" proteins and dairy products (i.e., proteins and dairy products produced without the use of antibiotics or other products intended to increase animal production).

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•: Generic products may be viewed as more cost-effective than our products. Generic competitors are becoming more aggressive in terms of launching products before patent rights expire, and, because of attractive pricing, sales of generic products are an increasing percentage of overall animal health sales in certain regions.
•: We may not successfully implement our business strategies or achieve targeted cost efficiencies and gross margin improvements. Realizing the anticipated benefits from our strategic initiatives, if any benefits are achieved at all, may take several years. Additionally, we may have insufficient access to capital to fund investments in strategic initiatives, or our business strategy may change from time to time, which could delay our ability to implement initiatives that we believe are important to our business.
•: Consolidation of our customers and distributors could negatively affect the pricing of our products. In recent years, there has been a trend towards the concentration of veterinarians in large clinics and hospitals. In addition, food animal producers, particularly swine and poultry producers, and our distributors have seen recent consolidation in their industries. Furthermore, we have seen the expansion of larger cross border corporate customers and an increase in the consolidation of buying groups (cooperatives of veterinary practices that leverage volume to pursue discounts from manufacturers). If these trends towards consolidation continue, our customers could attempt to improve their profitability by leveraging their buying power to obtain favorable pricing.
•: An outbreak of infectious disease carried by food animals could negatively affect the demand for, and sale and production of, our food animal products. In recent years, outbreaks of various diseases, including avian influenza, foot and mouth disease, bovine spongiform encephalopathy (otherwise known as BSE or "mad cow" disease) and porcine epidemic diarrhea virus (otherwise known as PEDV), have negatively impacted sales of our animal health products.
•: Our R&D, acquisition and licensing efforts may fail to generate new products or expand the use of our existing products. We may be unable to determine with accuracy when or whether any of our products now under development will be approved or launched, or we may be unable to develop, license or otherwise acquire product candidates or products. In addition, we cannot predict whether any products, once launched, will be commercially successful or will achieve sales and revenue that are consistent with our expectations.
•: We had losses on an as-reported basis for the last three years, and we expect to continue to incur substantial expenditures to develop, manufacture and market our products and implement our business strategies.

The foregoing is only a summary of some of our risks. For a more detailed discussion of these and other risks you should consider before making an investment in our common stock, see "Risk Factors."

The Separation

Prior to the completion of this offering, we are a wholly-owned subsidiary of Lilly, and all of our outstanding shares of common stock are owned by Lilly.

In connection with the completion of this offering, through a series of equity and other transactions, Lilly will transfer to us substantially all of its animal health businesses that will form our business going forward. In exchange, we will pay to Lilly as consideration (i) all of the net proceeds we will receive from the sale of our common stock in this offering, including any net proceeds we receive as a result of any exercise of the underwriters' option to purchase additional shares, (ii) all of the net proceeds (approximately $2.0 billion) we received in the Senior Notes Offering (as

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defined below) and (iii) all of the net proceeds ($498.6 million) we received from the entry into the Term Facility (as defined below); provided, to the extent the unrestricted cash held by us following the completion of this offering is less than (or more than) $300 million, we will retain a portion of the net proceeds (or pay additional amounts to Lilly) so that the unrestricted cash held by us for working capital and other general corporate purposes following the completion of this offering is $300 million. In addition, a portion of the consideration to be paid to Lilly will be temporarily retained by us as restricted cash in connection with the anticipated transfer to us from Lilly of certain animal health assets in certain jurisdictions that are anticipated to occur following the completion of the offering. We refer to these separation transactions, as described in "The Separation and Distribution Transactions — The Separation," as the "Separation."

In addition, immediately prior to the completion of this offering, we and Lilly intend to enter into certain agreements that will provide a framework for our ongoing relationship with Lilly. For a description of these agreements, see "Certain Relationships and Related Party Transactions — Relationship with Lilly."

Debt Transactions

On August 28, 2018, we issued $500 million aggregate principal amount of 3.912% Senior Notes due 2021, $750 million aggregate principal amount of 4.272% Senior Notes due 2023 and $750 million aggregate principal amount of 4.900% Senior Notes due 2028 (collectively, the "Senior Notes") in a private placement (the "Senior Notes Offering").

On September 5, 2018, we entered into (i) a revolving credit agreement for a five-year $750 million senior unsecured revolving credit facility (subject to certain conditions) with the ability to incur additional incremental commitments of up to $250 million (the "Revolving Facility"), and (ii) a term credit agreement with a syndicate of banks providing for a three-year senior unsecured term credit facility in an amount of $500 million (the "Term Facility" and, together with the Revolving Facility, the "Credit Facilities"). We refer to the entry into the Credit Facilities and the Senior Notes Offering together as the "Debt Transactions." We refer to the Separation and the Debt Transactions together as the "Transactions."

See "Description of Material Indebtedness" for more information on the Debt Transactions.

The Distribution

Lilly has informed us that, as of the date of this prospectus, it intends, following this offering, to make a distribution to its shareholders of all or a portion of its equity interest in us, which may include one or more distributions effected as a dividend to all Lilly shareholders, one or more offers to Lilly shareholders to exchange their Lilly shares for shares of our common stock, or any combination thereof. We refer to any such potential distribution as the "Distribution."

While, as of the date of this prospectus, Lilly intends to effect the Distribution, Lilly has no obligation to pursue or consummate any further dispositions of its ownership interest in us, including through the Distribution, by any specified date or at all. If pursued, the Distribution may be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions and the receipt of an opinion of counsel to the effect that the Separation, together with such Distribution, would be tax-free to Lilly and its shareholders for U.S. federal income tax purposes. The conditions to the Distribution may not be satisfied, Lilly may decide not to consummate the Distribution even if the conditions are satisfied or Lilly may decide to waive one or more of these conditions and consummate the Distribution even if all of the conditions are not satisfied.

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The Distribution is not being effected pursuant to this prospectus, and the underwriters of this offering are not acting as underwriters for the Distribution.

Corporate Information

Elanco Animal Health Incorporated was incorporated in Indiana on May 3, 2018. Our principal executive offices are located at 2500 Innovation Way, Greenfield, Indiana 46140, and our telephone number is (877) 352-6261. Our corporate website address is www.elanco.com. Our website and the information contained on, or that can be accessed through, our website is not deemed to be incorporated by reference in, and is not considered part of, this prospectus. You should not rely on any such information in making your decision whether to purchase our common stock.

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The Offering


Issuer		Elanco Animal Health Incorporated
Common stock offered by us		62,900,000 shares of common stock (or 72,335,000 shares of common stock if the underwriters exercise their option to purchase additional shares in full).
Common stock to be held by Lilly immediately after this offering		293,290,000 shares of common stock.
Common stock to be outstanding immediately after this offering		356,190,000 shares of common stock (or 365,625,000 shares of common stock if the underwriters exercise their option to purchase additional shares in full).
Option to purchase additional shares of common stock		The underwriters have an option to purchase an additional 9,435,000 shares of common stock from us. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.
Use of proceeds		We estimate that the net proceeds from the sale of our common stock in this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $1,292.6 million ($1,486.5 million if the underwriters exercise their option to purchase additional shares in full) based on an assumed initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus).
		We intend to pay to Lilly as consideration for the portion of its animal health businesses Lilly is contributing to us in connection with the Separation all of the net proceeds we will receive from the sale of our common stock in this offering, including any net proceeds we receive as a result of any exercise of the underwriters' option to purchase additional shares, together with the net proceeds we received from the Senior Notes Offering and the entry into the Term Facility; provided, to the extent the unrestricted cash held by us following the completion of this offering is less than (or more than) $300 million, we will retain a portion of the net proceeds (or pay additional amounts to Lilly) so that the unrestricted cash held by us for working capital and other general corporate purposes following the completion of this offering is $300 million. In addition, a portion of the consideration to be paid to Lilly will be temporarily retained by us as restricted cash in connection with the anticipated transfer to us from Lilly of certain animal health assets in certain jurisdictions that are anticipated to occur following the completion of the offering. See "Use of Proceeds."

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Dividend policy		We initially expect to pay quarterly cash dividends to holders of our common stock of approximately $0.06 per share commencing following the fourth quarter of 2018, subject to the discretion of our board of directors. Our ability to pay dividends is subject to certain limitations and we may change our dividend policy at any time. See "Risk Factors — Risks Related to Our Indebtedness," "Risk Factors — Risks Related to Our Initial Public Offering and Ownership of Our Common Stock — While we currently intend to pay a quarterly cash dividend to our common shareholders, we may change our dividend policy at any time" and "Dividend Policy."
Risk factors		Investing in our common stock involves a high degree of risk. See "Risk Factors" beginning on page 22 and the other information included in this prospectus for a discussion of factors you should carefully consider before investing in our common stock.
Directed share program		At our request, the underwriters have reserved up to 3% of the shares of our common stock offered by this prospectus for sale, at the initial public offering price, to our independent directors, officers and certain employees, to the extent permitted by local securities laws and regulations. The number of shares available for sale to the general public in this offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not purchased by these persons will be offered by the underwriters to the general public on the same terms as the other shares. See "Underwriting" for more information.
Principal shareholders		Upon completion of this offering, Lilly will continue to own a controlling interest in us. Accordingly, we intend to avail ourselves of the "controlled company" exemption under the corporate governance rules of the NYSE. See "Management — Director Independence and Controlled Company Exemption" and "Principal Shareholder."
Listing		We have been authorized to list our common stock on the NYSE under the symbol "ELAN."

Except as otherwise indicated, the number of shares of our common stock outstanding after this offering and the other information presented in this prospectus:

•: give effect to the transactions described under "The Separation and Distribution Transactions — The Separation;"
•: assume no exercise of the underwriters' option to purchase additional shares;
•: give effect to a 2,932,900-for-1 stock split of our common stock that will occur prior to the completion of this offering;
•: assume an initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus);

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•: exclude an aggregate of up to 11,000,000 shares of our common stock that will be available for future equity awards under our equity incentive plan, including up to 5,500,000 shares of our common stock authorized to be issued under our equity incentive plan prior to the Distribution, as further described in "Executive and Director Compensation — Anticipated Compensation Program Following this Offering — 2018 Elanco Stock Plan" and which includes awards described in "Executive and Director Compensation — Anticipated Compensation Program Following this Offering — Awards upon the Completion of this Offering;" and
•: give effect to our amended and restated certificate of incorporation and our amended and restated bylaws, which will be in effect prior to the completion of this offering.

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Summary Historical Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Data

We report our financial results in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The summary historical combined statement of operations data for the six months ended June 30, 2018 and 2017 and the summary historical combined balance sheet data as of June 30, 2018 presented below have been derived from our unaudited combined financial statements included elsewhere in this prospectus. The summary historical combined statement of operations data for the years ended December 31, 2017, 2016 and 2015 and the combined balance sheet data as of December 31, 2017 and 2016 presented below have been derived from our audited combined financial statements included elsewhere in this prospectus.

Our combined financial statements include the attribution of certain assets and liabilities that have historically been held at the Lilly corporate level but which are specifically identifiable or attributable to us. Our combined financial statements also include expense allocations related to certain Lilly corporate functions, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue, headcount or other measures. We believe that this expense methodology, and the results thereof, is reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred if we would have operated as an independent, publicly traded company for the periods presented. It is impractical to estimate what our standalone costs would have been for the historical periods presented.

The summary unaudited pro forma condensed combined statement of operations data for the six months ended June 30, 2018 and the year ended December 31, 2017 and summary unaudited pro forma condensed combined balance sheet data as of June 30, 2018 presented below have been derived from our unaudited pro forma condensed combined financial statements included elsewhere in this prospectus. The unaudited pro forma information set forth below reflects our historical combined financial information, as adjusted to give effect to the Transactions as if they had occurred as of January 1, 2017, in the case of statement of operations data, and June 30, 2018, in the case of balance sheet data. The unaudited pro forma information is illustrative and not intended to represent what our results of operations or financial position would have been had the Transactions occurred on the dates indicated or to project our results of operations or financial position for any future period. For an understanding of the pro forma financial statements that give pro forma effect to the Transactions, see "Unaudited Pro Forma Condensed Combined Financial Statements" included elsewhere in this prospectus.

The financial statements included in this prospectus may not be indicative of our future performance and do not necessarily reflect what our financial position and results of operations would have been had we operated as an independent, publicly traded company for the periods presented, including changes that will occur in our operations and capital structure as a result of this offering and the Separation.

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You should read the information set forth below together with "Selected Historical Combined Financial Data," "Unaudited Pro Forma Condensed Combined Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Capitalization," and our combined financial statements and the related notes thereto included elsewhere in this prospectus.


		Six Months Ended June 30,									Year Ended December 31,

					Historical									Historical

		Pro Forma 2018			2018			2017			Pro Forma 2017			2017			2016			2015

		(In millions, except per share data)
Statement of Operations Data:
Revenue	$	1,506.4		$	1,506.4		$	1,437.6		$	2,889.0		$	2,889.0		$	2,913.5		$	2,909.1

Costs, expenses and other:
Cost of sales		791.5			791.5			712.7			1,493.9			1,493.9			1,409.0			1,533.7
Research and development		126.6			126.6			127.9			251.7			251.7			265.8			291.0
Marketing, selling and administrative		371.1			371.1			388.4			779.8			779.8			784.8			916.0
Amortization of intangible assets		98.6			98.6			109.4			221.2			221.2			170.7			163.0
Asset impairment, restructuring and other special charges		70.4			70.4			165.6			375.1			375.1			308.4			263.3
Other — net, (income) expense		65.7			10.7			1.6			109.9			(0.1	)		(2.8	)		1.6

Income (loss) before income taxes	$	(17.5	)	$	37.5		$	(68.0	)	$	(342.6	)	$	(232.6	)	$	(22.4	)	$	(259.5	)
Income tax expense (benefit)		14.4			27.6			60.5			36.3			78.1			25.5			(48.7	)

Net income (loss)	$	(31.9	)	$	9.9		$	(128.5	)	$	(378.9	)	$	(310.7	)	$	(47.9	)	$	(210.8	)



Net income (loss) as a percent of revenue		(2	)%		1	%		(9	)%		(13	)%		(11	)%		(2	)%		(7	)%
Pro forma net income (loss) per share — basic and diluted	$	(0.09	)							$	(1.06	)
Pro forma weighted average shares outstanding — basic and diluted		356.2									356.2
Statement of Cash Flow Data:
Net cash provided by (used in):
Operating activities				$	183.9		$	90.6					$	173.8		$	155.9		$	6.6
Investing activities					(57.5	)		(903.8	)					(964.6	)		(182.1	)		(4,995.4	)
Financing activities					(123.7	)		811.9						847.5			(149.6	)		5,353.2
Other Data (non-GAAP):
Adjusted EBITDA ⁽¹⁾	$	306.2		$	306.2		$	278.4		$	498.9		$	498.9		$	540.4		$	393.7
Adjusted net income ⁽¹⁾	$	177.2		$	219.0		$	156.4		$	182.3		$	250.5		$	332.7		$	208.7


						As of December 31,

		As of June 30, 2018				Historical

		Pro Forma		Historical		2017		2016

		(Dollars in millions)
Balance Sheet Data:
Current assets	$	2,310.9	$	2,056.9	$	2,123.7	$	1,947.4
Current liabilities		867.5		558.4		632.6		618.9
Property and equipment, net		877.7		877.7		920.3		741.8
Total assets		8,822.6		8,577.4		8,940.3		8,099.7
Total liabilities		3,760.2		990.8		1,149.5		1,071.8
Long-term debt		2,475.5		—		—		—
Total equity		5,062.4		7,586.6		7,790.8		7,027.9

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(1)

Non-GAAP Financial Measures

Adjusted EBITDA

We define adjusted EBITDA as net income (loss) adjusted for interest expense, income tax expense (benefit) and depreciation and amortization, further adjusted to exclude purchase accounting adjustments to inventory, integration costs of acquisitions, severance, asset impairment, gain on sale of assets, facility exit costs and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations. For the periods presented, we have not made adjustments for all items that may be considered unrelated to our long-term operations. We believe adjusted EBITDA, when used in conjunction with our results presented in accordance with U.S. GAAP and its reconciliation to net income (loss), enhances investors' understanding of our performance, valuation and prospects for the future. We also believe adjusted EBITDA is a measure used in the animal health industry by analysts as a valuable performance metric for investors.

The following is a reconciliation of adjusted EBITDA to net income (loss), as reported under U.S. GAAP for the six months ended June 30, 2018 and 2017 and the years ended December 31, 2017, 2016 and 2015:


	Six Months Ended June 30,										Year Ended December 31,

	Pro Forma				Historical						Pro Forma				Historical

	2018				2018			2017			2017				2017			2016			2015

	(Dollars in millions)
Reported Net Income (Loss)		$	(31.9	)	$	9.9		$	(128.5	)		$	(378.9	)	$	(310.7	)	$	(47.9	)	$	(210.8	)
Interest expense		55.0			—			—				110.0			—			—			—
Income tax expense (benefit)		14.4			27.6			60.5				36.3			78.1			25.5			(48.7		)
Depreciation and amortization		149.6			149.6			156.1				318.4			318.4			254.4			236.9

EBITDA		187.1			187.1			88.1				85.8			85.8			232.0			(22.6		)
Purchase accounting adjustments to inventory (a)		—			—			26.5				42.7			42.7			—			153.0
Integration costs of acquisitions (b)		5.6			5.6			68.7				90.3			90.3			154.8			140.8
Severance (b)		(2.6		)	(2.6		)	56.3				162.0			162.0			42.1			59.5
Asset impairment (b)		57.7			57.7			43.8				110.6			110.6			98.3			57.5
Gain on sale of assets (b)		—			—			(16.0		)		(19.6		)	(19.6		)	—			—
Facility exit costs (b)		9.7			9.7			12.8				31.8			31.8			13.2			5.5
Contingent consideration (c)		8.5			8.5			(1.8		)		(4.7		)	(4.7		)	—			—
Inventory write-off (d)		40.2			40.2			—				—			—			—			—

Adjusted EBITDA		$	306.2		$	306.2		$	278.4			$	498.9		$	498.9		$	540.4		$	393.7

(a): See Note 4: Acquisitions to our audited combined financial statements.
(b): See Note 4: Asset Impairment, Restructuring and Other Special Charges to our unaudited interim combined financial statements and Note 5: Asset Impairment, Restructuring and Other Special Charges to our audited combined financial statements.
(c): See Note 6: Financial Instruments to our unaudited interim combined financial statements.
(d): See Note 5: Inventories to our unaudited interim combined financial statements.

Adjusted Net Income

We define adjusted net income as net income (loss) excluding amortization of intangible assets, purchase accounting adjustments to inventory, integration costs of acquisitions, severance, asset impairment, gain on sale of assets, facility exit costs and other specified significant items, such as unusual or non-recurring items that are unrelated to our long-term operations. For the periods presented, the only other specified significant item included is the exclusion in 2017 of the benefit related to the recently enacted U.S. tax reform legislation. Adjusted net income is an alternative view of performance used by management to evaluate the results of our operations and the discovery, development, manufacture and commercialization of our products, prior to considering certain income statement elements. Specifically, management intends to use adjusted net income for the purpose of analyzing performance results and setting compensation targets. We believe adjusted net income, when used in conjunction with our results presented in accordance with U.S. GAAP and its reconciliation to net income (loss), enhances investors' understanding of our performance, valuation and prospects for the future. We also believe adjusted net income is a measure used in the animal health industry by analysts as a valuable performance metric for investors.

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The following is a reconciliation of adjusted net income to net income (loss), as reported under U.S. GAAP for the six months ended June 30, 2018 and 2017 and the years ended December 31, 2017, 2016 and 2015:


	Six Months Ended June 30,										Year Ended December 31,

	Pro Forma				Historical						Pro Forma				Historical

	2018				2018			2017			2017				2017			2016			2015

	(Dollars in millions)
Reported Net Income (Loss)		$	(31.9	)	$	9.9		$	(128.5	)		$	(378.9	)	$	(310.7	)	$	(47.9	)	$	(210.8	)
Purchase Accounting Adjustments:
Amortization of intangible assets		98.6			98.6			109.4				221.2			221.2			170.7			163.0
Purchase accounting adjustments to inventory (a)		—			—			26.5				42.7			42.7			—			153.0
Integration costs of acquisitions (b)		5.6			5.6			68.7				90.3			90.3			154.8			140.8
Severance (b)		(2.6		)	(2.6		)	56.3				162.0			162.0			42.1			59.5
Asset impairment (b)		57.7			57.7			43.8				110.6			110.6			98.3			57.5
Gain on sale of assets (b)		—			—			(16.0		)		(19.6		)	(19.6		)	—			—
Facility exit costs (b)		9.7			9.7			12.8				31.8			31.8			13.2			5.5
Contingent consideration (c)		8.5			8.5			(1.8		)		(4.7		)	(4.7		)	—			—
Inventory write-off (d)		40.2			40.2			—				—			—			—			—
Other:
U.S tax reform (e)		—			—			—				(33.1		)	(33.1		)	—			—
Tax effect of adjustments (f)		(8.6		)	(8.6		)	(14.8		)		(40.0		)	(40.0		)	(98.5		)	(159.8		)

Adjusted Net Income		$	177.2		$	219.0		$	156.4			$	182.3		$	250.5		$	332.7		$	208.7

(a): See Note 4: Acquisitions to our audited combined financial statements.
(b): See Note 4: Asset Impairment, Restructuring and Other Special Charges to our unaudited interim combined financial statements and Note 5: Asset Impairment, Restructuring and Other Special Charges to our audited combined financial statements.
(c): See Note 6: Financial Instruments to our unaudited interim combined financial statements.
(d): See Note 5: Inventories to our unaudited interim combined financial statements.
(e): See Note 11: Income Taxes to our audited combined financial statements.
(f): The tax effect of the adjustments is calculated by applying the applicable tax rate to each adjustment in each relevant jurisdiction. In jurisdictions where we had recorded deferred tax assets related to net operating losses that were offset with valuation allowances, we applied the applicable tax rate to each adjustment and further adjusted for the tax effect of the beneficial reversal of the valuation allowances.

Limitations of Adjusted EBITDA and Adjusted Net Income

The primary material limitations associated with the use of adjusted EBITDA and adjusted net income as compared to U.S. GAAP results include the following: (i) they may not be comparable to similarly titled measures used by other companies, including those in our industry, (ii) they exclude financial information and events, such as the effects of an acquisition or amortization of intangible assets, that some may consider important in evaluating our performance, value or prospects for the future, (iii) they exclude items or types of items that may continue to occur from period to period in the future and (iv) they may not exclude all unusual or non-recurring items, which could increase or decrease these measures, which investors may consider to be unrelated to our long-term operations, such as Strategic Exits. These non-GAAP measures are not, and should not be viewed as, substitutes for U.S. GAAP reported net income (loss). We encourage investors to review our combined financial statements in their entirety and caution investors to use U.S. GAAP measures as the primary means of evaluating our performance, value and prospects for the future, and adjusted EBITDA and adjusted net income as supplemental measures.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this prospectus, including our combined financial statements and notes thereto, before you invest in our common stock. If any of the following risks actually materializes, our business, financial condition and results of operations could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

Risks Related to Our Business and Industry

The animal health industry is highly competitive.

The animal health industry is highly competitive. Our competitors include standalone animal health businesses, the animal health businesses of large pharmaceutical companies, specialty animal health businesses and companies that mainly produce generic products. We believe many of our competitors are conducting R&D activities in areas served by our products and in areas in which we are developing products. There are also several new start-up companies competing in the animal health industry. We also face competition from manufacturers of drugs globally, as well as producers of nutritional health products. These competitors may have access to greater financial, marketing, technical and other resources. As a result, they may be able to devote more resources to developing, manufacturing, marketing and selling their products, initiating or withstanding substantial price competition or more readily taking advantage of acquisitions or other opportunities. Further, consolidation in the animal health industry could result in existing competitors realizing additional efficiencies or improving portfolio bundling opportunities, thereby potentially increasing their market share and pricing power, which could lead to a decrease in our revenue and profitability and an increase in competition. For example, many of our competitors have relationships with key distributors and, because of their size, the ability to offer attractive pricing incentives, which may negatively impact or hinder our relationships with these distributors. In addition to competition from established market participants, new entrants to the animal health medicines and vaccines industry could substantially reduce our market share, render our products obsolete or disrupt our business model.

To the extent that any of our competitors are more successful with respect to any key competitive factor, or we are forced to reduce, or are unable to raise, the price of any of our products in order to remain competitive, our business, financial condition and results of operations could be materially adversely affected. Competitive pressure could arise from, among other things, more favorable safety and efficacy product profiles, limited demand growth or a significant number of additional competitive products being introduced into a particular market, price reductions by competitors, the ability of competitors to capitalize on their economies of scale, the ability of competitors to produce or otherwise procure animal health products at lower costs than us and the ability of competitors to access more or newer technology than us.

Disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein, could negatively affect the market for our products.

The markets for our products are regularly impacted by the introduction and/or broad market acceptance of newly-developed or alternative products that address the diseases and conditions for which we sell products, including "green" or "holistic" health products, specially bred disease-resistant animals or replacements for meat, milk, eggs or fish from alternative natural or synthetic sources. For example, the market for our companion animal therapeutics has been particularly affected by innovation in new molecules and delivery formulations in recent years. Technological breakthroughs by others may render obsolete our products and reduce or eliminate the market for

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our products. Introduction or acceptance of competing animal health products and innovation or disruptive protein alternatives could materially adversely affect our business, financial condition and results of operations.

Regulatory restrictions and bans on the use of antibiotics and productivity products in food animals, as well as changing market demand, may continue to negatively affect demand for certain of our food animal products.

Over the past few years, our operational results have been, and will continue to be, affected by regulations and changing market demand. In certain markets, including the U.S., sales of certain of our food animal products have been negatively affected by an increase in consumer sentiment for "clean" proteins and dairy products (i.e., proteins and dairy products produced without the use of antibiotics or other products intended to increase animal production).

There are two classes of antibiotics used in animal health: shared-class, or medically important, antibiotics, which are used to treat infectious disease caused by pathogens that occur in both humans and animals; and animal-only antibiotics, which are used to treat infectious disease caused by pathogens that occur in animals only. See "Business — Products — Antibiotics." Concerns that the use of antibiotics in food animal production may lead to increased antibiotic resistance of human pathogens have resulted in increased regulation and changing market demand. In December 2013, the U.S. Food & Drug Administration (the "FDA") announced final guidance establishing procedures for the voluntary phase-out in the U.S. over a three-year period of the use of shared-class antibiotics in animal feed for growth promotion in food animal production. The guidance allows for continued use of shared-class antibiotics in food-producing animals under the supervision of a veterinarian for treatment, control and, under certain circumstances, for prevention of disease. The FDA indicated that it took this action to help preserve the efficacy of shared-class antibiotics to treat infections in humans. As part of those efforts, stricter guidelines governing the administration of shared-class antibiotics have recently come into effect. As of January 1, 2017, under the FDA guidance and the related rule known as the Veterinary Feed Directive, the use of shared-class antibiotics in the water or feed of food-producing animals requires written authorization by a licensed veterinarian. In addition, other countries in which we sell or plan to sell our products, such as France and Vietnam, have passed restrictions or bans on antibiotic use. Other countries have placed restrictions or bans on the use of specific antibiotics in certain food-producing animals, regardless of the route of administration (in feed or injectable).

From 2015 to 2017, our revenue from shared-class antibiotics declined at a CAGR of 7%, excluding the impact of foreign exchange, driven primarily by changing regulations in many markets, including the Veterinary Feed Directive, as well as changing market demand. Globally, during the first half of 2018, our revenue from shared-class antibiotics was flat, excluding the impact of foreign exchange, and represented 12% (4% from sales in North America and 8% from sales outside of North America) of our total revenue, down from 16% in the first half of 2015. From 2015 to 2017, our revenue from animal-only antibiotics grew at a CAGR of 4%, excluding the impact of foreign exchange, driven by sales outside North America, which offset a slight decline in North America. Globally, during the first half of 2018, our revenue from animal-only antibiotics grew 9%, excluding the impact of foreign exchange, and represented 24% of our total revenue, up from 21% in the first half of 2015. During 2017, as well as the first half of 2018, 86% of our revenue from animal-only antibiotics resulted from the sale of ionophores. Ionophores are a special class of animal-only antimicrobials, and because of their animal-only designation, mode of action and spectrum of activity, their use has not to date been impacted by regulations or changing market demand in many markets outside of North America.

The impact of changes in regulations and market preferences regarding the use of antibiotics in food animals could have a material adverse effect on our business, financial condition and results

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of operations. If there is an increased public perception that consumption of food derived from animals that utilize our products poses a risk to human health, there may be a further decline in the production of those food products and, in turn, demand for our products. In addition, antibiotic resistance concerns will likely result in additional restrictions or bans, expanded regulations or public pressure to further reduce the use of antibiotics in food animals, increased demand for antibiotic-free protein, or changes in the market acceptance or regulatory treatment of ionophores, any of which could materially adversely affect our business, financial condition and results of operations.

In addition, our revenue has also been impacted by regulatory changes in China and other markets restricting the use of productivity products, such as those containing ractopamine, in food animals. This has resulted in many U.S. food producers who access such markets to eliminate their use of ractopamine. Our FA Ruminants & Swine products Optaflexx and Paylean contain ractopamine. If more producers decide to access such markets or additional markets restrict the use of ractopamine or other productivity products, our business, financial condition and results of operations could be materially adversely affected.

Generic products may be viewed as more cost-effective than our products.

We face competition from products produced by other companies, including generic alternatives to our products. We depend on patents and regulatory data exclusivity periods to provide us with exclusive marketing rights for some of our products. Patents for individual products expire at different times based on the date of the patent filing (or sometimes the date of patent grant) and the legal term of patents in the jurisdictions where such patents are obtained. The extent of protection afforded by our patents varies from jurisdiction to jurisdiction and is limited by the scope of the claimed subject matter of our patents, the term of the patent and the availability and enforcement of legal remedies in the applicable jurisdiction. In 2017, approximately 75% of our revenue was from products that did not have patent protection, including revenue from some of our top products such as Rumensin , Maxiban , Denagard and Tylan Premix . Other products are protected by patents that expire over the next several years. For example, certain patents related to Trifexis expire as early as 2020 in the U.S., 2021 in Japan and 2025 in European territories. As the patents for a brand name product expire, competitors may begin to introduce generic or other alternatives, and as a result, we may face competition from lower-priced alternatives to many of our products. For example, we have experienced significant competitive headwinds from generic ractopamine in the U.S. In the third quarter of 2013, a large established animal health company received U.S. approval for generic ractopamine. U.S. revenue from Optaflexx , our ractopamine beef product, has declined at a CAGR of 28% from 2015 to 2017 as a result of generic competition and international regulatory restrictions. We may face similar competition in the future for existing products that do not benefit from exclusivity, including Rumensin , which has not benefitted from patent protection in the U.S. for over 20 years, or for existing products with material patents expiring in the future. See "Business — Intellectual Property."

Generic competitors are becoming more aggressive in terms of launching products before patent rights expire, and, because of attractive pricing, sales of generic products are an increasing percentage of overall animal health sales in certain regions. Although the impact of generic competition in the animal health industry to date has not typically mirrored that seen in human health, product pricing and the impact of generic competition in the future may more closely mirror human health as a result of changes in industry dynamics, such as channel expansion, consolidation, an increase in the availability and use of pet insurance and the potential for generic competition by established animal health businesses. If animal health customers increase their use of new or existing generic products, our business, financial condition and results of operations could be materially adversely affected.

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We may not successfully implement our business strategies or achieve targeted cost efficiencies and gross margin improvements.

We are pursuing strategic initiatives that management considers critical to our long-term success, including, but not limited to: improving manufacturing processes, reducing our manufacturing footprint, achieving lean initiatives, consolidating our CMO network, strategically insourcing projects, pursuing cost savings opportunities with respect to raw materials through a new procurement process and improving the productivity of our sales force. We may pursue additional strategic initiatives in the future to improve gross margins and achieve our targeted cost efficiencies. We also have acquired or partnered with a number of smaller animal health businesses, and we intend to continue to do so in the future. There are significant risks involved with the execution of these initiatives, including significant business, economic and competitive uncertainties, many of which are outside of our control. Accordingly, we may not succeed in implementing these strategic initiatives. Realizing the anticipated benefits from these initiatives, if any benefits are achieved at all, may take several years. We may be unable to achieve our targeted cost efficiencies and gross margin improvements. Additionally, we may have insufficient access to capital to fund investments in strategic initiatives, or our business strategy may change from time to time, which could delay our ability to implement initiatives that we believe are important to our business.

Consolidation of our customers and distributors could negatively affect the pricing of our products.

Third-party distributors, veterinarians and food animal producers are our primary customers. In recent years, there has been a trend towards the concentration of veterinarians in large clinics and hospitals. In addition, food animal producers, particularly swine and poultry producers, and our distributors have seen recent consolidation in their industries. Furthermore, we have seen the expansion of larger cross-border corporate customers and an increase in the consolidation of buying groups (cooperatives of veterinary practices that leverage volume to pursue discounts from manufacturers). The pace of consolidation and structure of markets varies greatly across geographies. If these trends towards consolidation continue, our customers could attempt to improve their profitability by leveraging their buying power to obtain favorable pricing. The resulting decrease in our prices could have a material adverse effect on our business, financial condition and results of operations.

An outbreak of infectious disease carried by food animals could negatively affect the demand for, and sale and production of, our food animal products.

Sales of our food animal products could be materially adversely affected by the outbreak of disease carried by food animals, which could lead to the widespread death or precautionary destruction of food animals as well as the reduced consumption and demand for animal protein. In addition, outbreaks of disease carried by food animals may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our food animal products due to reduced herd or flock sizes.

In recent years, outbreaks of various diseases, including avian influenza, foot-and-mouth disease, bovine spongiform encephalopathy (otherwise known as BSE or "mad cow" disease) and porcine epidemic diarrhea virus (otherwise known as PEDV), have negatively impacted sales of our animal health products. The discovery of additional cases of any of these, or new, diseases may result in additional restrictions on animal protein, reduced herd or flock sizes, or reduced demand for animal protein, any of which may have a material adverse effect on our business, financial condition and results of operations. In addition, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses in procuring raw materials or products elsewhere.

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Our R&D, acquisition and licensing efforts may fail to generate new products or expand the use of our existing products.

Our future success depends on both our existing product portfolio and our pipeline of new products, including new products that we may develop through joint ventures and products that we are able to obtain through license or acquisition. We commit substantial effort, funds and other resources to R&D, both through our own dedicated resources and through collaborations with third parties.

We may be unable to determine with accuracy when or whether any of our products now under development will be approved or launched, or we may be unable to develop, license or otherwise acquire product candidates or products. In addition, we cannot predict whether any products, once launched, will be commercially successful or will achieve sales and revenue that are consistent with our expectations. The animal health industry is subject to regional and local trends and regulations and, as a result, products that are successful in some markets may not achieve similar success when introduced into other markets. Furthermore, the timing and cost of our R&D may increase, and our R&D may become less predictable as, among other things, regulations applicable to our industry may make it more time-consuming and/or costly to research, develop and register products. If we are unable to generate new products or expand the use of our existing products, our business, financial condition and results of operations will be materially adversely affected. For example, between 2015 and 2017, prior to our February 2018 launch of Credelio in the U.S., we experienced an innovation lag in the companion animal parasiticide space. In the absence of a competitive combined oral flea and tick product, our U.S. companion animal parasiticide portfolio revenue declined 15% in 2017, excluding the impact on revenue resulting from a reduction in inventory levels within our distribution channel.

In addition, some of our growth has occurred through Lilly's acquisitions, including Novartis Animal Health, Lohmann Animal Health, Janssen Animal Health and the BI Vetmedica U.S. vaccines portfolio. However, following the Separation, we will no longer benefit from Lilly's scale, capital base and financial strength.

We had losses on an as-reported basis for the last three years.

Historically, we have incurred net losses, as reported on a combined basis, including a net income (loss) for each of the years ended December 31, 2017, 2016 and 2015 of $(310.7) million, $(47.9) million and $(210.8) million, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." We could continue to incur asset impairment, restructuring and other special charges and could report losses in the future. We also expect to continue to incur substantial expenditures to develop, manufacture and market our products and implement our business strategies. We may encounter unforeseen expenses, difficulties, complications, delays, adverse events and other unknown factors that may materially adversely affect our business.

The misuse or off-label use of our products may harm our reputation or result in financial or other damages.

Our products have been approved for use under specific circumstances for the treatment of certain diseases and conditions in specific species. There may be increased risk of product liability claims if veterinarians, food animal producers, pet owners or others attempt to use our products off-label, including the use of our products in species (including humans) for which they have not been approved. Furthermore, the use of our products for indications other than those for which our products have been approved may not be effective, which could harm our reputation and lead to an increased risk of litigation. If we are deemed by a governmental or regulatory agency to have engaged in the promotion of any of our products for off-label use, such agency could request that we modify our training or promotional materials and practices, and we could be subject to

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significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry. Any of these events could materially adversely affect our business, financial condition and results of operations.

Animal health products are subject to unanticipated safety, quality or efficacy concerns, which may harm our reputation.

Unanticipated safety, quality or efficacy concerns arise from time to time with respect to animal health products, whether or not scientifically or clinically supported, leading to product recalls, withdrawals or suspended or declining sales, as well as product liability and other claims.

Regulatory actions based on these types of safety, quality or efficacy concerns could impact all, or a significant portion, of a product's sales and could, depending on the circumstances, materially adversely affect our results of operations.

In addition, since we depend on positive perceptions of the safety, quality and efficacy of our products, and animal health products generally, by food producers, veterinarians and pet owners, any concern as to the safety, quality or efficacy of our products, whether actual or perceived, may harm our reputation. These concerns and the related harm to our reputation could materially adversely affect our business, financial condition and results of operations, regardless of whether such reports are accurate.

Our business may be negatively affected by weather conditions and the availability of natural resources.

The animal health industry and demand for many of our products in a particular region are affected by weather conditions, varying weather patterns and weather-related pressures from pests, such as ticks. As a result, we may experience regional and seasonal fluctuations in our results of operations.

Food animal producers depend on the availability of natural resources, including large supplies of fresh water. Their animals' health and their ability to operate could be adversely affected if they experience a shortage of fresh water due to human population growth or floods, droughts or other weather conditions. In the event of adverse weather conditions or a shortage of fresh water, veterinarians or food animal producers may purchase less of our products.

Further, heat waves may cause stress in animals and lead to increased vulnerability to disease, reduced fertility rates and reduced milk production. Droughts may threaten pasture and feed supplies by reducing the quality and amount of forage available to grazing livestock, while climate change may increase the prevalence of parasites and diseases that affect food animals. Adverse weather conditions may also have a material impact on the aquaculture business. Changes in water temperatures could affect the timing of reproduction and growth of various fish species, as well as trigger the outbreak of certain water borne diseases.

In addition, veterinary hospitals and practitioners depend on visits from, and access to, the animals under their care. Veterinarians' patient volume and ability to operate could be adversely affected if they experience prolonged snow, ice or other severe weather conditions, particularly in regions not accustomed to sustained inclement weather.

We may not be able to realize the expected benefits of our investments in emerging markets and are subject to certain risks due to our presence in emerging markets, including political or economic instability and failure to adequately comply with legal and regulatory requirements.

We have taken steps to increase our presence in select emerging markets, including by expanding our sales organization and product offerings in these markets. Failure to continue to

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maintain and expand our business in emerging markets could materially adversely affect our business, financial condition and results of operations.

In addition, certain emerging markets have legal systems that are less developed. Other jurisdictions in which we conduct business may have legal and regulatory regimes that differ materially from U.S. laws and regulations, are continuously evolving or do not include sufficient judicial or administrative guidance to interpret such laws and regulations. Compliance with diverse legal requirements is costly and time-consuming and requires significant resources. Violations or possible violations of applicable laws or regulations by our employees may result in investigation costs, potential penalties and other related costs which in turn could negatively affect our reputation and our results of operations.

Some countries within emerging markets may be especially vulnerable to periods of local, regional or global economic, political or social instability or crisis. For example, our sales in certain emerging markets have suffered from extended periods of disruption due to natural disasters. Furthermore, we have also experienced lower than expected sales in certain emerging markets due to local, regional and global restrictions on banking and commercial activities in those countries. In addition, certain emerging markets have currencies that fluctuate substantially, which may impact our financial performance. For these reasons, among others, doing business within emerging markets carries significant risks.

Modification of foreign trade policy may harm our food animal product customers.

Changes in laws, agreements and policies governing foreign trade in the territories and countries where our customers do business could negatively impact such customers' businesses and adversely affect our results of operations. A number of our customers, particularly U.S.-based food animal producers, benefit from free trade agreements, such as the North American Free Trade Agreement ("NAFTA"). The U.S. has initiated negotiations with Canada and Mexico aimed at re-negotiating terms of NAFTA. Efforts by the U.S. to withdraw from or materially modify NAFTA or other international trade agreements to which it is a party, as well as trade disputes or the imposition of tariffs, could harm our customers, and as a result, materially adversely affect our business, financial condition and results of operations.

Our business is subject to risk based on global economic conditions.

Macroeconomic business and financial disruptions could have a material adverse effect on our business, financial condition and results of operations. Certain of our customers and suppliers could be affected directly by an economic downturn and could face constraints on the availability of credit or decreased cash flow that could give rise to payment delays, increased credit risk, bankruptcies and other financial hardships that could decrease the demand for our products or hinder our ability to collect amounts due from our customers. If one or more of our large customers, including distributors, discontinues or modifies their relationship with us as a result of economic conditions or otherwise, our business, financial condition and results of operations may be materially adversely affected. In addition, economic concerns may cause some pet owners to forgo or defer visits to veterinary practices or could reduce their willingness to treat pet health conditions or to continue to own a pet. Furthermore, our exposure to credit and collectability risk is higher in certain international markets and our ability to mitigate such risks may be limited. Our procedures intended to monitor and limit our exposure to credit and collectability risk may not effectively limit such risk and avoid losses.

Our results of operations are dependent upon the success of our top products.

If any of our top products experience issues, such as disruptive innovations or the introduction of more effective competitive products, negative publicity, changes to veterinarian or customer preferences, loss of patent protection, material product liability litigation, new or unexpected side

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effects, manufacturing disruptions and/or regulatory proceedings, our revenue could be negatively impacted, perhaps significantly. Our top five products, Rumensin , Trifexis , Maxiban , Denagard and Tylan Premix , contributed approximately 29% of our revenue in 2017. Any issues with these top products, particularly Rumensin , which contributed approximately 10% of our revenue in 2017, could have a material adverse effect on our business, financial condition and results of operations.

Our business is subject to risk based on customer exposure to rising costs and reduced customer income.

Feed, fuel, transportation and other key costs for food animal producers may increase or animal protein prices or sales may decrease. Either of these trends could cause deterioration in the financial condition of our food animal product customers, potentially inhibiting their ability to purchase our products or pay us for products delivered. Our food animal product customers may offset rising costs by reducing spending on our food animal products, including by switching to lower-cost alternatives to our products. In addition, concerns about the financial resources of pet owners could cause veterinarians to alter their treatment recommendations in favor of lower-cost alternatives to our products, which could result in a decrease in sales of our companion animal products, especially in developed countries where there is a higher rate of pet ownership. Rising costs or reduced income for our customers could have a material adverse effect on our business, financial condition and results of operations.

For our companion animal products, increased use of alternative distribution channels, or changes within existing distribution channels, could negatively impact our market share, margins and distribution of our products.

In most markets, pet owners typically purchase their animal health products directly from veterinarians. However, pet owners increasingly have the option to purchase animal health products from sources other than veterinarians, such as online retailers, "big-box" retail stores or other over-the-counter distribution channels. This trend has been demonstrated by the significant shift away from the veterinarian distribution channel in the sale of flea and tick products in recent years. Pet owners also could decrease their reliance on, and visits to, veterinarians as they rely more on internet-based animal health information. Because we market our companion animal prescription products primarily through the veterinarian distribution channel, any decrease in visits to veterinarians by pet owners could reduce our market share for such products and materially adversely affect our business, financial condition and results of operations. In addition, pet owners may substitute human health products for animal health products if human health products are deemed to be lower-cost alternatives.

Legislation has also been proposed in the U.S., and may be proposed in the U.S. or abroad in the future, that could impact the distribution channels for our companion animal products. For example, such legislation may require veterinarians to provide pet owners with written prescriptions and disclosure that the pet owner may fill prescriptions through a third party, which may further reduce the number of pet owners who purchase their animal health products directly from veterinarians. Such requirements may lead to increased use of generic alternatives to our products or the increased substitution of our companion animal products with other animal health products or human health products if such other products are deemed to be lower-cost alternatives. Many states already have regulations requiring veterinarians to provide prescriptions to pet owners upon request and the American Veterinary Medical Association has long-standing policies in place to encourage this practice.

Over time, these and other competitive conditions may increase our use of online retailers, "big-box" retail stores or other over-the-counter distribution channels to sell our companion animal products. We may not be adequately prepared or able to distribute our companion animal products if an increased portion of our sales occurs through these channels. Also, we may realize lower

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margins on sales through these distribution channels than we do on sales through veterinarians. Any of these events could materially adversely affect our business, financial condition and results of operations.

In addition, if one or more of our companion animal distributors discontinues or modifies their relationship with us, our business, financial condition and results of operations may be materially adversely affected. For example, in 2017, a change in our U.S. inventory management practices resulted in a revenue lag as existing inventory was sold down, which management estimates decreased our revenue by approximately $35 million.

Loss of our executive officers or other key personnel could disrupt our operations.

We depend on the efforts of our executive officers and other key personnel. Our executive officers and other key personnel are not currently, and are not expected to be, subject to non-compete provisions. In addition, we have not entered into employment agreements with our executive officers or other key personnel. Any unplanned turnover or our failure to develop an adequate succession plan for one or more of our executive officer or other key personnel positions could deplete our institutional knowledge base and erode our competitive advantage. The loss or limited availability of the services of one or more of our executive officers or other key personnel, or our inability to recruit and retain qualified executive officers or other key personnel in the future, could, at least temporarily, have a material adverse effect on our business, financial condition and results of operations.

We may be required to write down goodwill or identifiable intangible assets.

Under U.S. GAAP, if we determine goodwill or identifiable intangible assets are impaired, we will be required to write down these assets and record a non-cash impairment charge. As of June 30, 2018, we had goodwill of $2.9 billion and identifiable intangible assets, less accumulated amortization, of $2.5 billion. Identifiable intangible assets consist primarily of marketed products acquired or licensed from third parties, licensed platform technologies that have alternative future uses in R&D, manufacturing technologies, and customer relationships from business combinations. We also have indefinite-lived intangible assets, which consist of acquired in-process R&D projects from business combinations that are subject to impairment and non-cash impairment charges.

Determining whether an impairment exists and the amount of the potential impairment involves quantitative data and qualitative criteria that are based on estimates and assumptions requiring significant management judgment. Future events or new information may change management's valuation of an intangible asset in a short amount of time. The timing and amount of impairment charges recorded in our combined statements of operations and write-downs recorded in our combined balance sheets could vary if management's conclusions change. Any impairment of goodwill or identifiable intangible assets could have a material adverse effect on our business, financial condition and results of operations.

Our R&D relies on evaluations of animals, which may become subject to bans, additional restrictive regulations or increased attention from activism movements.

As an animal health medicines and vaccines business, the evaluation of our existing and new products in animals is required to register our products. Animal testing in certain industries has been the subject of controversy and adverse publicity. Some organizations and individuals have attempted to ban animal testing or encourage the adoption of new regulations applicable to animal testing. To the extent that the activities of such organizations and individuals are successful, our R&D, and by extension our business, financial condition and results of operations, could be materially adversely affected. In addition, negative publicity about us or our industry could harm our reputation.

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Manufacturing problems and capacity imbalances may cause product launch delays, inventory shortages, recalls or unanticipated costs.

In order to sell our products, we must be able to produce and ship sufficient quantities to our customers. Following the Separation, we will own and operate 13 internal manufacturing sites located in nine countries. We also employ a network of approximately 120 third-party CMOs. Many of our products involve complex manufacturing processes and are sole-sourced from certain manufacturing sites.

Minor deviations in our manufacturing or logistical processes, such as temperature excursions or improper package sealing, could result, and have in the past resulted in, delays, inventory shortages, unanticipated costs, product recalls, product liability and/or regulatory action. In addition, a number of factors could cause production interruptions, including:

•: the failure of us or any of our vendors or suppliers, including logistical service providers, to comply with applicable regulations and quality assurance guidelines;
•: mislabeling;
•: construction delays;
•: equipment malfunctions;
•: shortages of materials;
•: labor problems;
•: natural disasters;
•: power outages;
•: criminal and terrorist activities;
•: changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements, changes in types of products produced, shipping distributions or physical limitations; and
•: the outbreak of any highly contagious diseases near our production sites.

These interruptions could result in launch delays, inventory shortages, recalls, unanticipated costs or issues with our agreements under which we supply third parties, which may materially adversely affect our business, financial condition and results of operations.

Our manufacturing network may be unable to meet the demand for our products or we may have excess capacity if demand for our products changes. The unpredictability of a product's regulatory or commercial success or failure, the lead time necessary to construct highly technical and complex manufacturing sites and shifting customer demand (including as a result of market conditions or entry of branded or generic competition) increase the potential for capacity imbalances. In addition, construction of sites is expensive, and our ability to recover costs will depend on the market acceptance and success of the products produced at the new sites, which is uncertain.

We rely on third parties to provide us with materials and services and are subject to increased labor and material costs and potential disruptions in supply.

The materials used to manufacture our products may be subject to availability constraints and price volatility caused by changes in demand, weather conditions, supply conditions, government regulations, economic climate and other factors. In addition, labor costs may be subject to volatility caused by the supply of labor, governmental regulations, economic climate and other factors. Increases in the demand for, availability or the price of, materials used to manufacture our products and increases in labor costs could increase the costs to manufacture our products, result in product delivery delays or shortages, and impact our ability to launch new products on a timely basis or at all. We may not be able to pass all or a material portion of any higher material or labor costs on to our customers, which could materially adversely affect our business, financial condition and results of operations.

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We may be unable to meet demand for certain of our products if any of our third-party suppliers cease or interrupt operations, fail to renew contracts with us or otherwise fail to meet their obligations to us.

We may incur substantial costs and receive adverse outcomes in litigation and other legal matters.

Our business, financial condition and results of operations could be materially adversely affected by unfavorable results in pending or future litigation matters. These matters may include, among other things, allegations of violation of U.S. and foreign competition law, labor laws, consumer protection laws and environmental laws and regulations, as well as claims or litigations relating to product liability, intellectual property, securities, breach of contract and tort. In addition, changes in the interpretations of laws and regulations to which we are subject, or in legal standards in one or more of the jurisdictions in which we operate, could increase our exposure to liability. For example, in the U.S., attempts have been made to allow damages for emotional distress and pain and suffering in connection with the loss of, or injury to, a companion animal. If such attempts were successful, our exposure with respect to product liability claims could increase materially.

Litigation matters, regardless of their merits or their ultimate outcomes, are costly, divert management's attention and may materially adversely affect our reputation and demand for our products. We cannot predict with certainty the eventual outcome of pending or future litigation matters. An adverse outcome of litigation or legal matters could result in our being responsible for significant damages. Any of these negative effects resulting from litigation matters could materially adversely affect our business, financial condition and results of operations.

Our business is subject to substantial regulation.

As a global company, we are subject to various state, federal and international laws and regulations, including regulations relating to the development, quality assurance, manufacturing, importation, distribution, marketing and sale of our products. Changes in applicable federal, state, local and foreign laws and regulations could have a material adverse effect on our business, financial condition and results of operations. In addition, our manufacturing facilities, including the manufacturing facilities operated by our CMOs, are subject to periodic inspections by regulatory agencies. An inspection may report conditions or practices that indicate possible violations of regulatory requirements. Our failure, or the failure of third parties we rely on, including CMOs, to comply with these regulatory requirements, allegations of such non-compliance or the discovery of previously unknown problems with a product or manufacturer could result in, among other things, inspection observation notices, warning letters or similar regulatory correspondence, fines, a partial or total shutdown of production in one or more of our facilities while an alleged violation is remediated, withdrawals or suspensions of current products from the market, and civil or criminal prosecution, as well as decreased sales as a result of negative publicity and product liability claims. Any one of these consequences could materially adversely affect our business, financial condition and results of operations.

In addition, we will not be able to market new products unless and until we have obtained all required regulatory approvals in each jurisdiction where we propose to market those products. Even after a product reaches market, it may be subject to re-review and may lose its approvals. Our failure to obtain approvals, delays in the approval process, or our failure to maintain approvals in any jurisdiction, may prevent us from selling products in that jurisdiction until approval or re-approval is obtained, if ever. In regard to Brexit, the European Union ("EU") and the United Kingdom ("UK") negotiators have agreed to a transition period, which is scheduled to last until December 2020. It is unclear if the parties will be able to reach an agreement post-separation.

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The illegal distribution and sale by third parties of counterfeit or illegally compounded versions of our products or of stolen, diverted or relabeled products could have a negative impact on our reputation and business.

Third parties may illegally distribute and sell counterfeit or illegally compounded versions of our products that do not meet the exacting standards of our development, manufacturing and distribution processes. Counterfeit or illegally compounded medicines pose a significant risk to animal health and safety because of the conditions under which they are manufactured and the lack of regulation of their contents. Counterfeit or illegally compounded products are frequently unsafe or ineffective and can be potentially life-threatening to animals. Our reputation and business could suffer harm as a result of counterfeit or illegally compounded products which are alleged to be equivalent and/or which are sold under our brand name. In addition, products stolen or unlawfully diverted from inventory, warehouses, plants or while in transit, which are not properly stored or which have an expired shelf life and which have been repackaged or relabeled and which are sold through unauthorized channels, could adversely impact animal health and safety, our reputation and our business. Public loss of confidence in the integrity of vaccines and/or pharmaceutical products as a result of counterfeiting, illegal compounding or theft could have a material adverse effect on our business, financial condition and results of operations.

We are subject to complex environmental, health and safety laws and regulations.

We are subject to various federal, state, local and foreign environmental, health and safety laws and regulations. These laws and regulations govern matters such as the emission and discharge of hazardous materials into the ground, air or water; the generation, use, storage, handling, treatment, packaging, transportation, exposure to and disposal of hazardous and biological materials, including recordkeeping, reporting and registration requirements; and the health and safety of our employees. Due to our operations, these laws and regulations also require us to obtain, and comply with, permits, registrations or other authorizations issued by governmental authorities. These authorities can modify or revoke our permits, registrations or other authorizations and can enforce compliance through fines and injunctions.

Given the nature of our business, we have incurred, are currently incurring and may in the future incur liabilities for the investigation and remediation of contaminated land under the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or under other federal, state, local and foreign environmental cleanup laws, with respect to our current or former sites, adjacent or nearby third-party sites, or offsite disposal locations. We could be subject to liability for the investigation and remediation of legacy environmental contamination caused by historical industrial activity as sites that we own or on which we operate. The costs associated with future cleanup activities that we may be required to conduct or finance could be material. Additionally, we may become liable to third parties for damages, including personal injury, property damage and natural resource damages, resulting from the disposal or release of hazardous materials into the environment. Such liability could materially adversely affect our business, financial condition and results of operations.

Furthermore, regulatory agencies are showing increasing concern over the impact of animal health products and food animal operations on the environment. This increased regulatory scrutiny has in the past and may in the future necessitate that additional time and resources be spent to address these concerns in both new and existing products.

Our failure to comply with the environmental, health and safety laws and regulations to which we are subject, including any permits issued thereunder, may result in environmental remediation costs, loss of permits, fines, penalties or other adverse governmental or private actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures,

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installation of pollution control equipment or remedial measures. We could also be held liable for any and all consequences arising out of human exposure to hazardous materials, environmental damage or significant environmental, health and safety issues that might arise at a manufacturing or R&D facility. Environmental laws and regulations are complex, change frequently, have tended to become more stringent and stringently enforced over time and may be subject to new interpretation. It is possible that our costs of complying with current and future environmental, health and safety laws, and our liabilities arising from past or future releases of, or exposure to, hazardous materials could materially adversely affect our business, financial condition and results of operations.

The actual or purported intellectual property rights of third parties may negatively affect our business.

A third party may sue us, or our distributors or licensors, including Lilly, or otherwise make a claim, alleging infringement or other violation of such third-party's patents, trademarks, trade dress, copyrights, trade secrets, domain names or other intellectual property rights. If we, our distributors or licensors do not prevail in this type of litigation, we may be required to:

•: pay monetary damages;
•: obtain a license in order to continue manufacturing or marketing the affected products, which may not be available on commercially reasonable terms, or at all; or
•: stop activities, including any commercial activities, relating to the affected products, which could include a recall of the affected products and/or a cessation of sales in the future.

The costs of defending an intellectual property claim could be substantial and could materially adversely affect our business, financial condition and results of operations, even if we successfully defend such claim. Moreover, even if we believe that we do not infringe a validly existing third-party patent, we may choose to license such patent, which would result in associated costs and obligations. We may also incur costs in connection with an obligation to indemnify a distributor, licensor or other third party.

The intellectual property positions of animal health medicines and vaccines businesses frequently involve complex legal and factual questions, and an issued patent does not guarantee us the right to practice the patented technology or develop, manufacture or commercialize the patented product. For example, while we generally enter into proprietary information agreements with our employees and third parties which assign intellectual property rights to us, these agreements may not be honored or may not effectively assign intellectual property rights to us under the local laws of some countries or jurisdictions. We cannot be certain that a competitor or other third party does not have or will not obtain rights to intellectual property that may prevent us from manufacturing, developing or marketing certain of our products, regardless of whether we believe such intellectual property rights are valid and enforceable or we believe we would otherwise be able to develop a more commercially successful product, which may materially adversely affect our business, financial condition and results of operations.

If our intellectual property rights are challenged or circumvented, competitors may be able to take advantage of our research and development efforts or harm the value of our brands.

Our long-term success depends on our ability to market innovative, competitive products. We rely and expect to continue to rely on a combination of intellectual property, including patent, trademark, trade dress, copyright, trade secret and domain name protection, as well as confidentiality and license agreements with our employees and others, to protect our intellectual property and proprietary rights. If we fail to obtain and maintain adequate intellectual property

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protection, we may not be able to prevent third parties from using our proprietary technologies or from marketing products that are very similar or identical to ours.

Our currently pending or future patent applications may not result in issued patents, or be approved on a timely basis, if at all. Similarly, any term extensions that we seek may not be approved on a timely basis, if at all. In addition, our issued patents, or any patents that may issue in the future, may not contain claims sufficiently broad to protect us against third parties with similar technologies or products or provide us with any competitive advantage, including exclusivity in a particular product area.

The validity and scope of our patent claims also may vary between countries, as individual countries have their own patent laws. For example, some countries only permit the issuance of patents covering a novel chemical compound itself, and its first use, and thus further methods of use for the same compound may not be patentable. The validity, enforceability, scope and effective term of patents can be highly uncertain and often involve complex legal and factual questions and proceedings that vary based on the local law of the relevant jurisdiction. Our ability to enforce our patents also depends on the laws of individual countries and each country's practice with respect to enforcement of intellectual property rights. Patent protection must be obtained on a jurisdiction-by-jurisdiction basis, and we only pursue patent protection in countries where we think it makes commercial sense for the given product. In addition, if we are unable to maintain our existing license agreements or other agreements pursuant to which third parties grant us rights to intellectual property, including because such agreements terminate, our financial condition and results of operations could be materially adversely affected.

Patent law reform in the U.S. and other countries may also weaken our ability to enforce our patent rights, or make such enforcement financially unattractive. For instance, in September 2011, the U.S. enacted the America Invents Act, which permits enhanced third-party actions for challenging patents and implements a first-to-invent system. These reforms could result in increased costs to protect our intellectual property or limit our ability to obtain and maintain patent protection for our products in these jurisdictions. Additionally, certain foreign governments have indicated that compulsory licenses to patents may be granted in the case of national emergencies, which could diminish or eliminate sales and profits from those regions and materially adversely affect our financial condition and results of operations.

Our trademarks and brands may provide us with a competitive advantage in the market as they may be known or trusted by consumers. In order to maintain the value of such brands, we must be able to enforce and defend our trademarks. We have pursued and will pursue the registration of trademarks and service marks in the U.S. and internationally; however, enforcing rights against those who knowingly or unknowingly dilute or infringe our brands can be difficult. Effective trademark, service mark, trade dress or related protections may not be available in every country in which our products and services are available. Enforcement is especially difficult in first-to-file countries where "trademark squatters" can prevent us from obtaining adequate protections for our brands. There can be no assurance that the steps we have taken and will take to protect our proprietary rights in our brands and trademarks will be adequate or that third parties will not infringe, dilute or misappropriate our brands, trademarks, trade dress or other similar proprietary rights.

Many of our products are based on or incorporate proprietary information. We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, by generally requiring our employees, consultants, other advisors and other third parties to execute proprietary information and confidentiality agreements upon the commencement of their employment, engagement or other relationship. Despite these efforts and precautions, we may be unable to prevent a third party from copying or otherwise obtaining and using our trade secrets or

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our other intellectual property without authorization and legal remedies may not adequately compensate us for the damages caused by such unauthorized use. Further, others may independently and lawfully develop substantially similar or identical products that circumvent our intellectual property by means of alternative designs or processes or otherwise.

We could be subject to changes in our tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities.

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Changes in the relevant tax laws, regulations, administrative practices, principles and interpretations could adversely affect our future effective tax rates. The U.S. recently enacted tax reform legislation significantly revising U.S. tax law, and a number of other countries are actively considering or enacting tax changes. Other organizations, such as the Organisation for Economic Cooperation and Development and the European Commission, are active regarding tax-related matters which could influence international tax policy in countries in which we operate. While outcomes of these initiatives continue to develop and remain uncertain, modifications to key elements of the U.S. or international tax framework could have a material adverse effect on our consolidated results of operations and cash flows.

In December 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "2017 Tax Act"). The 2017 Tax Act includes significant changes to the U.S. corporate income tax system, such as the reduction in the corporate income tax rate, transition to a modified territorial tax system, changes to business related exclusions, deductions and credits, and modifications to international tax provisions. U.S. GAAP requires that the income tax accounting effects from a change in tax laws or tax rates be recognized in continuing operations in the reporting period that includes the enactment date of the change. These effects include, among other things, re-measuring deferred tax assets and liabilities, evaluating deferred tax assets for valuation allowances and assessing the impact of certain provisions of the 2017 Tax Act. Pursuant to the Staff Accounting Bulletin No. 118 published by the SEC on December 22, 2017 addressing the challenges in accounting for the effects of the Tax Act in the period of enactment, companies must report provisional amounts for those specific income tax effects of the Tax Act for which the accounting is incomplete but a reasonable estimate can be determined. Those provisional amounts will be subject to adjustment during a measurement period of up to one year from the enactment date.

In addition, our effective tax rate is subject to potential risks that various taxing authorities may challenge the pricing of our cross-border arrangements and subject us to additional tax, adversely impacting our effective tax rate and our tax liability. We are also subject to the examination of our tax returns and other tax matters by the Internal Revenue Service (the "IRS") and other tax authorities and governmental bodies. We regularly assess the likelihood of an adverse outcome resulting from these examinations to determine the adequacy of our provision for taxes. There can be no assurance as to the outcome of these examinations. If our effective tax rates were to increase, particularly in the U.S. or other material foreign jurisdictions, or if the ultimate determination of our taxes owed is for an amount in excess of amounts previously accrued, our business, financial condition and results of operations could be materially adversely affected.

Significant portions of our operations are conducted in foreign jurisdictions, including jurisdictions presenting a high risk of bribery and corruption, and are subject to the economic, political, legal and business environments of the countries in which we do business.

Our international operations could be limited or disrupted by any of the following:

•: volatility in the international financial markets;

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•: compliance with governmental controls;
•: difficulties enforcing contractual and intellectual property rights;
•: parallel trade in our products (importation of our products from EU countries where our products are sold at lower prices into EU countries where the products are sold at higher prices);
•: compliance with a wide variety of laws and regulations, such as the U.S. Foreign Corrupt Practices Act (the "FCPA") and similar non-U.S. laws and regulations;
•: compliance with foreign labor laws;
•: burdens to comply with multiple and potentially conflicting foreign laws and regulations, including those relating to environmental, health and safety requirements;
•: changes in laws, regulations, government controls or enforcement practices with respect to our business and the businesses of our customers, including the imposition of limits on our profitability;
•: political and social instability, including crime, civil disturbance, terrorist activities and armed conflicts;
•: trade restrictions and restrictions on direct investments by foreign entities, including restrictions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury and the EU, in relation to our products or the products of farmers and other customers;
•: government limitations on foreign ownership;
•: government takeover or nationalization of business;
•: changes in tax laws and tariffs;
•: imposition of anti-dumping and countervailing duties or other trade-related sanctions;
•: costs and difficulties and compliance risks in staffing, managing and monitoring international operations, including in the use of overseas third-party goods and service providers;
•: corruption risk inherent in business arrangements and regulatory contacts with foreign government entities;
•: longer payment cycles and increased exposure to counterparty risk; and
•: additional limitations on transferring personal information between countries or other restrictions on the processing of personal information.

In addition, international transactions may involve increased financial and legal risks due to differing legal systems and customs. Compliance with these requirements may prohibit the import or export of certain products and technologies or may require us to obtain a license before importing or exporting certain products or technologies. A failure to comply with any of these laws, regulations or requirements could result in civil or criminal legal proceedings, monetary or non-monetary penalties, or both, disruptions to our business, limitations on our ability to import and export products, and damage to our reputation. In addition, variations in the pricing of our products between jurisdictions may result in the unauthorized importation or unauthorized re-importation of our products between jurisdictions and may also result in the imposition of anti-dumping and countervailing duties or other trade-related sanctions. While the impact of these factors is difficult to predict, any of them could materially adversely affect our business, financial condition and results of operations.

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Further, changes in any of these laws, regulations or requirements, or the political environment in a particular country, may affect our ability to engage in business transactions in certain markets, including investment, procurement and repatriation of earnings. For example, Brexit has created political and economic uncertainty, particularly in the UK and the EU. A withdrawal could significantly disrupt the free movement of goods, services, and people between the UK and the EU, and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe. The UK's vote to exit the EU could also result in similar referendums or votes in other European countries in which we do business. The uncertainty surrounding the terms of the UK's withdrawal and its consequences could adversely impact consumer and investor confidence, and could affect sales or regulation of our products. Any of these effects, among others, could materially adversely affect our business, financial condition and results of operations.

Foreign exchange rate fluctuations and potential currency controls affect our results of operations, as reported in our financial statements.

We conduct operations in many areas of the world, involving transactions denominated in a variety of currencies. In 2017, we generated approximately 50% of our revenue in currencies other than the U.S. dollar, principally the euro, British pound, Brazilian real, Australian dollar, Japanese yen, Canadian dollar and Chinese yuan. We are subject to currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenue. In addition, because our financial statements are reported in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations.

We also face risks arising from currency devaluations and the imposition of cash repatriation restrictions and exchange controls. Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation. Cash repatriation restrictions and exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing restrictions or controls. While we currently have no need, and do not intend, to repatriate or convert cash held in countries that have significant restrictions or controls in place, should we need to do so to fund our operations, we may be unable to repatriate or convert such cash, or may be unable to do so without incurring substantial costs.

We depend on sophisticated information technology and infrastructure.

We rely on various information systems to manage our operations, and we increasingly depend on third parties to operate and support our information technology systems, including by way of virtual and cloud-based operations. These third parties include large established vendors as well as small, privately owned companies. Failure by any provider to adequately service our operations, or a change in control or insolvency of one or more providers, may materially adversely affect our business, financial condition and results of operations. Prior to the Separation, we relied on Lilly to negotiate and manage many of our relationships and contracts with these third parties.

Prior to the completion of this offering and in connection with the Separation, we will substantially change a number of our business processes, including changes in our financial reporting and supply chain processes and with respect to where and from whom we obtain information technology systems. In order to support the new business processes under the terms of our transitional services agreement with Lilly, we will make significant configuration, process and data changes within many of the information technology systems we use. If our information technology systems and processes are not sufficient to support our business and financial reporting functions, or if we fail to properly implement our new business processes, our financial reporting

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may be delayed or inaccurate and, as a result, our business, financial condition and results of operations may be materially adversely affected. Even if we are able to successfully configure and change our systems, all technology systems, even with implementation of security measures, are vulnerable to disability, failures or unauthorized access. If our information technology systems were to fail or be breached, this could materially adversely affect our reputation and our ability to perform critical business functions, and sensitive and confidential data could be compromised.

Breaches of our information technology systems or improper disclosure of confidential company or personal data could have a material adverse effect on our reputation and operations, or we may fail to comply with privacy laws, regulations and our contractual obligations.

We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations, including customer, employee and company data. The secure processing, maintenance and transmission of this information is critical to our operations and the legal environment surrounding information security, storage, use, processing, disclosure and privacy is demanding, with the frequent imposition of new and changing requirements. We also store certain information with third parties. Our information systems and those of our third-party vendors are subjected to computer viruses or other malicious codes, unauthorized access attempts, and cyber- or phishing-attacks and also are vulnerable to an increasing threat of continually evolving cybersecurity risks and external hazards, as well as improper or inadvertent staff behavior, all of which could expose confidential company and personal data systems and information to security breaches. Any such breach could compromise our networks, and the information stored therein could be accessed, publicly disclosed, lost or stolen. Such attacks could result in our intellectual property and other confidential information being lost or stolen, disruption of our operations, and other negative consequences, such as increased costs for security measures or remediation costs, and diversion of management attention. Any actual or perceived access, disclosure or other loss of information or any significant breakdown, intrusion, interruption, cyber-attack or corruption of customer, employee or company data or our failure to comply with federal, state, local and foreign privacy laws or contractual obligations with customers, vendors, payment processors and other third parties, could result in legal claims or proceedings, liability under laws or contracts that protect the privacy of personal information, regulatory penalties, disruption of our operations, and damage to our reputation, all of which could materially adversely affect our business, revenue and competitive position. While we will continue to implement additional protective measures to reduce the risk of and detect cyber-incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used in such attacks change rapidly. Our protective measures may not protect us against attacks and such attacks could have a significant impact on our business and reputation. In addition, prior to the Separation we relied on Lilly for certain privacy and compliance functions and personnel and may experience difficulties maintaining and implementing all policies and practices following completion of the Separation.

Increased regulation or decreased governmental financial support relating to the raising, processing or consumption of food animals could reduce demand for our food animal products.

Companies in the food animal sector are subject to extensive and increasingly stringent regulations. See "Business — Regulatory." If food animal producers are adversely affected by new regulations or changes to existing regulations, they may reduce herd or flock sizes or become less profitable and, as a result, they may reduce their use of our products, which may materially adversely affect our business, financial condition and results of operations. Also, many food animal producers benefit from governmental subsidies, and if such subsidies were to be reduced or eliminated, these companies may become less profitable and, as a result, may reduce their use of

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our food animal products. More stringent regulation of the food animal sector, including regarding the use of food animal products, could have a material adverse effect on our business, financial condition and results of operations.

Our business could be materially adversely affected by labor disputes, strikes or work stoppages.

Some of our employees are members of unions, works councils, trade associations or are otherwise subject to collective bargaining agreements in certain jurisdictions, including the U.S. As a result, we are subject to the risk of labor disputes, strikes, work stoppages and other labor-relations matters. We may be unable to negotiate new collective bargaining agreements on similar or more favorable terms and may experience work stoppages, higher ongoing labor costs or other labor problems in the future at our sites. We may also experience difficulty or delays in implementing changes to our workforce in certain markets.

These risks may be increased by the Separation because we will no longer be able to benefit from Lilly's prior relationships and negotiations relating to such agreements. In addition, in France, we anticipate that we will be required to consult with our works council about the Separation prior to entering into a definitive agreement with respect to the French operations. Due to possible delays in the consultation process or resistance from the works council, there is a risk that the separation of the French operations will not be complete by the closing of the offering.

Further, labor-related issues, including at our suppliers or CMOs, could cause a disruption of our operations, which could have a material adverse effect on our business, financial condition and results of operations, potentially resulting in cancelled orders by customers, unanticipated inventory accumulation or shortages and reduced revenue and net income.

The anticipated benefits of the Separation may not be achieved.

We may not be able to achieve the full strategic and financial benefits expected to result from the Separation. Further, such benefits, if ultimately achieved, may be delayed. These benefits include the following:

•: improving strategic and operational flexibility and streamlining decision-making by providing the flexibility to implement our strategic plan and to respond more effectively to different customer needs and the changing economic and industry environment;
•: allowing us to adopt the investment policy and dividend policy best suited to our financial profile and business needs, and allowing us to raise capital as an independent business;
•: creating an independent equity structure that makes possible future acquisitions utilizing our common stock as well as compensation arrangements; and
•: facilitating incentive compensation arrangements for employees more directly tied to the performance of our business, and enhancing employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives of our business.

We may not achieve the anticipated benefits of the Separation for a variety of reasons. In addition, the Separation could materially adversely affect our business, financial condition and results of operations.

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We have underfunded pension plan liabilities. We will require current and future operating cash flow to fund these shortfalls reducing the cash available for other uses.

We have certain defined benefit pension plans, predominantly outside of the U.S., that our employees participate in that are either dedicated to our employees or where the plan assets and liabilities that relate to our employees are legally required to transfer to us at the time of the Separation. The funded status and net periodic pension cost for these plans is materially affected by the discount rate used to measure pension obligations, the longevity and actuarial profile of our workforce, the level of plan assets available to fund those obligations and the actual and expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets or in a change in the expected rate of return on plan assets. As of December 31, 2017, for pension plans with projected benefit obligations in excess of plan assets, the projected benefit obligation was $251.6 million with plan assets of $121.8 million. Any changes in the discount rate could result in a significant increase or decrease in the valuation of pension obligations, affecting the reported funded status of our pension plans as well as the net periodic pension cost in the following years. Similarly, changes in the expected return on plan assets can result in significant changes in the net periodic pension cost in the following years. The need to make additional cash contributions will divert resources from our operations and may have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Indebtedness

We have substantial indebtedness.

We have a significant amount of indebtedness, which could materially adversely affect our business, financial condition and results of operations. As of June 30, 2018, pro forma for the Transactions, we had approximately $2.5 billion of outstanding indebtedness, consisting of the Senior Notes and the Credit Facilities. See "Description of Material Indebtedness."

We may incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our high level of debt could have important consequences, including:

•: making it more difficult for us to satisfy our obligations with respect to our debt;
•: limiting our ability to obtain additional financing to fund future working capital, capital expenditures, business development or other general corporate requirements, including dividends;
•: increasing our vulnerability to general adverse economic and industry conditions;
•: exposing us to the risk of increased interest rates as certain of our borrowings are and may in the future be at variable rates of interest;
•: limiting our flexibility in planning for and reacting to changes in the animal health industry;
•: impacting our effective tax rate; and
•: increasing our cost of borrowing.

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We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures, or to dispose of material assets or operations, alter our dividend policy, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The instruments that will govern our indebtedness may restrict our ability to dispose of assets and may restrict the use of proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.

In addition, we conduct our operations through our subsidiaries. Accordingly, repayment of our indebtedness will depend on the generation of cash flow by our subsidiaries, including certain international subsidiaries, and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Our subsidiaries may not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make adequate distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity and, under certain circumstances, legal, tax and contractual restrictions may limit our ability to obtain cash from our subsidiaries. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock.

Risks Related to Our Relationship with Lilly

Following the completion of the offering, Lilly will continue to have significant control over us for a period of time, which could continue indefinitely, preventing you and other shareholders from influencing significant decisions.

Immediately following the completion of this offering, Lilly will own 82.3% of our outstanding common stock.

Lilly has indicated that, following completion of the offering, it intends to divest its interest in us. However, Lilly is under no obligation to do so or to dispose of any of its shares of our common stock, whether pursuant to the Distribution or otherwise. A determination whether to effect the Distribution or other disposal of any our shares of common stock, and the timing thereof, is within Lilly's sole discretion.

If the Distribution does not occur, or if Lilly does not otherwise dispose of its shares of our common stock, the risks relating to Lilly's control of us will continue to be relevant to our

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shareholders. The liquidity of shares of our common stock in the market may be constrained for as long as Lilly continues to hold a significant position in our common stock. A lack of liquidity in our common stock could depress the price of our common stock.

For so long as Lilly controls the majority of the voting power of our outstanding common stock, it will determine the outcome of all corporate actions requiring shareholder approval. Even if Lilly were to dispose of certain of its shares of our common stock such that it would control less than a majority of the voting power of our outstanding common stock, it may be able to influence the outcome of corporate actions so long as it retains a significant portion of our common stock. During the period of Lilly's ownership, investors in this offering may not be able to affect the outcome of such corporate actions. For such time as Lilly owns a controlling interest in or a significant portion of our common stock, it generally will be able to control or significantly influence, directly or indirectly and subject to applicable law, all matters affecting us, including:

•: the election of directors;
•: determinations with respect to our business direction and policies, including the appointment and removal of officers;
•: determinations with respect to corporate transactions, such as mergers, business combinations or the acquisition or the disposition of assets;
•: our financing and dividend policy;
•: determinations with respect to our tax returns; and
•: compensation and benefits programs and other human resources policy decisions.

Lilly's interests may differ from our interests and the interests of our public shareholders.

Lilly's interests may differ from our interests and the interests of our shareholders, and therefore actions Lilly takes with respect to us, as a controlling or significant shareholder, including under the master separation agreement, may not be favorable to us or our public shareholders.

Lilly will have significant rights under the master separation agreement with us.

Until such time, if any, as Lilly divests all or a significant portion of its shares of our common stock, the master separation agreement will give Lilly certain significant rights. The master separation agreement will provide that, for so long as Lilly and its affiliates beneficially own at least 10% of our voting shares, Lilly will be entitled to designate for nomination the number of representatives on the board of directors that is proportionate to its ownership of our voting shares (rounding up to the nearest whole number of directors). For the avoidance of doubt, so long as Lilly and its affiliates beneficially own at least 80% of our voting shares, Lilly will designate for nomination at least 80% of the members of the board of directors (rounding up to the nearest whole number of directors). In addition, so long as Lilly and its affiliates beneficially own at least a majority of our voting shares, Lilly will be entitled to designate the chairman of the board of directors and a majority of the members of each committee of the board of directors.

In addition, subject to certain exceptions, so long as Lilly beneficially owns at least a majority of our voting shares, we will be required to obtain Lilly's prior written approval before undertaking (or permitting or authorizing any of our subsidiaries to undertake) various significant corporate actions, including:

•: consolidation or merger transactions;
•: dissolution, liquidation or winding up;

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•: incurrence of any indebtedness (as defined in the master separation agreement), other than pursuant to existing debt obligations or unsecured lines of credit as of the date of completion of the offering;
•: altering, amending, terminating, repealing or adopting any provisions inconsistent with our amended and restated articles of incorporation or our amended and restated bylaws (unless required to comply with applicable law); or
•: the issuance, purchase, redemption or other acquisition or retirement for value of any of our equity securities (other than deemed repurchases resulting from the exercise of stock options or tax withholdings).

If Lilly sells a controlling interest in our company to a third party in a private transaction, you may not realize any change-of-control premium on shares of our common stock and we may become subject to the control of a presently unknown third party.

Following the completion of this offering, Lilly will continue to own 82.3% of our outstanding common stock. Subject to the provisions of the lock-up agreement entered into in connection with this offering, Lilly will not be restricted from selling some or all of its shares of our common stock in a privately negotiated transaction or otherwise, and a sale of its shares, if sufficient in size, could result in a change of control of our company.

The ability of Lilly to privately sell its shares of our common stock, with no requirement for a concurrent offer to be made to acquire all of the shares of our common stock held by our other shareholders, could prevent you from realizing any change-of-control premium on your shares of our common stock that may otherwise accrue to Lilly on its private sale of our common stock. Additionally, if Lilly privately sells its controlling equity interest in our company, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with those of other shareholders. In addition, if Lilly sells a controlling interest in our company to a third party, our indebtedness may be subject to acceleration, and our other commercial agreements and relationships, including any remaining agreements with Lilly, could be impacted, all of which may adversely affect our ability to run our business as described herein and may have a material adverse effect on our business, financial condition and results of operations.

For so long as Lilly controls a majority of the voting power of our outstanding common stock, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of companies that are subject to such requirements.

Upon completion of this offering, we will qualify as a "controlled company" within the meaning of the corporate governance standards of the NYSE because Lilly will control a majority of the voting power of our outstanding common stock entitled to vote in the election of directors. A "controlled company" may elect not to comply with certain corporate governance requirements of the NYSE. Consistent with this, the master separation agreement will provide that, for so long as we are a "controlled company," we will use our reasonable best efforts to take advantage of available "controlled company" exemptions from compliance with certain corporate governance requirements under NYSE rules, including:

•: the requirement that a majority of the board of directors consist of independent directors;
•: the requirement that our corporate governance committee be composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;

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•: the requirement that our compensation committee be composed entirely of independent directors; and
•: the requirement for an annual performance evaluation of our corporate governance and compensation committees.

While Lilly controls a majority of the voting power of our outstanding common stock, we may not have a majority of independent directors or corporate governance and compensation committees consisting entirely of independent directors and we will have annual performance evaluations of these committees from time to time.

Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.

As a result of the Separation, we will lose Lilly's brand, reputation, capital base and other resources, and may experience difficulty operating as a standalone company.

We believe our association with Lilly has contributed to our building relationships with our customers due to Lilly's globally recognized brand and perceived high-quality products. This offering and the Separation could adversely affect our ability to attract and retain customers, which could result in reduced sales of our products.

The loss of Lilly's scale, capital base and financial strength may also prompt suppliers to reprice, modify or terminate their relationships with us. In addition, Lilly's reduction of its ownership of our company could potentially cause some of our existing agreements and licenses to be terminated. We cannot predict with certainty the effect that this offering, the Separation or the Distribution will have on our business, our clients, vendors or other persons, or whether our Elanco brand will be accepted in the marketplace.

Further, because we have not operated as a standalone company in the past, we may have difficulty doing so. We may need to acquire assets and resources in addition to those provided by Lilly to our company, and in connection with the Separation, may also face difficulty in separating our assets from Lilly's assets and integrating newly acquired assets into our business. Our business, financial condition and results of operations could be materially adversely affected if we have difficulty operating as a standalone company, fail to acquire assets that prove to be important to our operations or incur unexpected costs in separating our assets from Lilly's assets or integrating newly-acquired assets.

Lilly may compete with us.

Lilly will not be restricted from competing with us in the animal health business. Although Lilly has informed us it has no current intention to compete with us in the animal health business, if Lilly in the future decides to engage in the type of business we conduct, it may have a competitive advantage over us, which may cause our business, financial condition and results of operations to be materially adversely affected.

Certain of our directors may have actual or potential conflicts of interest because of their positions with Lilly.

Following this offering, a majority of our directors will retain their positions as employees with Lilly. In addition, such directors may own Lilly common stock or equity awards. For certain of these individuals, their holdings of Lilly common stock or equity awards may be significant compared to their total assets. Their position at Lilly and the ownership of any Lilly equity or equity awards creates, or may create the appearance of, conflicts of interest when these directors are faced with decisions that could have different implications for Lilly than for us. These potential conflicts could

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arise, for example, over matters such as the desirability of changes in our business and operations, funding and capital matters, regulatory matters, matters arising with respect to the master separation agreement and other agreements with Lilly relating to the Separation or otherwise, employee retention or recruiting, or our dividend policy.

Provisions relating to certain relationships and transactions in our amended and restated articles of incorporation address certain potential conflicts of interest between us, on the one hand, and Lilly and its officers who are directors of our Company, on the other hand. By becoming our shareholder, you will be deemed to have notice of and have consented to these provisions of our amended and restated articles of incorporation. Although these provisions are designed to resolve certain conflicts between us and Lilly fairly, we cannot assure you that any conflicts will be so resolved. The principles for resolving these potential conflicts of interest are described under "Description of Capital Stock — Conflicts of Interest; Corporate Opportunities."

Lilly and its directors and officers will have limited liability to us or you for breach of fiduciary duty.

Our amended and restated articles of incorporation provide that, subject to any contractual provision to the contrary, Lilly will have no obligation to refrain from:

•: engaging in the same or similar business activities or lines of business as we do; or
•: doing business with any of our clients, customers or vendors.

Under our amended and restated articles of incorporation, neither Lilly nor any officer or director of Lilly, including our directors who are also Lilly employees, except as provided therein, is liable to us or to our shareholders for breach of any fiduciary duty by reason of any of these activities.

To preserve the tax-free treatment to Lilly and its stockholders of the Separation and the potential Distribution, we may not be able to engage in certain transactions.

To preserve the tax-free treatment to Lilly and its stockholders of the Separation and the potential Distribution, under the tax matters agreement, we will be restricted from taking any action that prevents the Separation and the potential Distribution, taken together, from being tax-free for U.S. federal income tax purposes. These restrictions may limit our ability to pursue certain strategic transactions or engage in other transactions, including use of our common stock to make acquisitions and equity capital market transactions that might increase the value of our business.

We will incur significant charges in connection with this offering and the Separation and incremental costs as a standalone public company.

We will need to replicate or replace certain functions, systems and infrastructure to which we will no longer have the same access after this offering. We may also need to make investments or hire additional employees to operate without the same access to Lilly's existing operational and administrative infrastructure. These initiatives may be costly to implement. Due to the scope and complexity of the underlying projects relative to these efforts, the amount of total costs could be materially higher than our estimate, and the timing of the incurrence of these costs is subject to change.

Lilly currently performs or supports many important corporate functions for our company. Our combined financial statements reflect charges for these services on an allocated basis. Following this offering, many of these services will be governed by our transitional services agreement with Lilly. Under the transitional services agreement we will be able to use these Lilly services for a fixed term established on a service-by-service basis. Partial reduction in the provision of any service or

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termination of a service prior to the expiration of the applicable fixed term requires Lilly's consent. In addition, either party will be able to terminate the agreement due to a material breach of the other party, upon prior written notice, subject to limited cure periods or if the other party undergoes a change of control.

We will pay Lilly mutually agreed-upon fees for these services, which will be based on Lilly's costs (including third-party costs) of providing the services through March 31, 2021 and subject to a mark-up of 7% thereafter, with additional inflation-based escalation beginning January 1, 2022. However, since our transitional services agreement was negotiated in the context of a parent-subsidiary relationship, the terms of the agreement, including the fees charged for the services, may be higher or lower than those that would be agreed to by parties bargaining at arm's length for similar services and may be higher or lower than the costs reflected in the allocations in our historical financial statements. In addition, while these services are being provided to us by Lilly, our operational flexibility to modify or implement changes with respect to such services or the amounts we pay for them will be limited. Prior to the Distribution, if effected, Lilly will have the unilateral right to resolve disputes under the transitional services agreement.

We may not be able to replace these services or enter into appropriate third-party agreements on terms and conditions, including cost, comparable to those that we will receive from Lilly under our transitional services agreement. Additionally, after the transitional services agreement terminates, we may be unable to sustain the services at the same levels or obtain the same benefits as when we were receiving such services and benefits from Lilly. When we begin to operate these functions separately, if we do not have our own adequate systems and business functions in place, or are unable to obtain them from other providers, we may not be able to operate our business effectively or at comparable costs, and our profitability may decline. In addition, we have historically received informal support from Lilly, which may not be addressed in our transitional services agreement. The level of this informal support will diminish or be eliminated following this offering.

In addition, our historical combined financial statements include the attribution of certain assets and liabilities that historically have been held at the Lilly corporate level but which are specifically identifiable or attributable to the businesses being transferred to us in connection with the Separation. The value of the assets and liabilities we assume in connection with the Separation could ultimately be materially different than such attributions, which could have a material adverse effect on our financial condition.

Lilly's rights as licensor under the intellectual property and technology license agreement could limit our ability to develop and commercialize certain products.

Prior to the Separation, we had the ability to leverage certain of Lilly's intellectual property. As part of the Separation, we intend to enter into an intellectual property and technology license agreement. Pursuant to the intellectual property and technology license agreement, Lilly will license to us certain of its intellectual property (excluding trademarks) related to the animal health business and a license for us to use Lilly's proprietary compound library for a period of two years plus up to three additional one-year periods, each such period to be granted under Lilly's sole discretion. If we fail to comply with our obligations under this agreement and Lilly exercises its right to terminate it, our ability to continue to research, develop and commercialize products incorporating that intellectual property will be limited. In addition, this agreement includes limitations that affect our ability to develop and commercialize certain products, including in circumstances where Lilly has an interest in the licensed intellectual property in connection with its human health development programs. These limitations and termination rights may make it more difficult, time consuming or expensive for us to develop and commercialize certain new products, or may result in our products being later to market than those of our competitors. For a summary description of the terms of the

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intellectual property and technology license agreement, see "Certain Relationships and Related Party Transactions — Relationship with Lilly — Intellectual Property and Technology License Agreement."

Risks Related to Our Initial Public Offering and Ownership of Our Common Stock

An active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the initial public offering price.

Prior to the completion of this offering, there has been no public market for our common stock. An active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The price for our common stock in this offering will be determined by negotiations among Lilly, us and representatives of the underwriters, and it may not be indicative of prices that will prevail in the open market following this offering. Further, our independent directors, officers and certain employees have the opportunity to purchase up to 3% of the shares of our common stock offered in this offering at the initial public offering price in a directed share program. To the extent these individuals purchase shares in this offering, fewer shares may be actively traded in the public market because these stockholders will be restricted from selling the shares by a 180-day lock-up restriction, which would reduce the liquidity of the market for our common stock. Consequently, you may not be able to sell your common stock at or above the initial public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock, and it may impair our ability to attract and motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using our common stock as consideration.

The price of our common stock may fluctuate substantially.

You should consider an investment in our common stock to be risky, and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this section of the prospectus, are:

•: our announcements or our competitors' announcements regarding new products, enhancements, significant contracts, acquisitions or strategic investments;
•: changes in earnings estimates or recommendations by securities analysts, if any, who cover our common stock;
•: failures to meet external expectations or management guidance;
•: fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
•: changes in our capital structure or dividend policy, including as a result of the Distribution, future issuances of securities, sales of large blocks of common stock by our shareholders, including Lilly, or our incurrence of additional debt;
•: reputational issues;
•: changes in general economic and market conditions in or any of the regions in which we conduct our business;
•: changes in industry conditions or perceptions;
•: changes in applicable laws, rules or regulations and other dynamics; and

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•: announcements or actions taken by Lilly as our principal shareholder.

In addition, if the market for stocks in our industry or related industries, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

You will incur immediate dilution as a result of this offering.

If you purchase common stock in this offering, you will pay more for your shares than the pro forma net tangible book value of your shares. As a result, you will incur immediate dilution of $22.64 per share, representing the difference between the assumed initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus) and our pro forma net tangible book deficit per share as of June 30, 2018 after giving effect to the Transactions and this offering of $(1.14). Accordingly, should we be liquidated at our book value, you would not receive the full amount of your investment.

Our historical combined financial data is not necessarily representative of the results we would have achieved as a standalone company and may not be a reliable indicator of our future results.

Our historical combined financial data included in this prospectus does not reflect the financial condition, results of operations or cash flows we would have achieved as a standalone company during the periods presented or those we will achieve in the future. This is primarily the result of the following factors:

•: our historical combined financial data does not reflect the Separation;
•: our historical combined financial data reflects expense allocations for certain support functions that are provided on a centralized basis within Lilly, such as expenses for executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations that may be higher or lower than the comparable expenses we would have actually incurred, or will incur in the future, as a standalone company;
•: our cost of debt and our capital structure will be different from that reflected in our historical combined financial statements;
•: significant increases may occur in our cost structure as a result of this offering, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"); and
•: this offering may have a material effect on our customers and other business relationships, including supplier relationships, and may result in the loss of preferred pricing available by virtue of our reduced relationship with Lilly.

Our financial condition and future results of operations, after giving effect to the Separation, will be materially different from amounts reflected in our historical combined financial statements included elsewhere in this prospectus. As a result of the Separation, it may be difficult for investors to compare our future results to historical results or to evaluate our relative performance or trends in our business.

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The pro forma and non-GAAP financial measures included in this prospectus are presented for informational purposes only and may not be an indication of our financial condition or results of operations in the future.

The unaudited pro forma condensed combined financial statements included in this prospectus are presented for information purposes only and are not necessarily indicative of what our actual financial condition or results of operations would have been had the Transactions been completed on the date indicated. The assumptions used in preparing the pro forma financial information may not prove to be accurate and other factors may affect our financial condition or results of operations. Accordingly, our financial condition and results of operations in the future may not be consistent with, or evident from, such pro forma financial information. The non-GAAP financial measures included in this prospectus, adjusted EBITDA and adjusted net income, include information that we use to evaluate our past performance, but you should not consider such information in isolation or as an alternative to measures of our performance determined under U.S. GAAP. For further information regarding such limitations, see "Prospectus Summary — Summary Historical Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Data."

As a standalone public company, we may expend additional time and resources to comply with rules and regulations that do not currently apply to us, and failure to comply with such rules may lead investors to lose confidence in our financial data.

As a standalone public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations of the NYSE. We have established all of the procedures and practices required as a subsidiary of Lilly, but we must implement others as a separate, standalone public company. Establishing such procedures and practices will increase our legal, accounting and financial compliance costs, will make some activities more difficult, time-consuming and costly and could be burdensome on our personnel, systems and resources. We will devote significant resources to address these public company requirements, including compliance programs and investor relations, as well as our financial reporting obligations. As a result, we have and will continue to incur significant legal, accounting and other expenses that we did not previously incur to comply with these rules and regulations. Furthermore, the need to establish the corporate infrastructure necessary for a standalone public company may divert some of management's attention from operating our business and implementing our strategy. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements.

We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations. In particular, as a public company, our management will be required to conduct an annual evaluation of our internal controls over financial reporting and include a report of management on our internal controls in our annual reports on Form 10-K. Under current rules, we will be subject to these requirements beginning with our annual report on Form 10-K for the year ended December 31, 2019. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal controls over financial reporting pursuant to Auditing Standard No. 5 beginning with our annual report on Form 10-K for the year ended December 31, 2019. If we are unable to conclude that we have effective internal controls over financial reporting, or if our registered public accounting firm is unable to provide us with an attestation and an unqualified report as to the effectiveness of our internal controls over financial reporting, investors could lose

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confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.

While we currently intend to pay a quarterly cash dividend to our common shareholders, we may change our dividend policy at any time.

Although we currently intend to pay a quarterly cash dividend to our common shareholders, we have no obligation to do so, and our dividend policy may change at any time without notice to our shareholders. We currently intend to pay a quarterly cash dividend on our common stock of approximately $0.06 per share commencing following the fourth quarter of 2018, subject to the discretion of our board of directors. Returns on your investment will primarily depend on the appreciation, if any, in the price of our common stock. We anticipate that we will retain most of our future earnings, if any, for use in the development and expansion of our business, repayment of indebtedness and for general corporate purposes. The declaration and payment of dividends to holders of our common stock will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including our financial condition, results of operations, current and anticipated cash needs, cash flows available in the U.S., impact on our effective tax rate, indebtedness, legal requirements and other factors that our board of directors deems relevant.

The distributions we pay on our common stock may not qualify as dividends for U.S. federal income tax purposes, which could adversely affect the U.S. federal income tax consequences to you of owning our common stock.

Generally, any distributions that we make to a stockholder with respect to its shares of our common stock will constitute a dividend for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. We had no accumulated earnings and profits, as determined for U.S. federal income tax purposes, as of June 30, 2018. Furthermore, our ability to generate earnings and profits, as determined for U.S. federal income tax purposes, in any future year is subject to a number of variables that are uncertain and difficult to predict.

Generally, any distribution not constituting a dividend under the rules described above will be treated as first reducing your adjusted basis in your shares of our common stock and, to the extent that the distribution exceeds your adjusted basis in your shares of our common stock, as gain from the sale or exchange of such shares, and if you are a domestic corporation, you will not be entitled to claim, with respect to such non-dividend distribution, a "dividends-received" deduction, which generally applies to dividends received from other domestic corporations.

Prospective foreign investors should see "Material U.S. Federal Income and Estate Tax Considerations for Non-U.S. Holders" for a more detailed description of the material U.S. federal income tax consequences of the ownership and disposition of shares of our common stock to such investors.

Applicable laws and regulations, provisions of our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws and certain contractual rights granted to Lilly may discourage takeover attempts and business combinations that shareholders might consider in their best interests.

Applicable laws, provisions of our amended and restated articles of incorporation and our amended and restated bylaws and certain contractual rights that will be granted to Lilly under the master separation agreement may delay, deter, prevent or render more difficult a takeover attempt that our shareholders might consider in their best interests. For example, they may prevent our

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shareholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.

Our amended and restated articles of incorporation and our amended and restated bylaws contain provisions that are intended to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover, which could deter coercive takeover practices and inadequate takeover bids. These provisions provide for:

•: a board of directors divided into three classes with staggered terms;
•: advance notice requirements regarding how our shareholders may present proposals or nominate directors for election at shareholder meetings (except for Lilly's designation of persons for nomination by the board of directors);
•: the right of our board of directors to issue one or more series of preferred stock with such powers, rights and preferences as the board of directors shall determine;
•: only the board of directors to fill newly-created directorships or vacancies on our board of directors;
•: limitations on the ability of shareholders to call special meetings of shareholders and require that all shareholder action be taken at a meeting rather than by written consent;
•: a two-thirds shareholder vote requirement to amend our amended and restated articles of incorporation;
•: the exclusive right of our board of directors to amend our amended and restated bylaws; and
•: the requirement that a 66 ² / 3 % vote is necessary to remove directors.

These limitations may adversely affect the prevailing market price and market for our common stock if they are viewed as limiting the liquidity of our stock or discouraging takeover attempts in the future.

The Distribution or future sales of our common stock or securities convertible into or exchangeable for common stock, or the perception that the Distribution or such sales may occur, could depress the market price of our common stock.

We are unable to predict with certainty whether or when Lilly will sell a substantial number of shares of our common stock to the extent it retains shares following the Distribution or in the event the Distribution does not occur. The Distribution or sale by Lilly of a substantial number of shares after this offering, or a perception that the Distribution or such sales could occur, could significantly reduce the market price of our common stock.

We may also issue additional shares of common stock or convertible debt securities to finance future acquisitions or for other corporate purposes. Sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock. Further, we cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock will have on the market price of our common stock. Any such issuance could result in substantial dilution to our existing shareholders.

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After the expiration of the lock-up period, there may be sales of a substantial amount of our common stock by our current shareholders, and these sales could cause the price of our common stock to decline.

Lilly and our executive officers and directors have entered into lock-up agreements with the underwriters under which they have agreed, subject to specific exceptions, not to sell, directly or indirectly, any shares of common stock without the permission of each of Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley and Co. LLC for a period of 180 days following the date of this prospectus. We refer to such period as the lock-up period. When the lock-up period expires, we and our shareholders subject to a lock-up agreement will be able to sell shares of our common stock in the public market. In addition, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley and Co. LLC may, in their sole discretion, release all or some portion of the shares subject to lock-up agreements at any time and for any reason. See "Shares Eligible for Future Sale." Sales of a substantial number of such shares upon expiration of the lock-up agreements, the perception that such sales may occur, or early release of these agreements, could cause our market price to decline or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.

If Lilly makes the Distribution, and there is later a determination that the Separation and the Distribution, taken together, are not tax-free for U.S. federal income tax purposes because the facts, assumptions, representations or undertakings underlying the tax opinion are incorrect or for any other reason, then Lilly and its shareholders could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities.

Completion by Lilly of the Distribution is expected to be conditioned on, among other things, the receipt of an opinion of tax counsel to the effect that, among other things, the Separation, together with the Distribution, will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"). The opinion will rely on certain facts, assumptions, representations and undertakings from Lilly and us regarding the past and future conduct of the companies' respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not otherwise satisfied, the conclusions reached in the opinion could be adversely affected and the Separation and/or the Distribution may not qualify for tax-free treatment. Furthermore, an opinion of counsel is not binding on the IRS or the courts, and the IRS could determine on audit that the Separation, together with the Distribution, is taxable if it disagrees with the conclusions in the opinion or for other reasons, including as a result of certain significant changes in the stock ownership of Lilly or us after the Distribution. Accordingly, no assurance can be given that the IRS will not challenge the conclusions set forth in the opinion or that a court would not sustain such a challenge. If the Separation and/or the Distribution is determined to not be tax-free for U.S. federal income tax purposes, Lilly and its shareholders could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities under applicable law or as a result of our indemnification obligations to Lilly under the tax matters agreement.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, including, without limitation, statements concerning our industry and our operations, performance and financial condition, including in particular, statements relating to our business, growth strategies, product development efforts and future expenses. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, such as those contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national, or global political, economic, business, competitive, market, and regulatory conditions and the following:

•: heightened competition, including from new innovation or generics;
•: the impact of disruptive innovations and advances in veterinary medical practices, animal health technologies and alternatives to animal-derived protein;
•: changes in regulatory restrictions on the use of antibiotics in food animals, as well as changing market demand regarding the use of antibiotics and productivity products;
•: our ability to implement our business strategies or achieve targeted cost efficiencies and gross margin improvements;
•: consolidation of our customers and distributors;
•: the success of our R&D, acquisition and licensing efforts;
•: unanticipated safety, quality or efficacy concerns associated with our products;
•: the impact of weather conditions and the availability of natural resources;
•: changes in U.S. foreign trade policy, imposition of tariffs or trade disputes;
•: the impact of global macroeconomic conditions; and
•: the effect of the Separation or the Distribution, if consummated, on our business.

See "Risk Factors" for a further description of these and other factors. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this prospectus. Any forward-looking statement made by us in this prospectus speaks only as of the date thereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should be viewed as historical data.

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $1,292.6 million, or approximately $1,486.5 million if the underwriters exercise in full their option to purchase additional shares, assuming an initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to pay to Lilly as consideration for the portion of its animal health businesses Lilly is contributing to us in connection with the Separation all of the net proceeds we will receive from the sale of our common stock in this offering, including any net proceeds we receive as a result of any exercise of the underwriters' option to purchase additional shares, together with the net proceeds we received from the Senior Notes Offering and the entry into the Term Facility; provided, to the extent the unrestricted cash held by us following the completion of this offering is less than (or more than) $300 million, we will retain a portion of the net proceeds (or pay additional amounts to Lilly) so that the unrestricted cash held by us for working capital and other general corporate purposes following the completion of the offering is $300 million. In addition, a portion of the consideration to be paid to Lilly will be temporarily retained by us as restricted cash in connection with the anticipated transfer to us from Lilly of certain animal health assets in certain jurisdictions that are anticipated to occur following the completion of the offering (which consideration shall be paid to Lilly if, despite our and Lilly's cooperation and commercially reasonable efforts, such transfers have not occurred prior to a date mutually agreed by us and Lilly).

Assuming no exercise of the underwriters' option to purchase additional shares, each $1.00 increase (decrease) in the assumed initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering by $60.1 million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, an increase (decrease) of one million shares of common stock sold in this offering by us would increase (decrease) our net proceeds by $20.6 million, assuming the initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus), remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. However, any such changes will not impact the cash retained by us following our payment to Lilly of consideration in connection with Separation.

The foregoing represents our current intentions with respect to the use and allocation of the net proceeds of this offering based upon our present plans and business conditions, but our management will have significant flexibility and discretion in applying the net proceeds. The occurrence of unforeseen events or changed business conditions could result in application of the net proceeds of this offering in a manner other than as described in this prospectus.

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DIVIDEND POLICY

We initially expect to pay quarterly cash dividends to holders of our common stock of approximately $0.06 per share commencing following the fourth quarter of 2018, subject to the discretion of our board of directors.

Our ability to pay dividends may be restricted by any future indebtedness we incur.

We are a holding company that does not conduct any business operations of our own. As a result, our ability to pay cash dividends on our common stock is dependent upon cash dividends and distributions and other transfers from our subsidiaries.

The declaration and payment of dividends to holders of our common stock will be at the discretion of our board of directors and will take into account:

•: general economic business conditions;
•: our earnings, financial condition and results of operations;
•: cash flows available;
•: our capital requirements;
•: our prospects;
•: restrictions in our debt instruments, including the indenture governing our Senior Notes and the credit agreement governing our Credit Facilities;
•: legal restrictions; and
•: such other factors as our board of directors may deem relevant.

See "Risk Factors — Risks Related to Our Indebtedness," "Risk Factors — Risks Related to Our Initial Public Offering and Ownership of Our Common Stock — While we currently intend to pay a quarterly cash dividend to our common shareholders, we may change our dividend policy at any time," "Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources," "Description of Material Indebtedness" and "Description of Capital Stock."

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2018:

•: on a historical basis; and
•: on a pro forma basis to give effect to (i) the Transactions and (ii) the sale of 62,900,000 shares of our common stock in this offering at an assumed public offering price of $21.50 per share, (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus), and the application of the net proceeds received by us from this offering as described under "Use of Proceeds."

The information below is not necessarily indicative of what our cash and cash equivalents and capitalization would have been had the Transactions been completed as of June 30, 2018. In addition, it is not indicative of our future cash and cash equivalents and capitalization. This table should be read in conjunction with "Use of Proceeds," "Selected Historical Combined Financial Data," "Unaudited Pro Forma Condensed Combined Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Capital Stock" and the combined financial statements and notes thereto appearing elsewhere in this prospectus.


		June 30, 2018

		Historical			Pro Forma For Transactions and Offering ⁽¹⁾

		(Dollars in millions)
Cash and cash equivalents	$	321.0		$	300.0



Debt ⁽²⁾ :
Revolving Credit Facility ⁽³⁾	$	—		$	—
Term Facility ⁽⁴⁾		—			500.0
3.912% Senior Notes due 2021		—			500.0
4.272% Senior Notes due 2023		—			750.0
4.900% Senior Notes due 2028		—			750.0
Debt issuance costs		—			(24.5	)

Total debt		—			2,475.5

Equity ⁽⁵⁾ :
Net parent company investment		7,947.5			—
Common stock, no par value, 5,000,000,000 shares authorized, 356,190,000 shares issued and outstanding on a pro forma basis		—			—
Additional paid in capital		—			5,423.3
Accumulated other comprehensive income (loss)		(360.9	)		(360.9	)

Total equity		7,586.6			5,062.4

Total capitalization	$	7,586.6		$	7,537.9

(1): Each $1.00 increase or decrease in the public offering price per share would increase or decrease, as applicable, our net proceeds, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, by $60.1 million (assuming no exercise of the underwriters' option to purchase additional shares), assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same. Similarly, an increase or decrease of one million shares of common stock sold in this offering by us would increase or decrease, as applicable, our net proceeds, after deducting the underwriting discounts and commissions and estimated offering

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expenses payable by us, by $20.6 million, based on an assumed initial public offering price of $21.50 per share, (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus). However, any such changes will not impact the cash retained by us following our payment to Lilly of consideration in connection with the Separation. See "Use of Proceeds."

(2): For a description of our indebtedness, see "Description of Material Indebtedness."
(3): On September 5, 2018, we entered into a five-year $750 million senior unsecured revolving credit facility. The Revolving Facility will not be available for borrowings until the date on which certain conditions, including the completion of this offering, are satisfied. We expect that these conditions will be met concurrently with the completion of this offering. Subject to certain conditions, we expect to have the right to increase the Revolving Facility by up to $250 million. For the pro forma basis presentation, we have not assumed any borrowings under the Revolving Facility.
(4): On September 5, 2018, we entered into a Term Facility in an amount of $500 million.
(5): We have authorized preferred stock, but no preferred shares are assumed to be issued and outstanding on the date of the completion of this offering.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book deficit per share of our common stock upon the completion of this offering. Dilution results from the fact that the per share offering price of our common stock is in excess of the book deficit per share attributable to new investors.

Our pro forma net tangible book deficit as of June 30, 2018 was $(404.8) million, or $(1.38) per share of common stock without adjusting for the sale of common stock in this offering. Pro forma net tangible book deficit represents the amount of total tangible assets less total liabilities after giving pro forma effect to the Transactions, and pro forma net tangible book deficit per share represents pro forma net tangible book deficit divided by the number of shares of common stock outstanding immediately prior to the completion of the offering.

After giving further effect to (i) the sale of 62,900,000 shares of common stock in this offering at the assumed initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus) and (ii) the application of the net proceeds from this offering, our pro forma as adjusted net tangible book deficit as of June 30, 2018 would have remained $(404.8) million, or $(1.14) per share. This represents an immediate decrease in pro forma as adjusted net tangible book deficit of $0.24 per share to our existing investors and an immediate dilution of $22.64 per share to new investors.

The following table illustrates this dilution on a per share of common stock basis:


Assumed initial public offering price per share				$	21.50
Pro forma net tangible book deficit per share as of June 30, 2018	$	(1.38	)
Decrease in pro forma net tangible book deficit per share attributable to new investors	$	0.24

Pro forma as adjusted net tangible book deficit per share after this offering and the application of the use of proceeds				$	(1.14	)

Dilution per share to new investors in this offering				$	22.64

If the underwriters were to fully exercise their option to purchase 9,435,000 additional shares of our common stock, our pro forma as adjusted net tangible book deficit would be $(1.11) per share. This represents a decrease in pro forma as adjusted net tangible book deficit of $0.27 per share to our existing investors and an immediate dilution of $22.61 per share to new investors.

A $1.00 increase/(decrease) in the assumed initial public offering price of $21.50 per share (the midpoint of the price range set forth on the cover of this prospectus) would not impact our pro forma net tangible book deficit or our pro forma net tangible book deficit per share but it would increase/(decrease) dilution per share to new investors in this offering by $1.00.

A one million increase/(decrease) in the number of shares offered by us would not impact our pro forma as adjusted net tangible book deficit, but it would (decrease)/increase our pro forma as adjusted net tangible book deficit per share by $0.003 and the dilution per share to new investors by $0.003, in each case assuming the initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus) remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, on a pro forma as adjusted basis as of June 30, 2018, after giving effect to this offering, the difference between our existing shareholder and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid

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to us, or to be paid, and the average price per share paid by our existing shareholder or to be paid by new investors purchasing shares in this offering, at an assumed initial public offering price of $21.50 per share, (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus), before deducting the estimated underwriting discounts and commissions:


	Shares Purchased				Total Consideration ⁽¹⁾				Average Price

	Number	Percent			$ in Millions	Percent			Per Share

Existing shareholder ⁽¹⁾	293,290,000	82.3	%	$	5,062.4	78.9	%	$	17.26
New investors	62,900,000	17.7			1,352.4	21.1			21.50

Total	356,190,000	100.0	%	$	6,414.8	100.0	%	$	18.01

(1): Total consideration represents the pro forma book value of the net assets being contributed to us by Lilly in connection with the Separation.

If the underwriters were to fully exercise their option to purchase 9,435,000 additional shares of our common stock, the percentage of shares of our common stock held by our existing shareholder would be 80.2%, and the percentage of shares of our common stock held by new investors would be 19.8%.

The foregoing tables and calculations exclude up to 11,000,000 shares of our common stock reserved for future issuance under our equity incentive plan as of the date hereof, including up to 5,500,000 shares of our common stock authorized to be issued under our equity incentive plan prior to the Distribution, which will be effective upon the completion of this offering. To the extent equity awards are granted and exercised or become vested, there will be further dilution to new investors.

The above discussion and tables are based on the number of shares outstanding at June 30, 2018. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our shareholders.

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SELECTED HISTORICAL COMBINED FINANCIAL DATA

The following tables set forth our selected historical combined financial data for the periods indicated below.

The selected historical combined statement of operations data for the six months ended June 30, 2018 and 2017 and the selected historical combined balance sheet data as of June 30, 2018 and 2017 presented below have been derived from our unaudited combined financial statements included elsewhere in this prospectus. The selected historical combined statement of operations data for the years ended December 31, 2017, 2016 and 2015 and the selected historical combined balance sheet data as of December 31, 2017 and 2016 presented below have been derived from our audited combined financial statements included elsewhere in this prospectus. The selected historical combined statement of operations data for the years ended December 31, 2014 and 2013 and the selected historical combined balance sheet data as of December 31, 2015, 2014 and 2013 presented below have been derived from unaudited combined financial information not included elsewhere in this prospectus.

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You should read the information set forth below together with "Prospectus Summary — Summary Historical Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Capitalization" and our combined financial statements and the related notes thereto included elsewhere in this prospectus.


		Six Months Ended June 30,						Year Ended December 31,

		2018			2017			2017			2016			2015			2014			2013

		(Dollars in millions)
Statement of Operations Data:
Revenue	$	1,506.4		$	1,437.6		$	2,889.0		$	2,913.5		$	2,909.1		$	2,066.0		$	1,928.4

Costs, expenses and other:
Cost of sales		791.5			712.7			1,493.9			1,409.0			1,533.7			932.6			842.1
Research and development		126.6			127.9			251.7			265.8			291.0			208.5			216.4
Marketing, selling and administrative		371.1			388.4			779.8			784.8			916.0			561.2			511.0
Amortization of intangible assets		98.6			109.4			221.2			170.7			163.0			57.6			49.0
Asset impairment, restructuring and other special charges		70.4			165.6			375.1			308.4			263.3			38.8			—
Other — net, (income) expense		10.7			1.6			(0.1	)		(2.8	)		1.6			1.4			1.9

Income (loss) before income tax expense		37.5			(68.0	)		(232.6	)		(22.4	)		(259.5	)		265.9			308.0
Income tax expense (benefit)		27.6			60.5			78.1			25.5			(48.7	)		101.0			117.0

Net income (loss)	$	9.9		$	(128.5	)	$	(310.7	)	$	(47.9	)	$	(210.8	)	$	164.9		$	191.0



Net income (loss) as a percent of revenue		1	%		(9	)%		(11	)%		(2	)%		(7	)%		8	%		10	%


		As of June 30,				As of December 31,

		2018		2017		2017		2016		2015		2014		2013

		(Dollars in millions)
Balance Sheet Data:
Total assets	$	8,577.4	$	8,996.1	$	8,940.3	$	8,099.7	$	8,433.6	$	2,980.6	$	2,163.7
Total liabilities	$	990.8	$	1,036.4	$	1,149.5	$	1,071.8	$	993.6	$	541.0	$	595.3
Total equity	$	7,586.6	$	7,959.7	$	7,790.8	$	7,027.9	$	7,440.0	$	2,439.6	$	1,568.4

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements should be read in conjunction with the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited and unaudited combined financial statements and accompanying notes included elsewhere in this prospectus.

Our unaudited pro forma condensed combined financial statements consist of an unaudited pro forma condensed combined balance sheet as of June 30, 2018 and unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2018 and 2017 and the year ended December 31, 2017. The unaudited pro forma condensed combined financial statements are based on and have been derived from our historical combined financial statements included elsewhere in this prospectus.

In management's opinion, the unaudited pro forma condensed combined financial statements reflect certain adjustments that are necessary to present fairly our unaudited pro forma condensed combined results of operations and our unaudited pro forma condensed combined balance sheet as of and for the periods indicated. The pro forma adjustments give effect to events that are (i) directly attributable to the transactions described below, (ii) factually supportable, and, with respect to the statement of operations, (iii) expected to have a continuing impact on us. The pro forma adjustments are based on assumptions that management believes are reasonable given the best information currently available.

The unaudited pro forma condensed combined financial statements are for illustrative and informational purposes only and are not intended to represent what our results of operations or financial position would have been had we operated as an independent, publicly traded company during the periods presented or if the transactions described below had actually occurred as of the dates indicated. The unaudited pro forma condensed combined financial statements also should not be considered indicative of our future results of operations or financial position as an independent, publicly traded company.

The unaudited pro forma condensed combined financial statements give effect to the following transactions, which we refer to as the "Transactions," as if they each had occurred on June 30, 2018 for the unaudited pro forma condensed combined balance sheet and on January 1, 2017 for the pro forma condensed combined statements of operations:

•: Lilly's transfer to us, through a series of equity transactions, of substantially all of its animal health businesses;
•: the impact of the Debt Transactions and the use of the proceeds therefrom; and
•: a 2,932,900-for-1 stock split of our common stock that will occur prior to the completion of this offering.

Due to local regulatory and operational requirements, in certain non-U.S. jurisdictions, the transfer of certain assets and liabilities of Lilly's animal health businesses may not legally occur prior to this offering. We have not adjusted the accompanying unaudited pro forma condensed combined balance sheet for the potential impact of the delayed transfers because these assets and liabilities are not material to our unaudited pro forma condensed combined financial statements, individually or in the aggregate.

Our combined financial statements include expense allocations related to certain Lilly corporate functions, including, but not limited to, executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue,

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headcount or other measures. We believe that this expense methodology, and the results thereof, is reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred if we would have operated as an independent, publicly traded company for the period presented. Following this offering, we expect Lilly to continue to provide us with some of the services related to these functions on a transitional basis in exchange for agreed-upon fees and we expect to incur other costs to replace the services and resources that will not be provided by Lilly. We will also incur new costs relating to our public reporting and compliance obligations as an independent, publicly traded company. We have not adjusted the accompanying unaudited pro forma condensed combined statements of operations for these estimated costs as they are projected amounts based on estimates and are not factually supportable.

The unaudited pro forma condensed combined statements of operations exclude certain non-recurring costs that we have incurred or expect to incur related to the Separation, including, among other things, the creation of a standalone infrastructure in areas such as information technology, facilities management, distribution, human resources, manufacturing, finance and other functions. We currently estimate these costs in the aggregate to be in a range from $240 million to $290 million, of which a portion will be capitalized and the remainder will be expensed.

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2018


		Historical			Pro Forma Adjustments		Notes		Pro Forma

		(Dollars in millions)
Assets
Current Assets
Cash and cash equivalents	$	321.0		$	(21.0	)	(a)	$	300.0
Accounts receivable, net		587.8			—				587.8
Inventories		1,005.6			—				1,005.6
Other		142.5			275.0		(b)		417.5

Total current assets		2,056.9			254.0				2,310.9

Long Term Assets
Goodwill		2,932.3			—				2,932.3
Other intangibles, net		2,534.9			—				2,534.9
Property and equipment, net		877.7			—				877.7
Other		175.6			(8.8	)	(c)		166.8

Total assets	$	8,577.4		$	245.2			$	8,822.6



Liabilities and Equity
Current liabilities
Accounts payable	$	193.9		$	275.0		(b)	$	468.9
Employee compensation		65.4			—				65.4
Sales rebates and discounts		127.6			—				127.6
Other		171.5			34.1		(c)		205.6

Total current liabilities		558.4			309.1				867.5

Long Term liabilities
Long-term debt		—			2,475.5		(d)		2,475.5
Accrued retirement benefits		142.6			—				142.6
Deferred taxes		175.5			—				175.5
Other noncurrent liabilities		114.3			(15.2	)	(c)		99.1

Total long term liabilities		432.4			2,460.3				2,892.7

Commitments and contingencies
Equity
Net parent company investment		7,947.5			(7,947.5	)	(e)		—
Common stock, no par value, 5,000,000,000 shares authorized; 356,190,000 shares issued and outstanding on a pro forma basis		—			—		(f)		—
Additional paid-in capital		—			5,423.3		(f)		5,423.3
Accumulated other comprehensive income (loss)		(360.9	)		—				(360.9	)

Total equity		7,586.6			(2,524.2	)			5,062.4

Total liabilities and equity	$	8,577.4		$	245.2			$	8,822.6

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2018


		Historical		Pro Forma Adjustments		Notes		Pro Forma

		(In millions, except per share data)
Revenue	$	1,506.4	$	—			$	1,506.4

Costs, expenses and other:
Cost of sales		791.5		—				791.5
Research and development		126.6		—				126.6
Marketing, selling and administrative		371.1		—				371.1
Amortization of intangible assets		98.6		—				98.6
Asset impairment, restructuring and other special charges		70.4		—				70.4
Other — net expense		10.7		55.0		(g)		65.7

Income (loss) before income tax expense		37.5		(55.0	)			(17.5	)
Income tax expense (benefit)		27.6		(13.2	)	(h)		14.4

Net income (loss)	$	9.9	$	(41.8	)		$	(31.9	)



Net income (loss) per share — basic and diluted						(i)	$	(0.09	)
Weighted average shares outstanding — basic and diluted						(i)		356.2

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2017


		Historical			Pro Forma Adjustments		Notes		Pro Forma

		(In millions, except per share data)
Revenue	$	1,437.6		$	—			$	1,437.6

Costs, expenses and other:
Cost of sales		712.7			—				712.7
Research and development		127.9			—				127.9
Marketing, selling and administrative		388.4			—				388.4
Amortization of intangible assets		109.4			—				109.4
Asset impairment, restructuring and other special charges		165.6			—				165.6
Other — net expense		1.6			55.0		(g)		56.6

Loss before income tax expense		(68.0	)		(55.0	)			(123.0	)
Income tax expense (benefit)		60.5			(20.9	)	(h)		39.6

Net loss	$	(128.5	)	$	(34.1	)		$	(162.6	)



Net loss per share — basic and diluted							(i)	$	(0.46	)
Weighted average shares outstanding — basic and diluted							(i)		356.2

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2017


		Historical			Pro Forma Adjustments		Notes		Pro Forma

		(In millions, except per share data)
Revenue	$	2,889.0		$	—			$	2,889.0

Costs, expenses and other:
Cost of sales		1,493.9			—				1,493.9
Research and development		251.7			—				251.7
Marketing, selling and administrative		779.8			—				779.8
Amortization of intangible assets		221.2			—				221.2
Asset impairment, restructuring and other special charges		375.1			—				375.1
Other — net expense (income)		(0.1	)		110.0		(g)		109.9

Loss before income tax expense		(232.6	)		(110.0	)			(342.6	)
Income tax expense (benefit)		78.1			(41.8	)	(h)		36.3

Net loss	$	(310.7	)	$	(68.2	)		$	(378.9	)



Net loss per share — basic and diluted							(i)	$	(1.06	)
Weighted average shares outstanding — basic and diluted							(i)		356.2

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

(a): Reflects an adjustment to present $300 million of cash at the balance sheet date, which is the amount of cash we will have following the completion of the Separation. This reflects pro forma adjustment to cash as calculated as follows:


Net proceeds from debt issuance	$	2,475.5
Net proceeds from IPO		1,292.6
Less: Distribution of debt and IPO proceeds to Lilly		(3,768.1	)
Less: Excess cash ⁽ⁱ⁾		(21.0	)

Total pro forma adjustment	$	(21.0	)

(i): Represents the cash in excess of $300 million at the balance sheet date as the total cash that will remain with us at Separation is $300 million based on the Master Separation Agreement.

(b): This represents the restricted cash we will hold at Separation and the offsetting payable to Lilly. This restricted cash will be used to pay Lilly further consideration toward the purchase of our animal health businesses from Lilly.
(c): Reflects the elimination of income tax balances that will remain with Lilly upon the Separation including deferred tax assets, liability for uncertain tax positions and income tax receivables, which were recorded net against income taxes payable on the historical balance sheet.
(d): Reflects $2.0 billion of proceeds from the Senior Notes Offering and $500 million of borrowings under the Term Facility, which are offset by estimated debt issuance costs of $24.5 million.
(e): Represents the reclassification of parent net investment to additional paid-in capital at Separation.
(f): Represents the adjustments to additional paid-in capital resulting from the Transactions, calculated as follows:


		Additional paid-in capital

Issuance of shares ⁽ⁱ⁾	$	1,292.6
Distribution of debt and equity net proceeds to Lilly ⁽ⁱⁱ⁾		(3,768.1	)
Distribution of assets that will remain with Lilly ⁽ⁱⁱⁱ⁾		(48.7	)
Reclassification of NPI to APIC		7,947.5

Total pro forma adjustment	$	5,423.3

(i): Reflects the issuance of an assumed 62,900,000 shares of our common stock based on an assumed initial public offering price of $21.50 per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus). The proceeds are offset by estimated underwriting discounts and commissions and estimated offering expenses to be paid by us totaling $59.8 million. In addition, there are estimated offering expenses in connection with this offering of $17.7 million being paid by Lilly.
(ii): The total proceeds from the IPO and the previously issued debt will be distributed to Lilly. This represents the adjustment to reflect the Distribution of an amount of cash equal to substantially all of the net proceeds we received in the senior notes offering.
(iii): Reflects the distribution of certain net deferred tax assets and excess cash that will remain with Lilly upon on our Separation.

(g): Reflects interest expense related to the Senior Notes Offering, the Credit Facilities and amortization of the associated deferred debt issuance costs. The interest expense has

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been calculated based on the fixed interest rates for the notes issued in the Senior Notes Offering and the estimated rate for borrowings under the Term Facility, which in aggregate result in a blended interest rate of 4.2%, along with an estimated $24.5 million of debt issuance costs amortized over the term of the debt.

(h): Reflects the impact of the pro forma adjustments on income tax calculated using our U.S. statutory tax rate of 38% for the year ended December 31, 2017 and the six months ended June 30, 2017 and 24% for the six months June 30, 2018. This represents our U.S. statutory rate during these periods, which differs from our effective rate and does not include the tax impact of valuation allowances. The pro forma taxes have not been adjusted to reflect any change in our effective tax rate subsequent to the Separation.
(i): We have calculated earnings per share based on assuming 356,190,000 shares were outstanding for the full period. This represents an aggregate of 293,290,000 shares of common stock held by Lilly (which represents the 100 shares held by Lilly prior to giving effect to the 2,932,900-for-1 stock split that will occur prior to the completion of this offering) and an assumed issuance of 62,900,000 shares of common stock in this offering.

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THE SEPARATION AND DISTRIBUTION TRANSACTIONS

The Separation

Prior to the completion of this offering, we are a wholly-owned subsidiary of Lilly, and all of our outstanding shares of common stock are owned by Lilly.

The following are the principal steps of the Separation:

•: Lilly formed Elanco Animal Health Incorporated on May 3, 2018.
•: Prior to the completion of this offering, Lilly will transfer to us, through a series of equity transactions, substantially all of its animal health businesses that will form our business going forward.
•: In exchange for substantially all of Lilly's animal health businesses, we will pay to Lilly (i) all of the net proceeds we will receive from the sale of our common stock in this offering, including any net proceeds we receive as a result of any exercise of the underwriters' option to purchase additional shares, (ii) all of the net proceeds (approximately $2.0 billion) we received in the Senior Notes Offering and (iii) all of the net proceeds ($498.6 million) we received from the entry into the Term Facility; provided, to the extent the unrestricted cash held by us following the completion of this offering is less than (or more than) $300 million, we will retain a portion of the net proceeds (or pay additional amounts to Lilly) so that the unrestricted cash held by us for working capital and other general corporate purposes following the completion of this offering is $300 million. In addition, a portion of the consideration to be paid to Lilly will be temporarily retained by us as restricted cash in connection with the anticipated transfer to us from Lilly of certain animal health assets in certain jurisdictions that are anticipated to occur following the completion of the offering (which consideration shall be paid to Lilly if, despite our and Lilly's cooperation and commercially reasonable efforts, such transfers have not occurred prior to a date mutually agreed by us and Lilly).

Following this offering, Lilly intends to transfer to us certain assets and liabilities of the historic Elanco animal health businesses that, due to business, regulatory or other legal constraints, could not be transferred prior to this offering.

Historically, Lilly has provided significant corporate and shared functions and resources to our business. Our historical financial statements in this prospectus reflect an allocation of these costs within the following statement of operations line items: cost of sales; R&D; marketing, selling and administrative; and other. These expense allocations for certain support functions that are provided on a centralized basis within Lilly include expenses for executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. Following the Separation, we expect Lilly to continue to provide us with some of the services related to these functions on a transitional basis in exchange for agreed-upon fees, and we expect to incur other costs to replace the services and resources that will not be provided by Lilly. These fees and costs may be greater than or less than levels allocated in our historical financial statements. We will also incur new costs relating to our public reporting and compliance obligations as an independent, publicly traded company.

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The Distribution

While, as of the date of this prospectus, Lilly intends to effect the Distribution, Lilly has no obligation to pursue or consummate any further dispositions of its ownership interest in us, including through the Distribution, by any specified date or at all. If pursued, the Distribution may be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions and the receipt of an opinion of counsel to the effect that such Distribution would be tax-free to Lilly and its shareholders for U.S. federal income tax purposes. The conditions to the Distribution may not be satisfied, Lilly may decide not to consummate the Distribution even if the conditions are satisfied or Lilly may decide to waive one or more of these conditions and consummate the Distribution even if all of the conditions are not satisfied.

The Distribution is not being effected pursuant to this prospectus, and the underwriters of this offering are not acting as underwriters for the Distribution.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations as of, and for, the periods presented. You should read the following discussion and analysis of our financial condition and results of operations together with the sections entitled "Summary — Summary Historical Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Data," "Risk Factors," "Cautionary Note Regarding Forward-Looking Statements," "Selected Historical Combined Financial Data," "Unaudited Pro Forma Condensed Combined Financial Statements" and our combined financial statements and related notes thereto included elsewhere in this prospectus.

Overview

We operate our business in a single segment directed at fulfilling our vision of enriching the lives of people through food — making protein more accessible and affordable — and through pet companionship — helping pets live longer, healthier lives. We advance our vision by offering products in four primary categories:

•: Companion Animal Disease Prevention ("CA Disease Prevention") : We have one of the broadest parasiticide portfolios in the companion animal sector based on indications, species and formulations, with products that protect pets from worms, fleas and ticks. Combining our parasiticide portfolio with our vaccines presence, we are a leader in the U.S. in the disease prevention category based on share of revenue.
•: Companion Animal Therapeutics ("CA Therapeutics") : We have a broad pain and osteoarthritis portfolio across species, modes of action, indications and disease stages. Pet owners are increasingly treating osteoarthritis in their pets, and our Galliprant product is one of the fastest growing osteoarthritis treatments in the U.S. We also have treatments for otitis (ear infections), as well as cardiovascular and dermatology indications.
•: Food Animal Future Protein & Health ("FA Future Protein & Health") : Our portfolio in this category, which includes vaccines, nutritional enzymes and animal-only antibiotics, serves the growing demand for protein and includes innovative products in poultry and aquaculture production, where demand for animal health products is outpacing overall industry growth. We are focused on developing functional nutritional health products that promote food animal health, including enzymes, probiotics and prebiotics. We are a leader in providing vaccines as alternatives to antibiotics to promote animal health based on share of revenue.
•: Food Animal Ruminants & Swine ("FA Ruminants & Swine") : We have developed a range of food animal products used extensively in ruminant (e.g., cattle, sheep and goats) and swine production.

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was $9.9 million and $(128.5) million, respectively, our adjusted EBITDA was $306.2 million and $278.4 million, respectively, and our adjusted net income was $219.0 million and $156.4 million, respectively. For the years ended December 31, 2017, 2016 and 2015, our net income (loss) was $(310.7) million, $(47.9) million and $(210.8) million, respectively, our adjusted EBITDA was $498.9 million, $540.4 million and $393.7 million, respectively, and our adjusted net income was $250.5 million, $332.7 million and $208.7 million, respectively. For a reconciliation of adjusted EBITDA and adjusted net income to net income (loss), see "Prospectus Summary — Summary Historical Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Data."

Key Trends and Conditions Affecting Our Results of Operations

Industry Trends

The animal health industry, which focuses on both food animals and companion animals, is a growing industry that benefits billions of people worldwide.

As demand for animal protein grows, food animal health is becoming increasingly important. Factors influencing growth in demand for food animal medicines and vaccines include:

•: one in three people needs improved nutrition;
•: increased global demand for protein, particularly poultry and aquaculture;
•: natural resource constraints, such as scarcity of arable land, fresh water and increased competition for cultivated land, driving the need for more efficient food production;
•: loss of productivity due to food animal disease and death;
•: increased focus on food safety and food security; and
•: human population growth, increased standards of living, particularly in many emerging markets, and increased urbanization.

Growth in food animal nutritional health products (enzymes, probiotics and prebiotics) is influenced, among other factors, by demand for antibiotic alternatives that can promote animal health and increase productivity.

Factors influencing growth in demand for companion animal medicines and vaccines include:

•: increased pet ownership globally;
•: pets living longer; and
•: increased pet spending as pets are viewed as members of the family by owners.

Product Development and New Product Launches

A key element of our targeted value creation strategy is to drive growth through portfolio development and product innovation, primarily in our three targeted growth categories. Our nine product launches between 2015 and 2017 have had a significant positive impact on our revenue over those periods, and we expect new products and innovation will continue to have a positive impact on our revenue in the future. Revenue from these product launches contributed $143.8 million to revenue for the year ended December 31, 2017 and $136.6 million to revenue for the six months ended June 30, 2018. We continue to pursue the development of new chemical and biological molecules through our approach to innovation. Our future growth and success depends on both our pipeline of new products, including new products that we may develop through joint ventures and products that we are able to obtain through license or acquisition, and the expansion

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of the use of our existing products. We believe we are an industry leader in animal health R&D, with a track record of product innovation, business development and commercialization.

Impact of Changing Market Demand for Antibiotics

In recent years, our operational results have been, and will continue to be, affected by regulations and changing market demand relating to the use of antibiotics and other products intended to increase food animal production.

There are two classes of antibiotics used in animal health, shared-class, or medically important, antibiotics and animal-only antibiotics. Shared-class antibiotics are used to treat infectious disease caused by pathogens that occur in both humans and animals. As part of our antibiotic stewardship plan and in compliance with FDA guidance, shared-class antibiotics are labeled only for the treatment of an established need in animals and only with veterinarian oversight. However, not all pathogens that cause disease in animals are infectious in humans, and accordingly animal-only antibiotics are not used in human medicine (i.e., not medically important). From 2015 to 2017, our revenue from shared-class antibiotics declined at a CAGR of 7%, excluding the impact of foreign exchange, driven primarily by changing regulations in many markets, including the Veterinary Feed Directive, as well as changing market demand. Globally, during the first half of 2018, our revenue from shared-class antibiotics was flat, excluding the impact of foreign exchange, and represented 12% (4% from sales in North America and 8% from sales outside of North America) of our total revenue, down from 16% in the first half of 2015. From 2015 to 2017, our revenue from animal-only antibiotics grew at a CAGR of 4%, excluding the impact of foreign exchange, driven by sales outside North America, which offset a slight decline in North America. Globally, during the first half of 2018, our revenue from animal-only antibiotics grew 9%, excluding the impact of foreign exchange, and represented 24% of our total revenue, up from 21% in the first half of 2015. During 2017, as well as the first half of 2018, 86% of our revenue from animal-only antibiotics resulted from the sale of ionophores. Ionophores are a special class of animal-only antimicrobials, and because of their animal-only designation, mode of action and spectrum of activity, their use has not to date been impacted by regulations or changing market demand in many markets outside of North America.

Over the past two years, we have intentionally shifted away from shared-class antibiotics, and are focusing on animal-only antibiotics, as well as antibiotic-free solutions. When an animal-only antibiotic exists, we believe it should be the first, preferred antibiotic treatment. Antibiotic resistance concerns, or other health concerns regarding food animal products, may result in additional restrictions, expanded regulations or changes in market demand to further reduce the use of antibiotics in food animals. We believe it is important to protect the benefits of antibiotics in human medicine, while responsibly protecting the health of food animals and the safety of our food supply.

Impact of Competition

The animal health industry is competitive. Established animal health companies who consistently deliver high quality products enjoy brand loyalty from their customers, which often continues after the loss of patent-based or regulatory exclusivity. In 2017, approximately 75% of our revenue was from products that did not have patent protection. In animal health, while potentially significant, erosion from generic competition is often not as steep as in human health, with the originator often retaining a significant market share. While our largest product, Rumensin , has been subject to generic competition for monensin outside the U.S. for more than 10 years, our revenue from Rumensin sales outside the U.S. grew 10% from 2015 to 2017. However, generic competition can nevertheless significantly affect our results. We have experienced significant competitive headwinds from generic ractopamine in the U.S. In the third quarter of 2013, a large, established animal health company received U.S. approval for generic ractopamine. U.S. revenue for Optaflexx ,

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our ractopamine beef product, has declined at a CAGR of 28% from 2015 to 2017 as a result of generic competition and the impact of international regulatory restrictions. In 2017, we had an estimated 64% market share of all U.S. ractopamine-treated beef cattle based on management estimates.

Although we believe brand loyalty is an important contributor to a product's ongoing success, the animal health industry is also impacted by innovation. We experienced an innovation lag in the companion animal parasiticide space from 2015 to 2017. In the absence of a competitive combined oral flea and tick product, our U.S. companion animal parasiticide portfolio revenue declined 15% in 2017, excluding the impact on revenue resulting from a reduction in inventory levels within our distribution channel. In February 2018, we launched Credelio in the U.S. for the treatment of fleas and ticks. Since the launch of Credelio , our U.S. parasiticide portfolio has returned to growth.

Productivity

Our results during the periods presented have benefitted from operational and productivity initiatives that we have implemented following our recent acquisitions and in response to changing market demand for antibiotics and other headwinds. We estimate that these initiatives have generated more than $500 million in annualized cost savings from the beginning of 2015 through the end of 2017.

Our acquisitions of Lohmann Animal Health in 2014, Novartis Animal Health in 2015 and the BI Vetmedica U.S. vaccines portfolio in 2017 added in aggregate $1.4 billion in revenue, 4,500 full-time employees, 12 manufacturing and eight R&D sites. In addition, from 2015 to 2017, changing market demand for antibiotics and other headwinds, such as competition with generics and innovation, affected some of our highest gross margin products, resulting in a change to our product mix and driving operating margin lower. In response, we implemented a number of initiatives across manufacturing, R&D and SG&A. Our manufacturing cost savings strategies included improving manufacturing processes and headcount through lean manufacturing (minimizing waste while maintaining productivity), closing three manufacturing sites, consolidating our CMO network, strategically insourcing certain projects, and pursuing cost savings opportunities with respect to raw materials via a new procurement process. Additional cost savings resulted from reducing the number of R&D sites from 16 to nine, SG&A savings from sales force consolidation, and reducing discretionary and other G&A operating expense.

Foreign Exchange Rates

Significant portions of our revenue and costs are exposed to changes in foreign exchange rates. Our products are sold in more than 90 countries and, as a result, our revenue is influenced by changes in foreign exchange rates. For the year ended December 31, 2017, approximately 50% of our revenue was denominated in foreign currencies. We seek to manage our foreign exchange risk, in part, through operational means, including managing same-currency revenue in relation to same-currency costs and same-currency assets in relation to same-currency liabilities. As we operate in multiple foreign currencies, including the euro, British pound, Brazilian real, Australian dollar, Japanese yen, Canadian dollar, Chinese yuan, and other currencies, changes in those currencies relative to the U.S. dollar will impact our revenue, cost of goods and expenses, and consequently, net income. Exchange rate fluctuations in emerging markets may also have an impact beyond our reported financial results and directly impact operations. These fluctuations may affect the ability to buy and sell our products between markets impacted by significant exchange rate variances. Foreign exchange rates had a negligible effect on revenue in 2017 as compared to 2016 and had a negative impact of 2% in 2016 as compared to 2015.

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General Economic Conditions

In addition to industry-specific factors, we, like other businesses, face challenges related to global economic conditions. Growth in both the food animal and companion animal sectors is driven in part by overall economic development and related growth, particularly in many emerging markets. In recent years, certain of our customers and suppliers have been affected directly by economic downturns, which decreased the demand for our products.

The cost of our products to food animal producers is small relative to their other production costs, including feed, and the use of our products is intended to improve economic outcomes for food animal producers. Similarly, industry sources have reported that pet owners indicated a preference for reducing spending on other aspects of their lifestyle, including entertainment, clothing and household goods, before reducing spending on pet care. While these factors have mitigated the impact of recent downturns in the global economy, further economic challenges could increase cost sensitivity among our customers, which may result in reduced demand for our products and could have a material adverse effect on our financial condition and results of operations.

Weather Conditions and the Availability of Natural Resources

The animal health industry and demand for many of our animal health products in a particular region are affected by weather conditions, varying weather patterns and weather-related pressures from pests, such as fleas and ticks. As a result, we may experience regional and seasonal fluctuations in our results of operations.

Drought conditions could negatively impact, among other things, the supply of corn and the availability of grazing pastures. A decrease in harvested corn results in higher corn prices, which could negatively impact the profitability of food animal producers of ruminants, pork and poultry. Higher corn prices and reduced availability of grazing pastures contribute to reductions in herd or flock sizes that in turn result in less spending on animal health products. As such, a prolonged drought could have a material adverse effect on our financial condition and results of operations. Factors influencing the magnitude and timing of effects of a drought on our performance include, but may not be limited to, weather patterns and herd management decisions.

In addition, veterinary hospitals and practitioners depend on visits from and access to the animals under their care. Veterinarians' patient volume and ability to operate could be adversely affected if they experience prolonged snow, ice or other severe weather conditions, particularly in regions not accustomed to sustained inclement weather. Adverse weather conditions or a shortage of fresh water may cause veterinarians and food animal producers to purchase less of our products.

Disease Outbreaks

Sales of our food animal products could be adversely affected by the outbreak of disease carried by animals. Outbreaks of disease may reduce regional or global sales of particular animal-derived food products or result in reduced exports of such products, either due to heightened export restrictions or import prohibitions, which may reduce demand for our products. Also, the outbreak of any highly contagious disease near our main production sites could require us to immediately halt production of our products at such sites or force us to incur substantial expenses

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in procuring raw materials or products elsewhere. Alternatively, sales of products that treat specific disease outbreaks may increase.

Manufacturing and Supply

In order to sell our products, we must be able to reliably produce and ship our products in sufficient quantities. Many of our products involve complex manufacturing processes and are sole-sourced from certain manufacturing sites.

Minor deviations in our manufacturing or logistical processes, unpredictability of a product's regulatory or commercial success or failure, the lead time necessary to construct highly technical and complex manufacturing sites, and shifting customer demand increase the potential for capacity imbalances.

Components of Revenue and Costs and Expenses

Revenue

Our revenue is primarily derived from sales of our products to third-party distributors, and directly to food producers and veterinarians. For additional information regarding our products, including descriptions of our products, see "Business — Products."

We aggregate our products into five categories to understand revenue growth:

•: CA Disease Prevention includes parasiticides and vaccine products for dogs and cats;
•: CA Therapeutics includes products for the treatment of pain, osteoarthritis, otitis, cardiovascular and dermatology indications in dogs and cats;
•: FA Future Protein & Health includes vaccines, antibiotics, parasiticides and other products used in poultry and aquaculture production, as well as functional nutritional health products, including enzymes, probiotics and prebiotics;
•: FA Ruminants & Swine includes vaccines, antibiotics, implants, parasiticides, and other products used in ruminants and swine production, as well as certain other food animal products; and
•: Strategic Exits includes business activities that we have either exited or made the strategic decision to exit, including the transitional contract manufacturing activity that we acquired in connection with our acquisition of the BI Vetmedica U.S. vaccines portfolio, two terminated legacy U.S. distribution agreements, a terminated distribution agreement outside the U.S. and an equine product not core to our business.

Costs and Expenses and Other

Cost of sales consists primarily of cost of materials, facilities and other infrastructure used to manufacture our products, shipping and handling, inventory losses and expired products.

Marketing, selling and administrative expenses consist of, among other things, the costs of marketing, promotion and advertising and the costs of administration (business technology, facilities, legal, finance, human resources, business development, external affairs and procurement).

Amortization of intangible assets consist of the amortization expense for intangible assets that have been acquired through business combinations.

R&D expenses consist of project costs specific to new product R&D and product lifecycle management, overhead costs associated with R&D operations, regulatory, product registrations and investments that support local market clinical trials for approved indications. We manage overall

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R&D based on our strategic opportunities and do not disaggregate our R&D expenses incurred by nature or by product as we do not use or maintain such information in managing our business.

Asset impairment, restructuring and other special charges consists primarily of impairment of long-term assets, restructuring charges, costs associated with acquiring and integrating businesses, and certain non-recurring expenses.

Other — (income) deductions consists of net interest (income)/expense, realized or unrealized foreign exchange losses and loss or impairment on other investments.

Comparability of Historical Results

Our historical results of operations for the periods presented may not be comparable with prior periods or with our results of operations in the future. In addition to the factors identified in "— Key trends and Conditions Affecting Our Results of Operations," the following factors, among others, have impacted or may impact the comparability of our results of operations.

Our Relationship with Lilly and Additional Standalone Costs

Our business is currently operated as part of a division of Lilly. Our combined financial statements have been derived from Lilly's consolidated financial statements and accounting records. Our combined financial statements reflect our financial position, results of operations and cash flows of the business that will be transferred to us at the time of the Separation and do not purport to reflect what the results of operations, comprehensive income/(loss), financial position, equity or cash flows would have been had we operated as an independent, publicly traded company during the periods presented.

Our historical results reflect an allocation of costs for certain Lilly corporate costs, including, among others, executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. These allocations are not necessarily indicative of the expenses we may incur in the future as a standalone public company. Although we intend to enter into certain agreements with Lilly in connection with this offering and the Separation, the amount and composition of our expenses may vary from historical levels since the fees charged for the services under the agreement may be higher or lower than the costs reflected in the historical allocations. In addition, we intend to replace these services over time with ones supplied either internally by our employees or by third parties, the cost of which may be higher or lower than the historical allocations. During the six months ended June 30, 2018 and 2017, corporate overhead and other allocations were $71.1 million and $71.7 million, respectively. During the three years ended December 31, 2017, 2016 and 2015, corporate overhead and other allocations were $151.7 million, $145.3 million and $156.0 million, respectively. See Note 10: Related Party Transactions to our unaudited interim combined financial statements and Note 16: Related Party Transactions to our audited combined financial statements.

We are currently investing in expanding our own administrative functions, including, but not limited to, information technology, facilities management, distribution, human resources and manufacturing, to replace services currently provided by Lilly. Because of initial stand-up costs and overlaps with services currently provided by Lilly, we expect to incur certain temporary, duplicative expenses in connection with the Separation as we replace the services provided by Lilly. We also expect to incur costs related to the build out of processes and systems to support finance and global supply and logistics, among others. We currently estimate these costs in the aggregate to be in a range from $240 million to $290 million, of which a portion will be capitalized and the remainder will be expensed. See "Certain Relationships and Related Party Transactions — Relationship with Lilly."

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Lilly utilizes a centralized treasury management system. Our combined financial statements reflect cash held only in bank accounts in our legal name and no allocation of combined cash positions. Our combined financial statements also do not reflect an allocation of Lilly's debt and do not reflect the $2.0 billion aggregate principal amount of Senior Notes we issued in a private placement on August 28, 2018 or the $1.25 billion aggregate principal amount of the Credit Facilities that we entered into on September 5, 2018, and our historical expenses do not reflect the interest expense related thereto that we expect to pay going forward.

For the purposes of our combined financial statements, income tax expense (benefit) is computed on a separate company basis, as if operated as a standalone entity or a separate consolidated group in each material jurisdiction in which we operate. Our financial statements reflect certain deferred tax assets and liabilities and income taxes payable based on this approach that may not transfer to us upon the Separation, as the underlying tax attributes may have been used by Lilly or may be retained by Lilly. As a result of potential changes to our business model and the fact that these deferred tax assets and liabilities and income taxes payable may not transfer to us, income tax expense (benefit) included in the combined financial statements may not be indicative of our future expected tax rate.

See "Unaudited Pro Forma Condensed Combined Financial Statements."

Our historical results also do not reflect the impact of costs we expect to incur as a consequence of becoming a standalone company, including a change in our compensation policies and programs and incremental costs associated with being a publicly traded company.

We expect to institute competitive compensation policies and programs as a standalone public company, the expense for which may differ from the compensation expense allocated by Lilly in our combined financial statements.

As a result of this offering, we will become subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. We will have additional procedures and practices to establish as a standalone public company. As a result, we will incur additional costs as a standalone public company, including internal audit, external audit, investor relations, stock administration, stock exchange fees and regulatory compliance costs.

Recent Significant Acquisitions

Our financial results have been impacted by acquisitions and integrations. For the periods presented, these include primarily the acquisitions and integrations of Novartis Animal Health, which closed on January 1, 2015, certain rights to develop, manufacture, market and commercialize Galliprant outside the U.S. and co-promote it in the U.S. from Aratana Therapeutics, Inc., which closed on April 22, 2016, and BI Vetmedica U.S. vaccines portfolio, which closed on January 3, 2017. For more information, see Note 4: Acquisitions to our audited combined financial statements.

Asset Impairment, Restructuring and Other Special Charges

During 2015 to 2018, including in connection with the productivity initiatives described above, we incurred charges related to asset impairment, restructuring and other special charges, including integration of acquired businesses. These charges include severance costs resulting from actions taken to reduce our cost structure, asset impairment charges related to competitive pressures for certain companion animal products, product exits and site closures, and integration costs related to acquired businesses, primarily Novartis Animal Health.

For more information on these charges, see Note 4: Asset Impairment, Restructuring and Other Special Charges to our unaudited interim combined financial statements and Note 5: Asset Impairment, Restructuring and Other Special Charges to our audited combined financial statements.

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Results of Operations

The following discussion and analysis of our combined statements of operations should be read along with our combined financial statements and the notes thereto included elsewhere in this prospectus, which reflect the results of operations of the business to be transferred to us from Lilly. For more information on the combined basis of preparation, see Note 1: Nature of Business and Basis of Presentation to our unaudited interim combined financial statements and Note 1: Nature of Business and Basis of Preparation to our audited combined financial statements.


		Six Months Ended June 30,					% Change			Year Ended December 31,								% Change

(Dollars in millions)		2018			2017		18/17			2017			2016			2015		17/16		16/15

Revenue	$	1,506.4		$	1,437.6		5	%	$	2,889.0		$	2,913.5		$	2,909.1		(1	)%	0	%
Costs, expenses and other:
Cost of sales		791.5			712.7		11	%		1,493.9			1,409.0			1,533.7		6	%	(8	)%
% of revenue		53	%		50	%	3	%		52	%		48	%		53	%
Research and development		126.6			127.9		(1	)%		251.7			265.8			291.0		(5	)%	(9	)%
% of revenue		8	%		9	%	(1	)%		9	%		9	%		10	%
Marketing, selling and administrative		371.1			388.4		(4	)%		779.8			784.8			916.0		(1	)%	(14	)%
% of revenue		25	%		27	%	(2	)%		27	%		27	%		31	%
Amortization of intangible assets		98.6			109.4		(10	)%		221.2			170.7			163.0		30	%	5	%
% of revenue		7	%		8	%	(1	)%		8	%		6	%		6	%
Asset impairment, restructuring and other special charges		70.4			165.6		(57	)%		375.1			308.4			263.3		22	%	17	%
Other — (income) expense		10.7			1.6		NM			(0.1	)		(2.8	)		1.6		NM		NM
Income (loss) before income taxes	$	37.5		$	(68.0	)	NM		$	(232.6	)	$	(22.4	)	$	(259.5	)	NM		NM
% of revenue		2	%		(5	)%	NM			(8	)%		(1	)%		(9	)%	NM		NM
Income tax expense (benefit)		27.6			60.5		NM			78.1			25.5			(48.7	)	NM		NM
Net income (loss)	$	9.9		$	(128.5	)	NM		$	(310.7	)	$	(47.9	)	$	(210.8	)	NM		NM

Certain amounts and percentages may reflect rounding adjustments.

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Revenue

On a global basis, our revenue within our product categories was as follows:


		Six Months Ended June 30,			% Change			Year Ended December 31,					% Change

(Dollars in millions)		2018		2017	18/17			2017		2016		2015	17/16		16/15

CA Disease Prevention	$	415.3	$	379.3	10	%	$	660.2	$	628.4	$	591.2	5	%	6	%
CA Therapeutics ^(a)		130.6		118.3	10	%		260.8		255.6		245.2	2	%	4	%
FA Future Protein & Health		339.3		291.5	16	%		649.2		630.8		633.2	3	%	(0	)%
FA Ruminants & Swine		579.6		576.9	0	%		1,175.0		1,309.2		1,356.6	(10	)%	(3	)%

Subtotal	$	1,464.8	$	1,366.0	7	%	$	2,745.2	$	2,824.0	$	2,826.2	(3	)%	(0	)%

Strategic Exits ^(a)		41.6		71.6	(42	)%		143.8		89.5		82.9	61	%	8	%

Total	$	1,506.4	$	1,437.6	5	%	$	2,889.0	$	2,913.5	$	2,909.1	(1	)%	0	%

Certain amounts and percentages may reflect rounding adjustments.

(a): On June 30, 2018, we made the decision to exit an equine product not core to our business. Revenue from this product is reflected in Strategic Exits for the six months ended June 30, 2018 and 2017 and in CA Therapeutics for the years ended December 31, 2017, 2016 and 2015. Revenue from this product was $1.6 million and $1.5 million for the six months ended June 30, 2018 and 2017, respectively, and $3.4 million, $3.7 million and $3.4 million, for the years ended December 31, 2017, 2016 and 2015, respectively.

In order to represent the underlying growth trend of our portfolio during the six months ended June 30, 2018 and 2017 and the years ended December 31, 2017, 2016 and 2015, we believe that it is important to also understand revenue growth excluding the impact of incremental revenue of recent significant acquisitions, Strategic Exits and foreign exchange rates.


% Change in Revenue: increases/ (decreases)	Reported		Resulting from Revenue Growth excluding Acquisition, Strategic Exits and FX ⁽¹⁾		Resulting from Acquisition ⁽¹⁾		Resulting from Strategic Exits		Resulting from FX

*First six months of 2018 vs. first six months of 2017*
Total revenue	5	%	4	%	(0	)%	(2	)%	3	%
CA Disease Prevention	10	%	8	%	0	%	0	%	2	%
CA Therapeutics	10	%	5	%	0	%	0	%	5	%
FA Future Protein & Health	16	%	12	%	0	%	0	%	5	%
FA Ruminants & Swine	0	%	(2	)%	0	%	0	%	2	%
Subtotal	7	%	4	%	0	%	0	%	3	%
Strategic Exits	(42	)%	0	%	(9	)%	(33	)%	1	%
*2017 vs. 2016*
Total revenue	(1	)%	(8	)%	7	%	(1	)%	0	%
CA Disease Prevention	5	%	(18	)%	22	%	0	%	1	%
CA Therapeutics	2	%	2	%	0	%	0	%	(0	)%
FA Future Protein & Health	3	%	3	%	0	%	0	%	0	%
FA Ruminants & Swine	(10	)%	(10	)%	0	%	0	%	(0	)%
Subtotal	(3	)%	(8	)%	5	%	0	%	0	%
Strategic Exits	61	%	(0	)%	83	%	(22	)%	0	%
*2016 vs. 2015*
Total revenue	0	%	2	%	0	%	0	%	(2	)%
CA Disease Prevention	6	%	7	%	0	%	0	%	(1	)%
CA Therapeutics	4	%	5	%	0	%	0	%	(1	)%
FA Future Protein & Health	(0	)%	4	%	0	%	0	%	(5	)%
FA Ruminants & Swine	(3	)%	(1	)%	0	%	0	%	(2	)%
Subtotal	(0	)%	2	%	0	%	0	%	(3	)%
Strategic Exits	8	%	0	%	0	%	8	%	(0	)%

(1): Refers to the acquisition of the BI Vetmedica U.S. vaccines portfolio in January 2017.

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For geographical information regarding our revenue, see Note 9: Geographic Information to our unaudited interim combined financial statements and Note 15: Geographic Information to our audited combined financial statements.

Total revenue

Six months ended June 30, 2018 vs. six months ended June 30, 2017

Total revenue increased $68.8 million or 5% for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, reflecting a 3% favorable foreign exchange rate impact, a 3% increase due to higher realized prices and a 1% decrease due to lower volumes.

In summary, the total revenue increase was due primarily to:

•: an increase in revenue of $37.3 million due to the positive impact of foreign exchange rates;
•: an increase in revenue of $35.8 million or 12% from FA Future Protein & Health products, excluding the impact foreign exchange rates;
•: an increase in revenue of $29.3 million or 8% from CA Disease Prevention products, excluding the impact of foreign exchange rates; and
•: an increase in revenue of $6.4 million or 5% from CA Therapeutics products, excluding the impact of foreign exchange rates;

partially offset by:

•: a decrease in revenue of $30.6 million from Strategic Exits, excluding the impact of foreign exchange rates; and
•: a decrease in revenue of $9.3 million or 2% from FA Ruminants & Swine products, excluding the impact of foreign exchange rates.

The detailed change in revenue by product category was as follows:

•: CA Disease Prevention revenue increased by $36.0 million or 10% due primarily to the launches of Credelio and Interceptor Plus , partially offset by competition in certain parasiticides, primarily impacting Trifexis and Comfortis and favorable U.S. purchasing patterns for Trifexis in 2017.
•: CA Therapeutics revenue increased by $12.3 million or 10% due primarily to the growth of Galliprant , partially offset by a temporary supply shortage of Percorten V , used for the treatment of canine Addison's Disease.
•: FA Future Protein & Health revenue increased by $47.8 million or 16% due primarily to growth in animal-only antibiotics, Imvixa and AviPro .
•: FA Ruminants & Swine revenue increased by $2.7 million or 0% due primarily to growth in animal-only and shared-class antibiotics, offset by competition from generic ractopamine-based products and a change in purchase patterns in the first half of 2017.
•: Strategic Exits revenue decreased by $30.0 million or 42% due primarily to the termination in the third quarter of 2017 of a legacy U.S. distribution agreement acquired as part of our Novartis Animal Health acquisition.

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2017 vs. 2016

Total revenue decreased $24.5 million or 1% in 2017 as compared to 2016, reflecting a 0% foreign exchange rate impact, a 0% change due to realized prices and a 1% decrease due to lower volumes.

In summary, the total revenue decrease was due primarily to:

•: a decline in revenue of $133.6 million or 10% from FA Ruminants & Swine products, excluding the impact of foreign exchanges rates; and
•: a decline in revenue of $113.6 million or 18% from CA Disease Prevention products, excluding the impact of acquisition and foreign exchange rates;

partially offset by:

•: the acquisition of the BI Vetmedica U.S. vaccines portfolio which contributed $216.7 million in 2017; and
•: an increase in revenue of $18.7 million or 3% from FA Future Protein & Health products, excluding the impact of foreign exchange rates.

The detailed change in revenue by product category was as follows:

•: CA Disease Prevention revenue increased by $31.8 million or 5%. Excluding product revenue from the acquisition of the BI Vetmedica U.S. vaccines portfolio and the impact of foreign exchange rates, revenue declined $113.6 million or 18% due primarily to competition in certain parasiticides, primarily impacting Trifexis and Comfortis , and a reduction in inventory levels within our U.S. companion animal distribution channel partially offset by the growth of Interceptor Plus .
•: CA Therapeutics revenue increased by $5.2 million or 2% due primarily to the launch of Galliprant , partially offset by volume declines from competition in our dermatology portfolio.
•: FA Future Protein & Health revenue increased by $18.4 million or 3% due primarily to growth in poultry products, including animal-only antibiotics, enzymes and vaccines, and to a lesser extent aquaculture products.
•: FA Ruminants & Swine revenue decreased by $134.2 million or 10% due primarily to competition from generic ractopamine-based products, as well as declines in shared-class antibiotics and a reduction in inventory levels within our China distribution channel, partially offset by growth in animal-only antibiotics.
•: Strategic Exits revenue increased by $54.3 million or 61% due primarily to the acquisition of a transitional contract manufacturing arrangement at Fort Dodge as part of the BI Vetmedica U.S. vaccines portfolio acquisition, partially offset by the termination in the third quarter of 2017 of a legacy U.S. distribution agreement acquired as part of our Novartis Animal Health acquisition.

2016 vs. 2015

Total revenue increased by $4.4 million or 0% in 2016 as compared to 2015, reflecting a 2% unfavorable foreign exchange rate impact, a 1% increase due to higher realized prices and a 1% increase due to higher volume.

In summary, the total revenue increase was due primarily to:

•: an increase in revenue of $44.2 million or 7% from CA Disease Prevention products, excluding the impact of foreign exchange rates;

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•: an increase in revenue of $26.9 million or 4% from FA Future Protein & Health products, excluding the impact of foreign exchange rates; and
•: an increase in revenue of $12.2 million or 5% from CA Therapeutics products, excluding the impact of foreign exchange rates;

partially offset by:

•: a decline in revenue of $70.9 million due to the negative impact of foreign exchange rates; and
•: a decline in revenue of $14.6 million from FA Ruminants & Swine products, excluding the impact of foreign exchange rates.

The detailed change in revenue by product category was as follows:

•: CA Disease Prevention revenue increased by $37.2 million or 6% due primarily to the growth of Interceptor Plus , partially offset by competition in certain parasiticides, primarily impacting Trifexis and Comfortis , and the impact of foreign exchange rates.
•: CA Therapeutics revenue increased by $10.4 million or 4% due primarily to the growth of Osurnia, partially offset by the impact of foreign exchange rates.
•: FA Future Protein & Health revenue decreased by $2.4 million or 0% due primarily to the negative impact of foreign exchange rates, partially offset by growth in poultry including animal-only antibiotics, enzymes and vaccines.
•: FA Ruminants & Swine revenue decreased by $47.4 million or 3% due primarily to the negative impact of foreign exchange rates, declines in shared-class antibiotics and competition from generic ractopamine-based products, partially offset by growth in vaccines and animal-only antibiotics.
•: Strategic Exits revenue increased by $6.6 million or 8% due primarily to revenue growth under two legacy U.S. distribution agreements acquired as part of our Novartis Animal Health acquisition, which have subsequently been terminated.

Costs and Expenses and Other

Cost of sales

Six months ended June 30, 2018 vs. six months ended June 30, 2017

Cost of sales increased $78.8 million for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due primarily to:

•: an unfavorable product mix as a result of decreasing revenue from higher margin products primarily resulting from generic competition and favorable U.S. purchasing patterns for Trifexis in 2017;
•: higher expenses due to the impact during the first half of 2018 of the implementation of productivity initiatives, including inventory write-offs of $40.2 million for Imrestor and other products; and
•: expensing of capitalized costs related to inventory produced in the prior year and contractual increases in third-party manufacturing agreements;

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partially offset by:

•: approximately $42.7 million in non-recurring costs in 2017 associated with the incremental purchase accounting charges from the acquisition of the BI Vetmedica U.S. vaccines portfolio related to the fair value adjustments to inventory that was subsequently sold.

2017 vs. 2016

Cost of sales increased $84.9 million in 2017 as compared to 2016 due primarily to:

•: the addition of approximately $134.1 million of costs in 2017 related to the acquisition of the BI Vetmedica U.S. vaccines portfolio, including $54.0 million associated with Strategic Exits contract manufacturing obligations and approximately $42.7 million in non-recurring costs associated with the incremental purchase accounting charges related to the fair value adjustments to inventory acquired that was subsequently sold;
•: an unfavorable product mix as a result of disproportional revenue decreases of higher margin products primarily resulting from changing market demand for antibiotics and competition headwinds; and
•: contractual increases in third-party manufacturing agreements;

partially offset by:

•: operational efficiencies and cost savings associated with manufacturing footprint consolidation and overall cost reductions.

2016 vs. 2015

Cost of sales decreased $124.7 million in 2016 as compared to 2015 due primarily to:

•: approximately $153.0 million in non-recurring costs in 2015 associated with the incremental purchase accounting charges of the Novartis Animal Health acquisition related to the fair value adjustments to inventory acquired that was subsequently sold; and
•: operational efficiencies and cost savings associated with manufacturing footprint consolidation and overall cost reductions;

partially offset by:

•: expensing of capitalized costs related to inventory produced in the prior year; and
•: an unfavorable product mix as a result of disproportional revenue decreases of higher margin products primarily resulting from changing market demand for antibiotics and competition headwinds.

Research and development

Six months ended June 30, 2018 vs. six months ended June 30, 2017

R&D expenses decreased $1.3 million for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due primarily to savings realized from the consolidation of acquired R&D sites and operations, as well as the termination of certain R&D projects.

2017 vs. 2016

R&D expenses decreased $14.1 million in 2017 as compared to 2016 due primarily to savings realized from the consolidation of acquired R&D sites and operations, as well as the termination of

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certain R&D projects. This decrease was partially offset by expenses incurred in connection with the acquisition of the BI Vetmedica U.S. vaccines portfolio in 2017.

2016 vs. 2015

R&D expenses decreased $25.2 million in 2016 as compared to 2015 due primarily to savings realized from the consolidation of acquired R&D sites and operations, as well as the rationalization of R&D projects.

Marketing, selling and administrative

Six months ended June 30, 2018 vs. six months ended June 30, 2017

Marketing, selling and administrative expenses decreased $17.3 million for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due primarily to savings from productivity initiatives related to marketing functions.

2017 vs. 2016

Marketing, selling and administrative expenses decreased $5.0 million in 2017 as compared to 2016 due primarily to savings from productivity initiatives related to salesforce, marketing and administrative functions, more than offsetting the increase from the acquisition of the BI Vetmedica U.S. vaccines portfolio.

2016 vs. 2015

Marketing, selling and administrative expenses decreased $131.2 million in 2016 as compared to 2015 due primarily to cost savings realized from the acquisition and integration of Novartis Animal Health, as well as additional productivity initiatives.

Amortization of intangible assets

Six months ended June 30, 2018 vs. six months ended June 30, 2017

Amortization of intangible assets decreased $10.8 million in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due primarily to the acceleration of amortization related to certain product exits that occurred in 2017.

2017 vs. 2016

Amortization of intangible assets increased $50.5 million in 2017 as compared to 2016 due primarily to the impact of the acquisition of the BI Vetmedica U.S. vaccines portfolio and, to a lesser extent, the acceleration of amortization related to certain product exits.

2016 vs. 2015

Amortization of intangible assets increased $7.7 million in 2016 as compared to 2015 due primarily to the impact of the completion of acquired in-process R&D assets, which triggered amortization, as well as the acquisition of Galliprant .

Asset impairment, restructuring and other special charges

For additional information regarding our asset impairment, restructuring and other special charges, see Note 4: Asset Impairment, Restructuring and Other Special Charges to our unaudited interim combined financial statements and Note 5: Asset Impairment, Restructuring and Other Special Charges to our audited combined financial statements.

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Six months ended June 30, 2018 vs. six months ended June 30, 2017

Asset impairment, restructuring and other special charges decreased $95.2 million in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due primarily to:

•: higher severance costs recognized in 2017 due to the U.S. voluntary exit program offered to our employees and higher integration costs recognized in 2017 relating to our acquired businesses;

partially offset by:

•: higher asset impairments and other charges due to the decision to close a manufacturing facility in the U.S. as well as the decision to suspend commercialization of Imrestor .

2017 vs. 2016

Asset impairment, restructuring and other special charges increased $66.7 million in 2017 as compared to 2016 due primarily to:

•: higher severance costs recognized in 2017 due to the U.S. voluntary early retirement program offered to our employees;

partially offset by:

•: lower integration costs relating to our acquired businesses.

2016 vs. 2015

Asset impairment, restructuring and other special charges increased $45.1 million in 2016 as compared to 2015 due primarily to:

•: higher asset impairment charges due to the closure of a manufacturing facility in Ireland in 2016.

Income Tax Expense (benefit)

Our historical income tax expense (benefit) may not be indicative of our future expected tax rate. See "— Comparability of Historical Results — Our Relationship with Lilly and Additional Standalone Costs."

Six months ended June 30, 2018 vs. six months ended June 30, 2017

Income tax expense, as reported, decreased $32.9 million due primarily to a decrease in the U.S. valuation allowance related to the utilization of prior years' net operating losses.

2017 vs. 2016

Income tax expense, as reported, increased $52.6 million due primarily to an increase in unrecognized deferred tax assets in 2017 due to a valuation allowance and the tax effect of asset impairment, restructuring and other special charges, partially offset by an income tax benefit related to U.S. tax reform.

2016 vs. 2015

Income tax expense (benefit), as reported, increased $74.2 million due primarily to an increase in unrecognized deferred tax assets in 2016 due to a valuation allowance and the tax effect of asset impairment, restructuring and other special charges.

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Liquidity and Capital Resources

We have historically participated in Lilly's centralized treasury management system, including centralized cash pooling and overall financing arrangements. We have generated and expect to continue to generate positive cash flows from operations. Following the Separation, we expect our primary sources of liquidity will be our cash on hand, cash flows from operations and funds available under our Credit Facilities. As a significant portion of our business is conducted outside the U.S., we expect to hold a significant portion of our cash outside of the U.S. after our Separation. We will monitor and adjust the amount of foreign cash based on projected cash flow requirements. Our ability to use foreign cash to fund cash flow requirements in the U.S. may be impacted by local regulations and, to a lesser extent, following U.S. tax reforms, the income taxes associated with transferring cash to the U.S. See "Business." We currently intend to indefinitely reinvest foreign earnings for continued use in our foreign operations. As our structure evolves as a standalone company, we may change that strategy, particularly to the extent we identify tax efficient reinvestment alternatives for our foreign earnings or we change our cash management strategy.

Our cash used for or provided from financing activities in the historical periods primarily reflect Lilly's funding of animal health acquisitions.

Our principal liquidity needs include funding existing marketed and pipeline products, capital expenditures, business development in our targeted areas and our anticipated dividend.

We believe our cash and cash equivalents on hand, our operating cash flows and our existing financing arrangements will be sufficient to support our cash needs for the foreseeable future, including for at least the next 12 months.

Our ability to meet future funding requirements may be impacted by macroeconomic, business and financial volatility. As markets change, we will continue to monitor our liquidity position. However, a challenging economic environment or an economic downturn may impact our liquidity or our ability to obtain future financing. See "Cautionary Note Regarding Forward-Looking Statements."

Cash Flows

The following table provides a summary of cash flows from operating, investing and financing activities for the periods presented:


		Six Months Ended June 30,					% Change			Year Ended December 31,								% Change

(Dollars in millions)		2018			2017		18/17			2017			2016			2015		17/16		16/15

Net Cash provided by/(used in):
Operating activities	$	183.9		$	90.6		103	%	$	173.8		$	155.9		$	6.6		12	%	2,262	%
Investing activities		(57.5	)		(903.8	)	(94	)%		(964.6	)		(182.1	)		(4,995.4	)	430	%	(96	)%
Financing activities		(123.7	)		811.9		(115	)%		847.5			(149.6	)		5,353.2		(667	)%	(103	)%
Effect of exchange-rate changes on cash and cash equivalents		(5.1	)		6.9		(174	)%		7.9			(26.0	)		(19.8	)	(130	)%	31	%

Net increase/(decrease) in cash and cash equivalents	$	(2.4	)	$	5.6		(143	)%	$	64.6		$	(201.8	)	$	344.6		(132	)%	(159	)%

Certain amounts and percentages may reflect rounding adjustments.

Operating Activities

Six months ended June 30, 2018 vs. six months ended June 30, 2017

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Our net cash provided by operating activities was $183.9 million for the six months ended June 30, 2018 as compared to cash provided by operating activities of $90.6 million for the six months ended June 30, 2017. This increase in operating cash flows was primarily attributable to:

•: net income for the six months ended June 30, 2018 as compared to a net loss for the six months ended June 30, 2017;

partially offset by:

•: an increase in receivables for the six months ended June 30, 2018 as compared to a decrease for the six months ended June 30, 2017 due to an increase in sales in the first six months of 2018 as well as the elimination of cash discounts for early customer payments;
•: a larger decrease in accounts payable for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017 due to the timing of invoices and payments in the ordinary course of business; and
•: a decrease in accruals related to severance cost in the fourth quarter of 2017 due to the U.S. voluntary early retirement program offered to our employees.

2017 vs. 2016

Our net cash provided by operating activities was $173.8 million in 2017 as compared to cash provided by operating activities of $155.9 million in 2016. This increase in operating cash flows was primarily attributable to:

•: a decrease in receivables in 2017 as compared to an increase in 2016 due to a one-time impact of standardizing payment terms across our acquired businesses as well as payment receipt timing due to integration of acquired assets;
•: a decrease in other assets in 2017 as compared to an increase in 2016 primarily due to the timing of tax payments; and
•: a smaller increase in inventory levels in 2017 as compared to 2016;

partially offset by:

•: increased net losses.

2016 vs. 2015

Our net cash provided by operating activities was $155.9 million in 2016 as compared to cash provided by operating activities of $6.6 million in 2015. This increase in operating cash flows was primarily attributable to:

•: decreased net losses;

partially offset by:

•: higher inventory levels; and
•: a smaller increase in accounts payable and other liabilities in 2016 as compared to 2015 resulting from payments in the ordinary course of business, including income taxes, as well as from an increase in accounts payable following our acquisition of Novartis Animal Health in 2015.

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Investing Activities

Six months ended June 30, 2018 vs. six months ended June 30, 2017

Our net cash used in investing activities was $57.5 million for the six months ended June 30, 2018 as compared to cash used in investing activities of $903.8 million for the six months ended June 30, 2017. This decrease in net cash flows used in investing activities was primarily attributable to the acquisition of the BI Vetmedica U.S. vaccines portfolio in 2017.

2017 vs. 2016

Our net cash used in investing activities was $964.6 million in 2017 as compared to cash used in investing activities of $182.1 million in 2016. This increase in net cash flows used in investing activities was primarily attributable to the acquisition of the BI Vetmedica U.S. vaccines portfolio in 2017.

2016 vs. 2015

Our net cash used in investing activities was $182.1 million in 2016 as compared to cash used in investing activities of $5.0 billion in 2015. This decrease in net cash flows used in investing activities was primarily attributable to the acquisition of Novartis Animal Health in 2015.

Financing Activities

Six months ended June 30, 2018 vs. six months ended June 30, 2017

Our net cash used in financing activities was $123.7 million for the six months ended June 30, 2018 as compared to cash provided by financing activities of $811.9 million for the six months ended June 30, 2017. This decrease in net cash provided was primarily attributable to financing provided by Lilly for the acquisition of the BI Vetmedica U.S. vaccines portfolio in 2017.

2017 vs. 2016

Our net cash provided by financing activities was $847.5 million in 2017 as compared to cash used in financing activities of $149.6 million in 2016. This increase in net cash provided was primarily attributable to financing provided by Lilly for the acquisition of the BI Vetmedica U.S. vaccines portfolio in 2017.

2016 vs. 2015

Our net cash used in financing activities was $149.6 million in 2016 as compared to cash provided by financing activities of $5.4 billion in 2015. This decrease in net cash provided was primarily attributable to our financing provided by Lilly for the acquisition of Novartis Animal Health in 2015.

Description of Indebtedness

See "Description of Material Indebtedness."

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Contractual Obligations

Payments due under contractual obligations as of December 31, 2017, are set forth below:


				Years

(Dollars in millions)		Total ⁽³⁾		2018		2019 - 2020		2021 - 2022		Thereafter

Long-term debt obligations		—		—		—		—		—
Operating leases	$	109.7	$	20.0	$	34.8	$	27.6	$	27.3
Purchase obligations ⁽¹⁾		1,114.1		1,091.5		22.6		—		—
Other long-term liabilities ⁽²⁾		176.0		1.0		30.0		1.8		143.2

Certain amounts may reflect rounding adjustments.

(1): Represents open purchase orders as of December 31, 2017 and contractual payment obligations with each of our significant vendors which are noncancelable and are not contingent.
(2): Primarily represents our long-term liabilities associated with our underfunded pension plans. The timing of these payments may vary based on individual retirement dates and other activities, and the amount may change as it is based on actuarial estimates.
(3): We excluded deferred taxes because we cannot reasonably estimate the timing of future cash outflows associated with those liabilities.

The contractual obligation table is current as of December 31, 2017 and does not give effect to the Debt Transactions.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have a material current effect or that are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Certain of our accounting policies are considered critical because these policies are the most important to the depiction of our financial statements and require significant, difficult or complex judgments by us, often requiring the use of estimates about the effects of matters that are inherently uncertain. Actual results that differ from our estimates could have an unfavorable effect on our financial position and results of operations. We apply estimation methodologies consistently from year to year. The following is a summary of accounting policies that we consider critical to the combined financial statements.

Revenue Recognition

Our gross product revenue is subject to deductions that are generally estimated and recorded in the same period that the revenue is recognized and primarily represents revenue incentives (rebates and discounts) and sales returns. For example:

•: for revenue incentives, we use our historical experience with similar incentives programs and current sales data to estimate the impact of such programs on revenue and continually monitor the impact of this experience and adjust as necessary; and

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•: for sales returns, we consider items such as: local returns policies and practices; returns as a percentage of revenue; an understanding of the reasons for past returns; estimated shelf life by product; and estimate of the amount of time between shipment and return to estimate the impact of sales returns.

If any of our ratios, factors, assessments, experiences or judgments are not indicative or accurate predictors of our future experience, our results could be materially affected.

Although the amounts recorded for these revenue deductions are dependent on estimates and assumptions, historically our adjustments to actual results have not been material. The sensitivity of our estimates can vary by program, type of customer and geographic location. Amounts recorded for revenue deductions can result from a complex series of judgments about future events and uncertainties and can rely on estimates and assumptions.

Acquisitions and Fair Value

We account for the assets acquired and liabilities assumed in an acquisition based on the fair values as of the acquisition date. The excess of the purchase price over the fair value of the acquired net assets, where applicable, is recorded as goodwill.

The judgments made in determining estimated fair values assigned to assets acquired and liabilities assumed in a business combination, as well as estimated asset lives, can materially affect our consolidated results of operations. The fair values of intangible assets are re-determined using information available near the acquisition date based on expectations and assumptions that are deemed reasonable by management. Depending on the facts and circumstances, we may deem it necessary to engage an independent valuation expert to assist in valuing significant assets and liabilities.

The fair value of any contingent consideration liability that results from a business combination is determined using a market approach based on quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or a discounted cash flow analysis. Estimating the fair value of contingent consideration requires the use of significant estimates and judgments, including, but not limited to, revenue and the discount rate.

Impairment of Indefinite-Lived and Long-Lived Assets

We review the carrying value of long-lived assets (both intangible and tangible) for potential impairment on a periodic basis and whenever events or changes in circumstances indicate the carrying value of an asset (or asset group) may not be recoverable. We identify impairment by comparing the projected undiscounted cash flows to be generated by the asset (or asset group) to its carrying value. If an impairment is identified, a loss is recorded equal to the excess of the asset's net book value over its fair value, and the cost basis is adjusted.

Goodwill and indefinite-lived intangible assets are reviewed for impairment at least annually and when certain impairment indicators are present. When required, a comparison of fair value to the carrying amount of assets is performed to determine the amount of any impairment.

The estimated cash flows and fair values used in our impairment reviews require significant judgment with respect to future volume; use of working capital; foreign currency exchange rates; the selection of appropriate discount rates; product mix; income tax rates and other assumptions and estimates. Such estimates and assumptions are determined based upon our business plans and when applicable, market participants' views of us and other similar companies. We make these judgements based on our historical experience, relevant market size, historical pricing of similar products and expected industry trends. These assumptions are subject to change in future periods because of, among other things, additional information, financial information based on further

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historical experience, changes in competition, our investment decisions, volatility in foreign currency exchange rates, and results of research and development. A change in these assumptions or the use of alternative estimates and assumptions could have a significant impact on the estimated fair values of the assets, and may result in an impairment of the existing assets in a future period.

During the six months ended June 30, 2018 and 2017, we recorded asset impairments of $57.7 million and $43.8 million, respectively. During the years ended December 31, 2017, 2016 and 2015, we recorded asset impairments of $110.6 million, $98.3 million and $57.5 million due to changes in estimates or judgments related to the use of the assets. For more information related to our impairment charges, see Note 4: Asset Impairment, Restructuring and Other Special Charges to our unaudited interim combined financial statements and Note 5: Asset Impairment, Restructuring and Other Special Charges to our audited combined financial statements.

Deferred Tax Asset Valuation Allowances

We maintain valuation allowances unless it is more likely than not that all or a portion of the deferred tax asset will be realized. Changes in valuation allowances are included in our tax provision in the period of change. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. The realizability assessments made at a given balance sheet date are subject to change in the future, particularly if earnings of a subsidiary are significantly higher or lower than expected, or if we take operational or tax planning actions that could impact the future taxable earnings of a subsidiary. A change in these assumptions may result in an increase or decrease in the realizability of our existing deferred tax assets, and therefore a change in the valuation allowance, in future periods. As of June 30, 2018, we had a valuation allowance of $105.2 million, and as of December 31, 2017 and 2016, we had valuation allowances of $127.7 million and $39.1 million, respectively.

Qualitative and Quantitative Disclosures About Market Risk

Foreign Exchange Risk

We operate on a global basis and are exposed to the risk that our earnings, cash flows and equity could be adversely impacted by fluctuations in foreign exchange rates. We are primarily exposed to foreign exchange risk with respect to net assets denominated in the Euro, British pound, Canadian dollar, Australian dollar and Brazilian real. Lilly maintains a foreign currency risk management program through a central shared entity, which enters into derivative contracts to hedge foreign currency risk associated with forecasted transactions for the entire company, including for our operations. Gains and losses on derivative contracts entered into by Lilly have been allocated to our results to the extent they were to cover exposure related to our business and offset gains and losses on underlying foreign currency exposures. Following the Separation, we intend to implement a foreign currency risk management program on our own behalf.

We also face currency exposure that arises from translating the results of our global operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. We may enter into foreign currency forward or option derivative contracts to reduce the effect of fluctuating currency exchange rates in future periods, but our historical results do not reflect the impact of any such derivatives related to our exposure to foreign currency impacts on translation.

We estimate that a hypothetical 10% adverse movement in all foreign currency exchange rates related to the translation of the results of our foreign operations would increase our net loss by approximately $12 million.

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Interest Risk

Our combined balance sheets and statements of operations do not include an allocation of third-party debt or interest expense from Lilly because we are not the legal obligor of the debt and because Lilly's borrowings were not directly attributable to our business. We expect to incur indebtedness prior to or in connection with the Separation, at which time our exposure to interest rate risk will increase to the extent we incur or hedge into floating rate obligations.

Recently Issued Accounting Pronouncements

For discussion of our new accounting standards, see Note 3: Implementation of New Financial Accounting Pronouncements to our unaudited interim combined financial statements and Note 3: Implementation of New Financial Accounting Pronouncements to our audited combined financial statements.

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INDUSTRY

Overview

Global animal health industry revenue is projected to grow nominally at a CAGR of 5% from 2017 to 2023, according to Vetnosis. Importantly, this growing industry, which includes both food and companion animals, benefits billions of people worldwide. The food animal sector focuses on species raised to provide animal protein, such as cattle, other ruminants (e.g., sheep and goats), swine, poultry and aqua. The companion animal — or pet — sector focuses primarily on dogs and cats.

Food Animal. Food animal medicines and vaccines, including aquaculture, represented $21.2 billion of revenue in 2017 and grew at a CAGR of 4% from 2007 to 2017, according to Vetnosis.

Factors influencing growth in demand for food animal medicines and vaccines include:

•: one in three people needs improved nutrition;
•: increased global demand for protein, particularly poultry and aquaculture;
•: natural resource constraints, such as scarcity of arable land, fresh water and increased competition for cultivated land, driving the need for more efficient food production;
•: loss of productivity due to food animal disease and death;
•: increased focus on food safety and food security; and
•: human population growth, increased standards of living, particularly in many emerging markets, and increased urbanization.

Companion Animal. Companion animal medicines and vaccines represented $10.8 billion of revenue in 2017 and grew at a CAGR of 4% from 2007 to 2017, according to Vetnosis.

Factors influencing growth in demand for companion animal medicines and vaccines include:

•: increased pet ownership globally;
•: pets living longer; and
•: increased pet spending as pets are viewed as members of the family by owners.

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Food Animal Sector

Food Animal Growth Drivers

The global food animal sector is primarily focused on the production of cattle (both dairy and beef), other ruminants, swine, poultry and fish. These animals are the basis for most of the worldwide consumption of animal-based protein.

Animal protein now constitutes a larger percentage of the average human diet than ever before. Annual meat production would need to rise by 74%, or over 200 million tons, to reach 470 million tons by 2050 to meet expected global demand. The growth in animal protein consumption is being influenced in part by a growing middle class in developing countries, the global industrialization of food animal production and easier access to safe and affordable meat products. With billions of people currently receiving insufficient daily nutrition, we expect the demand for food animal protein to continue to rise to address this unmet need.

To meet the growing demand for animal protein, additional output is necessary. Simply adding livestock strains the environment and results in the overuse of natural resources. In order to meet the increased demand for animal protein, producers are increasingly looking for ways to drive efficiency and promote animal health through the use of medicines and vaccines.

Industry sources estimate that 20% of production animals are lost to disease and death. By improving health and lowering mortality rates of food animals — predominantly by actively preventing common parasites, diseases and viruses — producers are able to increase production yields and promote more efficient feeding. We believe most food producers find that the positive impact of these therapies outweighs their price, especially as they represent a small portion of the total cost of production. Consequently, we expect that use of these treatments will continue.

Food Animal Product Categories

Food animal medicines, vaccines and functional nutritionals are divided into two main categories: FA Ruminants & Swine and FA Future Protein & Health.

FA Ruminants & Swine

Ruminants and swine, which is comprised of beef and dairy cattle, sheep, goats and pigs, constituted approximately three quarters of the food animal sector revenue by species in 2017, according to Vetnosis. Ruminants and swine are important sources of animal protein throughout the world, and we believe it will continue to be a material category going forward. Management believes this category will continue to grow, albeit at a slower pace than FA Future Protein & Health, and that medicines and vaccines will continue to play a prominent role in the health and productivity of food animals.

FA Future Protein & Health (Poultry, Aquaculture and Functional Nutritionals)

Poultry and fish are among the fastest growing proteins in the food animal sector. The rapid growth of these proteins is expected to continue.

Fish is the fastest growing animal protein globally. Aquaculture — the farming of aquatic organisms such as fish and crustaceans — remains an immature market where low production yields and high costs due to mortality and biological challenges have limited market growth. These factors have led to increased expenditures on aquaculture-specific animal health products.

The use of functional nutritionals to promote animal health and immunity is another path to help producers maximize animal production efficiency and limit use of antibiotics. Enzymes, prebiotics and probiotics are being studied and used across food animal species today. Enzymes in

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animal feed act to improve feed digestibility and reduce gut inflammation, improving nutrient absorption and reducing cost for producers. Prebiotics are non-digestible functional ingredients fermented in the large colon that feed the beneficial bacteria in the animal's gut and support microbiome health. Probiotics are live bacteria added to feed in order to manage the microbiome and prevent infections. This category is expected to grow faster than the food animal medicines and vaccines market.

Companion Animal Sector

Companion Animal Growth Drivers

Pets are becoming a larger part of the average family dynamic and are increasingly viewed as "members of the family." The number of pets owned in the U.S. has increased in recent years, and in 2017, 68% of all U.S. households owned a pet. With pets living longer, consumers are spending more disposable income to give their "family member" a healthier, more comfortable life. Most veterinary expenditures are paid out of pocket. Even in times of recession, pet owners are less sensitive to the overall price of pet care than to other aspects of their lifestyle. As new innovations emerge, pet owners now have a greater ability to extend the life of their pet by treating chronic diseases and ailments associated with old age.

The U.S. pet ownership trend is being echoed in other parts of the world. Outside the U.S., the number of dogs and cats receiving healthcare is growing with the increasing middle class. In emerging markets, from 2003 to 2016, cat and dog pet ownership grew by approximately 50%.

Companion Animal Product Categories

Companion animal medicines and vaccines are divided into two main categories: CA Disease Prevention and CA Therapeutics.

CA Disease Prevention

CA Disease Prevention consists primarily of parasiticides, which predominantly target fleas, ticks, heartworms, roundworms, hookworms, whipworms and tapeworms; and vaccines, which target rabies, rhinotracheitis, feline leukemia, hepatitis, parainfluenza and other conditions. As pet owners become increasingly willing to spend money on their pets, they are extending the lives and quality of life of their pets through preventative care, mirroring human health trends. Prevention of fleas, ticks, worms and other parasites, as well as vaccination against infection, have become widely adopted by consumers.

CA Therapeutics

CA Therapeutics consists of products used to treat or manage chronic disease in pets. Examples include products for pain, inflammation, arthritis, cardiovascular issues, otitis (ear infections), dermatology conditions, diabetes and many others. These therapies, which offer a higher quality of life for pets, are growing, driven by innovation in new molecules and improved delivery formulations. As pets live longer and owners' willingness to provide them with medical treatment strengthens, innovation has further expanded with therapies influenced by human health, offering the potential for development of new animal health medicines and capabilities.

Key Structural Characteristics of the Animal Health Industry

•: Brands often have long, sustainable value. Branded animal health products often retain significant, and occasionally increased, market share after many years on the market, even after the loss of patent protection. As an example, five of our top 10 products, based on

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2017 revenue, have been on the market for over 25 years. In the food animal sector, the level of competition is influenced by macro-economic factors, brand loyalty, distribution models and the absence of governmental or third-party payer systems. In the companion animal sector, competition is influenced by brand loyalty, new innovation, relationships with veterinarians, channel expansion and the overall growth in pet ownership.

•: Diversified product portfolios. Animal health companies often derive their revenue from dozens, if not hundreds, of products and are frequently not dependent on a select few flagship products. For example, our top 10 products accounted for only 41% of revenue in 2017. We believe companies with diversified global companion and food animal product portfolios can be more resilient to changing market dynamics and are structured to better balance potential geographic, product and species volatility.
•: Deep customer relationships. Direct customer models allow animal health sales representatives and veterinary consultants to develop a deep understanding of customer needs, which often facilitate strong and impactful relationships. Representatives and consultants frequently partner with customers through product support and analytics, driving additional value for the customer.
•: Fast and efficient R&D model. Product approvals typically require a limited number of targeted studies in animals, which moderates research expenses. The approval process is generally predictable given the number of studies required, leading to average timelines from initiation of development to approval of three to seven years at a cost of $50 million to $100 million.
•: Self-pay market. Food animal producers, pet owners and veterinarians typically pay for products out of pocket, making them the primary decision makers. This results in manufacturers being able to price products based primarily on the end customer's realized value.

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BUSINESS

Overview

•: Companion Animal Disease Prevention ("CA Disease Prevention") : We have one of the broadest parasiticide portfolios in the companion animal sector based on indications, species and formulations, with products that protect pets from worms, fleas and ticks. Combining our parasiticide portfolio with our vaccines presence, we are a leader in the U.S. in the disease prevention category based on share of revenue.
•: Companion Animal Therapeutics ("CA Therapeutics") : We have a broad pain and osteoarthritis portfolio across species, modes of action, indications and disease stages. Pet owners are increasingly treating osteoarthritis in their pets, and our Galliprant product is one of the fastest growing osteoarthritis treatments in the U.S. We also have treatments for otitis (ear infections), as well as cardiovascular and dermatology indications.
•: Food Animal Future Protein & Health ("FA Future Protein & Health") : Our portfolio in this category, which includes vaccines, nutritional enzymes and animal-only antibiotics, serves the growing demand for protein and includes innovative products in poultry and aquaculture production, where demand for animal health products is outpacing overall industry growth. We are focused on developing functional nutritional health products that promote food animal health, including enzymes, probiotics and prebiotics. We are a leader in providing vaccines as alternatives to antibiotics to promote animal health based on share of revenue.
•: Food Animal Ruminants & Swine ("FA Ruminants & Swine") : We have developed a range of food animal products used extensively in ruminant (e.g., cattle, sheep and goats) and swine production. We also deliver value to producers beyond our products through our technical expertise and support.

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We have a top four presence in all four key industry geographic regions: NA; EMEA; LATAM; and APAC, as measured by 2017 revenue, according to Vetnosis. The following graphs demonstrate our revenue for the year ended December 31, 2017 by product category, geography and our highest revenue products:

Percentage of 2017 Revenue
By Product Category ⁽¹⁾

(1): Certain percentages may reflect rounding adjustments.
(2): Strategic Exits includes revenue from third-party manufacturing, distribution and other contractual arrangements, as well as an equine product not core to our business, which we have either exited or made the decision to exit.


Percentage of 2017 Revenue By Region ⁽¹⁾		Percentage of 2017 Revenue By Highest Revenue Products ⁽¹⁾

(1): Certain percentages may reflect rounding adjustments.
(2): LATAM includes aquaculture in all regions.

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For the six months ended June 30, 2018 and 2017, our revenue was $1.5 billion and $1.4 billion, respectively, and for each of the years ended December 31, 2017, 2016 and 2015, our revenue was $2.9 billion. For the six months ended June 30, 2018 and 2017, our net income (loss) was $9.9 million and $(128.5) million, respectively, our adjusted EBITDA was $306.2 million and $278.4 million, respectively, and our adjusted net income was $219.0 million and $156.4 million, respectively. For the years ended December 31, 2017, 2016 and 2015, our net income (loss) was $(310.7) million, $(47.9) million and $(210.8) million, respectively, our adjusted EBITDA was $498.9 million, $540.4 million and $393.7 million, respectively, and our adjusted net income was $250.5 million, $332.7 million and $208.7 million, respectively. For a reconciliation of adjusted EBITDA and adjusted net income to net income (loss), see "Prospectus Summary — Summary Historical Combined Financial Data and Unaudited Pro Forma Condensed Combined Financial Data."

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Company History

As a unit of Lilly, our business has been built over the course of more than 60 years, including the following key developments:


Year		Events

1953		Introduced one of the first antibiotics exclusively for veterinary use
1954		Combined all plant and animal science activities within a single division
1960		Launched Elanco Products Company
1990		Elanco Products Company renamed Elanco Animal Health and focuses solely on animal health products
2007		Acquired Ivy Animal Health, providing access to Ivy's product portfolio and the Benchmark Performance Program data and platform
		Launched companion animal business
2009		Formed Elanco Knowledge Solutions (analytics and consultation for customers)
2011		Acquired Janssen Animal Health, increasing our portfolio of companion animal products, diversifying our food animal portfolio with poultry products and significantly expanding our European footprint
2012		Acquired ChemGen, expanding our business into the enzyme/feed efficiency space
2014		Acquired Lohmann Animal Health, strengthening our position in poultry solutions by acquiring a global leader in the supply of poultry vaccines
2015		Acquired Novartis Animal Health, increasing our product portfolio, including companion animal and aquaculture, expanding our global commercial presence and enhancing our manufacturing and R&D capabilities
2016		Opened a state-of-the-art vaccine R&D facility and entered into a license agreement with Aratana Therapeutics, Inc. to develop, manufacture, market and commercialize Galliprant outside the U.S. and co-promote it in the U.S., expanding our companion animal portfolio
2017		Acquired the BI Vetmedica U.S. vaccines portfolio, diversifying our companion animal portfolio and acquiring a fully integrated manufacturing and R&D site

Our Competitive Strengths

We believe the following strengths create sustainable competitive advantages that will enable us to continue to grow as a leader in the animal health industry.

•: Established leader with a global presence and diversified product portfolio. We are the fourth largest animal health company in the world, with revenue of $2.9 billion for the year ended December 31, 2017. Globally, we are #1 in medicinal feed additives, #2 in poultry and #3 in cattle, as measured by 2017 revenue, according to Vetnosis. We also have one of the broadest portfolios of pet parasiticides in the companion animal sector, based on indications, species and formulations. We have a top four presence in all four key geographic regions (NA, EMEA, LATAM and APAC), as measured by 2017 revenue, according to Vetnosis, including a strong presence in the emerging markets of Brazil, Thailand, China and Mexico. We have a comprehensive and diversified product portfolio, with more than 125 brands sold in more than 90 countries. In 2017, our top 10 products accounted for 41% of our revenue, with our top selling product accounting for approximately 10% of our revenue. Our global footprint includes a direct commercial presence in

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62 countries, which we have plans to reduce to fewer than 50 countries, and third-party distribution relationships serving other relevant markets. Of our approximately 1,530 sales representatives as of June 30, 2018, two-thirds were based outside of North America.

•: Strategically positioned to drive innovation and growth in our three targeted growth categories. Over the past 10 years, we have intentionally transformed Elanco from a food animal focused company into a diversified global company. In addition to our FA Ruminants & Swine category, we now have established positions in our three targeted growth categories: CA Disease Prevention, CA Therapeutics and FA Future Protein & Health. To achieve this, among other steps, we have made strategic acquisitions to expand our product portfolio, increase our sales presence globally and obtain R&D and manufacturing capabilities in these categories. Recent acquisitions include Janssen Animal Health, ChemGen, Lohmann Animal Health, Novartis Animal Health and the BI Vetmedica U.S. vaccines portfolio. See "— Company History." As a result of these acquisitions as well as organic growth, we have grown our companion animal categories, from a minimal presence in 2007 to more than $900 million in revenue in 2017. We believe that as a result of establishing a strong presence in our targeted growth categories, which feature favorable industry dynamics, we are strategically positioned to grow our revenue and increase profitability.
•: Strength of brands and relationships in our FA Ruminants & Swine category. We provide a range of products for use in ruminant and swine production that we believe have created strong, long-standing customer relationships and provide an important revenue source for our business and for investment capital to support future growth. We have well-established Elanco brands in this category such as Rumensin , a leading cattle feed additive that has been used for more than 40 years to improve feed efficiency and control coccidiosis. In addition, our technical expertise and analytics help us deliver value to our customers beyond our products. Our analytics help producers analyze large amounts of health and production data, turning that data into actionable information that helps them improve the health of their animals and, as a result, their productivity and profitability. We believe our brands and additional customer support have helped us create broad name recognition and a high level of trust among target customers, which is important to the success of our food animal products. We expect to continue to be a leader in FA Ruminants & Swine.
•: Proven track record of innovation and product launches. We have developed in-house R&D capabilities in the chemical sciences and life sciences, which enable us to discover and develop vaccines and small and large molecules in our targeted areas. We also have an R&D platform that enables us to discover, develop and evaluate future nutritional health opportunities in enzymes, probiotics and prebiotics. Beyond our strong in-house R&D, we also access ideas and innovation from a broad array of sources. This inclusive approach to innovation allows us to identify, attract, fund and develop new ideas in a manner that enhances our pipeline while, we believe, reducing the risk associated with an in-house only innovation model. As a result we have launched nine products from 2015 to 2017 that delivered revenue of $24.7 million in 2015, $97.9 million in 2016, $143.8 million in 2017 and $136.6 million in the first half of 2018. We believe our new products will be an important source of future revenue.

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New Launches by Quarter

(1): We suspended commercialization of Imrestor in the second quarter of 2018 and plan to pursue additional indications. Revenues from Imrestor were $6.5 million for the year ended December 31, 2017 and $1.0 million for the six months ended June 30, 2018.

Three of these products were developed following the traditional in-house model, while the other products were obtained through an acquisition or venture capital investment. These launches are evidence of our ability to identify innovation from diverse sources and develop them into distinctive products in our targeted categories. They include: Credelio , for the treatment and elimination of fleas and ticks in dogs and puppies; Interceptor Plus , for the prevention of heartworm disease and treatment and control of other endoparasite infections in dogs and puppies; Galliprant , for the treatment of canine osteoarthritis pain and inflammation; Osurnia , for the treatment of otitis externa in dogs; Clynav , for the immunization of Atlantic salmon against pancreas disease; Imvixa , for the prevention and control of sea lice; Inteprity , for the prevention of mortality caused by necrotic enteritis in broiler chickens; Kavault , for the reduction of diarrhea in weaned pigs; and Imrestor , which we suspended commercialization of in the second quarter of 2018, for the reduction of incidence of clinical mastitis in periparturient dairy cows. In 2017, Clynav and Galliprant were named best food animal and companion animal products, respectively, by Animal Pharm . We currently have R&D projects relating to 36 potential new product innovations (which we define as new chemical entities, new combinations or significant line extensions), which we are investigating as candidates for potential new product launches through 2023. We believe our approach to innovation will enable us to create and maintain an attractive pipeline of novel products.

•: Expertise in driving cost efficiencies and productivity. In the last 10 years, we have successfully integrated 10 businesses, including businesses acquired within the last four years with an aggregate of 4,500 full-time employees, 12 manufacturing sites and eight R&D sites. These acquisitions had a negative impact on operating margins and over the last three years, we have identified and executed a number of initiatives which improved our operational efficiency and positively impacted our operating margins. Through the reduction of manufacturing and R&D sites, headcount rationalization, focused procurement initiatives, sales force organizational design and the establishment of an integration center of excellence, we estimate that we delivered more than $500 million in annualized cost savings

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from the beginning of 2015 through the end of 2017. Since 2015, in manufacturing we have closed three sites, reduced headcount from approximately 3,500 to approximately 2,330 employees and eliminated over 2,600 SKUs (we currently supply approximately 4,400 SKUs). Drawing on these experiences, we are currently executing additional productivity initiatives throughout the organization that we believe will materially strengthen the margin profile of our business over time.

•: Experienced management team and dedicated employees. Our executive management team is comprised of a group of leaders with diverse backgrounds and extensive experience across global animal health and related industries. We believe their experience has provided organizational capabilities to support our targeted growth strategies and helped us create a legacy of growth and transformation in a dynamic industry. Our executives have taken an active role in important initiatives shaping the animal health industry. We also believe we have a loyal, highly engaged, customer-focused and cause-oriented professional workforce. We have recently strengthened our management team by adding executive officers with extensive public company experience.

Our Targeted Value-Generating Strategies

We intend to continue to grow our business and create value for our shareholders through a targeted value-generating strategy with three key pillars: a Portfolio Strategy for our marketed products, an Innovation Strategy for our R&D pipeline and a Productivity Strategy for our margin expansion initiatives.

Portfolio Strategy

•

•: CA Disease Prevention — Parasiticides and vaccines are fundamental to preventing disease in companion animals. We have a strong vaccines portfolio as well as products that protect pets from a broad spectrum of parasites, such as fleas, ticks, heartworms, roundworms, hookworms, whipworms and tapeworms. We believe we are

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well positioned to drive additional growth through continued product innovation and sales channel expansion.

•: CA Therapeutics — Pets are living longer and owners increasingly seek treatments for chronic diseases in their pets. To capitalize on these trends, we are focused on driving growth in our CA Therapeutics category by building on our broad base of pain and osteoarthritis products.
•: FA Future Protein & Health — We expect to drive revenue growth through our poultry and aquaculture portfolios. Poultry and aquaculture are expected to be among the fastest growing animal health protein sources over the next 10 years. We also are focused on nutritional health products and antibiotic stewardship that address market trends in this category.

•: Reinforce our strong presence in our FA Ruminants & Swine category. We plan to continue fortifying our long-standing FA Ruminants & Swine category to meet our customers' needs through targeted product investment and by continuing to strengthen our deep business-to-business relationships through sales force excellence and leadership in industry coalitions. We also plan to continue to utilize analytics, social media and other support to provide value to our customers beyond our products.

Innovation Strategy

•

Companion Animal — We are targeting therapeutics, vaccines and parasiticides.

•: Therapeutics — We are focused on continuing to discover and develop products in areas where we currently compete such as dermatology, otitis and pain. We are also pursuing novel targets to address unmet needs for chronic conditions in dogs and cats.
•: Vaccines — We have a competitive line of core canine, feline and rabies vaccines that we are developing for expansion into geographies outside the U.S. We are also developing novel delivery technologies for companion animal vaccines, building on the success of the formulation innovation of our current product line.
•: Parasiticides — We leverage proprietary active ingredients to develop and commercialize novel products with endoparasite and ectoparasite efficacy through combinations and novel formulations. We are also actively pursuing products with novel mechanisms of action to introduce innovation in this category.

•

Food Animal — We are targeting pharmaceuticals, vaccines and the emerging nutritional health space.

•: Pharmaceuticals — We focus efforts in discovery and development of novel pharmaceutical and biopharmaceutical products that could be effective alternatives to antibiotics or address other health challenges encountered in livestock production.
•: Vaccines — We have active vaccine R&D programs to discover and develop products to address bacterial and viral threats in poultry, swine, cattle and fish.
•: Nutritional Health — Building on our enzyme product platform and the success of Hemicell , we are targeting R&D efforts in nutritional health to deliver new products that improve gut health and performance in livestock. We focus on the role and composition of the microbiome on the health and digestive performance of the

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animal and look to introduce new products that are enzymes, probiotics or prebiotics.

•: Inclusive approach to sourcing innovation. We have a build, buy or ally strategy to identify, attract and develop new ideas in our six R&D focus areas in a manner intended to reduce risk and sustain our pipeline. In addition to traditional corporate R&D, we pursue in-licensing and partnering activities, actively and selectively engaging in funding models that include venture capital, project financing and crowdsourced innovation. This strategy gives us access to a wider range of novel ideas and increases our ability to bring innovative products to market compared to an in-house only model.

Productivity Strategy

•

Leverage our productivity capabilities to improve operating margins. We estimate that from the beginning of 2015 through the end of 2017, we generated more than $500 million in annualized cost savings through our productivity initiatives, including the integration of three major acquisitions. Leveraging this track record of productivity improvements and cost savings, we aim to significantly increase our operating margins over time through our initiatives in manufacturing and SG&A. Our productivity strategies include:

•: Manufacturing efficiency and cost savings. We plan to continue to execute on initiatives we have identified to improve manufacturing processes, reduce our manufacturing footprint, advance lean initiatives, consolidate our CMO network, strategically insource projects and pursue cost savings opportunities for raw materials through a new procurement process. We also plan to leverage our extensive integration experience to continue identifying cost-savings and delivering on our margin expansion objectives.
•: SG&A excellence. Our sales strategy is focused on achieving growth in our targeted product categories while increasing productivity within our sales force. We plan to utilize both our sales force's strong customer relationships and our strategic distributor partnerships to efficiently grow demand for our products. We also have a targeted procurement initiative and are in the process of implementing a G&A steady state organizational design to reduce overhead costs and simplify infrastructure following the termination of our transitional service agreement with Lilly.

Products

We have a diverse portfolio of products marketed under more than 125 brands, including products for both food animals and companion animals.

Our food animal products are designed to enable producers to keep animals healthy and deliver more food while using fewer resources. Our antibacterials, anticoccidials, vaccines and parasiticides aim to make food safer by preventing and controlling disease. We offer products and support to enhance the integrity of the food supply, while our productivity enhancers help make food more affordable and abundant by increasing the amount of meat, milk or eggs an animal can supply. Furthermore, our expertise and data analytics help our customers improve production efficiency and business performance. Food animal products represented approximately 63% of our revenue for the year ended December 31, 2017.

Our companion animal products help veterinarians better care for pets. We partner with pet owners and veterinarians for the purpose of providing a consistent flow of innovative and effective products and support. Our R&D focuses on products that prevent and treat disease, improve and extend quality of life and improve the type of care received by pets. We also partner closely with veterinarians to provide technical support and case management for our products. Companion animal products represented approximately 37% of our revenue for the year ended December 31, 2017.

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We group our products into four principal categories:

•: CA Disease Prevention : includes parasiticides and vaccine products for canines and felines.
•: CA Therapeutics : includes products for the treatment of pain, osteoarthritis, otitis, cardiovascular and dermatology indications in canines and felines.
•: FA Future Protein & Health : includes vaccines, antibiotics, parasiticides and other products used in poultry and aquaculture production, as well as functional nutritional health products, including enzymes, probiotics and prebiotics.
•: FA Ruminants & Swine : includes vaccines, antibiotics, implants, parasiticides and other products used in ruminants and swine production, as well as certain other food animal products.

We pursue the development of new chemical and biological molecules through our innovation strategy. Since 2015, we have launched the following nine products:

•: In CA Disease Prevention, Credelio and Interceptor Plus .
•: In CA Therapeutics, Galliprant and Osurnia.
•: In FA Future Protein & Health, Inteprity , Imvixa and Clynav .
•: In FA Ruminants & Swine, Imrestor and Kavault .

In the second quarter of 2018, we suspended commercialization of Imrestor and plan to pursue additional indications.

In 2016, we announced the creation of our Nutritional Health organization, which focuses on functional nutrition products, including enzymes, probiotics and prebiotics, which impact animal microbiomes and other dietary factors to reduce disease incidence, improve gut health and enhance feed digestibility. We first focused on nutritional health in 2012, with the acquisition of ChemGen and the Hemicell brand. In 2016, we entered into an agreement with Agro Biosciences, Inc. to commercialize Correlink — a novel direct-fed microbial (probiotic) product outside the U.S. In early 2018, we announced a new global, exclusive in-licensing agreement with Ab E Discovery to further develop and bring to the market an in feed antibody product focused on reducing and controlling coccidiosis.

Rumensin , our top selling product, contributed approximately 10% of our revenue in 2017, 2016 and 2015. No other product contributed 10% or more of our revenue. Our top five selling products, Rumensin , Trifexis , Maxiban , Denagard and Tylan Premix , collectively contributed approximately 29% of our 2017 revenue. Our top 10 products collectively contributed 41% of our 2017 revenue.

Set forth below is information regarding our principal products.

CA Disease Prevention Products


		Primary
Product	Description	Species

Bronchi Shield III and Bronchi Shield Oral (vaccines)	Bronchi Shield III — To protect against adenovirus, parainfluenza and Bordetella bronchiseptica (Bb) in dogs. Bronchi Shield Oral — To protect against Bb in dogs.	Dogs

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		Primary
Product	Description	Species

Comfortis (spinosad)	To kill fleas and prevent and treat flea infestations ( Ctenocephalides felis ) in cats 14 weeks of age or older and weighing at least 4.1 lbs. and dogs 14 weeks of age or older and weighing at least 5.0 lbs.	Cats, Dogs
Credelio (lotilaner)	To kill adult fleas and to treat flea infestations ( Ctenocephalides felis ) and treat and control tick infestations ( Amblyomma americanum (lone star tick), Dermacentor variabilis (American dog tick), Ixodes scapularis (black-legged tick) and Rhipicephalus sanguineus (brown dog tick)) for one month in dogs and puppies 8 weeks of age or older and weighing at least 4.4 lbs.	Dogs
Duramune (vaccines)	Includes multiple products that collectively protect against distemper, adenovirus, parvovirus, corona, parainfluenza, leptospira canicola, and other diseases in dogs.	Dogs
Rabvac (vaccines)	To protect against rabies, includes a 1-year and 3-year shot.	Cats, Dogs
Fel-O-Vax (vaccines)	Includes multiple products that collectively protect against Leukemia, rhinovirus, calicivirus, panleukopenia, and chlamydia in cats.	Cats
Fel-O-Guard (vaccines)	Includes multiple products that collectively protect against Leukemia, rhinovirus, calicivirus, panleukopenia, and chlamydia in cats.	Cats
Interceptor Plus (milbemycin oxime/praziquantel)	To prevent heartworm disease caused by Dirofilaria immitis and for the treatment and control of adult roundworm ( Toxocara canis and Toxascaris leonina ), adult hookworm ( Ancylostoma caninum ), adult whipworm ( Trichuris vulpis ), and adult tapeworm ( Taenia pisiformis , Echinococcus multilocularis , and Echinococcus granulosus ) infections in dogs and puppies weighing at least 2 lbs. and 6 weeks of age or older. Interceptor Plus is a relaunch of a previously approved formula.	Dogs
Milbemax (milbemycin oxime + praziquantel)	To treat and control parasitic infections due to adult hookworm, adult roundworm and adult tapeworm and to prevent heartworm disease caused by Dirofilaria immitis in cats and dogs.	Cats, Dogs
Trifexis (spinosad + milbemycin oxime)	To prevent heartworm disease ( Dirofilaria immitis ) and to kill fleas. Trifexis is indicated for the prevention and treatment of flea infestations ( Ctenocephalides felis ), and the treatment and control of adult hookworm (Ancylostoma caninum) , adult roundworm ( Toxocara canis and Toxascaris leonina ) and adult whipworm ( Trichuris vulpis ) infections in dogs and puppies 8 weeks of age or older and weighing at least 5 lbs.	Dogs

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CA Therapeutics Products


		Primary
Product	Description	Species

Atopica (cyclosporine A)	To control atopic dermatitis in dogs weighing at least 4 lbs.	Dogs
Fortekor Plus (benazepril + pimobendan)	To treat congestive heart failure due to atrioventricular valve insufficiency or dilated cardiomyopathy in dogs.	Dogs
Galliprant (grapiprant)	To control pain and inflammation associated with osteoarthritis in dogs.	Dogs
Onsior (robenacoxib)	To control postoperative pain and inflammation associated with soft tissue surgery in dogs weighing at least 5.5 lbs. and 4 months of age or older and control postoperative pain and inflammation associated with orthopedic surgery, ovariohysterectomy and castration in cats weighing at least 5.5 lbs. and 6 months of age or older; for up to a maximum of 3 days.	Cats, Dogs
Osurnia (terbinafine + florfenicol + betamethasone acetate)	To treat otitis externa in dogs associated with susceptible strains of bacteria ( Staphylococcus pseudintermedius ) and yeast ( Malassezia pachydermatis ).	Dogs

FA Future Protein & Health


		Primary
Product	Description	Species

AviPro (vaccines)	Includes multiple products that collectively protect against Newcastle disease, infectious bronchitis, fowl cholera, paramyxovirus Type 3, Bursal Disease, other diseases and foodborne pathogens like Salmonella in poultry.	Poultry
Clynav (plasmid deoxyribonucleic acid vaccine)	To immunize Atlantic salmon to reduce impaired daily weight gain, and reduce mortality, and cardiac, pancreatic and skeletal muscle lesions caused by pancreas disease following infection with salmonid alphavirus subtype 3 (SAV3).	Fish (Salmon)
Coban / Elancoban (monensin)	To aid in the prevention of coccidiosis in broiler and replacement chickens (caused by Eimeria necatrix, E. tenella, E. acervulina, E. brunetti, E. mivati , and E. maxima ), in turkeys (caused by Eimeria adenoeides, E. meleagrimitis and E. gallopavonis ) and in growing Bobwhite quail (caused by Eimeria dispersa and E. lettyae ). Coban/Elancoban is an animal-only antibiotic and an ionophore.	Poultry
Hemicell (endo-1, 4- b -mannanase)	Enzyme supplement for poultry and swine feeds that contain a source of b -mannanase, which hydrolyses the b -mannans present in soybean and corn meal.	Poultry, Swine

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		Primary
Product	Description	Species

Imvixa (lufenuron)	To prevent and control infestation caused by sea lice, Caligus reogercresseyi, in farmed salmon.	Fish (Salmon)
Maxiban (narasin + nicarbazin)	To prevent coccidiosis in broiler chickens caused by Eimeria necatrix, E. tenella, E. acervulina, E. brunetti, E. mivati and E. maxima. Maxiban is an animal-only antibiotic and an ionophore.	Poultry
Monteban (narasin)	To prevent coccidiosis in broiler chickens caused by Eimeria necatrix, E. tenella, E. acervulina, E. brunetti, E. mivati and E. maxima. Monteban is an animal-only antibiotic and an ionophore.	Poultry
Surmax / Maxus / Inteprity (avilamycin)	To prevent mortality caused by necrotic enteritis associated with Clostridium perfringens in broiler chickens. Surmax, Maxis and Inteprity are animal-only antibiotics.	Poultry

FA Ruminants & Swine


		Primary
Product	Description	Species

Denagard (tiamulin)	To treat Swine Dysentery associated with Serpulina hyodysenteriae susceptible to tiamulin and for treatment of swine bacterial enteritis caused by Escherichia coli and Salmonella choleraesuis sensitive to chlortetracycline and treatment of bacterial pneumonia caused by Pasteurella multocida sensitive to chlortetracycline. Denagard is a shared-class antibiotic.	Swine
Optaflexx / Paylean (ractopamine hydrochloride)	To increase rate of weight gain, improve feed efficiency and increase carcass leanness, and used as a top dress feed to increase rate of weight gain and improve feed efficiency in cattle fed in confinement for slaughter during the last 28 to 42 days on feed. Ractopamine, the active ingredient in Paylean and Optaflexx, is a beta adrenoreceptor agonist.	Cattle, Swine
Pulmotil (tilmicosin)	For swine: To control swine respiratory disease associated with Actinobacillus pleuropneumoniae and Pasteurella multocida. For cattle: To control bovine respiratory disease (BRD) associated with Mannheimia haemolytica, Pasteurella multocida and Histophilus somni in groups of beef and non-lactating dairy cattle, where active BRD has been diagnosed in at least 10% of the animals in the group. Pulmotil is a shared-class antibiotic.	Cattle, Swine
Rumensin (monensin)	For cattle fed in confinement for slaughter: To improve feed efficiency and prevent and control coccidiosis due to Eimeria bovis and Eimeria zuernii . For dairy cows: To increase milk production efficiency (production of marketable solids-corrected milk per unit of feed intake).	Cattle

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		Primary
Product	Description	Species

	For growing cattle on pasture or in dry lot (stocker and feeder and dairy and beef replacement heifers): To increase rate of weight gain and to prevent and control coccidiosis due to Eimeria bovis and Eimeria zuernii . For mature reproducing beef cows: To improve feed efficiency when receiving supplemental feed and to prevent and control coccidiosis due to Eimeria bovis and Eimeria zuernii . For goats: To prevent coccidiosis due to Eimeria crandallis, Eimeria christenseni and Eimeria ninakohlyakimovae in goats maintained in confinement. For calves (excluding veal calves): To prevent and control coccidiosis due to Eimeria bovis and Eimeria zuernii. Rumensin is an animal-only antibiotic and an ionophore.
Tylan Premix (tylosin phosphate)	To control porcine proliferative enteropathies associated with Lawsonia intracellularis and to control porcine proliferative enteropathies associated with Lawsonia intracellularis immediately after medicating with Tylan Soluble (tylosin tartrate) in drinking water. Tylan Premix is a shared-class antibiotic.	Swine, Cattle, Poultry
Vira Shield (vaccines)	Includes multiple products that protect against infection, bovine rhinotracheitis, bovine viral diarrhea, bovine respiratory syncytial virus, bovine respiratory disease, leptospira canicola and other diseases in cattle.	Cattle

Antibiotics

Antimicrobial resistance in humans, or the risk that human pathogens evolve or otherwise emerge that are resistant to antibiotics or other antimicrobials, is a significant health concern, and animal agriculture can play a role in mitigating this risk. As a company dedicated to the health and well-being of animals, we seek to help veterinarians and farmers responsibly use antibiotics when treating animals. In our efforts to address antibiotic resistance while protecting animal health, we introduced a global antibiotic stewardship plan focusing on increasing responsible antibiotic use; reducing the need for shared-class antibiotics; and replacing antibiotics with alternatives to help livestock producers treat and prevent animal disease. Antibiotics, used responsibly, along with good animal care practices, help enhance food safety and animal well-being.

There are two classes of antibiotics used in animal health:

•: Animal-only antibiotics and ionophores : Not all pathogens that cause disease in animals are infectious in humans, and accordingly animal-only antibiotics are not used in human medicine (i.e., not medically important). Ionophores are a special class of animal-only antimicrobials uniquely developed only for use in animals. In Europe and certain other jurisdictions, ionophores are not currently classified as antibiotics. Because of their animal-only designation, mode of action, and spectrum of activity, their use is not considered to create the same risk of resistance in human pathogens.

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•: Shared-class antibiotics : These are used in both humans and animals. Some antibiotics are used to treat infectious disease caused by pathogens that occur in both humans and animals. Of the 18 major antibiotic resistance threats that the Centers for Disease Control and Prevention tracks, two are associated with infectious disease in animals. As part of our global antibiotic stewardship plan and in compliance with FDA guidance, shared-class antibiotics are labeled only for the treatment of an established need in animals and only with veterinarian oversight.

We have intentionally shifted away from shared-class antibiotics, and are focusing on animal-only antibiotics, as well as antibiotic-free solutions. In 2017, 13% of our revenue was from products classified as shared-class antibiotics, of which 7% of our revenue was in NA and EMEA and 6% was in APAC and LATAM, whereas 24% of our revenue was from animal-only antibiotics and ionophores, of which ionophores constituted 21% of our revenue. Through our policies and efforts in this area, we seek to protect the benefits of antibiotics in human medicine, while responsibly protecting the health of food animals and the safety of our food supply.

Sales and Marketing

Our sales organization includes sales representatives, veterinary consultants and other value added specialists. In markets where we do not have a direct commercial presence, we generally contract with distributors that provide logistics and sales and marketing support for our products.

Our sales representatives visit our customers, including consultants, veterinarians, food animal producers, and resellers, to inform, promote and sell our products and to support customers. Our veterinary consultants provide scientific consulting focused on disease management and herd management, training and education on diverse topics, including responsible product use, and generally have advanced degrees in veterinary medicine, veterinary nutrition or other agriculture-related fields. These direct relationships with customers allow us to understand their needs. Additionally, our sales representatives and veterinary consultants focus on collaborating with our customers to educate and support them on topics such as local disease awareness and to help them adopt new and more sophisticated animal health solutions, including through the use of our products. As a result of these relationships, our sales and consulting visits provide us with access to customer decision makers. In addition, our sales and marketing organization provides enhanced value by providing support to food animal producers to help maximize their yields and reduce costs. Our analytics help customers analyze large amounts of health and production data. As of June 30, 2018, we had approximately 1,530 sales representatives.

Customers

We primarily sell our food animal products to third-party distributors and directly to a diverse set of food animal producers, including beef and dairy farmers as well as pork, poultry and aquaculture operations. We primarily sell our companion animal products to third-party distributors, as well as directly to veterinarians that typically then sell our products to pet owners. We are also expanding into retail channels in order to meet pet owners where they want to purchase. Our largest customer, an affiliate of AmerisourceBergen Corp., is a third-party veterinary distributor and represented approximately 13% of our revenue for the year ended December 31, 2017. Our next largest customer represented approximately 7% of our revenue for the year ended December 31, 2017 and no other customer represented more than 5% of our revenue for the same period.

Research and Development

Our R&D organization is comprised of internal research, global development, global regulatory and external innovation collaborations and venture investing. As of June 30, 2018, we employed

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approximately 700 employees in our global R&D and Regulatory Affairs organizations. Our R&D headquarters is located in Greenfield, Indiana. We also have R&D facilities in Basel, Switzerland; Yarrandoo, Australia; Sao Paulo, Brazil; and Shanghai, China and a regulatory facility in Bangalore, India. Additionally, we have R&D operations co-located with manufacturing sites in Fort Dodge, Iowa; Prince Edward Island, Canada; and Cuxhaven, Germany. We incurred R&D expenses of $251.7 million in 2017, $265.8 million in 2016 and $291.0 million in 2015.

New product innovation is a core part of our business strategy. Our R&D investment is focused on projects that target novel product introductions, as well as new indications, presentations, combinations and species expansion. Our approach is a build, buy, or ally strategy to develop compelling targets and concepts that originate from our scientists and innovators, academia, agribusiness, or human pharmaceutical and biotechnology at all stages of R&D. The ability to source our concepts from different areas allows us to create a pipeline that can be competitive in the categories in which we have chosen to compete, while reducing our risk by not owning and funding all aspects of our R&D projects.

We seek to concentrate our resources in areas where we believe the science and our capabilities best match the opportunities in the animal health market. Specifically, our R&D focuses on six areas across companion animals and food animals. For companion animals, we have R&D activities in therapeutics, vaccines and parasiticides, while in food animals we are pursuing pharmaceuticals, vaccines and nutritional health.

Our R&D efforts consist of more than 100 active programs balanced across species and technology platforms. For both food animals and companion animals, we apply both large and small molecule approaches. In vaccines, our efforts encompass a full range of modified live, inactivated and nucleic acid strategies. In nutritional health, we focus on products based on enzymes, probiotics, prebiotics and other approaches that modulate biological activity in the animal digestive tract. Additionally, we employ various delivery strategies for products including in-feed, injectable, oral and topical formulations developed in conjunction with our manufacturing team to assure production that maximizes the capabilities within our internal and external manufacturing network.

We engage in licensing and business development to acquire assets for our pipeline and new R&D platforms and to establish strategic R&D collaborations. We make and maintain capital investments in venture capital vehicles that focus on agribusiness and animal health, and we engage in risk sharing collaborations to expand our external capital sources to augment internal investments. To support collaborations with innovation sources focused on human health we have developed capabilities to conduct translational comparative medical research trials in animals with naturally occurring conditions that mimic a human disease or disorder. This type of collaboration de-risks unproven or less well-validated human hypotheses while potentially defining a clinically validated new approach in veterinary medicine.

Our R&D and commercial leadership allocate R&D investment annually with the goal of aligning near- and long-term strategic opportunities and objectives. Portfolio investment decisions are made based on the probability of technical success and regulatory approval, timing of approval/launch and earlier milestones, feasibility and cost of development and manufacture, intellectual property protection and market attractiveness/commercial forecast. R&D projects are supported by pharmaceutical project management approaches and we aim for all of our supporting R&D functional capabilities and capacities to be managed and matched to the evolving demands of the pipeline. We believe this overall R&D management system has enabled us to consistently gain product approvals while maintaining clear visibility to pipeline breadth and depth to support sustained launches into the future.

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Manufacturing and Supply Chain

Prior to the Separation, our products have been manufactured at both sites operated by us and sites operated by third-party CMOs.

Following the Separation, we will own and operate 13 internal manufacturing sites, four of which focus on vaccines, six of which focus on other animal health products and three of which are regional sites that focus on packaging:


Site	Location	Site	Location

Clinton	Indiana, U.S.	Winslow	Maine, U.S.
Speke	Liverpool, U.K.	Fort Dodge	Iowa, U.S.
Kansas City	Kansas, U.S.	Cuxhaven	Germany
Huningue	France	Chungli	Taiwan
Wusi	China	Cali ^(a)	Colombia
Terre Haute	Indiana, U.S.	Barueri	Brazil
Prince Edward Island	Canada

(a): We have announced our intention to exit ownership of this site

Following the Separation, we will continue to manufacture one product for Lilly at one of these sites for a period of two years. Lilly will have the option to extend for three additional years.

Our global manufacturing and supply chain is also supported by a network of CMOs. As of December 31, 2017, this network was comprised of approximately 120 CMOs. Our External Manufacturing Network centrally governs our global CMO relationships and provides oversight to these CMOs through four hubs.

We select CMOs based on several factors: (i) their ability to reliably supply products or materials that meet our quality standards at an optimized cost; (ii) their access to specialty products and technologies; (iii) capacity; and (iv) financial analyses. Our External Manufacturing Network seeks to ensure that all of the CMOs we use adhere to our standards of manufacturing quality.

We purchase certain raw materials necessary for the commercial production of our products from a variety of third-party suppliers. We utilize logistics service providers as a part of our global supply chain, primarily for shipping and logistics support.

We intend to continue our efficiency improvement programs in our manufacturing and supply chain organization. We have strong globally managed and coordinated quality control and quality assurance programs in place at all internal manufacturing sites and external manufacturing hubs, and we regularly inspect and audit our internal sites and CMO locations. We recently conducted a review of our global manufacturing and supply network to improve efficiency. As a result of this review and our operational efficiency program, we exited ownership of our manufacturing sites in Vacaville, California; Dundee, Scotland; Sligo, Ireland and Larchwood, lowa during the last three years, and we are in the process of exiting our manufacturing site in Cali, Colombia.

Our manufacturing sites experienced approximately 140 external regulatory inspections globally from 2015 to 2017, for which such regulators made no critical findings.

Competition

We face intense competition in the sectors and regions on which we focus. Principal methods of competition vary depending on the particular region, species, product category, or individual

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product. Some of these methods include new product development, quality, price, service and promotion.

Our primary competitors include animal health medicines and vaccines companies such as Zoetis Inc.; Boehringer Ingelheim Vetmedica, Inc., the animal health division of Boehringer Ingelheim GmbH; Merck Animal Health, the animal health division of Merck & Co., Inc.; and Bayer Animal Health, the animal health division of Bayer AG. We also face competition globally from manufacturers of generic drugs, as well as from producers of nutritional health products, such as DSM Nutritional Products AG and Danisco Animal Nutrition, the animal health division of E. I. du Pont de Nemours and Company. There are also several new start-up companies working in the animal health area. In addition, we compete with numerous other producers of animal health products throughout the world.

Intellectual Property

Our technology, brands and other intellectual property are important elements of our business. We rely on patent, trademark, copyright and trade secret laws, as well as regulatory exclusivity periods and non-disclosure agreements to protect our intellectual property rights. Our policy is to vigorously protect, enforce and defend our rights to our intellectual property, as appropriate.

Our product portfolio and certain product candidates enjoy the protection of approximately 3,000 patents and applications, filed in over 50 countries, with concentration in our major market countries as well as other countries with strong patent systems, such as Australia, Brazil, Canada, Europe, Japan and the U.S. Many of the patents and patent applications in our portfolio are the result of our own work, while other patents and patent applications in our portfolio were at least partially developed, and licensed to us, by third parties. A subset of our current products or product candidates are covered by patents and patent applications in our portfolio.

Patents for individual products expire at different times based on the date of the patent filing (or sometimes the date of patent grant) and the legal term of patents in the countries where such patents are obtained. For example, Galliprant's active ingredient, grapiprant, is encompassed by both compound and physical form patents in the U.S., Europe, Canada and other key markets, with terms that expire between at least October 2021 and March 2026. Various formulation and method of use patents encompass the spinosad pesticide products, Comfortis and Trifexis . The Comfortis formulation patent extends through August 2020 in the U.S., Canada and Australia, and, upon grant of applicable supplementing protection certificate ("SPC"), through August 2025 in Europe. The Trifexis formulation and method of use patents extends through September 2021 in the U.S., Canada and Australia, and, upon grant of applicable SPC, through September 2026 in Europe. We typically maintain all of our patents and assert against third parties as appropriate.

Additionally, many of our vaccine products, including the Duramune family of vaccines, are based on proprietary or patented master seeds and formulations. We actively seek to protect our proprietary information, including our trade secrets and proprietary know-how, through a variety of means including by seeking to require our employees, consultants, advisors and partners to enter into confidentiality agreements and other arrangements upon the commencement of their employment or engagement.

In order to facilitate the Separation and allow Lilly and our operations to continue with minimal interruption, Lilly will license to us the right to use certain intellectual property rights in the animal health field. In addition, Lilly will grant us a transitional license to use certain of Lilly's trademarks for a period of time following the completion of this offering. See "Certain Relationships and Related Party Transactions — Relationship with Lilly — Transitional Trademark License Agreement."

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We seek to file and maintain trademarks around the world based on commercial activities in most regions where we have, or desire to have, a business presence for a particular product. We currently maintain more than 9,000 trademark applications and registrations in major regions, primarily identifying products dedicated to the care of livestock and companion animals.

Regulatory

The sale of animal health products is governed by the laws and regulations specific to each country in which we sell our products. To maintain compliance with these regulatory requirements, we have established processes, systems and dedicated resources with end-to-end involvement from product concept to launch and maintenance in the market. Our regulatory function actively seeks to engage in dialogue with various global agencies regarding their policies that relate to animal health products. In the majority of our markets, the relevant health authority is separate from those governing human medicinal products.

United States

U.S. Food and Drug Administration. The regulatory body that is responsible for the regulation of animal health pharmaceuticals in the U.S. is the Center for Veterinary Medicine, a division of the FDA. All manufacturers of animal health pharmaceuticals must demonstrate their products to be safe, effective and produced by a consistent method of manufacture as defined under the Federal Food, Drug and Cosmetic Act (the "FFDCA"). The FDA's basis for approving a new animal drug application is documented in a Freedom of Information Summary. Post-approval monitoring of products is required by law, with reports being provided to the CVM's Office of Surveillance and Compliance. Reports of product quality defects, adverse events or unexpected results are maintained and submitted in accordance with the law. Additionally, as part of the drug experience report, we are required to submit all new information pertaining to the safety or effectiveness of a product, regardless of the source.

U.S. Department of Agriculture. The regulatory body in the U.S. for veterinary biologicals is the U.S. Department of Agriculture (the "USDA"). The Center for Veterinary Biologics within the Animal and Plant Health Inspection Service in the USDA is responsible for the regulation of animal health biologicals, which includes but is not limited to vaccines, bacterins, allergens, antibodies, antitoxins, toxoids, immunostimulants, certain cytokines, antigenic or immunizing components of live microorganisms, and diagnostic components of natural or synthetic origin, or that are derived from synthesizing or altering various substances or components of substances such as microorganisms, genes or genetic sequences, carbohydrates, proteins, antigens, allergens or antibodies. All manufacturers of animal health biologicals must show their products to be pure, safe, effective and produced by a consistent method of manufacture as defined under the Virus Serum Toxin Act. Post-approval monitoring of products is required. Reports of product quality defects, adverse events or unexpected results are maintained and submitted in accordance with the agency requirements.

Environmental Protection Agency. The main regulatory body in the U.S. for veterinary pesticides is the Environmental Protection Agency (the "EPA"). The EPA's Office of Pesticide Programs is responsible for the regulation of most pesticide products applied to animals in accordance with a memorandum of understanding (#225-73-8010) between the FDA and EPA for products that are subject to regulation under both the FFDCA and the Federal Insecticide, Fungicide and Rodenticide Act. All manufacturers of animal health pesticides must show their products will not cause unreasonable adverse effects to man or the environment as stated in the act. Within the U.S., individual state pesticide authorities must, before distribution in that state, also approve pesticide products that are approved by the EPA. Post-approval monitoring of products is required, with reports provided to the EPA and some state regulatory agencies.

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Food Safety Inspection Service. The FDA is authorized to determine the safety of substances (including "generally recognized as safe" substances, food additives and color additives), as well as prescribe their safe conditions of use. However, although the FDA has the responsibility for determining the safety of substances, the Food Safety and Inspection Service, the public health agency in the USDA, still retains, under the tenets of the Federal Meat Inspection Act and the Poultry Products Inspection Act and their implementing regulations, the authority to determine that new substances and new uses of previously approved substances are suitable for use in meat and poultry products.

In addition, the FCPA prohibits U.S. corporations and their representatives from offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Other countries have enacted similar anti-corruption laws and/or regulations. In some countries in which we operate, the pharmaceutical and life sciences industries are exposed to a high risk of corruption associated with sales to healthcare professionals and institutions. Notwithstanding our reasonable efforts to conduct our operations in material compliance with the FCPA, our international business could expose us to potential liability under the FCPA, which may result in us incurring significant criminal and civil penalties, and to potential liability under the anti-corruption laws and regulations of other jurisdictions in which we operate. In addition, the costs we may incur in defending against an FCPA investigation could be significant.

Outside of the United States

European Union (EU). We are governed by the following EU regulatory bodies:

•: The European Medicines Agency ("EMA") is a centralized agency of the EU, currently located in London, England. Due to the decision of the UK to leave the EU, the agency will relocate to Amsterdam. The agency is responsible for the scientific evaluation of Veterinary Medicinal Products ("VMP") developed by pharmaceutical companies for use in the EU. The agency has a veterinary review section distinct from the medical review section for human products. The Committee for Veterinary Medicinal Products ("CVMP") is responsible for scientific review of the submissions for VMP and Immunological Veterinary Medicinal Products. If the CVMP concludes that all requirements for quality, safety and efficacy are met, they issue a positive opinion that is forwarded to the European Commission, who takes the final decision following the European comitology procedure. The centralized marketing authorization (commission decision) of the European Commission is valid in all of the EU. All countries that are not part of the EU but belong to the European Economic Area ("EEA"), i.e., Norway, Iceland and Liechtenstein, have been part of the scientific assessment done by the CVMP. These countries issue a national marketing approval in accordance with the Commission Decision. A series of regulations, directives, guidelines, EU Pharmacopeia Monographs and other legislation provide the requirements for approval in the EU. In general, these requirements are similar to those in the U.S., requiring demonstrated evidence of purity, safety, efficacy and consistency of manufacturing processes.

If approval is sought for products that either cannot or do not need to follow the centralized procedure, approval can also be achieved by national approval in an EEA country agency. This national authorization can be mutually recognized by other EEA countries/EU member states (Mutual Recognition Procedure). In addition, national and mutual recognition can be done in a combined procedure (Decentralized Procedure).
•: The European Food Safety Authority ("EFSA") is the agency of the EU that provides scientific advice and communicates with respect to existing and emerging risks associated

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with the food chain. EFSA was established in February 2002, is based in Parma, Italy. Based on EFSA's mandate, the agency evaluates applications for feed additives, including enzymes and several nutritionals for animals.

•: The European Chemical Agency ("ECHA") is the agency of the EU for the safe use of chemicals. ECHA was founded in 2007 and is based in Helsinki, Finland. Based on ECHA's mandate, the agency conducts the evaluation of biocides for the EU.

In regard to Brexit, the EU and the UK negotiators have agreed to a transition period which is scheduled to last until December 2020, whereby regulatory processes would operate as they currently do. Post-separation, the UK has indicated they will look to continue working closely with the EMA, and that existing agreements between the EMA and other countries such as Switzerland, the U.S. and Canada provide a precedent which the UK could build on.

Brazil. The Ministry of Agriculture, Livestock Production and Supply ("MAPA") is the regulatory body in Brazil that is responsible for the regulation and control of pharmaceuticals, biologicals and medicinal feed additives for animal use. MAPA's regulatory activities are conducted through the Secretary of Agricultural Defense and its Livestock Products Inspection Department. In addition, regulatory activities are conducted at a local level through the Federal Agriculture Superintendence. These activities include the inspection and licensing of both manufacturing and commercial establishments for veterinary products, as well as the submission, review and approval of pharmaceuticals, biologicals and medicinal feed additives. MAPA is one of the most active regulatory agencies in Latin America, having permanent seats at several international animal health forums, such as Codex Alimentarius, World Organization for Animal Health and Committee of Veterinary Medicines for the Americas. MAPA was also recently invited to be a Latin American representative at International Cooperation on Harmonisation of Technical Requirements for Registration of Veterinary Medicinal Products ("VICH") meetings. Several normative instructions issued by MAPA have set regulatory trends in Latin America.

Japan. The Ministry of Agriculture, Forestry and Fishery ("MAFF") is the regulatory body in Japan that is responsible for the regulation and control of pharmaceuticals (including biologicals and pesticide/disinfectant) and feed additive/feed for animal use. MAFF's regulatory activities are conducted through the Livestock & Aquaculture Product Safety Control Division under Consumer safety bureau. The animal drug reviews and approvals, reexamination reviews, GxP compliance checks, GxP site inspections and product assay checks (including vaccine national assays) are done by National Veterinary Assay Laboratory ("NVAL"). MAFF coordinates with other agencies such as Ministry of Health, Labor and Welfare ("MHLW") and Food safety commission ("FSC") to perform various license compliance checks (e.g., MA holder, manufacturer and oversea site accreditation) and ensure good promotional activities. Routine inspections, antimicrobial feed additive national assays and manufacturing inspections are done by the Food & Agriculture Material Inspection Center. For food animal products, animal drug review is done by NVAL but the human food safety review is done by FSC (ADI establishment and antimicrobial risk assessment) and MHLW (MRL establishment). These three agencies (NVAL, FSC and MHLW) work together to approve food animal products. In addition to those central government agencies, various licenses are delegated to the local municipal government, such as animal drug wholesaler and retailer licenses and feed additive distributor licenses.

China. The Ministry of Agriculture ("MOA") is the regulatory body that is responsible for the regulation and control of pharmaceuticals, biologicals, disinfectants, medicinal feed additives,

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pesticide and feed/feed additives for animal use. There are three organizations under the MOA that regulate animal health:

•: The Institute of Veterinary Drug Control is responsible for the evaluation of new applications, renewals, variations, manufacturers, quality methods and tissue residue methods for pharmaceuticals, biologicals, disinfectants and medicinal feed additives.
•: The feed/feed additive office is responsible for the registration and renewal of feed and feed additives.
•: The pesticide bureau is responsible for the registration and renewal of pesticide products.

Australia. The Australian Pesticides and Veterinary Medicines Authority ("APVMA") is an Australian government statutory authority established in 1993 to centralize the registration of all agricultural and veterinary products into the Australian marketplace. Previously, each state and territory government had its own system of registration. The APVMA assesses applications from companies and individuals seeking registration so they can supply their product to the marketplace. Applications undergo rigorous assessment using the expertise of the APVMA's scientific staff and drawing on the technical knowledge of other relevant scientific organizations, Commonwealth government departments and state agriculture departments. If the product works as intended and the scientific data confirms that when used as directed on the product label it will have no harmful or unintended effects on people, animals, the environment or international trade, the APVMA will register the product. As well as registering new agricultural and veterinary products, the APVMA reviews older products that have been on the market for a substantial period of time to ensure they still do the job users expect and are safe to use. The APVMA also reviews registered products when particular concerns are raised about their safety and effectiveness. The review of a product may result in confirmation of its registration or it may see registration continue with some changes to the way the product can be used. In some cases the review may result in the registration of a product being cancelled and the product taken off the market.

Rest of world. Country-specific regulatory laws typically have provisions that include requirements for certain labeling, safety, efficacy and manufacturers' quality control procedures (to assure the consistency of the products), as well as company records and reports. Other countries' regulatory agencies typically either refer to the FDA, USDA, EU and other international animal health entities, including the World Organization for Animal Health, Codex Alimentarius or VICH (see below), in establishing standards and regulations for veterinary pharmaceuticals and vaccines, or review the quality, safety and effectiveness of the products themselves according to their own national requirements.

Global policy and guidance

Joint FAO/WHO Expert Committee on Food Additives. The Joint FAO/WHO Expert Committee on Food Additives is an international expert scientific committee that is administered jointly by the Food and Agriculture Organization of the United Nations ("FAO") and the World Health Organization ("WHO"). They provide a risk assessment/safety evaluation of residues of veterinary drugs in animal products, exposure and residue definition and maximum residue limit proposals for veterinary drugs. Similarly, the Joint FAO/WHO Meeting on Pesticide Residues ("JMPR") is an international expert scientific group administered jointly by the FAO and WHO. JMPR reviews residues and analytical aspects of the pesticides, estimate the maximum residue levels, review toxicological data and estimate acceptable daily intakes for humans of the pesticides under consideration. We work with these committees to establish acceptable safe levels of residual product in food-producing animals after treatment with veterinary drugs or pesticides. This in turn enables the calculation of appropriate withdrawal times for our products prior to an animal entering the food chain.

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Advertising and promotion review. Promotion of ethical animal health products is controlled by regulations in many countries. These rules generally restrict advertising and promotion to those claims and uses that have been reviewed and endorsed by the applicable agency. We conduct a review of promotion material for compliance with the local and regional requirements in the markets where we sell animal health products.

Import and Export of Products. The importation and exportation of animal health products is controlled by regulations in many countries. In some jurisdictions this may include obtaining separate permits or licenses by product or by company or filing notices with applicable regulatory agencies prior to import or export of product. We ensure compliance with local and global regulations in the markets where we import/export our animal health products.

International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products. VICH is a trilateral (EU-Japan-USA) program launched in 1996 aimed at harmonizing technical requirements for veterinary product registration. Several other countries have obtained observer status, e.g., Canada, New Zealand, Australia and South Africa, or are linked to VICH on basis of the VICH Outreach Forum, a VICH initiative with the main objective of providing a basis for wider international harmonization of technical requirements. In addition, the World Organization for Animal Health is an associate member of VICH.

The objectives of the VICH are as follows:

•: Establish and implement harmonized technical requirements for the registration of veterinary medicinal products in the VICH regions, which meet high quality, safety and efficacy standards and minimize the use of test animals and costs of product development.
•: Provide a basis for wider international harmonization of registration requirements through the VICH Outreach Forum.
•: Monitor and maintain existing VICH guidelines, taking particular note of the ICH work program and, where necessary, update these VICH guidelines.
•: Ensure efficient processes for maintaining and monitoring consistent interpretation of data requirements following the implementation of VICH guidelines.
•: By means of a constructive dialogue between regulatory authorities and industry, provide technical guidance enabling response to significant emerging global issues and science that impact regulatory requirements within the VICH regions.

Employees

As of June 30, 2018, we employed approximately 5,640 full time employees. In addition, we employed approximately 240 fixed-duration employees, which are individuals hired for a pre-defined length of time (one to four years). Together, they total approximately 5,880 worldwide. Of the 5,880 employees globally, approximately 2,450 are U.S.-based and approximately 3,430 are employed in other jurisdictions. Some of these employees are members of unions, works councils, trade associations or are otherwise subject to collective bargaining agreements, including approximately 150 union employees in the U.S. located at our Fort Dodge, Iowa manufacturing/R&D facility. Approximately 40% of our global population is in customer-facing roles, including but not limited to, traditional sales roles, technical consultants, account managers and commercial and general managers.

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Property

We have R&D operations co-located with certain of our manufacturing sites in the U.S. to facilitate the efficient transfer of production processes from our laboratories to manufacturing sites. In addition, we maintain R&D operations at non-manufacturing locations in the U.S., Switzerland, Australia, Brazil and China. As part of the Separation, Lilly will transfer to us its interest in each of these R&D facilities. Our largest R&D facility is our U.S. R&D site located in Fort Dodge, Iowa, which has approximately 0.3 million square feet.

The address of our principal executive offices is currently c/o Elanco, 2500 Innovation Way, Greenfield IN, 46140, and we expect that our principal executive offices will remain at this address following the completion of this offering.

Following the Separation, our global manufacturing network will be comprised of 13 manufacturing sites. The largest manufacturing site in our global manufacturing network is our manufacturing site located in Clinton, Indiana, which has approximately 0.7 million square feet. In addition, our global manufacturing network will continue to be supplemented by approximately 120 CMOs. See "— Manufacturing and Supply Chain."

We own or lease various additional properties for other business purposes including office space, warehouses and logistics centers. In addition, under the transitional services agreement, Lilly will provide us with continued access to certain of its premises currently occupied by our employees for up to two years.

We believe that our existing properties, as supplemented by CMOs and access to Lilly facilities that will be provided under the transitional services agreement, are adequate for our current requirements and for our operations in the near future.

Environmental, Health and Safety

We are subject to various federal, state, local and foreign environmental, health and safety ("EHS") laws and regulations. These laws and regulations govern matters such as the emission and discharge of hazardous materials into the ground, air or water; the generation, use, storage, handling, treatment, packaging, transportation, exposure to, and disposal of hazardous and biological materials, including recordkeeping, reporting and registration requirements; and the health and safety of our employees. Due to our operations, these laws and regulations also require us to obtain, and comply with, permits, registrations or other authorizations issued by governmental authorities. These authorities can modify or revoke our permits, registrations or other authorizations and can enforce compliance through fines and injunctions.

Certain environmental laws impose joint and several liability, without regard to fault, for cleanup costs on persons who have disposed of or released hazardous substances into the environment, including at third-party sites or offsite disposal locations, or that currently own or operate (or formerly owned or operated) sites where such a release occurred. We could be subject to liability for the investigation and remediation of legacy environmental contamination caused by historical industrial activity at sites that we own or on which we operate. In addition to clean-up actions brought by federal, state, local and foreign governmental entities, private parties could raise personal injury or other claims against us due to the presence of, or exposure to, hazardous materials on, from or otherwise relating to such a property.

We have made, and intend to continue to make, necessary expenditures for compliance with applicable EHS laws and regulations. We are also monitoring and investigating environmental contamination from past industrial activity at certain sites. While we cannot predict with certainty our future capital expenditures or operating costs for environmental compliance or the investigation and remediation of contaminated sites, we anticipate capital and operational expenditures for the remainder of the year ending December 31, 2018 and the year ending December 31, 2019 for

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environmental compliance purposes and for the monitoring, investigation or clean-up of certain past industrial activities as follows:

•: environmental-related capital expenditures — $2.9 million; and
•: other environmental-related expenditures — $2.2 million.

In connection with past acquisitions and divestitures, we have undertaken certain indemnification obligations that may require us in the future, to conduct or finance environmental cleanups at sites that we no longer own or operate. We have also entered into indemnification agreements in which we are or may be indemnified for various environmental cleanups; however, such indemnities are limited in both time and scope and may be further limited in the presence of new information, or may not be available at all.

Legal Proceedings

We are from time to time subject to claims and litigation arising in the ordinary course of business. These claims and litigation may include, among other things, allegations of violation of U.S. and foreign competition law, labor laws, consumer protection laws and environmental laws and regulations, as well as claims or litigation relating to product liability, intellectual property, securities, breach of contract and tort. We operate in multiple jurisdictions and, as a result, a claim in one jurisdiction may lead to claims or regulatory penalties in other jurisdictions. We intend to vigorously defend against any pending or future claims and litigation, as appropriate.

At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our combined results of operations, financial condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management's attention and may materially adversely affect our reputation, even if resolved in our favor.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth the names and ages, as of June 30, 2018, and titles of the individuals we currently expect to serve as our executive officers and members of our board of directors at the time of the offering. Certain biographical information with respect to those executive officers and directors follows the table.


Name	Age	Position

Jeffrey N. Simmons	51	President, Chief Executive Officer and Director
Lucas E. Montarce	41	Acting Chief Financial Officer
Ramiro M. Cabral	47	Executive Vice President, Elanco International and Global Customer Value
Michael-Bryant Hicks	43	Executive Vice President, General Counsel and Corporate Secretary
David S. Kinard	51	Executive Vice President, Human Resources and Corporate Affairs
Sarena S. Lin	47	Executive Vice President, Elanco USA and Global Strategy
Aaron L. Schacht	51	Executive Vice President, Innovation, Regulatory and Business Development
David A. Urbanek	52	Executive Vice President, Manufacturing and Quality
R. David Hoover	73	Director (Chairman)
Kapila K. Anand	64	Director
Michael J. Harrington	55	Director
Lawrence E. Kurzius	60	Director
Carl L. McMillian	52	Director
David A. Ricks	51	Director
Aarti S. Shah	53	Director
Joshua L. Smiley	48	Director

Jeffrey N. Simmons serves as our President and Chief Executive Officer and as a director on our board. Mr. Simmons has served as the President of the Elanco Animal Health division of Lilly and Senior Vice President of Lilly since 2008. Prior to 2008, Mr. Simmons held various leadership roles for Elanco, including District Sales Manager, International Marketing Manager, Country Director for Brazil, Area Director for Western Europe and Executive Director for U.S. and Global Research & Development.

Mr. Simmons' experience described above, including his knowledge of our company and the animal health industry and his business and management experience, provides him with the qualifications and skills to serve as a director on our board.

Lucas E. Montarce serves as our Acting Chief Financial Officer. Mr. Montarce was appointed as Acting Chief Financial Officer in August 2018, following the medical leave of absence of our Chief Financial Officer. Mr. Montarce has served as Vice President, Finance, Strategy and Operations of the Elanco Animal Health division of Lilly since June 2017. Since joining Lilly in 2001, he has held a variety of positions across Latin America, Europe and the U.S., including local and regional Chief Finance Officer and Director of Global Treasury.

Ramiro M. Cabral serves as our Executive Vice President, Elanco International and Global Customer Value. Mr. Cabral has served as Vice President and Chief Marketing Officer of the Elanco Animal Health division of Lilly since 2017. Mr. Cabral joined Lilly in 2005 and has held various leadership positions for Elanco, including Vice President and Head of Operations for Elanco EMEA from 2013 to 2017 and Senior Director, U.S. Beef Business Unit from 2011 to 2013.

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Michael-Bryant Hicks serves as our Executive Vice President, General Counsel and Corporate Secretary. Mr. Hicks has served as General Counsel of the Elanco Animal Health division of Lilly since May 2018. Prior to joining Elanco, Mr. Hicks served in various legal roles, including General Counsel at Mallinckrodt Public Liability Company from 2016 to 2018, Senior Vice President, General Counsel and Corporate Strategy at The Providence Service Corporation from 2014 to 2016 and as Assistant General Counsel at DaVita Inc. from 2011 to 2013.

David S. Kinard serves as our Executive Vice President, Human Resources and Corporate Affairs. Mr. Kinard has served as Vice President of Human Resources and Global Learning and Development for the Elanco Animal Health division of Lilly since May 2018. Prior to May 2018, Mr. Kinard served in various leadership roles for Lilly, including Vice President of Human Resources for a variety of Lilly businesses, including Lilly International in 2017, Bio-Medicines and Emerging Markets from 2015 to 2017 and Lilly Diabetes and Global Employee Relations/HR Operations from 2011 to 2015.

Sarena S. Lin serves as our Executive Vice President, Elanco USA and Global Strategy. Ms. Lin has served as Senior Vice President of North American Operations and Strategy at the Elanco Animal Health division of Lilly since January 2018. Prior to joining Lilly, Ms. Lin served as President of Cargill Feed & Nutrition from 2014 to 2017. Prior to 2014, Ms. Lin served as Global Head of Strategy and Business Development for Cargill from 2011 to 2014. Ms. Lin served on the board of directors for the animal health and dental distributor, Patterson Companies, from 2014 to 2018.

Aaron L. Schacht serves as our Executive Vice President, Innovation, Regulatory and Business Development. Mr. Schacht has served as the Vice President of global research and development of the Elanco Animal Health division of Lilly since 2015. Prior to 2015, Mr. Schacht served in various leadership roles for Lilly, including Global Brand Development Leader of Pain in Lilly BioMedicines in 2014, Senior Advisor of Strategy & Business Development for Lilly BioMedicines from 2012 to 2014 and Executive Director of Global External R&D at Lilly from 2008 to 2012.

David A. Urbanek serves as our Executive Vice President, Manufacturing and Quality. Mr. Urbanek has served as Vice President of Manufacturing at the Elanco Animal Health division of Lilly since November 2017. Prior to that, Mr. Urbanek served in various leadership roles for Lilly's Manufacturing division, including Senior Director of Emerging Markets Manufacturing from 2013 to 2017, Senior Director of Global Diabetes Manufacturing from 2011 to 2013 and Senior Director of External Drug Products Operations from 2009 to 2011.

R. David Hoover serves as the chairman of our board. Mr. Hoover has been retired since 2013. Prior to that, Mr. Hoover served in various roles at Ball Corporation, including Chairman from 2002 to 2013, Chief Executive Officer from 2010 to 2011, President and Chief Executive Officer from 2001 to 2010, Chief Operating Officer from 2000 to 2001 and Chief Financial Officer from 1998 to 2000. Mr. Hoover currently serves on the boards of directors of Ball Corporation and Edgewell Personal Care Company.

Mr. Hoover's experience described above, including his extensive management experience as Chief Executive Officer and Chief Financial Officer at Ball Corporation and corporate governance experience through his service on other public boards, including nine years he previously served as a director for Lilly, provides him with the qualifications and skills to serve as a director on our board.

Kapila K. Anand serves as a director on our board. Ms. Anand has served as a Senior Advisor to KPMG LLP since 2016. Prior to that, Ms. Anand served in various leadership roles as a partner at KPMG LLP, including Industry Segment Leader — Travel, Leisure and Hospitality from 2011 to 2017, Partner in Charge — Public Policy Business Initiatives from 2009 to 2013, KPMG LLP Board

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member from 2005 to 2010, Advisory Leader — Private Equity, Real Estate and Hospitality from 2002 to 2009 and Audit Partner — Real Estate and Hospitality from 1989 to 2002. Ms. Anand currently serves on the boards of directors of Extended Stay America, Inc. and Omega Healthcare Investors, Inc.

Ms. Anand's experience described above, including her extensive financial, managerial and corporate governance experience, provides her with the qualifications and skills to serve as a director on our board.

Michael J. Harrington serves as a director on our board. Mr. Harrington has served as the Senior Vice President and General Counsel for Lilly since January 2013. Prior to 2013, Mr. Harrington served in various legal roles for Lilly, including Vice President and Deputy General Counsel of Global Pharmaceutical Operations from 2010 to 2012 and Vice President and General Counsel, Corporate from 2004 to 2010.

Mr. Harrington's experience described above, including his knowledge of our company and the animal health industry and his business and management experience, provides him with the qualifications and skills to serve as a director on our board.

Lawrence E. Kurzius serves as a director on our board. Mr. Kurzius has served in various leadership roles at McCormick & Company, including director since 2015 and Chairman of the Board of Directors since 2017, Chief Executive Officer since 2016, President since 2015, Chief Operating Officer from 2015 to 2016, Chief Administrative Officer from 2013 to 2015, President, International Businesses from 2008 to 2013, President, Europe, Middle East and Africa from 2007 to 2008 and President, U.S. Consumer Foods from 2005 to 2006.

Mr. Kurzius' experience described above, including his extensive management experience and corporate governance experience, provides him with the qualifications and skills to serve as a director on our board.

Carl L. McMillian serves as a director on our board. Mr. McMillian has served as Vice President of Toxicology, Drug Disposition, PKPD, Veterinary Resources & Experimental Medicine of Lilly since 2012. Prior to that, Mr. McMillian served in various leadership roles for Lilly, including Senior Director, Drug Disposition from 2008 to 2012 and Director, Drug Disposition from 2002 to 2008.

Mr. McMillian's experience described above, including his knowledge of our company and the animal health industry and his business and management experience, provides him with the qualifications and skills to serve as a director on our board.

David A. Ricks serves as a director on our board. Mr. Ricks has served as the Chief Executive Officer and President of Lilly since January 2017; Mr. Ricks joined the board of Lilly in January 2017 and became Chairman in June 2017. Prior to that, Mr. Ricks served in various leadership roles for Lilly, including President of Lilly Bio-Medicines from 2012 to 2016 and President of Lilly USA from 2009 to 2012.

Mr. Ricks's experience described above, including his knowledge of our company and the animal health industry and his business and management experience, provides him with the qualifications and skills to serve as a director on our board.

Aarti S. Shah serves as a director on our board. Ms. Shah has served as Senior Vice President and Chief Information Officer of Lilly since July 2016. Prior to that, Ms. Shah served in various leadership roles for Lilly, including Global Brand Leader of the Autoimmune Division of Lilly Bio-Medicines from 2013 to 2016 and Vice President of Biometrics & Advanced Analysis from 2009 to 2013.

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Ms. Shah's experience described above, including her knowledge of our company and the animal health industry and her business and management experience, provides her with the qualifications and skills to serve as a director on our board.

Joshua L. Smiley serves as a director on our board. Mr. Smiley has served as Senior Vice President and Chief Financial Officer of Lilly since January 2018. Prior to January 2018, Mr. Smiley held a variety of leadership positions at Lilly, including Senior Vice President and Treasurer in 2017 and Senior Vice President of Finance, Corporate Controller and Chief Financial Officer of Lilly Research from 2011 to 2015.

Mr. Smiley's experience described above, including his knowledge of our company and the animal health industry and his business and management experience, provides him with the qualifications and skills to serve as a director on our board.

Board of Directors

Our business and affairs are managed under the direction of our board of directors. Our amended and restated articles of incorporation and amended and restated bylaws will provide that our board of directors consist of not less than five directors. Contemporaneous with this offering, our board of directors will be composed of nine directors.

Our amended and restated articles of incorporation will provide that our board of directors will be divided into three classes, with one class being elected at each annual meeting of shareholders. Each director will serve a three-year term, with expiration staggered according to class. Each class will initially consist of three directors. The Class I directors, whose terms will expire at the first annual meeting of our shareholders following the filing of our amended and restated articles of incorporation, will be Joshua L. Smiley, Carl L. McMillian and Aarti S. Shah. The Class II directors, whose terms will expire at the second annual meeting of our shareholders following the filing of our amended and restated articles of incorporation, will be David A. Ricks, Michael J. Harrington and Kapila K. Anand. The Class III directors, whose terms will expire at the third annual meeting of our shareholders following the filing of our amended and restated articles of incorporation, will be R. David Hoover, Jeffrey N. Simmons and Lawrence E. Kurzius. See "Description of Capital Stock — Anti-Takeover Effects of Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws."

Director Independence and Controlled Company Exemption

We intend to avail ourselves of the "controlled company" exemption under the corporate governance rules of the NYSE. Accordingly, we will not be required to have a majority of "independent directors" on our board of directors as defined under the rules of the NYSE; nor will we have a compensation committee and a corporate governance and nominating committee composed entirely of independent directors. The "controlled company" exemption does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Sarbanes-Oxley Act and the NYSE, which require that our audit committee be composed of at least three members, one of whom will be independent upon the listing of our common stock, a majority of whom will be independent within 90 days of listing, and each of whom will be independent within one year of listing.

At such time that we cease to be a "controlled company" under the rules of the NYSE, our board of directors will take all action necessary to comply with the NYSE corporate governance rules, including appointing a majority of independent directors to the board of directors and establishing certain committees composed entirely of independent directors, subject to a permitted "phase-in" period.

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Our board of directors has determined that Kapila K. Anand, R. David Hoover and Lawrence E. Kurzius are independent directors under the applicable rules of the NYSE.

Board Committees

Our board of directors will establish an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee will operate under a charter that will be approved by our board of directors and will have the composition and responsibilities described below. Members will serve on these committees until their resignations or until otherwise determined by our board of directors. The charter of each committee will be available on our website.

Audit Committee. The primary purposes of our audit committee will be to assist our board of directors' oversight of:

•: the integrity of our financial statements and any other financial information which will be provided to the shareholders and others;
•: the independent auditor's qualifications and independence;
•: the systems of internal controls and disclosure controls which management has established;
•: the performance of internal and independent audit functions; and
•: our compliance with legal and regulatory requirements.

Upon the completion of this offering, and prior to the listing of our common stock, our audit committee will be composed of Kapila K. Anand, Lawrence E. Kurzius and Joshua L. Smiley. Ms. Anand will serve as chair of the audit committee. Each of Ms. Anand and Messrs. Kurzius and Smiley qualifies as an "audit committee financial expert" as such term has been defined by the Securities and Exchange Commission in Item 407(d) of Regulation S-K. Our board of directors has affirmatively determined that Ms. Anand and Mr. Kurzius meet the definition of an "independent director" for the purposes of serving on the audit committee under applicable NYSE rules and Rule 10A-3 under the Exchange Act. We intend to comply with these independence requirements for all members of the audit committee within the time periods specified under such rules. The audit committee will be governed by a charter that complies with the rules of the NYSE.

Compensation Committee. The primary purposes of our compensation committee will be to assist our board of directors in overseeing our management compensation policies and practices, including:

•: determining and approving the compensation of our executive officers; and
•: oversight of our compensation plans, including by reviewing and approving incentive compensation and equity compensation policies and programs.

Upon the completion of this offering, and prior to the listing of our common stock, our compensation committee will be composed of Lawrence E. Kurzius, Kapila K. Anand, R. David Hoover and Aarti S. Shah. Mr. Kurzius will serve as chair of the compensation committee. Ms. Anand and Messrs. Kurzius and Hoover, each of whom qualifies as a "non-employee director" under Rule 16b-3 of the Exchange Act, will serve as a subcommittee of our compensation committee for the purpose of reviewing and approving equity awards to our directors and executive officers made pursuant to the 2018 Elanco Stock Plan. We intend to avail ourselves of the "controlled company" exemption under the rules of the NYSE, which exempts us from the requirement that we have a compensation committee composed entirely of independent directors. The compensation committee will be governed by a charter that complies with the rules of the NYSE.

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Nominating and Corporate Governance Committee. The primary purposes of our nominating and corporate governance committee will be to:

•: recommend to the board of directors the qualifications required for membership on our board of directors and its committees;
•: identify and recommend to our board of directors candidates for membership on our board of directors and its committees;
•: develop and recommend criteria and policies relating to the service of directors; and
•: oversee matters of corporate governance.

Upon the completion of this offering, and prior to the listing of our common stock, our nominating and corporate governance committee will be composed of R. David Hoover, Michael J. Harrington and Carl L. McMillian. Mr. Hoover will serve as chair of the nominating and corporate governance committee. We intend to avail ourselves of the "controlled company" exemption under the rules of the NYSE, which exempts us from the requirement that we have a nominating and corporate governance committee composed entirely of independent directors. The nominating and corporate governance committee will be governed by a charter that complies with the rules of the NYSE.

Indemnification of Directors and Officers

See "Description of Capital Stock — Certain Provisions of the Indiana Business Corporation Law."

Code of Business Conduct and Ethics

Prior to the completion of this offering, we will adopt a code of conduct and code of ethical conduct for financial management that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the codes will be available on our website located at www.elanco.com. Any amendments to or waivers from our code of ethical conduct for financial management will be disclosed on our Internet website promptly following the date of such amendment or waiver.

Corporate Governance Guidelines

Our board of directors will adopt corporate governance guidelines in accordance with the corporate governance rules of the NYSE, which will serve as a flexible framework within which our board of directors and its committees will operate. These guidelines will cover a number of areas, including the role of the board of directors, board composition, director independence, director selection, qualification and election, director compensation, executive sessions, key board responsibilities, CEO evaluation, succession planning, risk management, board leadership and operations, conflicts of interest, annual board assessments, board committees, director orientation and continuing education, board agenda, materials, information and presentations, director access to management and independent advisers, and board communication with shareholders and others. A copy of our corporate governance guidelines will be posted on our website.

Compensation Committee Interlocks and Insider Participation

We do not have any interlocking relationships between any member of our compensation committee and any of our executive officers that would require disclosure under the applicable rules promulgated under the federal securities laws.

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EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

Introduction

This compensation, discussion and analysis ("CD&A") provides detailed information regarding the individuals who we currently expect to serve as our Chief Executive Officer and Chief Financial Officer and to be our three most highly-compensated executive officers following this offering (the "Named Executive Officers"):


Name		Title

Jeffrey N. Simmons		President and Chief Executive Officer
Lucas E. Montarce		Acting Chief Financial Officer
Aaron L. Schacht		Executive Vice President, Innovation, Regulatory and Business Development
David S. Kinard		Executive Vice President, Human Resources and Corporate Affairs
David A. Urbanek		Executive Vice President, Manufacturing and Quality

We currently operate as part of Lilly. As a result, the 2017 compensation for our Named Executive Officers was determined by Lilly, as described below. We anticipate that Lilly will continue to establish and manage the compensation for all of our Named Executive Officers until the completion of this offering. Accordingly, the discussion in this CD&A primarily relates to Lilly's compensation and compensation philosophy. Our board of directors, through our compensation committee, will establish and oversee our compensation programs following the completion of this offering. The compensation programs that we adopt, and our compensation philosophy, may differ materially from the current Lilly programs summarized in this discussion.

Because Messrs. Montarce, Schacht, Kinard and Urbanek were not executive officers of Lilly, their cash and equity compensation was determined by Lilly's senior management consistent with Lilly's compensation philosophy, but was not specifically determined or reviewed by the Lilly compensation committee. As a Lilly executive officer, Mr. Simmons' compensation was reviewed and determined by Lilly's compensation committee, with the advice of the compensation consultant engaged by Lilly's compensation committee.

This CD&A describes Lilly's compensation philosophy, the elements of each compensation program, the factors that Lilly considered when setting its 2017 executive compensation, and how results affected incentive payouts for 2017 performance for each of our Named Executive Officers, as well as certain elements of the compensation program we currently expect to be in effect following completion of the offering.

Lilly's Philosophy on Compensation

Lilly's compensation programs are designed to help achieve the goals of attracting, engaging and retaining highly talented individuals who are committed to its core values of integrity, excellence and respect for people while balancing the long-term interests of its shareholders and customers.

Lilly's compensation and benefits programs are based on the following objectives:

•: Reflect individual and company performance. Lilly reinforces a high-performance culture by linking pay with individual performance and company performance. As Lilly employees assume greater levels of responsibility, the proportion of total compensation based on company performance and shareholder returns increases. Lilly performs an annual review to

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ensure its programs provide incentives to deliver long-term, sustainable business results while discouraging excessive risk-taking or other adverse behaviors.

•: Attract and retain talented employees. Lilly aims for compensation opportunities at Lilly to be competitive with its peer group and reflect the level of job impact and responsibility. Retention of talent is an important factor in the design of its compensation and benefit programs.
•: Implement broad-based programs. While the amount of compensation paid to employees varies, the overall structure of Lilly's compensation and benefit programs is broadly similar across the organization to encourage and reward all employees who contribute to its success.
•: Consider shareholder input. Lilly management and the Lilly compensation committee consider the results of its annual say-on-pay vote and other sources of shareholder feedback when designing Lilly's compensation and benefit programs.

Compensation Processes and Analysis

Process for Setting Compensation

The Lilly compensation committee considers individual performance assessments, compensation recommendations from senior leadership, Lilly's company performance, Elanco performance (as applicable), Lilly's peer group data, input from its compensation consultant and its own judgment when determining compensation for its executive officers. When determining the compensation for our other Named Executive Officers, who are not also executive officers of Lilly, Lilly's senior management considers similar factors consistent with Lilly's philosophy, focusing on individual performance assessment, compensation recommendations from senior leadership, Elanco's performance and their own judgment.

•

Assessment of individual performance. Each executive's, including our Named Executive Officers', as applicable, performance assessment is based on achievement of objectives established at the start of the year, as well as other factors, including the demonstration of Lilly values and leadership behaviors.

•

Assessment of company performance. Lilly company performance and Elanco performance, as applicable, is considered in two ways:

•: Overall performance of the prior year based on a variety of metrics, which is a factor in establishing target compensation for the coming year.
•: Specific performance goals are established at the beginning of each performance year to determine payouts under cash and equity incentive programs.

•

Peer group analysis. Lilly uses data from its peer group as a market check for compensation decisions, but does not use this data as the sole basis for its compensation targets.

•

Input from an independent compensation consultant concerning executive pay. Lilly's compensation committee receives the advice of its independent compensation consultant, Frederic W. Cook & Co., Inc., when setting Lilly executive officer compensation.

Competitive Pay Assessment

Lilly's peer group is comprised of companies that directly compete with Lilly, operate in a similar business model and employ people with the unique skills required to operate an established biopharmaceutical company. Lilly's compensation committee selects a peer group whose median

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market cap and revenues are broadly similar to Lilly's. Lilly's compensation committee reviews the peer group at least every three years. Lilly's compensation committee reviewed the peer group for purposes of assessing competitive pay in June 2015 and decided to include Abbvie, Amgen, AstraZeneca, Baxter, Biogen, Bristol-Myers Squibb, Celgene, Gilead, GlaxoSmithKline, Hoffman-La Roche, Johnson & Johnson, Medtronic, Merck, Novartis, Pfizer, Sanofi-Aventis and Shire Plc. With the exception of Johnson & Johnson, Novartis and Pfizer, peer companies were no greater than three times Lilly's size on both measures. Lilly's compensation committee included these three companies despite their size because they compete directly with Lilly, have similar business models and seek to hire from the same pool of management and scientific talent.

Components of Executive Compensation

Lilly's executive compensation program, including for our Named Executive Officers, is primarily comprised of three components:

•

base salary;

•

annual cash bonus programs, including:

•: Elanco Corporate Bonus Plan ("Elanco Bonus Plan"), under which bonuses are calculated based on Elanco's performance as compared to Elanco's internal targets for revenue and income before taxes ("IBT"), Elanco's innovation progress and Lilly's performance under The Eli Lilly and Company Bonus Plan ("Lilly Bonus Plan"), and for Mr. Simmons bonus payouts under the Elanco Bonus Plan are also subject to the terms of the Lilly Executive Officer incentive Plan (EIOP), as described below; and
•: Lilly Bonus Plan, under which bonuses are calculated based on Lilly's performance as compared to Lilly's internal targets for revenue, earnings per share ("EPS"), and Lilly innovation progress.

•

Lilly equity incentives:

•: performance awards ("Lilly PAs"), which are Lilly equity awards with a performance component measuring Lilly's two-year growth in EPS relative to the expected peer group growth. For performance awards granted to Lilly executive officers, including Mr. Simmons ("Lilly Executive Officer PAs"), the two-year performance period is immediately followed by a 13-month service-vesting period; and
•: shareholder value awards ("Lilly SVAs"), which are performance-based Lilly equity awards that pay out based on absolute Lilly stock price growth over a three-year performance period. For shareholder value awards granted to Lilly executive officers, including Mr. Simmons ("Lilly Executive Officer SVAs"), Lilly also applies a measure of total shareholder return ("TSR") relative to peers and a one-year holding period.

Lilly employees, including our Named Executive Officers, also receive a company benefits package, described below under "Other Compensation Practices and Information — Employee Benefits."

1. Base Salary

Base salaries, including for our Named Executive Officers, are reviewed and established annually by Lilly and may be adjusted upon promotion, following a change in job responsibilities or to maintain market competitiveness. Salaries are based on each person's level of contribution, responsibility, expertise and competitiveness with Lilly peer group data.

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Base salary increases for 2017 were established based upon a Lilly corporate budget for salary increases, which were set considering Lilly performance over the prior year, expected Lilly performance for the following year and general external trends. In setting salaries, Lilly seeks to retain, motivate and reward successful performers, while maintaining affordability within the company's business plan.

2. Annual Cash Bonus

Our Named Executive Officers, except for Mr. Kinard, participated in the Elanco Bonus Plan during 2017. The Elanco Bonus Plan is designed to reward the achievement of Elanco's financial goals, innovation objectives and contributions to Lilly's overall financial success for the year. The bonus is based on four areas that are measured relative to internal targets: Elanco revenue, Elanco IBT, Elanco innovation progress and Lilly corporate objectives as measured under the Lilly Bonus Plan (referred to as the Lilly Bonus Plan Multiple (LBPM)).

Mr. Kinard participated in the Lilly Bonus Plan for all of 2017. Messrs. Montarce and Urbanek participated in the Lilly Bonus Plan during January 2017 after which they participated in the Elanco Bonus Plan. The Lilly Bonus Plan is designed to reward the achievement of Lilly's financial goals and innovation objectives. The bonus is based on three areas that are measured relative to internal targets: Lilly revenue, Lilly EPS and Lilly innovation progress.

Elanco and Lilly performance goals and individual bonus targets are set at the beginning of each year. Actual payout can range from 0% to 200% of an individual's bonus target. Performance targets and the assessment of the relative weighting for each objective is based upon annual operating plans with a threshold, target and maximum set for each objective (with straight line interpolation for achievement between relevant levels). The 2017 weightings were as follows:

Elanco Bonus Plan


Elanco Goals	Weighting

Elanco revenue performance	25	%
Elanco IBT performance	25	%
Elanco innovation progress	25	%
Lilly Bonus Plan Multiple (LBPM)	25	%

Based on this weighting, the Elanco Bonus Plan multiple is calculated as follows:

(0.25 × revenue multiple) + (0.25 × IBT multiple) + (0.25 × innovation multiple) + (0.25 × LBPM)
= Elanco Bonus Plan multiple

The annual Elanco Bonus Plan payout is calculated as follows:

Elanco Bonus Plan multiple × individual bonus target × base salary earnings = payout

Lilly Bonus Plan


Lilly Goals	Weighting

Lilly revenue performance	25	%
Lilly EPS performance	50	%
Lilly innovation progress	25	%

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Based on this weighting, the Lilly Bonus Plan multiple is calculated as follows:

(0.25 × revenue multiple) + (0.50 × EPS multiple) + (0.25 × innovation multiple)
= Lilly Bonus Plan multiple

The annual Lilly Bonus Plan payout is calculated as follows:

Lilly Bonus Plan multiple × individual bonus target × base salary earnings = payout

For Mr. Simmons, who is also a Lilly executive officer, annual bonuses are subject to the terms of the Lilly Executive Officer Incentive Plan (EOIP). Under the EOIP, the maximum annual cash bonus allowable is calculated based on Lilly's non-GAAP net income for the year. For Mr. Simmons, the maximum amount for 2017 was 0.15% of non-GAAP net income. None of the Lilly executive officers, including Mr. Simmons, receive an annual cash bonus payment unless Lilly has positive non-GAAP net income for the year.

Under the EOIP, once the maximum payout for Mr. Simmons is determined, the Lilly compensation committee has the discretion to reduce (but not increase) the amount to be paid. In exercising this discretion, the committee's intent is to award the lesser of (i) the bonus Mr. Simmons would have received under the Elanco Bonus Plan or (ii) the EOIP maximum payout. For 2018, Mr. Simmons' bonus payout under the EOIP will be based entirely on Elanco performance.

3. Equity Incentives

Lilly primarily grants two types of equity incentives to executives and certain other employees, including our Named Executive Officers — Lilly PAs and Lilly SVAs. Lilly PAs are designed to focus its leaders on multi-year operational performance relative to peer companies. Lilly SVAs align earned compensation with long-term growth in Lilly shareholder value. Messrs. Schacht and Urbanek received special retention awards during 2017, as described in "Special Retention Awards" below.

Lilly Executive Officer PAs and Lilly Executive Officer SVAs are awarded to Lilly executive officers, including Mr. Simmons. The Lilly compensation committee has the discretion to adjust downward (but not upward) any Lilly executive officer's equity award payout from the amount yielded by the applicable formula.

Performance Awards (PAs and Executive Officer PAs)

Our Named Executive Officers (other than Mr. Simmons) received Lilly PAs which vest over two years. Potential Lilly shares are based on achieving Lilly EPS growth targets over a two-year performance period. The growth-rate targets are set relative to the median expected EPS growth for Lilly's peer group. These awards do not accumulate dividends.

Lilly executive officers, including Mr. Simmons, received the Lilly Executive Officer PAs which use the same two-year EPS growth-rate targets as the Lilly PAs for determining the number of Lilly shares; however, the performance period is followed by an additional 13-month service-vesting period during which the award is held in the form of Lilly restricted stock units.

The Lilly compensation committee believes EPS growth is an effective measure of operational performance because it is closely linked to shareholder value, is broadly communicated to the public, is easily understood by its employees and allows for objective comparisons to its peer group performance. Consistent with its compensation objectives, Lilly company performance exceeding the expected peer group median results in above-target payouts, while Lilly company performance lagging the expected peer group median results in below-target payouts. Possible payouts range from 0% to 150% of the target, depending on Lilly EPS growth over the performance period.

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Shareholder Value Awards (SVAs and Executive Officer SVAs)

Our Named Executive Officers (other than Mr. Simmons) received Lilly SVAs. These awards are based on Lilly's share price appreciation over a three-year performance period. Lilly SVAs pay above target if Lilly's stock outperforms an expected rate of return and below target if Lilly's stock underperforms that expected rate of return. The expected rate of return is based on the three-year TSR that a reasonable investor would consider appropriate when investing in a basket of large-cap U.S. companies, as determined by the Lilly compensation committee. The minimum price to achieve target is calculated by multiplying the starting share price of Lilly's stock by the three-year compounded expected rate of return less Lilly's dividend yield.

Lilly executive officers, including Mr. Simmons, received Lilly Executive Officer SVAs. These awards are the same as Lilly SVAs except executive officers receive no payout if Lilly's TSR for the three-year period is zero or negative, and a modifier based on Lilly's three-year cumulative TSR relative to its peer companies' median TSR performance will be applied to payouts for SVAs granted in 2016 or later. If Lilly's TSR is above the median of Lilly's peers, the payout is increased by 1% for every percentage point that Lilly's TSR exceeds the median (up to a maximum of 20%). Likewise, if Lilly's TSR is below the median, the payout will be reduced by up to a maximum of 20%. Adding the relative TSR modifier to the Lilly Executive Officer SVAs helps ensure Lilly executive officers' rewards align with shareholder experience while also rewarding strong performance relative to our peer group.

Pay for Performance

The mix of compensation for our Named Executive Officers reflects Lilly's desire to link executive compensation with performance. The graphic below depicts the mix of pay for our CEO and the average for our other Named Executive Officers based on 2017 compensation for all of our Named Executive Officers.

2017 Target Total Compensation

Setting Target Compensation

As described above in "Process for Setting Compensation," in setting its executive officer compensation for 2017, including for Mr. Simmons, Lilly considered individual, Lilly and Elanco (as applicable) performance during 2016, internal pay equity and peer group data. For our Named Executive Officers other than Mr. Simmons, target compensation for 2017 was determined by Lilly senior management, consistent with Lilly's compensation philosophy.

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The information below reflects total compensation at target for our Named Executive Officers for 2017. The actual compensation received in 2017 is summarized below in "2017 Compensation Payouts."

Base Salary

The following table outlines the annual salary for our Named Executive Officers that was approved by Lilly with respect to 2016 and 2017. Our Named Executive Officers' actual base salary earned during 2017 is reflected in the Summary Compensation Table in the "Executive Compensation" section of this prospectus.


Name		2016 Annual Base Salary		2017 Annual Base Salary

Mr. Simmons	$	688,118	$	688,118
Mr. Montarce	$	209,083	$	280,673
Mr. Kinard	$	390,028	$	405,632
Mr. Schacht	$	272,358	$	285,315
Mr. Urbanek	$	255,979	$	297,174

Annual Cash Bonus Targets

Bonus targets for 2016 and 2017 are shown in the table below as a percentage of our Named Executive Officer's base salary earnings:


Name	2016 Bonus Target	2017 Bonus Target

Mr. Simmons	80%	80%
Mr. Montarce	26%	34%	*
Mr. Kinard	45%	45%
Mr. Schacht	34%	34%
Mr. Urbanek	26%	35%	*

*: The bonus targets for Messrs. Montarce and Urbanek are a weighted average across the positions held during the year.

Total Equity Program — Target Grant Values

For 2017 equity grants, Lilly set the total target value for our Named Executive Officers based on internal pay equity, Lilly and Elanco (as applicable) performance, individual performance and Lilly peer group data (as applicable). Mr. Simmons had 60% of his equity target allocated to Lilly Executive Officer SVAs and 40% to Lilly Executive Officer PAs. Our remaining Named Executive Officers had 50% of their equity allocated to Lilly SVAs and 50% to Lilly PAs. Total target values for the 2016 and 2017 equity grants to our Named Executive Officers were as follows:


Name		2016 Annual Equity Grant		2017 Annual Equity Grant

Mr. Simmons	$	2,000,000	$	2,000,000
Mr. Montarce	$	105,000	$	90,000
Mr. Kinard	$	400,000	$	415,000
Mr. Schacht	$	175,000	$	225,000
Mr. Urbanek	$	85,000	$	80,000

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Messrs. Schacht and Urbanek also received special retention award during 2017, as described in "Special Retention Awards" below, which are not reflected in the table above.

Performance Goals for 2017 Lilly Incentive Programs

Annual Bonus Goals

Performance targets for the Elanco Bonus Plan and the Lilly Bonus Plan were based on the 2017 operating plan for each of Elanco and Lilly, respectively. These targets are described below under "2017 Compensation Payouts."

Performance Award (PAs and Executive Officer PAs)

In February 2017, the Lilly compensation committee established a cumulative, compounded two-year Lilly EPS growth target of 5.3% per year for the 2017-2018 performance period, based on investment analysts' growth estimates for Lilly's peer group companies at that time. Payouts for the 2017-2018 Lilly PAs and 2017-2019 Lilly Executive Officer PAs range from 0% to 150% of the target, as illustrated below:

Shareholder Value Award (SVAs and Executive Officer SVAs)

For purposes of establishing the Lilly stock price target for the 2017-19 Lilly SVAs, the starting price was $72.15 per share, the average Lilly closing stock price for all trading days in November and December 2016. The Lilly target share price was established using the expected annual rate of return for large-cap companies (8%), less an assumed Lilly dividend yield of 2.88%. To determine payouts, the ending price will be the average of the closing prices of Lilly stock for all trading days in November and December 2019.

The Lilly Executive Officer SVAs are designed to deliver no payout if the shareholder return (including projected dividends) is zero or negative.

Mr. Simmons received Lilly Executive Officer SVAs while the remaining Named Executive Officers received Lilly SVAs. Possible payouts based on share price ranges are illustrated in the grids below.

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Lilly Executive Officer SVA

Ending Stock Price

Less than
$65.80

$65.80 to
$74.79

$74.80 to
$83.79

$83.80 to
$92.79

$92.80 to
$101.79

Greater than
$101.79

Compounded Annual Share Price Growth Rate (excluding dividends)

Less than
(3.0%)

(3.0%) to
1.2%

1.2% to
5.1%

5.1% to
8.8%

8.8% to
12.2%

Greater than
12.2%

Percent of Target

50%

75%

100%

125%

150%

Lilly SVA

Ending Stock Price

Less than
$36.08

$36.08 to
$74.79

$74.80 to
$83.79

$83.80 to
$92.79

$92.80 to
$101.79

Greater than
$101.79

Compounded Annual Share Price Growth Rate (excluding dividends)

Less than
(20.6%)

(20.6%) to
1.2%

1.2% to
5.1%

5.1% to
8.8%

8.8% to
12.2%

Greater than
12.2%

Percent of Target

50%

75%

100%

125%

150%

Mr. Simmons' Lilly Executive Officer SVAs are subject to a relative TSR modifier, as outlined in the grid below. The number of Lilly shares to be paid will increase or decrease by 1% for every percentage point Lilly's three-year TSR deviates from Lilly's peer group's median three-year TSR, capped at 20%.

Special Retention Awards

Messrs. Schacht and Urbanek each received a special retention grant of restricted stock units with a grant date fair value of $300,060 and $200,040, respectively, on September 1, 2017. The awards were determined and granted by Lilly management in recognition of their contributions and their importance to Elanco's future success and will vest on the third anniversary of the awards, September 1, 2020, subject to their continued employment with Elanco other than the event of certain qualifying terminations as described below in "Lilly Payments Upon Termination or Change in Control."

2017 Compensation Payouts

The information in this section reflects the amounts paid to our Named Executive Officers under the Elanco Bonus Plan, Lilly Bonus Plan and in respect of Lilly equity awards granted in prior years for which the relevant performance period ended in 2017.

Elanco Performance

In 2017, Elanco did not achieve its annual revenue and IBT targets; however, Elanco made significant progress on its innovation goals. Key innovation highlights include the launches of

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Galliprant and Clynav , and the first regulatory approval of Credelio . While business performance was below expectations, Elanco made significant progress on its long-term strategic agenda, improving its cost structure, reducing global headcount, rationalizing key assets and products and accelerating important pipeline projects. The 2017 results described below reflect Elanco's 2017 performance with respect to the Elanco Bonus Plan targets and are not presented on the same basis as, and are not directly comparable to, our combined financial results presented in this prospectus.

Elanco Bonus Plan

Elanco's performance compared to the 2017 targets for revenue, IBT, innovation progress and the Lilly Company Bonus Multiple, as well as the resulting bonus multiple, is set forth below.


		2017 Elanco Target		2017 Elanco Results	Multiple

Revenue	$	3,566M	$	3,086M	0.36
IBT	$	943M	$	552M	0.00
Innovation		3.00		3.10	1.05
Lilly Company Bonus Multiple (LCBM)					1.34
Resulting Elanco Bonus Multiple					0.69

Elanco's 2017 innovation target was 3.0 on a scale of 1.0 to 5.0. Elanco's innovation multiple is comprised of the following factors: (i) achievement of product approvals, (ii) entrants into early and late stage development, (iii) adherence to approval timelines and (iv) a qualitative assessment by Elanco's head of R&D of overall performance. Based on the weighted outcomes of these factors, Elanco achieved a 3.10 score, which correlates to a 1.05 innovation multiple for use in the Elanco bonus calculation.

When combined, the Elanco revenue, IBT, innovation and Lilly Corporate Bonus multiples yielded a 2017 Elanco Bonus Plan multiple of 0.69.

(0.25 × 0.36) + (0.25 × 0.00) + (0.25 × 1.05) + (0.25 × 1.34) = 0.69 bonus multiple

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The 2017 bonuses paid to our Named Executive Officers under the Elanco Bonus Plan were as follows:


Name			2017 Bonus ($)

Mr. Simmons			379,841
Mr. Montarce			52,647
Mr. Schacht			66,935
Mr. Urbanek			69,401

Lilly Performance

In 2017, Lilly exceeded both its annual revenue and EPS targets. Lilly also made significant progress on its pipeline, meeting or exceeding all of its pipeline targets. Key pipeline highlights include first regulatory approval for Verzenio and Olumiant, along with nine other new approvals, indications or line extensions.

Lilly Bonus Plan

Lilly's performance compared to its 2017 targets for revenue, EPS and pipeline progress, as well as the resulting bonus multiple, is illustrated below.


		2017 Lilly Target		2017 Adjusted Results	Multiple

Revenue	$	22.3B	$	22.9B	1.30
EPS	$	4.15	$	4.28	1.37
Pipeline Score		3.00		3.65	1.33
Resulting Lilly Bonus Multiple					1.34

Lilly's Science and Technology Committee assessed Lilly's progress toward achieving product pipeline goals based on the following factors: (i) achievement of product approvals, (ii) new chemical entity entrants into Phase 1 and Phase 3 clinical trials, (iii) new indication or line extension entrants into Phase 3 clinical trials, (iv) speed of development, (v) adherence to timelines and (iv) a qualitative assessment of overall performance. Based on the recommendation of the Science and Technology Committee, Lilly's compensation committee certified a pipeline score of 3.65, resulting in a pipeline multiple of 1.33.

When combined, the Lilly revenue, EPS, and pipeline multiples yielded a 2017 Lilly Bonus Plan multiple of 1.34.

(0.25 × 1.30) + (0.50 × 1.37) + (0.25 × 1.33) = 1.34 bonus multiple

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The 2017 bonuses paid to Messrs. Montarce, Kinard and Urbanek under the Lilly Bonus Plan were as follows:


Name		2017 Bonus ($)

Mr. Montarce		31,329
Mr. Kinard		244,596
Mr. Urbanek		7,486

Performance Awards (PAs and Executive Officer PAs)

The target cumulative Lilly EPS for the 2016-2017 Lilly PAs and the 2016-2018 Lilly Executive Officer PAs was set in the first quarter of 2016, reflecting expected industry growth of 7.0% each year over the two-year performance period of 2016-2017. Lilly's actual annual EPS growth for the two-year period was 7.0%. This outcome was largely driven by volume growth from newer Lilly products.

For our Named Executive Officers, the number of Lilly shares earned under the 2016-2017 Lilly PAs or, for Mr. Simmons, the 2016-2018 Lilly Executive Officer PAs is set forth in the table below. Mr. Simmons' shares earned under the 2016-2018 Lilly Executive Officer PA are subject to an additional 13-month service-vesting period.


Name	Target Shares	Shares Earned

Mr. Simmons	11,111	11,111
Mr. Montarce	729	729
Mr. Kinard	2,778	2,778
Mr. Schacht	1,215	1,215
Mr. Urbanek	590	590

Shareholder Value Award (SVAs)

The target Lilly stock price range of $80.30 to $86.17 (16.2% to 24.6% stock price growth) for the 2015-2017 Lilly SVAs was set in 2015 based on a beginning Lilly stock price of $69.13, which was the average closing price for Lilly stock for all trading days in November and December 2014. The ending Lilly stock price of $84.70 represents a stock price growth of approximately 22.5% over

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the relevant three-year period. Lilly's performance compared to target for 2015-2017 Lilly SVAs is shown below.

The shares earned by our Named Executive Officers during 2018 under the 2015-2017 Lilly SVAs were as follows


Name	Target Shares	Shares Paid Out

Mr. Simmons	22,507	22,507
Mr. Montarce	385	385
Mr. Kinard	3,418	3,418
Mr. Schacht	684	684
Mr. Urbanek	598	598

Other Lilly Compensation Practices and Information

Lilly Employee Benefits

Lilly offers core employee benefits coverage to:

•: provide the Lilly workforce with a reasonable level of financial support in the event of illness or injury;
•: provide post-retirement income; and
•: enhance productivity and job satisfaction through benefit programs that focus on overall well-being.

The benefits available to our Named Executive Officers are generally the same as are available to all U.S. Lilly employees and include medical and dental insurance, disability insurance and life insurance. In addition, The Lilly Employee 401(k) plan ("Lilly 401(k) Plan") and The Lilly Retirement Plan provide U.S. Lilly employees a reasonable level of retirement income reflecting employees' careers with Lilly.

To the extent that any Lilly employee's retirement benefit exceeds Internal Revenue Service (IRS) limits for amounts that can be paid through a qualified plan, Lilly also offers a nonqualified pension plan and a nonqualified savings plan. Our Named Executive Officers participated in these nonqualified plans in 2017. These plans provide only the difference between the calculated benefits and the IRS limits, and the formula is the same for all U.S. Lilly employees. The cost of Lilly employee benefits is partially borne by the employee, including our Named Executive Officers.

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The Lilly Deferred Compensation Plan

Lilly executive officers, including Mr. Simmons, but not our other Named Executive Officers may defer receipt of all or part of their cash compensation and other U.S. Lilly executives may defer receipt of all or part of their cash bonus under The Lilly Deferred Compensation Plan, which allows participants to save for retirement in a tax-effective way at minimal cost to Lilly. Under this unfunded plan, amounts deferred by the participant are credited at an interest rate of 120% of the applicable federal long-term rate, as described in more detail following the "Nonqualified Deferred Compensation in 2017" table.

Lilly Severance Benefits

Except in the case of a change in control of Lilly, Lilly is not obligated to pay severance to Mr. Simmons upon termination of employment, but severance may be paid at the discretion of the Lilly compensation committee. Lilly has a severance plan in which our other Named Executive Officers participate. The plan generally provides severance benefits to eligible employees of Lilly and certain of its subsidiaries and affiliates in the event of involuntary retirement or termination without cause, which includes separation from Lilly due to their discharge or resignation in lieu of discharge (with certain exceptions), resignation because of disability, the closing of an office or facility in which the employee is employed, or any other reason determined by Lilly to warrant the payment of a severance benefit pursuant to the plan. Such employees will receive a benefit that is a function of their weekly pay and the number of years of service completed at the time of the employee's separation.

Change-in-Control Severance Agreements

Lilly has adopted change-in-control severance pay plans for nearly all Lilly employees, including a plan for select employees, which applies to our Named Executive Officers. The Lilly plans are intended to preserve Lilly employee morale and productivity and encourage retention in the face of the disruptive impact of an actual or rumored change in control. In addition, the Lilly plans are intended to align participating Lilly employee and Lilly shareholder interests by enabling executives to evaluate corporate transactions that may be in the best interests of the Lilly shareholders and other constituents of Lilly without undue concern over whether the transactions may jeopardize the participating employee's own employment.

Highlights of the Lilly change-in-control severance arrangements:

•: all regular Lilly employees are covered
•: double trigger required
•: no tax gross-ups
•: up to two-year pay protection
•: 18-month benefit continuation

The basic elements of the plan applicable to our Named Executive Officers include:

•: Double trigger. Unlike "single trigger" plans that pay out immediately upon a change in control, the select plan requires a "double trigger" — a change in control followed by an involuntary loss of employment within two years. This is consistent with Lilly's intent to provide employees with financial protection upon loss of employment.

In addition, with respect to unvested equity, pursuant to the terms of the award agreements, performance through the change in control will be used to determine the number of Lilly shares earned under an award, but, if awards are assumed or substituted, vesting would

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only occur upon an involuntary loss of employment following a change in control. Rather, the performance awards will convert to Lilly restricted stock units that continue to vest following the change in control. After a change in control, Lilly shares will vest upon the earlier of the completion of the original award period or upon a covered termination of employment. If the successor entity does not assume, substitute or otherwise replace the awards in connection with a change in control, awards will vest on the change in control.

•

Covered terminations. Our participating Named Executive Officers are eligible for payments under our select plan if, within two years of the change in control, their employment is terminated (i) without cause by Lilly or (ii) for good reason by the employee, each as is defined in the plan. See "— Lilly Payments Upon Termination or Change in Control (as of December 31, 2017)" for a more detailed discussion, including a discussion of what constitutes a change in control.

•

Up to two years of pay and 18 months of benefits protection upon a covered termination.

•: Severance payment. Our participating Named Executive Officers are eligible for up to two years' base salary plus two times their target bonus for the then-current year.
•: Benefit continuation. Basic employee benefits such as health and life insurance would continue for 18 months following a participating Named Executive Officer's termination of employment, unless they become eligible for coverage with a new employer before then. Our participating Named Executive Officers would receive an additional two years of both age and years-of-service credit for purposes of determining eligibility for retiree medical and dental benefits.

•

Accelerated vesting of Lilly equity awards. As described above, unvested equity awards would vest at the time of a covered termination of employment, which includes an involuntary termination following a change in control.

•

Excise tax. In some circumstances, the payments or other benefits received by a participating employee in connection with a change in control could exceed limits established under Section 280G of the Code resulting in an excise tax payment. Lilly does not reimburse or gross-up employees for these taxes. However, the amount of change in control-related benefits will be reduced to the maximum amount that would not result in an excise tax if the effect would be to deliver a greater after-tax benefit than the employee would receive if his or her benefits were not so reduced.

See "— Lilly Payments Upon Termination or Change in Control (as of December 31, 2017)" below.

Lilly Share Ownership and Retention Guidelines; Prohibition on Hedging and Pledging Shares

Lilly share ownership and retention guidelines help to foster a focus on long-term growth. During 2017, the holding requirement for our Named Executive Officers ranged from 3,500 shares to three times annual base salary depending on the position. The following table shows the share requirements for the applicable Named Executive Officers:


Name	Share Requirement 2017	Owns Required 2017 Shares

Mr. Simmons	Three times base salary	Yes
Mr. Montarce	5,000 shares	No*
Mr. Kinard	7,000 shares	Yes
Mr. Schacht	3,500 shares	No*
Mr. Urbanek	7,000 shares	Yes

*: Messrs. Montarce and Schacht were compliant with the annual award share retention guideline as they each build toward their respective ownership requirements.

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Lilly executive officers, including Mr. Simmons, are also required to hold all Lilly shares received from Lilly equity program payouts, net of acquisition costs and taxes, for at least one year, even once Lilly share ownership requirements have been met. For Lilly Executive Officer PAs, this holding requirement is met by the 13-month service-vesting period that applies after the end of the performance period.

Lilly employees, including our Named Executive Officers, are not permitted to hedge their economic exposures to Lilly stock through short sales or derivative transactions. All members of Lilly senior management, including our Named Executive Officers, are prohibited from pledging any Lilly stock (i.e., using Lilly stock as collateral for a loan or trading shares on margin).

Lilly Executive Compensation Recovery Policy

All Lilly incentive awards generally are subject to forfeiture upon termination of employment prior to the end of the performance or vesting period or for disciplinary reasons. In addition, the Lilly compensation committee has adopted a Lilly executive compensation recovery policy that gives the Lilly compensation committee broad discretion to claw back Lilly incentive payouts from any member of Lilly senior management, including our Named Executive Officers, whose misconduct results in a material violation of law or company policy that causes significant harm to Lilly or who fails in his or her supervisory responsibility to prevent such misconduct by others.

The Lilly recovery policy covers any Lilly incentive compensation awarded or paid to an employee at a time when he or she is a member of Lilly senior management. Subsequent changes in status, including retirement or termination of employment, do not affect Lilly's rights to recover compensation under the policy. Recoveries under the Lilly plan can extend back as far as three years.

Treatment of Outstanding Lilly Awards Following this Offering

Following the offering and prior to the Distribution, the Lilly equity awards previously granted to our Named Executive Officers will continue in accordance with their terms, provided that service to Elanco will be counted as service with Lilly for all purposes. Upon the Distribution, it is currently anticipated that the Lilly equity awards will terminate in accordance with their terms for no consideration paid to our Named Executive Officers, and that, in connection with the Separation, the Elanco compensation committee will determine to issue Elanco equity awards of similar value to our Named Executive Officers subject to the requirements of applicable law and the terms of the 2018 Elanco Stock Plan and applicable award agreements. In addition, it is currently anticipated that Elanco will maintain the Elanco Bonus Plan with the same metrics and eligibility for the remainder of 2018 and that for 2019 the Elanco compensation committee will make determinations with respect to the Elanco Bonus Plan as it deems appropriate. See "—Anticipated Compensation Program Following this Offering — Awards upon the Completion of this Offering" below and "Certain Relationships and Related Party Transactions — Relationship with Lilly — Employee Matters Agreement" for additional information with respect to our anticipated compensation programs following this offering.

Anticipated Compensation Program Following this Offering

The following section describes the compensation programs that we intend to implement following this offering, which continues to be subject to development by the Elanco compensation committee.

Elanco Compensation Committee

Following this offering, the Elanco compensation committee will determine the design of our executive and director compensation programs and our compensation philosophy. The Elanco

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compensation committee is expected to retain its own compensation consultant to advise on its compensation decisions. The Elanco compensation committee will annually review and evaluate our executive compensation plans and programs to ensure they are aligned with our compensation philosophy.

Peer Group

Based on the advice of Willis Towers Watson, the compensation consultant engaged by Lilly management to provide advice on the Elanco peer group in connection with this offering, the following group of 18 companies were identified as our "core" peers.


Agilent Technologies, Inc.	Endo International plc	PerkinElmer, Inc.
Alexion Pharmaceuticals, Inc.	Hologic, Inc.	Perrigo Company plc
Boston Scientific Corporation	IDEXX Laboratories, Inc.	Steris plc
Catalent, Inc.	Jazz Pharmaceuticals plc	Varian Medical Systems, Inc.
DENTSPLY SIRONA Inc.	Mallinckrodt Public Limited Company	West Pharmaceutical Services, Inc.
Edwards Lifesciences Corporation	OPKO Health, Inc.	Zoetis, Inc.

To determine the elements of our compensation programs for our Named Executive Officers, we expect that the Elanco compensation committee will use the following benchmarks, among others:

•: Proxy statement data for the "core" peer group as disclosed in each company's prior year compensation discussion and analysis and executive compensation tables; and
•: Survey data from similarly-sized companies within the life sciences industry, in particular, from the Willis Towers Watson CDB survey that encompassed life-science companies with annual revenues of less than or equal to $20 billion.

We expect the Elanco compensation committee to periodically review our peer group and to make adjustments to its size and composition within its discretion.

Awards upon the Completion of this Offering

We anticipate that certain of our executive officers, including the Named Executive Officers listed below, will receive a Founders' Award that will be granted approximately 30 days after the completion of this offering. It is not expected at this time that Mr. Montarce will receive a Founders' Award. The Founders' Awards are anticipated to be allocated evenly between Elanco RSUs and Elanco stock options. The number of shares subject to such RSUs and stock options will be calculated based upon the executive officer's allocation from a pool to be established for these awards that is expected to equal 0.1% of Elanco's market capitalization measured at the closing of this offering. The anticipated allocation for each of our Named Executive Officers from that pool is as follows:

Name

Mr. Simmons	26	%
Mr. Kinard	5	%
Mr. Schacht	5	%
Mr. Urbanek	5	%

In addition to the Founders' Awards, we anticipate making additional awards, not expected to exceed approximately $15.0 million in value, to our employees who are not our Named Executive Officers in connection with this offering under the 2018 Elanco Stock Plan, within the limits thereunder.

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Compensation Arrangements

Executive Compensation

Upon the completion of this offering, the following pay packages are expected to go into effect for our Named Executive Officers. The pay packages for our Named Executive Officers described below are based on the experience profile of the candidate and competitive positioning against peer group benchmarking as described above. All of our Named Executive Officers' compensation packages considered benchmarking data from the Willis Towers Watson life sciences CDB survey regressed for relative company size, and the compensation package for Mr. Simmons was also benchmarked against the compensation of our list of core peer companies.


Mr. Simmons:		As the President and Chief Executive Officer, Mr. Simmons is expected to receive $1,000,000 in base salary, an annual incentive target equal to 120% of base salary, and an annual equity award with a grant date value targeted at $4,150,000.
Mr. Montarce:		As the Acting Chief Financial Officer, Mr. Montarce is expected to receive $336,810 in base salary, an annual incentive target equal of 40% of base salary and an annual equity award with a grant date value targeted at $300,000.
Mr. Kinard:		As the Executive Vice President, Human Resources and Corporate Affairs, Mr. Kinard is expected to receive $430,000 in base salary, an annual incentive target equal to 60% of base salary, and an annual equity award with a grant date value targeted at $625,000.
Mr. Schacht:		As the Executive Vice President, Innovation, Regulatory and Business Development, Mr. Schacht is expected to receive $355,000 in base salary, an annual incentive target equal to 60% of base salary, and an annual equity award with a grant date value targeted at $650,000.
Mr. Urbanek:		As the Executive Vice President, Manufacturing and Quality, Mr. Urbanek is expected to receive $385,000 in base salary, an annual incentive target equal to 60% of base salary, and an annual equity award with a grant date value targeted at $550,000.

2018 Elanco Stock Plan

Prior to the completion of this offering, we expect our board of directors and our stockholder to approve the 2018 Elanco Stock Plan (the "2018 Stock Plan"), which we expect will become effective on the day immediately prior to the date that the offering of our shares pursuant to this prospectus is declared effective by the SEC and is not expected to be utilized until after the completion of this offering. The following is what we expect to be the material terms of the 2018 Stock Plan.

Awards. Under the 2018 Stock Plan, the following awards may be granted: stock options (including "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code), restricted stock, stock appreciation rights, restricted stock units, other share-based awards, and performance-based awards (all such grants are collectively referred to in this summary as "awards"). Restricted stock units may also be granted as "replacement awards" to employees of the Company (or any affiliate) in substitution of a restricted stock unit covering Lilly common stock that was granted by Lilly to such employees under Lilly's stock plan prior to the effective date that Lilly owns less than fifty percent (50%) of the outstanding Elanco shares.

Shares Reserved. Subject to adjustment in the event of specified capitalization events, the total number of shares of our common stock that will be authorized and available for issuance pursuant to awards granted under the 2018 Stock Plan will be 5,500,000 shares as of the date the

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2018 Stock Plan becomes effective, provided that the number of shares available for issuance will be increased immediately following the date on which the Distribution is completed, by the lesser of (a) 5,500,000 shares or (b) such other number of shares as may be determined by our board of directors. Subject to adjustment in the event of specified capitalization events, no more than 4,000,000 shares may be issued pursuant to the exercise of incentive stock options.

Shares Reissuable Under the 2018 Stock Plan. The following shares will be available for reissuance pursuant to the Plan: (i) shares that are not issued as a result of the termination, expiration or lapsing of any award for any reason; (ii) shares subject to a "full value" award that are not issued because the award is settled in cash; (iii) shares covered by an option which are surrendered in payment of the option exercise or purchase price or in satisfaction of obligations for tax-related items incident to the exercise of an option; (iv) shares covered by an award which are surrendered in satisfaction of obligations for tax-related items incident to the vesting or settlement of a full value award.

Shares Not Reissuable Under the 2018 Stock Plan. Shares that are repurchased on the open market with the proceeds of the exercise of an option will be counted against the maximum number of shares available for issuance and will not be returned to the 2018 Stock Plan.

Shares Not Counted Against Share Reserve Pool Under the 2018 Stock Plan. To the extent permitted by applicable law or any stock exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or an affiliate will not be counted against shares available for grant pursuant to the 2018 Stock Plan. The payment of a dividend equivalent right in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2018 Stock Plan.

Eligibility. Incentive stock options may be granted only to our employees and to employees of any of our subsidiaries meeting the requirements of the Internal Revenue Code. Awards other than incentive stock options may be granted to our non-employee directors and to employees of the Company and any of its affiliates.

Administration. The 2018 Stock Plan will be administered by our board of directors or a duly authorized committee of our board of directors (the board of directors or the committee to which administration of the 2018 Stock Plan has been delegated will be referred to in this summary as the "Committee"). The Committee has the sole authority to grant awards and sole and exclusive discretion to interpret and administer the 2018 Stock Plan. The Committee determines the eligible individuals who will receive grants and the precise terms of the grants (including accelerations or waivers of any restrictions, and the conditions under which such accelerated vesting or waivers occur). The Committee has the authority to amend or modify the terms of an outstanding award. To the extent permitted by applicable law, our board of directors also may delegate to a committee of one or more members of our board of directors or one or more officers of the Company the authority to grant or amend awards to participants other than employees who are subject to Section 16 of the Securities Exchange Act of 1934, as amended, or officers or directors of the Company to whom authority to grant or amend awards has been delegated.

Stock Options. The 2018 Stock Plan authorizes the grant of incentive stock options, which are intended to satisfy the requirements of Section 422 of the Internal Revenue Code, and non-qualified stock options, which do not satisfy the requirements of Section 422 of the Code. The exercise price of stock options granted under the 2018 Stock Plan may not be less than 100% (or higher in the case of certain incentive stock options) of the fair market value of a share of our common stock on the date of grant. While the shares are traded on an established stock exchange, "fair market value" means, as of any given date, the closing price of a share as quoted on the principal exchange on which the shares are listed for such date, or if no sale occurred on such date, the first trading date immediately prior to such date during which a sale occurred. Subject to the one-year minimum vesting requirement described below, options granted under the 2018 Stock

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Plan will vest at the rate specified by the Committee. No stock option will be exercisable for more than ten years after the date it is granted.

Until the shares are issued, no right to vote or receive dividends or dividend equivalents or any other rights as a shareholder will exist with respect to the shares subject to an option, notwithstanding the exercise of an option. If a participant ceases to provide services to the Company or any affiliate, the participant may exercise his or her option within such period of time as is specified in the award agreement to the extent that the option is vested on the date of termination (but in no event later than the expiration of the term of such option as set forth in the award agreement).

Restricted Stock Awards. An award of restricted stock is a direct grant of common stock, subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote the underlying shares or the right to receive dividends with respect to the underlying shares). The restrictions, if any, may be based on, among other conditions, continued service, the attainment of performance conditions, or a combination of both. Subject to the one-year minimum vesting requirement describe below, these restrictions may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the award or thereafter. Generally, any shares subject to restrictions are forfeited upon termination of employment. The price, if any, that participants are required to pay for each share of restricted stock will be set by the Committee and will be paid in a form approved by the Committee, which may be cash, services rendered or to be rendered to the Company or an affiliate of the Company, or in another form of payment. To the extent that any dividends are payable with respect to a restricted stock award, the dividends will be accumulated and subject to any restrictions and risk of forfeiture to which the underlying restricted stock is subject.

Stock Appreciation Rights. Stock appreciation rights, or "SARs," typically provide for payments to the holder based upon increases in the price of our shares from the date the SAR was granted to the date that the right is exercised. Subject to the one-year minimum vesting requirements, the Committee will generally determine when the SAR will vest and become exercisable. The vesting conditions, if any, may be based on, among other conditions, continued service, the attainment of performance conditions, or a combination of both. The grant price of a SAR may not be less than the fair market value of a share on the date of grant of the SAR. The Committee determines the term of a SAR, but no SAR will be exercisable more than ten years after the date it is granted.

Until the shares are issued, no right to vote or receive dividends or any other rights as a shareholder will exist with respect to the shares subject to a SAR, notwithstanding the exercise of the SAR. The Committee may elect to settle exercised SARs in cash, in shares, or in a combination of cash and shares. Unless otherwise provided in the 2018 Stock Plan or an award agreement, upon termination of a participant's employment, a SAR will generally be subject to the same conditions as apply to stock options. A SAR may be granted as a standalone right or in connection with an option.

Restricted Stock Units. Restricted stock units are denominated in unit equivalent of shares and are typically awarded to participants without payment of consideration. Subject to the one-year minimum vesting requirements described below, restricted stock units may be subject to vesting conditions based upon continued service, the attainment of performance-based conditions, or both. Except as otherwise determined by the Committee at the time of the grant of the award or thereafter, any restricted stock units that are not vested as of the date of the participant's termination of service will be forfeited.

Unlike restricted stock, the stock underlying restricted stock units will not be issued until the restricted stock units have vested. In addition, recipients of restricted stock units generally have no

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voting or dividend rights until the vesting conditions are satisfied and the underlying shares are issued. Restricted stock units may be settled in shares, cash or a combination of both.

On the vesting date (or such later date as determined by the Committee and set forth in the agreement evidencing the award), the participant will be issued one unrestricted, fully transferable share for each restricted stock unit scheduled to be paid out on such date and not previously forfeited. Alternatively, settlement of a restricted stock unit may be made in cash (in an amount reflecting the fair market value of shares that would have been issued) or any combination of cash and shares, as determined by the Committee, in its sole discretion. The Committee may authorize dividend equivalents to be paid on outstanding restricted stock units. If dividend equivalents are authorized to be paid, they may be payable in cash or shares, as determined in the discretion of the Committee, only to the extent the underlying award vests.

Other Share-Based Awards. The Committee is authorized under the 2018 Stock Plan to make any other award that is not inconsistent with the provisions of the 2018 Stock Plan and that by its terms involves or might involve the issuance of shares. Subject to the one-year minimum vesting requirements described below, awards may be subject to vesting based on continued service, the attainment of performance conditions, or a combination of both. The Committee may elect to settle these awards in cash, in shares, or in a combination of cash and shares. The Committee may establish the exercise price, if any, of any other share-based awards granted under the Plan, except that the exercise price may not be less than the fair market value of a share on the date of grant for an award that is intended to be exempt from Section 409A of the Internal Revenue Code. The Committee may authorize dividend equivalents to be paid with respect to a share-based award that is a full value award that are payable only to the extent the underlying award vests.

Performance-Based Awards. The Committee may grant to eligible individuals the right to receive performance-based awards. Performance-based awards vest upon the attainment of performance goals based on business criteria specified in the 2018 Stock Plan over a specified performance period. In determining the amount earned by an eligible individual, the Committee has the right to adjust or eliminate the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the performance period. The maximum number of shares with respect to which one or more performance-based awards may be granted to any one participant during any calendar year may not exceed 1,500,000 shares.

Minimum Vesting Requirements. No award may vest before the first anniversary of the date of grant, subject to certain accelerated vesting contemplated under the 2018 Stock Plan, with the exception of (i) up to five percent (5%) of the number of shares reserved for issuance under the 2018 Stock Plan, (ii) replacement awards granted under the 2018 Stock Plan, (iii) awards granted in connection with the assumption or substitution of awards as part of a transaction, and (iv) awards that may be settled only in cash.

Non-Employee Directors. Non-employee directors will be eligible to receive all types of awards (except for incentive stock options) under the 2018 Stock Plan. No non-employee director may be granted awards, the grant date fair value of which, when aggregated with cash compensation payable to the director in any calendar year, exceeds $800,000 in any calendar year.

Limits on Transferability of Awards. Except as otherwise provided by the Committee, no award granted under the 2018 Stock Plan may be assigned, transferred, or otherwise disposed of by a participant other than by will or the laws of descent and distribution.

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Change in Control. Unless precluded by any applicable award agreement, if a Change in Control of the Company occurs, each award outstanding under the 2018 Stock Plan that vests solely on continued service that is not converted, assumed, substituted or replaced by the successor corporation, will vest immediately prior to the Change in Control, and following the Change in Control, the awards will immediately terminate. Awards that vest based on the attainment of performance-based conditions will be subject to the governing impact of a Change in Control in the award agreement, provided the award agreement may not permit vesting of awards at a rate greater than the actual level of attainment and/or will provide for pro-rated vesting based on any reduction to the performance period resulting from the Change in Control. Where awards are assumed or continued after a Change in Control, the Committee may provide that the vesting of one or more awards will automatically accelerate upon an involuntary termination of the participant's employment or service within a designated period following the effective date of a change of control. "Change in Control" has a specified meaning that is defined in the 2018 Stock Plan.

Adjustments Upon Changes in Capitalization. In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, or other distribution (other than normal cash dividends) of the Company's assets to our shareholders, or any other similar event or other change related to a corporate event affecting our shares or the price of our shares other than certain equity restructurings identified in the 2018 Stock Plan, the Committee has discretion to make appropriate adjustments in the number and type of shares subject to the 2018 Stock Plan, the terms and conditions of any award outstanding under the 2018 Stock Plan, and the grant or exercise price of any such award. In the case of certain equity restructurings as specified in the 2018 Stock Plan, the number and type of securities subject to each outstanding award and the grant or exercise price will be equitably adjusted.

Amendment and Termination of Plan. With the approval of our board of directors, at any time and from time to time, the Committee may terminate, amend or modify the 2018 Stock Plan, except that our board may not, without prior shareholder approval, amend the 2018 Stock Plan in any manner that would require shareholder approval to comply with any applicable laws.

Furthermore, absent approval of our shareholders, no option or SAR may be amended to reduce the exercise price or grant price of the shares subject to such option or SAR and (except as permitted under the provisions of the 2018 Stock Plan dealing with certain capitalization adjustments and change in control) no option or SAR may be cancelled in exchange for the grant of an option or SAR having a lower per share exercise price or for a cash payment or another award at a time when the option or SAR has a per share exercise price that is higher than the fair market value of the shares.

Clawback/Recovery. Awards are subject to recoupment under any "clawback" policy adopted by the Company providing for the recovery of awards, shares, proceeds, or payments to participants in the event of fraud or as required by applicable laws or governance considerations or in other similar circumstances.

Plan Term. The 2018 Stock Plan will continue in effect until terminated by our board of directors, but no incentive stock options may be granted under the 2018 Stock Plan after the tenth anniversary of the date the 2018 Stock Plan was approved by our board of directors. Any awards that are outstanding at the time the 2018 Stock Plan terminates will remain in force according to the terms of the 2018 Stock Plan and the applicable agreement evidencing the award.

Elanco Change-in-Control Severance Pay Plan for Select Employees

Prior to the completion of this offering, we expect our board of directors to adopt Elanco change-in-control severance pay plans for nearly all Elanco employees, including a plan which will apply to our Named Executive Officers. The Elanco plans are intended to preserve Elanco employee morale and productivity and encourage retention in the face of the disruptive impact of

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an actual or rumored change in control. In addition, the Elanco plans are intended to align participating Elanco employee and Elanco shareholder interests by enabling executives to evaluate corporate transactions that may be in the best interests of the Elanco shareholders and other constituents of Elanco without undue concern over whether the transactions would jeopardize the participating employee's own employment.

Highlights of the expected Elanco change-in-control severance arrangements:

•: all regular Elanco employees will be covered;
•: double trigger required;
•: no tax gross-ups;
•: up to two-year pay protection; and
•: 18-month benefit continuation.

The basic elements of the select plan applicable to our Named Executive Officers are expected to include:

•

Double trigger. Unlike "single trigger" plans that pay out immediately upon a change in control, the select plan requires a "double trigger"—a change in control followed by an involuntary loss of employment within two years. This is consistent with Elanco's intent to provide employees with financial protection upon loss of employment.

•

Covered terminations. Our participating Named Executive Officers would be eligible for payments under our select plan if, within two years of the change in control, their employment is terminated (i) without cause by Elanco or (ii) for good reason by the employee, each as is defined in the plan.

•: The plan would provide for up to two years of pay and 18 months of benefits protection upon a covered termination.

•

Severance payment. Named Executive Officers would be eligible for up to two years' base salary plus two times their target bonus for the then-current year.

•

Benefit continuation. Basic employee benefits such as health and life insurance would continue for 18 months following a participating Named Executive Officer's termination of employment, unless they become eligible for coverage with a new employer before then.

•

Excise tax. In some circumstances, the payments or other benefits received by a participating employee in connection with a change in control could exceed limits established under Section 280G of the Code resulting in an excise tax payment. Elanco would not reimburse or gross-up employees for these taxes. However, the amount of change in control-related benefits would be reduced to the maximum amount that would not result in an excise tax if the effect would be to deliver a greater after-tax benefit than the employee would receive if his or her benefits were not so reduced.

Stock Ownership and Holding Requirements

Our board of directors may consider from time to time equity ownership requirements for non-employee directors and executive officers.

Hedging/Pledging Policy

We anticipate adopting a hedging and pledging policy under which our directors and executive officers will be prohibited from hedging their Elanco stock and from pledging, or using as collateral, their Elanco stock.

Executive Compensation

All amounts included in the tables below represent compensation paid by Lilly to our Named Executive Officers for 2017 or the year indicated in the applicable table.

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Summary Compensation Table


Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($) (1)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($) (2)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3)		All Other Compensation ($) (4)		Total Compensation ($)

Jeffrey Simmons, President and Chief Executive Officer	2017	$	688,118	$	0	$	2,400,000	$	0	$	379,841	$	1,261,845	$	41,287	$	4,771,091
Lucas Montarce, Acting Chief Financial Officer	2017	$	280,673	$	0	$	112,500	$	0	$	83,976	$	24,896	$	16,200	$	518,245
David Kinard, Executive Vice President, Human Resources and Corporate Affairs	2017	$	405,632	$	0	$	518,750	$	0	$	244,596	$	379,379	$	24,338	$	1,572,696
Aaron Schacht, Executive Vice President, Innovation, Regulatory and Business Development	2017	$	285,315	$	0	$	581,310	$	0	$	66,935	$	310,093	$	16,200	$	1,260,772
David Urbanek, Executive Vice President, Manufacturing and Quality	2017	$	297,174	$	0	$	300,040	$	0	$	76,887	$	333,402	$	17,830	$	1,025,333

(1): This column shows the grant date fair value of the Lilly PAs, Lilly Executive Officer PAs, Lilly SVAs, Lilly Executive Officer SVAs, and Restricted Stock Unit Awards, as applicable, awarded to our Named Executive Officers in 2017 computed in accordance with FASB ASC Topic 718, based upon the probable outcome of the performance conditions as of the grant date and the assumptions identified in Note 11 — Stock-based Compensation to Lilly's Annual Report on Form 10-K filed with the SEC on February 20, 2018. The grant date fair value for the Lilly PAs, Lilly Executive Officer PAs, Lilly SVAs and Lilly Executive Officer SVAs included in the "Stock Awards" column are based on the probable payout outcome anticipated at the time of grant, which for the Lilly PAs and Lilly Executive Officer PAs was the maximum value and for the Lilly SVAs and Lilly Executive Officer SVAs was target value.
: For Mr. Schacht and Mr. Urbanek, the "Stock Awards" column also includes a special retention award of Restricted Stock Units granted on September 1, 2017 with a grant date fair value of $300,060 for Mr. Schacht and $200,040 for Mr. Urbanek, which they received in recognition of their contributions to Elanco and their importance to Elanco's future success; both of these grants will vest on September 1, 2020. These grants will be forfeited if Mr. Schacht or Mr. Urbanek terminates employment with Elanco prior to that date, other than the event of certain qualifying terminations. See " — Lilly Payments Upon Termination or Change in Control (as of December 31, 2017) — Voluntary Termination" below.
: The supplemental table below shows the total target grant date values approved by the Lilly compensation committee for Mr. Simmons and approved by Lilly management for the remaining Named Executive Officers:


Name		2017 Total Equity

Mr. Simmons	$	2,000,000
Mr. Montarce	$	90,000
Mr. Kinard	$	415,000
Mr. Schacht	$	225,000
Mr. Urbanek	$	80,000

The table below shows the minimum, target and maximum payouts (using the grant date fair value) for the 2017-2018 Lilly PAs (2017-2019 Lilly Executive Officer PA for Mr. Simmons) included in this column of the "Summary Compensation Table."


Name	Payout Date		Minimum Payout		Target Payout		Maximum Payout

Mr. Simmons	January 2020	$	0	$	800,000	$	1,200,000
Mr. Montarce	January 2019	$	0	$	45,000	$	67,500
Mr. Kinard	January 2019	$	0	$	207,500	$	311,250
Mr. Schacht	January 2019	$	0	$	112,500	$	168,750
Mr. Urbanek	January 2019	$	0	$	40,000	$	60,000

The table below shows the minimum, target and maximum payouts (using the grant date fair value) for the 2017-2019 Lilly SVAs (2017-2019 Lilly Executive Officer SVAs for Mr. Simmons) included in this column of the "Summary Compensation Table."


Name	Payout Date		Minimum Payout		Target Payout		Maximum Payout

Mr. Simmons	January 2020	$	0	$	1,200,000	$	2,160,000
Mr. Montarce	January 2020	$	0	$	45,000	$	67,500
Mr. Kinard	January 2020	$	0	$	207,500	$	311,250
Mr. Schacht	January 2020	$	0	$	112,500	$	168,750
Mr. Urbanek	January 2020	$	0	$	40,000	$	60,000

(2): This column shows payments under the Elanco Bonus Plan and/or the Lilly Bonus Plan for performance in 2017. See "— 2017 Compensation Payouts" above for details on 2017 payouts for our Named Executive Officers under the applicable cash bonus plan.

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(3): The amounts in this column reflect the change in Lilly pension value, calculated by Lilly's actuary, and are affected by additional service accruals and pay earned, as well as actuarial assumption changes. The 2017 change in pension values was driven to a large extent by a lower discount rate which increased the net present value of our Named Executive Officers' pension. The design of the pension benefit did not change. See "— Pension Benefits" below for information about the actuarial assumptions used. Our Named Executive Officers did not receive any preferential or above-market earnings on deferred compensation.
(4): The amounts in this column consist solely of Lilly matching contributions for each individual's 401(k) plan and nonqualified savings plan contributions. There were no reportable perquisites, personal benefits or tax reimbursements or gross-ups paid to our Named Executive Officers for 2017.

Grants of Plan-Based Awards During 2017

The Lilly compensation plans under which the grants in the following table were made are described in the CD&A and consist of the Elanco Bonus Plan and Lilly Bonus Plan (each plan is a non-equity incentive plan) and the 2002 Lilly Stock Plan (which provides for the grant of performance awards (PAs), shareholder value awards (SVAs) and restricted stock units).

To receive a payout under the Lilly PAs, Lilly Executive Officer PAs, Lilly SVAs or Lilly Executive Officer SVAs, a participant must remain employed with Lilly through the end of the relevant award period (except in the case of death, disability, retirement or redundancy). No dividends accrue on either performance awards or shareholder value awards during the performance period. For the Lilly Executive Officer PAs, non-preferential dividend equivalents accrue during the 13-month service-vesting period (following the two-year performance period) and are paid upon vesting.


			Lilly compensation committee		Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)					Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock or Option of Stock, Options		Grant Date Fair Value of Stock and

Name	Award	Grant Date (2)	Action Date		Threshold ($)		Target ($)		Maximum ($)	Threshold (#)	Target (#)	Maximum (#)	or Units (#)		Option Awards (6)

Mr. Simmons	Elanco Bonus Plan			$	137,624	$	550,494	$	1,100,989
	2017 - 2019 Lilly Executive Officer PAs (3)	2/9/2017	12/12/2016							5,439	10,878	16,317		$	1,200,000
	2017 - 2019 Lilly Executive Officer SVAs (4)	2/9/2017	12/12/2016							9,187	18,374	33,074		$	1,200,000
Mr. Montarce	Lilly Bonus Plan			$	5,845	$	23,380	$	46,760
	Elanco Bonus Plan			$	19,075	$	76,300	$	152,600
	2017 - 2018 Lilly PAs (3)	2/9/2017	N/A							306	612	918		$	67,500
	2017 - 2019 Lilly SVAs (4)	2/9/2017	N/A							338	676	1,014		$	45,000
Mr. Kinard	Lilly Bonus Plan			$	45,634	$	182,535	$	365,069
	2017 - 2018 Lilly PAs (3)	2/9/2017	N/A							1,411	2,882	4,233		$	311,250
	2017 - 2019 Lilly SVAs (4)	2/9/2017	N/A							1,559	3,117	4,676		$	207,500
Mr. Schacht	Elanco Bonus Plan			$	24,253	$	97,007	$	194,014
	2017 - 2018 Lilly PAs (3)	2/9/2017	N/A							765	1,530	2,295		$	168,750
	2017 - 2019 Lilly SVAs (4)	2/9/2017	N/A							845	1,690	2,535		$	112,500
	RSU Award (5)	9/1/2017	N/A										3,747	$	300,060
Mr. Urbanek	Lilly Bonus Plan			$	1,397	$	5,586	$	11,173
	Elanco Bonus Plan			$	25,145	$	100,581	$	201,163
	2017 - 2018 Lilly PAs (3)	2/9/2017	N/A							272	544	816		$	60,000
	2017 - 2019 Lilly SVAs (4)	2/9/2017	N/A							301	601	902		$	40,000
	RSU Award (5)	9/1/2017	N/A										2,498	$	200,040

(1): These columns show the threshold, target, and maximum payouts for performance under the Elanco Bonus Plan or Lilly Bonus Plan. Bonus payouts range from 0% to 200% of target.
(2): To assure grant timing is not manipulated for employee gain, the annual grant date is established in advance by the Lilly compensation committee. Lilly equity awards to new hires and other off-cycle grants are generally effective on the first trading day of the following month. (1)
(3): This row shows the possible payouts for 2017-2018 Lilly PAs and the 2017-2019 Lilly Executive Officer PAs, ranging from 0% to 150% of target. The Lilly PAs, to the extent earned and vested, will pay out in January 2019, and the Lilly Executive Officer PAs, to the extent earned and vested, will pay out in January 2020. The grant date fair value of the Lilly PAs and Lilly Executive Officer PAs is based on the probable payout outcome at the time of grant, which assumes payout at the maximum value.
(4): This row shows the range of payouts for 2017-2019 Lilly SVAs and the 2017-2019 Lilly Executive Officer SVAs. These shareholder value awards will pay out in January 2020, with payouts for the 2017-2019 Lilly SVAs ranging from 0% to 150% and the payouts for the 2017-2019 Lilly Executive Officer SVAs ranging from 0% to 180% of target. Lilly measures the fair value of Lilly SVAs and the Lilly Executive Officer SVA awards on the grant date using a Monte Carlo simulation model. The grant date fair value of these shareholder value awards is based on the probable payout outcome at the time of grant, which assumes payout at the target value. The maximum value is listed for these awards Note 1 to the Summary Compensation Table, above.
(5): The RSU awards represent the special retention awards granted on September 1, 2017, which they received in recognition of their contributions to Elanco and their importance to Elanco's future success; both of these grants will vest on September 1, 2020.
(6): This column shows the grant date fair value of the Lilly PAs, Lilly Executive Officer PAs, Lilly SVAs and Lilly Executive Officer SVAs computed in accordance with FASB ASC Topic 718, based upon the probable outcome of the performance conditions as of the grant date and the assumptions identified in Note 11 — Stock-based Compensation to Lilly's Annual Report on Form 10-K filed with the SEC on February 20, 2018 as well as the grant date fair value of the Lilly RSU awards granted to Messrs. Schacht and Urbanek. See notes 3, 4 and 5 to this table. The grant date fair value of the SVAs assuming the maximum level of performance is included in the footnotes to the Summary Compensation Table above.

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Outstanding Lilly Equity Awards at December 31, 2017

The 2017 Lilly closing stock price used to calculate the values in the table below was $84.46.


	Stock Awards (1)

Name	Award	Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)

Mr. Simmons	2017 - 2019 Lilly Executive Officer SVA					33,074	(2)	$	2,793,430
	2016 - 2018 Lilly Executive Officer SVA					52,542	(3)	$	4,437,697
	2017 - 2019 Lilly Executive Officer PA					16,317	(4)	$	1,378,134
	2016 - 2018 Lilly Executive Officer PA	11,111	(5)	$	938,435
	2015 - 2017 Lilly Executive Officer PA	21,326	(6)	$	1,801,194
	2008 RSU Award	20,000	(7)	$	1,689,200
Mr. Montarce	2017 - 2019 Lilly SVA					1,014	(2)	$	85,642
	2016 - 2018 Lilly SVA					1,518	(3)	$	128,210
	2017 - 2018 Lilly PA					918	(4)	$	77,534
Mr. Kinard	2017 - 2019 Lilly SVA					4,676	(2)	$	394,935
	2016 - 2018 Lilly SVA					5,781	(3)	$	488,263
	2017 - 2018 Lilly PA					4,233	(4)	$	357,519
	2008 RSU Award	6,726	(8)	$	568,078
Mr. Schacht	2017 - 2019 Lilly SVA					2,535	(2)	$	214,106
	2016 - 2018 Lilly SVA					2,529	(3)	$	213,599
	2017 - 2018 Lilly PA					2,295	(4)	$	193,836
	2017 RSU Award	3,747	(9)	$	316,472
Mr. Urbanek	2017 - 2019 Lilly SVA					902	(2)	$	76,183
	2016 - 2018 Lilly SVA					1,229	(3)	$	103,801
	2017 - 2018 Lilly PA					816	(4)	$	68,919
	2017 RSU Award	2,498	(10)	$	210,981

(1): The table does not include stock option awards because Lilly has not awarded stock options to employees since 2006 and there are no outstanding Lilly stock option awards.
(2): Lilly SVAs and Lilly Executive Officer SVAs granted for the 2017-2019 performance period, to the extent earned, are scheduled to vest on December 31, 2019. The number of Lilly shares reported reflects the maximum payout, which will be made if the average closing Lilly stock price in November and December 2019 is over $101.79. Actual payouts may vary from 0% to 180% of target for the Lilly Executive Officer SVAs and 0% to 150% for the Lilly SVAs. Net Lilly shares received in respect of Lilly Executive Officer SVA payouts must be held by Mr. Simmons for a minimum of one year.
(3): Lilly SVAs and Lilly Executive Officer SVAs granted for the 2016-2018 performance period are scheduled to vest on December 31, 2018. The number of Lilly shares reported reflects the maximum payout, which will be made if the average closing Lilly stock price in November and December 2018 is over $119.58. Actual payouts may vary from 0% to 180% of target for the Lilly Executive Officer SVA and 0% to 150% for the Lilly SVA. Net Lilly shares from any payout must be held by our Named Executive Officer for a minimum of one year.
(4): For Mr. Simmons, this number represents the maximum value of Lilly Executive Officer PA shares that could pay out for 2017-2018 performance period provided performance goals are met. Once the combined cumulative Lilly EPS result and associated payout level is determined at the end of the performance period, the resultant number of shares owed to Mr. Simmons will be issued as Lilly RSUs that vest in February 2020. For Mr. Kinard, Mr. Schacht and Mr. Urbanek, this number represents the maximum value of Lilly PA shares that could pay out for 2017-2018 performance period provided performance goals are met. Actual payouts for both Lilly PAs and Lilly Executive Officer PAs may vary from 0% to 150% of target.
(5): The performance period ending December 31, 2017 for the 2016-2018 Lilly Executive Officer PA resulted in Mr. Simmons being issued Lilly RSUs for 150% of target shares. The RSUs are scheduled to vest in February 2019.
(6): RSUs vested in February 2018 from the 2015-2017 Lilly Executive Officer PA.
(7): This grant was made in 2008 outside of the normal annual cycle and vested on May 1, 2018.
(8): This grant was made in 2008 outside of the normal annual cycle and will vest on November 3, 2018.

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(9): This grant was made in 2017 outside of the normal annual cycle. This grant will vest on September 1, 2020.
(10): This grant was made in 2017 outside of the normal annual cycle. This grant will vest on September 1, 2020.

Lilly Stock Vested in 2017


	Lilly Stock Awards

Name	Number of Shares Acquired on Vesting (#)			Value Realized on Vesting ($) (1)

Mr. Simmons	10,244	⁽²⁾	$	789,095
	22,507	⁽³⁾	$	1,971,613
Mr. Montarce	729	⁽⁴⁾	$	243,353
	385	⁽³⁾	$	33,726
	237	⁽⁶⁾	$	18,304
Mr. Kinard	2,778	⁽⁴⁾	$	243,353
	3,418	⁽³⁾	$	299,417
Mr. Schacht	1,215	⁽⁴⁾	$	106,434
	684	⁽³⁾	$	59,918
Mr. Urbanek	590	⁽⁴⁾	$	51,684
	598	⁽³⁾	$	52,385
	4,815	⁽⁵⁾	$	410,816

(1): Amounts reflect the market value of the Lilly stock on the day the Lilly stock vested.
(2): Lilly restricted stock units resulting from the 2014-2016 Lilly Executive Officer PA that vested in February 2017.
(3): Payout of the 2015-2017 Lilly Executive Officer SVA and 2015-2017 Lilly SVA at 100% of target.
(4): Payout of the 2016-2017 Lilly PA at 100% of target.
(5): The last installment of a one-time RSU awarded to Mr. Urbanek in 2007 outside of the normal grant cycle.
(6): Payout of a 2014 RSU grant that vested in February 2017.

Retirement Benefits

Lilly provides retirement income to eligible U.S. Lilly employees, including our Named Executive Officers, through the following plans:

•: The Lilly 401(k) Plan, a defined contribution plan qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. Participants may elect to contribute a portion of their base salary to the plan, and Lilly provides matching contributions on employees' contributions up to 6% of base salary up to IRS limits. The employee contributions, Lilly contributions and earnings thereon are paid out in accordance with elections made by the participant. See the "All Other Compensation" column in the Summary Compensation Table for information about Lilly contributions under the 401(k) Plan for our Named Executive Officers.
•: The Lilly Retirement Plan, a tax-qualified defined benefit plan that provides monthly benefits to retirees. See the Pension Benefits in 2017 table below for additional information about the value of these pension benefits.

Sections 401 and 415 of the Code generally limit the amount of annual pension that can be paid from a tax-qualified plan ($270,000 in 2017 and $275,000 in 2018) as well as the amount of annual earnings that can be used to calculate a pension benefit. However, since 1975 Lilly has maintained a nonqualified pension plan that pays retirees the difference between the amount payable under the Retirement Plan and the amount they would have received without the Code limits. The Lilly nonqualified pension plan is unfunded and subject to forfeiture in the event of bankruptcy. Likewise, Lilly maintains a nonqualified savings plan that allows participants to contribute up to 6% of base salary exceeding the IRS limit. Lilly matches these contributions as

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described in the 401(k) Plan. For more information, see the disclosure immediately following the footnotes to the Nonqualified Deferred Compensation in 2017 table.

The following table shows benefits that our Named Executive Officers have accrued under the Lilly Retirement Plan and the Lilly nonqualified pension plan.

Pension Benefits


Name	Plan	Number of Years of Credited Service		Present Value of Accumulated Benefit ($) ⁽¹⁾		Payments During Last Fiscal Year ($)

Mr. Simmons	Lilly retirement plan (pre-2010)	21	$	1,080,447
	Lilly retirement plan (post-2009)	8	$	203,352
	Lilly nonqualified plan (pre-2010)	21	$	4,624,126
	Lilly nonqualified plan (post-2009)	8	$	835,649

			$	6,743,574	$	0
Mr. Montarce	Lilly retirement plan (post-2009)	1	$	21,417
	Lilly nonqualified plan (post-2009)	1	$	6,184

			$	27,601	$	0
Mr. Kinard	Lilly retirement plan (pre-2010)	13	$	527,840
	Lilly retirement plan (post-2009)	8	$	203,352
	Lilly nonqualified plan (pre-2010)	13	$	758,126
	Lilly nonqualified plan (post-2009)	8	$	280,422

			$	1,769,740	$	0
Mr. Schacht	Lilly retirement plan (pre-2010)	19	$	933,480
	Lilly retirement plan (post-2009)	8	$	203,352
	Lilly nonqualified plan (pre-2010)	19	$	499,320
	Lilly nonqualified plan (post-2009)	8	$	103,746

			$	1,739,898	$	0
Mr. Urbanek	Lilly retirement plan (pre-2010)	22	$	1,172,534
	Lilly retirement plan (post-2009)	8	$	211,141
	Lilly nonqualified plan (pre-2010)	22	$	394,285
	Lilly nonqualified plan (post-2009)	8	$	68,559

			$	1,846,519	$	0

(1): The following actuarial assumptions were used to calculate the present value of our Named Executive Officer's accumulated pension benefit:


Discount rate:		3.83% for the qualified plan and 3.70% for non-qualified plan
Mortality (post-retirement decrement only):		RP2006 with generational projection using Scale MP2017
Pre-2010 joint and survivor benefit (% of pension):		50% until age 62; 25% thereafter
Post-2009 benefit payment form:		life annuity

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The Lilly Retirement Plan benefits shown in the table are net present values. The benefits are not payable as a lump sum; they are generally paid as a monthly annuity for the life of the retiree and, if elected, any qualifying survivor. The annual benefit under the Lilly retirement plan is calculated using years of service and the average of the annual earnings (salary plus bonus) for the highest five out of the last 10 calendar years of service (final average earnings).

Post-2009 Lilly Plan Information : Following amendment of the Lilly Retirement Plan formulas, employees hired by Lilly on or after February 1, 2008 have accrued retirement benefits only under the new Lilly plan formula. Employees hired before that date have accrued benefits under both the old Lilly and new Lilly plan formulas. All eligible employees, including those hired on or after February 1, 2008, can retire at age 65 with at least five years of service and receive an unreduced benefit. The annual benefit under the new Lilly plan formula is equal to 1.2% of final average earnings multiplied by years of service. Early retirement benefits under this Lilly plan formula are reduced 6% for each year under age 65. Transition benefits were afforded to employees with 50 points (age plus service) or more as of December 31, 2009. These benefits were intended to ease the transition to the new Lilly retirement formula for those employees who were closer to retirement or had been with Lilly longer at the time the Lilly plan was changed. For the transition group, early retirement benefits are reduced 3% for each year from age 65 to age 60 and 6% for each year under age 60. Mr. Simmons is in this transition group.

Pre-2010 Lilly Plan Information : Employees hired by Lilly prior to February 1, 2008, accrued benefits under both Lilly plan formulas. For these employees, benefits that accrued before January 1, 2010 were calculated under the old Lilly plan formula. The amount of the benefit is calculated using actual years of service through December 31, 2009, while total years of service is used to determine eligibility and early retirement reductions. The benefit amount is increased (but not decreased) proportionately, based on final average earnings at termination compared to final average earnings at December 31, 2009. Full retirement benefits are earned by employees with 90 or more points (the sum of his or her age plus years of service). Employees electing early retirement receive reduced benefits as described below:

•: The benefit for Lilly employees with between 80 and 90 points is reduced by 3% for each year under 90 points or age 62.
•: The benefit for Lilly employees who have fewer than 80 points, but who reached age 55 and have at least 10 years of service, is reduced as described above and is further reduced by 6% for each year under 80 points or age 65.

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Nonqualified Deferred Compensation


Name	Plan		Executive Contributions in Last Fiscal Year ($) ⁽¹⁾		Registrant (Lilly) Contributions in Last Fiscal Year ($) ⁽²⁾		Aggregate Earnings in Last Fiscal Year ($)			Aggregate Withdrawals/ Distributions in Last Fiscal Year ($)		Aggregate Balance at Last Fiscal Year End ($)

Mr. Simmons	Lilly nonqualified savings	$	25,087	$	25,087	$	41,287		$	0	$	722,166
	Lilly deferred compensation	$	0	$	0	$	54,795				$	1,735,607

	Total	$	25,087	$	25,087	$	96,082		$	0	$	2,457,773
Mr. Montarce	Lilly nonqualified savings	$	0	$	0	$	0		$	0	$	0
	Lilly deferred compensation	$	0	$	0	$	0				$	0

	Total	$	0	$	0	$	0		$	0	$	0
Mr. Kinard	Lilly nonqualified savings	$	8,138	$	8,138	$	25,845		$	0	$	171,027
	Lilly deferred compensation	$	62,587	$	0	$	19,261				$	621,727

	Total	$	70,725	$	8,138	$	45,106		$	0	$	792,754
Mr. Schacht	Lilly nonqualified savings	$	0	$	0	$	0		$	0	$	0
	Lilly deferred compensation	$	0	$	0	$	0				$	0

	Total	$	0	$	0	$	0		$	0	$	0
Mr. Urbanek	Lilly nonqualified savings	$	1,630	$	1,630	$	(2	)	$	0	$	3,259
	Lilly deferred compensation	$	0	$	0	$	0				$	0

	Total	$	1,630	$	1,630	$	(2	)	$	0	$	3,259

(1): The amounts in this column are also included in the Summary Compensation Table, in the "Salary" column (nonqualified savings) or the "Lilly Non-Equity Incentive Plan Compensation" column (deferred compensation).
(2): The amounts in this column are also included in the Summary Compensation Table, in the "All Other Compensation" column as a portion of the savings plan match.

The Nonqualified Deferred Compensation table above shows information about two Lilly programs: the Lilly nonqualified savings plan and the Lilly Deferred Compensation Plan. The Lilly nonqualified savings plan is designed to allow each employee to contribute up to 6% of his or her base salary and receive a Lilly company match beyond the contribution limits prescribed by the IRS with regard to 401(k) plans. The Lilly plan is administered in the same manner as the 401(k) Plan, with the same participation and investment elections. Lilly executive officers may defer receipt of all or part of their cash compensation and other U.S. Lilly executives may defer receipt of all or part of their cash bonus under the Lilly Deferred Compensation Plan. Amounts deferred by executives under the Lilly plan are credited with interest at 120% of the applicable federal long-term rate as established the preceding December by the U.S. Treasury Department under Section 1274(d) of the Code with monthly compounding, which was 2.7% for 2017 and is 3.1% for 2018. Participants may elect to receive the funds in a lump sum or in up to 10 annual installments following termination of employment, but may not make withdrawals while employed by Lilly, except in the event of hardship as approved by the Lilly compensation committee. All deferral elections and associated distribution schedules are irrevocable. Both Lilly plans are unfunded and subject to forfeiture in the event of bankruptcy.

Lilly Payments Upon Termination or Change in Control (as of December 31, 2017)

The following table describes the potential payments and benefits under Lilly's compensation and benefit plans and arrangements to which our Named Executive Officers would be entitled upon a hypothetical termination of employment on December 31, 2017 in the circumstances described in the table. Except for certain terminations following a change in control of Lilly, certain qualifying terminations with respect to his Executive Officer SVAs and Executive Officer PAs as described in this CD&A, there are no agreements, arrangements or plans that entitle Mr. Simmons to severance, perquisites or other enhanced benefits upon termination of his employment. The narrative following

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the tabular disclosure below contains more details on the treatment of certain equity awards upon a qualifying termination of employment. Other than the payments and benefits described below, any agreement to provide severance payments or benefits (other than following a change in control) would be at the discretion of the Lilly compensation committee or, following this offering, our compensation committee.


		Cash Severance Payment ⁽¹⁾		Continuation of Medical / Welfare Benefits (present value)			Value of Acceleration of Equity Awards			Total Termination Benefits

Mr. Simmons
• Involuntary retirement or termination without cause	$	0	$	0		$	4,428,829	⁽⁴⁾	$	4,428,829
• Involuntary or good reason termination after change in control	$	2,477,225	$	315,496	⁽²⁾	$	8,591,525	⁽⁵⁾	$	11,384,245
Mr. Montarce
• Involuntary retirement or termination without cause	$	457,800	$	5,000	⁽³⁾	$	0	⁽⁴⁾	$	462,800
• Involuntary or good reason termination after change in control	$	915,600	$	39,903	⁽²⁾	$	177,366	⁽⁵⁾	$	1,132,869
Mr. Kinard
• Involuntary retirement or termination without cause	$	591,692	$	5,000	⁽³⁾	$	568,078	⁽⁴⁾	$	1,164,770
• Involuntary or good reason termination after change in control	$	1,183,925	$	39,903	⁽²⁾	$	1,351,613	⁽⁵⁾	$	2,575,442
Mr. Schacht
• Involuntary retirement or termination without cause	$	385,381	$	5,000	⁽³⁾	$	316,472	⁽⁴⁾	$	706,853
• Involuntary or good reason termination after change in control	$	770,763	$	315,496	⁽²⁾	$	724,245	⁽⁵⁾	$	1,810,503
Mr. Urbanek
• Involuntary retirement or termination without cause	$	687,383	$	5,000	⁽³⁾	$	210,981	⁽⁴⁾	$	903,364
• Involuntary or good reason termination after change in control	$	1,083,150	$	45,916	⁽²⁾	$	365,247	⁽⁵⁾	$	1,494,313

(1): Our Named Executive Officers, other than Mr. Simmons, are entitled to severance under The Lilly Severance Pay Plan upon an involuntary retirement or termination without cause. Also see "— Lilly Payments Upon Termination or Change in Control (as of December 31, 2017) — Lilly Change - in - Control Severance Pay Plan" below.
(2): See "Lilly Accrued Pay and Regular Retirement Benefits" and "Change-in-Control Severance Pay Plan — Continuation of medical and welfare benefits" below for a discussion of payments following a change in control.
(3): A one-time payment for any purpose including payment of medical premiums, job placement services or miscellaneous expenses.
(4): Includes amounts that would be paid under RSU awards including, for Mr. Simmons, the amount that would be paid under the 2015-2017 and 2016-2018 Executive Officer PAs subject to the 13 month period of service vesting. Does not include amounts that would be paid under the SVAs, Executive Officer SVAs, PAs and Executive Officer PAs, which would result in the following estimated amounts if calculated at target as of December 31, 2018: Mr. Simmons: $3,558,694; Mr. Montarce: $101,859; Mr. Kinard: $423,933; Mr. Schacht: $207,124; and Mr. Urbanek: $86,008. See "Outstanding Lilly Equity Awards at December 31, 2017" table above.
(5): Includes the acceleration of RSUs (including the Special Retention Awards), SVAs, Executive Officer SVAs, PAs and Executive Officer PAs upon the event of certain qualifying terminations, as applicable. See narrative below.

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Lilly Accrued Pay and Regular Retirement Benefits. The amounts shown in the table above do not include certain payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment or are disclosed above in the Pension Benefits Table or the Nonqualified Deferred Compensation Table. These include:

•: accrued salary and vacation pay;
•: regular pension benefits under the Lilly Retirement Plan and the Lilly nonqualified pension plan. See "— Retirement Benefits" above;
•: welfare benefits provided to all U.S. retirees, including retiree medical and dental insurance. The amounts shown in the table above as "Lilly Continuation of Medical / Welfare Benefits" are explained below; and
•: distributions of plan balances under the Lilly 401(k) Plan, the Lilly nonqualified savings plan and the Lilly Deferred Compensation Plan. See "— Nonqualified Deferred Compensation" for information about these plans.

Lilly Deferred Compensation. The amounts shown in the table do not include distributions of plan balances under the Lilly deferred compensation plan. See "— Nonqualified Deferred Compensation."

Death and Disability. A termination of employment due to death or disability does not entitle our Named Executive Officers to any cash payments or benefits that are not available to U.S. Lilly salaried employees generally. See "Involuntary Retirement or Termination Without Cause" below for the effect of a termination of employment due to death or disability on Lilly equity awards.

Termination for Cause. Executives terminated for cause, including our Named Executive Officer, receive no severance or enhanced Lilly benefits and forfeit any unvested Lilly equity grants.

Voluntary Termination. Executives, including our Named Executive Officers, receive no severance or enhanced Lilly benefits and forfeit any unvested Lilly equity grants if they leave voluntarily.

Involuntary Retirement or Termination Without Cause. In the event of involuntary retirement (i.e. a retirement predicated on some other involuntary event), death, disability or redundancy, SVAs, Executive Officer SVAs, PAs and Executive Officer PAs are paid on a pro-rated basis based upon the number of days worked and the relevant company performance at the end of the performance period. In addition, upon death, disability or redundancy, RSUs accelerate in full.

Lilly Change in Control Severance Pay Plan. As described in "— Other Lilly Compensation Practices and Information — Lilly Severance Benefits," Lilly maintains a change-in-control severance pay plan for nearly all employees, including our Named Executive Officers and a Lilly severance plan in which our Named Executive Officers other than Mr. Simmons participate. The Lilly change-in-control severance pay plan defines a change in control very specifically, but generally the terms include the occurrence of one of the following: (i) acquisition of 20% or more of Lilly's stock; (ii) replacement by the Lilly shareholders of one half or more of the Lilly board of directors; (iii) consummation of a merger, share exchange or consolidation of Lilly (other than a transaction that results in the Lilly shareholders prior to the transaction continuing to hold more than 60% of the voting stock of the combined entity); or (iv) liquidation of Lilly or sale or disposition of all or substantially all of its assets. The amounts shown in the table for "involuntary or good-reason termination after change in control" are based on the following assumptions and plan provisions:

•: Lilly covered terminations. The table assumes a termination of Lilly employment that is eligible for severance under the terms of the Lilly change-in-control severance pay plan,

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based on our Named Executive Officer's compensation, benefits, age and service credit on December 31, 2017. Eligible terminations include an involuntary termination for reasons other than for cause or a voluntary termination by the executive for good reason, within two years following the change in control.

•: A termination by Lilly is for cause if it is for any of the following reasons: (i) the employee's willful and continued refusal to perform, without legal cause, his or her material duties, resulting in demonstrable economic harm to Lilly; (ii) any act of fraud, dishonesty or gross misconduct resulting in significant economic harm or other significant harm to the business reputation of Lilly; or (iii) conviction of or the entering of a plea of guilty or nolo contendere to a felony.
•: A termination is for good reason if it results from: (i) a material diminution in the nature or status of the executive's position, title, reporting relationship, duties, responsibilities or authority, or the assignment to him or her of additional responsibilities that materially increase his or her workload; (ii) any reduction in the executive's then-current base salary; (iii) a material reduction in the executive's opportunities to earn incentive bonuses below those in effect for the year prior to the change in control; (iv) a material reduction in the executive's employee benefits from the benefit levels in effect immediately prior to the change in control; (v) the failure to grant to the executive stock options, stock units, performance shares or similar incentive rights during each 12-month period following the change in control on the basis of a number of Lilly shares or Lilly units and all other material terms at least as favorable to the executive as those rights granted to him or her on an annualized average basis for the three-year period immediately prior to the change in control; or (vi) relocation of the executive by more than 50 miles.

•: Lilly cash severance payment. The Lilly cash severance payment amounts to two times the affected employee's annual base salary plus two times the affected employee's bonus target for that year under the bonus plan.
•: Lilly continuation of medical and welfare benefits. This amount represents the present value of the Lilly change-in-control severance pay plan's provision, following a Lilly covered termination, of 18 months of continued coverage equivalent to the company's current active employee medical, dental, life and long-term disability insurance together with the value associated with additional credit for purposes of determining eligibility for retiree medical and dental benefits. Similar actuarial assumptions to those used to calculate incremental pension benefits apply to the calculation for continuation of medical and welfare benefits, with the addition of actual COBRA rates based on current benefit elections.
•: Acceleration of Lilly equity awards. Upon a Lilly change in control, any unvested Lilly equity awards would convert into Lilly restricted stock units of the new company, with the number of Lilly shares earned under the awards based on accrued performance at the time of the transaction. The Lilly restricted stock units will continue to vest and pay out upon the earlier of the completion of the original award period, upon a Lilly covered termination, or if the successor entity does not assume, substitute or otherwise replace the award. The amount in this column represents the value of the acceleration of unvested Lilly equity grants based on target performance, had a qualifying termination occurred on December 31, 2017.
•: Excise taxes. Upon a Lilly change in control, employees may be subject to certain excise taxes under Section 280G of the Code. Lilly does not reimburse the affected employees for those excise taxes or any income taxes payable by the employee. To reduce the employee's exposure to excise taxes, the employee's change in control benefit may be decreased to maximize the after-tax benefit to the individual.

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Lilly Payments Upon Change in Control Alone. In general, the Lilly change in control severance pay plan is a "double trigger" plan, meaning payments are made only if the employee suffers a covered termination of employment within two years following the change in control, or in the case of Lilly equity awards, if the successor entity does not assume, substitute or otherwise replace the awards.

Lilly Severance Pay Plan. Our Named Executive Officers, other than Mr. Simmons, participate in the Lilly Severance Pay Plan. The plan generally provides severance benefits to eligible employees of Lilly and certain of its subsidiaries and affiliates in the event of involuntary retirement or termination without cause, which includes separation from Lilly due to discharge or resignation in lieu of discharge, other than for cause, resignation because of disability, the closing of an office or facility in which the employee is employed, or any other reason determined by Lilly to warrant the payment of a severance benefit pursuant to the plan. Such employees will receive a benefit that is a function of their weekly pay and the number of years of service completed at the time of their separation.

Director Compensation

Elanco Director Compensation Program

Directors who are employed by us or Lilly (or any of their respective affiliates) are not expected to be eligible to receive compensation for their service on our board of directors. We anticipate that all other members of our board of directors will receive an annual retention fee of $70,000 in cash and an annual equity award in the number of our shares having a grant date value equal to $180,000, that the chairman of our board of directors also will receive an annual retention fee of $100,000 in cash, and the chairman of each of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee each also will receive an annual retention fee of $18,000, $16,000 and $16,000, respectively, in cash. We anticipate that the annual equity awards granted to directors who are not employed by us or Lilly will be subject to mandatory deferral under our Directors' Deferral Plan and that cash compensation will be subject to elective deferral under such plan, as described below.

All of our directors will be reimbursed for reasonable out-of-pocket travel expenses incurred in connection with attendance at board and committee meetings and other board-related activities. Our compensation committee may determine to review and make changes to our director compensation following this offering.

Director Letter Agreement with Chairman

In anticipation of the offering, R. David Hoover was appointed to serve as a director and chairman of our board of directors. In connection therewith, we entered into a letter agreement with Mr. Hoover, which provided, in part, that Mr. Hoover would assist in the identification and recruitment of potential candidates to serve on our board of directors. Mr. Hoover is entitled to a monthly fee of $10,000 for his service prior to the completion of the offering. It is anticipated that following the offering Mr. Hoover's compensation would be consistent with the director and chairman compensation described under "Elanco Director Compensation Program" above as determined by our board of directors in connection with the offering.

Elanco Directors' Deferral Plan

Prior to the completion of this offering we expect our board of directors and our stockholder to approve the Elanco Directors' Deferral Plan (the "Directors' Deferral Plan"), which we expect will become effective on the day immediately prior to the date that the offering of our shares pursuant to this prospectus is declared effective by the SEC. Under the Elanco Directors' Deferral Plan, non-employee directors' equity compensation (but no more than the lesser of 30,000 shares or the

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number of shares equal in value to $800,000 (as of the applicable valuation date) less the directors' cash compensation for the applicable plan year) are credited annually in a deferred stock account (as described below). The Elanco Directors' Deferral Plan also allows non-employee directors to defer receipt of all or part of their cash compensation until after their service on our board of directors has ended. Each director can choose to invest their deferred cash compensation in one or both of the following two accounts:

Deferred Stock Account. This account allows the director, in effect, to invest his or her deferred cash compensation in company stock. Funds in this account are credited as hypothetical shares of company stock based on the closing stock price on pre-set dates. The number of shares credited in respect of deferred cash compensation is calculated by the amount deferred divided by the closing stock price on pre-set dates. In addition, the annual stock compensation awards described above is also credited to this account. Deferred stock accounts are also credited for dividends as if the credited shares were actual shares, with such credited dividends credited in additional shares.

Deferred Compensation Account. Funds in this account earn interest each year at a rate of 120 percent of the applicable federal long-term rate, compounded monthly, as established the preceding December by the U.S. Treasury Department under Section 1274(d) of the Internal Revenue Code of 1986 (the Internal Revenue Code).

Both accounts may generally only be paid in a lump sum in January of the second plan year following the plan year in which the director separates from service or in annual installments over between two and 10 years, beginning at the same time the lump sum payment would be made. Amounts credited to the director's deferred stock account would generally be paid in shares of company stock and amounts credited to the director's deferred compensation account would be paid in cash.

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PRINCIPAL SHAREHOLDER

The following table shows information regarding the beneficial ownership of our common stock (i) immediately prior to the completion of this offering and (ii) as adjusted to give effect to this offering by:

•: each person or group known by us to own beneficially more than 5% of our common stock;
•: each member of our board of directors following the completion of this offering and each of our named executive officers; and
•: all members of our board of directors and our executive officers as a group.

Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Percentage of beneficial ownership is based on 293,290,000 shares of common stock outstanding immediately prior to the completion of this offering and 356,190,000 shares of common stock outstanding after giving effect to this offering, assuming no exercise of the underwriters' option to purchase additional shares, or 365,625,000 shares of common stock, assuming the underwriters exercise their option to purchase additional shares in full. Shares of common stock subject to options currently exercisable or exercisable within 60 days of the date of this prospectus are deemed to be outstanding and beneficially owned by the person holding the options for the purposes of computing the percentage of beneficial ownership of that person and any group of which that person is a member, but are not deemed outstanding for the purpose of computing the percentage of beneficial ownership for any other person. The table does not give effect to any shares that may be acquired by our directors or executive officers pursuant to the

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directed share program. Unless otherwise indicated, the address for each holder listed below is 2500 Innovation Way, Greenfield, Indiana 46140.


	Shares of common stock beneficially owned before this offering			Shares of common stock beneficially owned after this offering (assuming no exercise of the option to purchase additional shares)			Shares of common stock beneficially owned after this offering (assuming full exercise of the option to purchase additional shares)

Name and address of beneficial owner	Number of shares	Percentage of shares		Number of shares	Percentage of shares		Number of shares	Percentage of shares

5% shareholder:
Lilly ⁽¹⁾	293,290,000	100	%	293,290,000	82.3	%	293,290,000	80.2	%
Named executive officers and directors:
Jeffrey N. Simmons	—	—		—	—		—	—
David S. Kinard	—	—		—	—		—	—
Lucas E. Montarce	—	—		—	—		—	—
Aaron L. Schacht	—	—		—	—		—	—
David A. Urbanek	—	—		—	—		—	—
R. David Hoover	—	—		—	—		—	—
Kapila K. Anand	—	—		—	—		—	—
Michael J. Harrington	—	—		—	—		—	—
Lawrence E. Kurzius	—	—		—	—		—	—
Carl L. McMillian	—	—		—	—		—	—
David A. Ricks	—	—		—	—		—	—
Aarti S. Shah	—	—		—	—		—	—
Joshua L. Smiley	—	—		—	—		—	—
All board members and executive officers as a group (16 persons)	—	—		—	—		—	—

(1): Lilly's address is Lilly Corporate Center, Indianapolis, IN 46285.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Relationship with Lilly

Prior to the completion of this offering, all of our outstanding shares of common stock are owned by Lilly. Immediately following the completion of this offering, Lilly will own 82.3% of our common stock. See "Risk factors — Risks Related to Our Relationship with Lilly" and "The Separation and Distribution Transactions — The Separation."

In connection with this offering and the Separation, we and Lilly will enter into certain agreements that will effect the Separation of our business from Lilly and provide a framework for our relationship with Lilly after this offering and the Separation. The following is a summary of the terms of the material agreements that we intend to enter into with Lilly prior to the completion of this offering, which will be filed as exhibits to the registration statement of which this prospectus is a part. These summaries set forth the terms of the agreements that we believe are material and are qualified in their entirety by reference to the full text of such agreements.

For further information regarding historical related party transactions, see Note 10: Related Party Transactions to our unaudited interim combined financial statements and Note 16: Related Party Transactions to our audited combined financial statements.

Master Separation Agreement

We intend to enter into a separation agreement with Lilly prior to or concurrently with the completion of this offering. The master separation agreement will govern certain pre-offering transactions, as well as the relationship between Lilly and us following this offering and the Separation.

The separation of our business; contribution of entities. The master separation agreement generally allocates certain assets and liabilities between us and Lilly according to the business to which such assets or liabilities relate. Prior to the closing of the sale of shares pursuant to this offering, Lilly or its affiliates, as applicable, will have conveyed, contributed, assigned, distributed, delivered or otherwise transferred ownership of substantially all of the assets that are used exclusively in, relate exclusively to, or arise exclusively out of, the operation or conduct of Lilly's animal health businesses, to certain direct and indirect subsidiaries of Lilly.

Effective as of the closing of the sale of shares pursuant to this offering, Lilly will contribute to us, pursuant to the master separation agreement, the equity interests of certain entities that will, as of the time of such contribution, hold, either directly or indirectly through the equity ownership of additional entities, substantially all of the assets of Lilly's animal health businesses, which will form our business going forward. The master separation agreement also generally provides for the assumption by us or the entities that will become our subsidiaries pursuant to the master separation agreement, as applicable, of all historical and future liabilities to the extent relating to, arising out of or resulting from the ownership or operation of such animal health businesses. In exchange for the transfer to us of the entities holding substantially all of the assets and liabilities of its animal health businesses, Lilly will receive (i) all of the net proceeds we will receive from the sale of our common stock in this offering, including any net proceeds we receive as a result of any exercise of the underwriters' option to purchase additional shares, (ii) all of the net proceeds (approximately $2.0 billion) we received in the Senior Notes Offering and (iii) all of the net proceeds ($498.6 million) we received from the entry into the Term Facility; provided, to the extent the unrestricted cash held by us following the completion of this offering is less than (or more than) $300 million, we will retain a portion of the net proceeds (or pay additional amounts to Lilly) so that the unrestricted cash held by us for working capital and other general corporate purposes following the completion of this offering is $300 million. The determination date that will be used to measure

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the unrestricted cash held by us following this offering will be the day that is the last day of the month immediately prior to the completion of this offering, if the closing date of this offering is prior to the fifteenth day of the month, or the day that is the last day of the month in which this offering is completed, if the closing date of this offering is on or after the fifteenth day of the month. In addition, a portion of the consideration to be paid to Lilly will be temporarily retained by us as restricted cash in connection with the anticipated transfer to us from Lilly of certain animal health assets in certain jurisdictions that are anticipated to occur following the completion of the offering (which consideration shall be paid to Lilly if, despite our and Lilly's cooperation and commercially reasonable efforts, such transfers have not occurred prior to a date mutually agreed by us and Lilly).

Except as expressly set forth in any of the transaction documents, or as required by law, the assets that have been or will be conveyed, contributed or assigned, transferred, distributed or delivered to us or our subsidiaries (including entities the equity interests of which are being transferred to us by Lilly) are being so transferred on an "as is," "where is" basis, without any representations or warranties, and we have agreed to bear the economic and legal risks that any conveyance was insufficient to vest in us good title, free and clear of any security interest, that any necessary consents or approvals were not obtained or that any conveyance was not done in compliance with any requirements of law or judgments.

Delayed transfers and further assurances. To the extent that the transfers of the assets and the assumptions of the liabilities allocated to us under the master separation agreement have not been completed on or prior to the completion of the offering, we and Lilly will cooperate with each other and use commercially reasonable efforts to effect such transfers and assumptions as promptly as practicable thereafter or at such other time as we and Lilly have agreed. Under the master separation agreement, until the transfer of such assets and the assumption of such liabilities have occurred, the benefits and burdens relating to any such assets and liabilities generally will inure, after the offering, to the entity who would have received such asset or liability, had it been transferred prior to completion of the offering, including, in the case of the jurisdictions in which Lilly and we have agreed to defer the applicable transfers and assumptions, by calculating the net economic benefit and detriment attributable to such assets and liabilities and making payments in connection therewith in the manner agreed upon by us and Lilly. If, despite Lilly and our cooperating with one another and using our respective commercially reasonable efforts, the transfers and assumptions of the applicable assets and liabilities in one or more of such jurisdictions has not occurred on or prior to the date previously agreed upon in writing by us and Lilly, then Lilly shall be paid any remaining consideration retained by us as restricted cash, and shall be entitled to retain, sell, transfer or otherwise dispose of any such remaining asset or liability, in its sole discretion.

We and Lilly have agreed to cooperate with each other and use our respective commercially reasonable efforts to take or cause to be taken all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable law, regulations and agreements to consummate and make effective the transactions contemplated by the master separation agreement and the other transaction documents.

Distribution. Lilly has indicated that after this offering it currently intends to effect the Distribution. The master separation agreement provides that we will cooperate with Lilly in all respects to accomplish the Distribution.

Insurance. We will continue to enjoy coverage under Lilly's existing insurance policies until such time as Lilly holds 50% or less of our then outstanding common stock, subject to certain exceptions. After that time, we will arrange for our own insurance policies and will no longer seek benefit from any of Lilly's or its affiliates' insurance policies that may provide coverage for claims

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relating to the animal health businesses prior to the date on which we obtain our own insurance coverage. The master separation agreement contains procedures for the administration of insured claims and allocates the right to claim coverage and control over the prosecution and defense of claims between us and Lilly.

Mutual releases and Indemnification. Except for each party's obligations under the master separation agreement, the other transaction documents and certain other specified liabilities, under the master separation agreement, we and Lilly will release and discharge the other from any and all liabilities existing or arising from acts or events that occur (or fail to occur) prior to the completion of this offering.

We will indemnify, defend and hold harmless Lilly, each of its affiliates and each of its and their respective directors, officers, managers, members, employees and agents from and against any and all losses relating to, arising out of or resulting from, among others:

•: the liabilities of the animal health businesses that are allocated to us;
•: any breach by us or our subsidiaries of the master separation agreement or any other transaction document;
•: any untrue statement or omission of a material fact in Lilly's governmental or public filings, to the extent caused by information furnished by us or incorporated by reference from our public filings; or
•: any untrue statement or omission of a material fact in our governmental or public filings, to the extent not caused by information furnished by Lilly.

Lilly will indemnify, defend and hold harmless the Company, each of our affiliates and each of our and their respective directors, officers, managers, members, employees and agents from and against any and all losses relating to, arising out of or resulting from, among others:

•: the liabilities allocated to Lilly under the master separation agreement;
•: any breach by Lilly or its subsidiaries of the master separation agreement or any other transaction document;
•: any untrue statement or omission of a material fact in our governmental or public filings, to the extent caused by information furnished by Lilly or incorporated by reference from Lilly's public filings; or
•: any untrue statement or omission of a material fact in Lilly's governmental or public filings, to the extent not caused by information furnished by us.

Exchange of Information. The master separation agreement provides for the mutual sharing of information between Lilly and us in order to comply with applicable law, reporting, filing, audit or tax requirements or other applicable obligations, or for use in judicial or other proceedings after the completion of this offering.

Financial Reporting Covenants. Under the master separation agreement, we have agreed to comply with certain covenants relating to our financial reporting for so long as Lilly is required to consolidate our results of operations and financial position or to account for its investment in us under the equity method of accounting. These include covenants regarding:

•: delivery or supply of monthly, quarterly and annual financial information and annual budgets and financial projections to Lilly;

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•: disclosure of information about our financial controls to Lilly; and
•: restrictions on modifications to our existing accounting policies and procedures.

We have also agreed that, for so long as Lilly provides us services under the transitional services agreement, we will not change our auditor, nor will we engage our auditor for any non-audit services, in each case, without Lilly's prior consent, and we will generally implement and maintain Lilly's business practices and standards in accordance with certain policies and procedures specified by Lilly, subject to appropriate adjustments to materiality thresholds.

Other covenants. The master separation agreement also contains certain other covenants that place restrictions on our actions, including:

•: if Lilly effects a Distribution, then until Lilly and its affiliates beneficially own none of our voting shares, and if Lilly does not effect a Distribution, then for as long as Lilly and its affiliates beneficially own at least 30% of our voting shares, we will be precluded from taking any action that has the effect, directly or indirectly, of restricting or limiting Lilly or its affiliates from freely selling, transferring, assigning, pledging or disposing of our common stock;
•: for so long as we and Lilly are affiliates of each other, we and Lilly also agree not to, and will cause our respective affiliates not to, take or fail to take any action that would cause the other to be in breach of or in default under certain material contracts; and
•: if Lilly effects a Distribution, then until Lilly and its affiliates beneficially own none of our voting shares, and if Lilly does not effect a Distribution, then for as long as Lilly and its affiliates beneficially own a majority of our then outstanding common stock, and except with respect to certain specified exceptions or to the extent that a designated policy or procedure conflicts with our amended and restated articles of incorporation or bylaws or any transaction document, we and Lilly otherwise agree or as set forth in any other transaction document, we will consistently implement and maintain Lilly's business practices and standards in accordance with certain policies and procedures specified by Lilly, subject to appropriate adjustments to materiality thresholds.

Board representation. The master separation agreement will provide that, for so long as Lilly and its affiliates beneficially own at least 10% of our voting shares, Lilly will be entitled to designate for nomination the number of representatives on the board of directors that is proportionate to its ownership of our voting shares (rounding up to the nearest whole number of directors) and to designate at least one director to each committee of the board of directors other than the Audit Committee. For the avoidance of doubt, so long as Lilly and its affiliates beneficially own at least 80% of our voting shares, Lilly will designate for nomination at least 80% of the members of the board of directors (rounding up to the nearest whole number of directors). In addition, so long as Lilly and its affiliates beneficially own a majority of our voting shares, Lilly will be entitled to designate the chairman of the board of directors and to designate a majority of the members on each committee of the board of directors.

Approval rights. If Lilly effects a Distribution, then until Lilly and its affiliates beneficially own none of our voting shares, and if Lilly does not effect a Distribution, then for so long as Lilly and its affiliates beneficially own a majority of our then outstanding common stock, in each case subject to certain exceptions, we will be required to obtain Lilly's prior written approval before undertaking (or permitting or authorizing any of our subsidiaries to undertake) various significant corporate actions, including:

•: consolidation or merger transactions;

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•: dissolution, liquidation or winding up;
•: incurrence of any indebtedness (as defined in the master separation agreement), other than pursuant to existing debt obligations or unsecured lines of credit as of the date of completion of the offering;
•: altering, amending, terminating, repealing or adopting any provisions inconsistent with our amended and restated articles of incorporation or our amended and restated bylaws (unless required to comply with applicable law); or
•: the issuance, purchase, redemption or other acquisition or retirement for value of any of our equity securities (other than deemed repurchases resulting from the exercise of stock options or tax withholdings).

No solicitation of employees. Subject to certain customary exceptions, for a period of 12 months following the date on which Lilly and its affiliates no longer own a majority of our outstanding shares of common stock, neither we or our affiliates, nor Lilly or its affiliates, will directly or indirectly solicit or encourage any employee of the other party at the level of senior director and above to leave his or her employment without the prior written consent of the other party.

Dispute resolution. The master separation agreement provides that we and Lilly will use our respective commercially reasonable efforts to resolve disputes expeditiously and on a mutually acceptable negotiated basis by our senior level representatives. Any disputes unable to be resolved through such process will be referred to mediation, for non-binding resolution. Subject to compliance with the terms of the master separation agreement, either we or Lilly, following the escalation and mediation procedures in the master separation agreement, may submit a dispute to a court of competent jurisdiction in Indiana.

Term. Following completion of the offering, the master separation agreement will continue unless terminated by the mutual consent of us and Lilly, although certain rights and obligations may terminate upon a reduction in Lilly's ownership of our outstanding common stock.

Transitional Services Agreement

Historically, Lilly has provided us significant shared services and resources related to corporate functions such as executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations, which we refer to collectively as the "Lilly Services." The transitional services agreement will become operative as of the completion of this offering and the agreement will continue until the expiration or termination of the last Lilly Service to expire or be terminated, unless the agreement is earlier terminated according to the terms of the transitional services agreement.

Under the transitional services agreement, we will be able to use Lilly Services for a fixed term established on a service-by-service basis. Partial reduction in the provision of any Lilly Service or termination of a Lilly Service prior to the expiration of the applicable fixed term requires Lilly's consent. In addition, either party will be able to terminate the agreement due to a material breach of the other party, upon prior written notice, subject to limited cure periods or if the other party undergoes a change of control.

We will pay Lilly mutually agreed-upon fees for the Lilly Services provided under the transitional services agreement, which will be based on Lilly's cost (including third-party costs) of providing the Lilly Services through March 31, 2021 and subject to a mark-up of 7% thereafter, with additional inflation-based escalation beginning January 1, 2020.

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Tax Matters Agreement

Allocation of taxes. We intend to enter into a tax matters agreement with Lilly immediately prior to the completion of this offering that will govern the parties' respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. In general, under the agreement:

•: Lilly will be responsible for any U.S. federal, state, local or foreign taxes (and any related interest, penalties or audit adjustments and including those taxes attributable to our business) reportable on a consolidated, combined or unitary return that includes Lilly or any of its subsidiaries (and us and/or any of our subsidiaries) for any periods or portions thereof ending on or prior to the date of the closing of this offering. We will be responsible for the portion of any such taxes for periods or portions thereof beginning after such date, as would be applicable to us if we filed the relevant tax returns on a standalone basis.
•: We will be responsible for any U.S. federal, state, local or foreign taxes (and any related interest, penalties or audit adjustments) that are reportable on returns that include only us and/or any of our subsidiaries, for all tax periods whether before or after the completion of this offering.
•: Lilly will be responsible for certain taxes imposed on Lilly and/or any of its subsidiaries and us and/or any of our subsidiaries arising from, or attributable to, certain transfers of assets or liabilities in the Separation.

We will not generally be entitled to receive payment from Lilly in respect of any of our tax attributes or tax benefits or any reduction of taxes of Lilly. Neither party's obligations under the agreement will be limited in amount or subject to any cap. The agreement will also assign responsibilities for administrative matters, such as the filing of returns, payment of taxes due, retention of records and conduct of audits, examinations or similar proceedings. In addition, the agreement provides for cooperation and information sharing with respect to tax matters.

Lilly will be primarily responsible for preparing and filing any tax return with respect to the Lilly affiliated group for U.S. federal income tax purposes and with respect to any consolidated, combined, unitary or similar group for U.S. state or local or foreign tax purposes that includes Lilly or any of its subsidiaries (including those that also include us and/or any of our subsidiaries), as well as any tax return that includes only Lilly and/or any of its subsidiaries (including such tax returns that reflect taxes attributable to our business). We will generally be responsible for preparing and filing any tax returns that include only us and/or any of our subsidiaries.

The party responsible for preparing and filing a given tax return will generally have exclusive authority to control tax contests related to any such tax return. We will generally have exclusive authority to control tax contests with respect to tax returns that include only us and/or any of our subsidiaries.

Preservation of the tax-free status of certain aspects of the Separation. We and Lilly intend the Separation, the transfer of net cash proceeds from this offering and the Debt Transactions to Lilly and the potential Distribution to qualify as a reorganization pursuant to which no gain or loss is recognized by Lilly or its shareholders for federal income tax purposes under Sections 355, 368(a)(1)(D) and related provisions of the Code. In addition, we and Lilly intend for the Separation, the potential Distribution and certain related transactions to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law.

Lilly expects to receive opinions from its outside tax advisors to the effect that, among other things, the Separation, the transfer of net cash proceeds from this offering and the Debt

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Transactions to Lilly and the potential Distribution will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. In addition, Lilly expects to receive opinions from its outside tax advisors regarding the tax-free status of certain related transactions. In connection with the opinions, we and Lilly will make certain representations regarding the past and future conduct of our respective businesses and certain other matters.

We will also agree to certain covenants that contain restrictions intended to preserve the tax-free status of the Separation, the transfer of net cash proceeds from this offering and the Debt Transactions to Lilly, the potential Distribution and certain related transactions. We may take certain actions prohibited by these covenants only if Lilly receives a private letter ruling from the IRS or we obtain and provide to Lilly an opinion from a U.S. tax counsel or accountant of recognized national standing, in either case acceptable to Lilly in its sole and absolute discretion, to the effect that such action would not jeopardize the tax-free status of these transactions. We will be barred from taking any action, or failing to take any action, where such action or failure to act adversely affects or could reasonably be expected to adversely affect the tax-free status of these transactions, for all time periods. In addition, during the time period ending two years after the date of the potential Distribution these covenants will include specific restrictions on our:

•: issuance or sale of stock or other securities (including securities convertible into our stock but excluding certain compensatory arrangements);
•: sales of assets outside the ordinary course of business; and
•: entering into any other corporate transaction which would cause us to undergo a 40% or greater change in our stock ownership.

We will generally agree to indemnify Lilly and its affiliates against any and all tax-related liabilities incurred by them relating to the Separation, the transfer of net cash proceeds from this offering and the Debt Transactions to Lilly, the potential Distribution and/or certain related transactions to the extent caused by an acquisition of our stock or assets or by any other action undertaken by us. This indemnification provision will apply even if Lilly has permitted us to take an action that would otherwise have been prohibited under the tax-related covenants described above.

Employee Matters Agreement

We intend to enter into an employee matters agreement with Lilly immediately prior to the completion of this offering. The employee matters agreement will govern Lilly's, our and the parties' respective subsidiaries' and affiliates' rights, responsibilities and obligations after this offering with respect to employees, compensation, employment, employee benefit plans and related matters. Below is a summary or what we anticipate to be the terms of the employee matters agreement.

Benefit plans generally. Prior to the completion of this offering, except with respect to any cash bonus or equity compensation plans, we will be a participating employer in the Lilly benefit plans in which our employees currently participate to the extent permitted under the plans. We will cease to be a participating employer in the Lilly plans and will adopt our own benefit plans on a date following the completion of this offering, which we refer to as the "Plan Transition Date." Except as otherwise agreed to by the parties, the Plan Transition Date will be the earlier of January 1, 2019 or, with respect to Lilly plans sponsored or maintained primarily for our employees in the United States, the date we are no longer a member of a controlled group with Lilly. An appropriate allocation of our costs incurred under the Lilly benefit plans prior to the Plan Transition Date shall be charged back to us. Lilly will retain the right to amend or terminate its plans. As of the completion of this offering, we intend to adopt or retain, as applicable, cash bonus and equity compensation plans for our employees. Under the cash bonus plans, we will pay our employees on generally the same basis as in effect prior to the offering for the performance period which includes

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the offering and will assume any liability for the payment of bonuses under Lilly's bonus plans, to the extent applicable. As of the Plan Transition Date, we will establish benefit plans that are comparable to the Lilly plans in which our employees participated prior to the Plan Transition Date. The employee matters agreement does not obligate us to establish any defined benefit pension plan, retiree medical plan or nonqualified plan for our U.S. employees, unless required by law or an applicable collective bargaining agreement, and all liabilities relating to any such plan maintained by Lilly shall remain with Lilly (other than as provided for under "Non-U.S. retirement benefit arrangements").

Employment. We generally intend to offer employment, prior to the completion of this offering, to certain employees who are providing services to our business and who are not otherwise transferring to our entities by operation of law. We refer to the date on which any such transferring employee will be considered to be employed by us (either by operation of law or acceptance of an offer) for purposes of the employee matters agreement as the "Employee Transfer Date." To the extent that severance or termination obligations are triggered by or result from such transfers, or our failure to make offers or continue employment as required by the employee matters agreement, or are required to be paid under applicable law or a Lilly plan Lilly will administer the severance pay or termination pay obligations in accordance with the terms and conditions of the applicable Lilly severance pay or termination pay plan or policy, or as otherwise required by applicable law, and we will indemnify Lilly for such liability. If any of our U.S. employees begins long-term disability leave before the applicable Plan Transition Date, his or her employment will be transferred to Lilly immediately prior the Plan Transition Date. For the period starting as of the completion of this offering and ending on December 31, 2019, our employees will be entitled to receive: (A) (i) at least the same salary or wages, and cash bonus opportunities at target, (ii) equity incentive commitments equal to the equity budget value and (iii) other material terms and conditions of employment as such employees were provided immediately before January 1, 2019; and (B) employee benefits and perquisites (other than cash bonus opportunities, equity incentive commitments, defined benefit pension, retiree medical and nonqualified benefits) that are substantially comparable in the aggregate to the employee benefits and perquisites that such employees were provided under applicable plans of Lilly before January 1, 2019. We will use reasonable efforts to assume, as of the Employee Transfer Date, any applicable employment agreements or other individual benefit or compensation agreement entered into between Lilly and a transferring employee and will indemnify Lilly for all liabilities under such agreements. In addition, we expect to provide to any of our employees whose employment is terminated during the period ending on December 31, 2019, a level of severance benefits that is equal to the greater of (i) the severance benefits the employee would have received under the applicable Lilly plans in effect immediately before January 1, 2019, or (ii) the severance benefits provided under our severance arrangements applicable to similarly-situated employees, in each case, calculated based on the employee's compensation and service.

Unions and collective bargaining agreements. The parties will cooperate to inform and consult with any applicable representative of a labor union, or similar organization, covering any transferring employee, to the extent required by law or the applicable collective bargaining agreement or similar arrangement. As of the Employee Transfer Date, we will assume any collective bargaining, or similar, agreements or arrangements covering any such employees and indemnify Lilly for all related liabilities.

Credited service. We will cause our employee benefit plans to credit our employees, without duplication of benefits, for service with Lilly on or prior to the Employee Transfer Date, and for service with us on or following the Employee Transfer Date, for purposes of eligibility and vesting under all of our employee benefit plans and arrangements and computation of vacation, sick days or severance benefits, or as may otherwise be required by applicable law.

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U.S. defined benefit and retiree medical plans. Following the Plan Transition Date, U.S. employees will generally be eligible to receive credit for service with us for vesting and eligibility service (but not benefit service) under the Eli Lilly Retirement Plan and the Eli Lilly and Company Retiree Health Plan through a date not later than December 31, 2023, to the extent permitted by and subject to the terms of such plans.

U.S. defined contribution plans. We will establish a 401(k) plan for our U.S. employees effective as of the Plan Transition Date with terms that are substantially similar to Lilly's 401(k) plan, except that it will provide for a 6% Company match and 3% non-elective contribution. Any transferring employee whose Employee Transfer Date is on or before January 1, 2019 will be 100% vested in our 401(k) plan. We will accept the transfer from the U.S. Lilly qualified defined contribution plan to our qualified defined contribution plan of any assets and liabilities allocable to the participants transferring to us. Our employees will be 100% vested in their account balances under the Lilly qualified defined contribution benefit plan as of the Plan Transition Date, and will cease being eligible to receive any employer contributions from Lilly effective December 31, 2018.

U.S. Lilly nonqualified plans. As of the Plan Transition Date, the Eli Lilly Excess Savings Plan and Deferred Compensation Plan will be amended so that any transferring employee will cease being eligible for contributions from Lilly for services rendered after December 31, 2018. Following the Plan Transition Date, U.S. employees will generally be eligible to receive credit for service with us for vesting and eligibility service (but not benefit service) under the Eli Lilly Excess Benefit Retirement Plan through a date not later than December 31, 2023, to the extent permitted by and subject to the terms of the plan.

Non-U.S. retirement benefit arrangements. The employee matters agreement provides for the transfer from Lilly to us of any retirement benefit arrangement covering our employees located outside of the U.S. and of any related obligations or liabilities, unless otherwise agreed by the parties.

Lilly equity compensation. Prior to the completion of the offering, the board of directors of Lilly will determine how any Lilly equity, equity-related and long-term performance awards granted to our transferring employees will be treated under the applicable Lilly plans.

Toll Manufacturing and Supply Agreement

We intend to enter into a toll manufacturing and supply agreement with Lilly immediately prior to the completion of this offering. Lilly has historically manufactured Humatrope drug substance for use in the human health field at its Speke manufacturing site, which site is being transferred to us in connection with this offering. Under the toll manufacturing and supply agreement, we will continue to exclusively manufacture Humatrope for Lilly at the Speke site until December 31, 2020; provided, however, that such obligation may continue through December 31, 2023 (through the exercise of three one-year extensions) if Lilly's replacement third party supplier of Humatrope has not received all necessary governmental approvals or cannot meet Lilly's volume requirements.

The tolling fee that we charge Lilly for the provision of such manufacturing and supply services is based on local value added plus a reasonable arm's length mark-up. By October 1 of each calendar year during the term of the toll manufacturing and supply agreement, we will mutually agree upon a new tolling fee to be effective for the following calendar year.

Under the toll manufacturing and supply agreement, we agree not to manufacture or sell any product that is competitive to Humatrope for a period of five years after the expiration or termination of the agreement. In addition, during the term of the agreement, we agree not to manufacture any product other than Humatrope at certain buildings of the Speke manufacturing site without Lilly's consent.

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Intellectual Property and Technology License Agreement

We intend to enter into an intellectual property and technology license agreement with Lilly immediately prior to the completion of this offering. Under the intellectual property and technology license agreement, Lilly will grant us an exclusive, perpetual license to exploit products in the animal health field that utilize or use certain of Lilly's intellectual property (excluding trademarks). In addition, Lilly will grant us a non-exclusive, non-sublicenseable license to screen certain compounds in Lilly's compound libraries to exploit products in the animal health field that utilize or use certain of Lilly's intellectual property. This screening license will have an initial term of two years, subject to three one-year extensions, each of which requires Lilly's consent.

If Elanco makes any improvements to the licensed intellectual property, Elanco shall retain ownership of such improvements and provide Lilly with a non-exclusive, perpetual license to use the intellectual property in fields outside animal health (including human health).

For a period of two years following the effective date of the intellectual property and technology license agreement, each party will have a right of first offer with respect to third-party offers that the other party receives to license such other party's intellectual property in the first party's field (animal health versus human health). In connection with such right, we will negotiate exclusively as to such offer for the use of the other party's intellectual property in the first party's field.

Under the intellectual property and technology license agreement, we will provide quarterly reports to Lilly describing any know-how generated under the agreement, including inventions, patentable subject matter, discoveries, and technical data. Elanco will retain ownership of such generated know-how and will provide Lilly with a non-exclusive, perpetual license to use the know-how in fields outside animal health (including human health).

Transitional Trademark License Agreement

We intend to enter into a transitional trademark license agreement with Lilly immediately prior to the completion of this offering. Under the transitional trademark license agreement, Lilly will grant us a transitional license to use certain of Lilly's trademarks for a period of time following the completion of this offering. Such license will be non-exclusive and royalty-free, and will allow us to use certain of Lilly's trademarks on our product packaging, any advertising materials used in connection with the sale and distribution of our products, and generally in connection with the sale and distribution of our products and in the day-to-day operation of our business (including in our books and records).

Such license will terminate on a product-by-product and country-by-country basis. The term of the license will not extend beyond four years; provided, however, that the license can extend for one additional year (beyond such four years) if the parties mutually agree upon such extension. Lilly can terminate the transitional trademark license agreement due to our breach of such agreement, upon prior written notice, subject to a limited cure period.

Registration Rights Agreement

We intend to enter into a registration rights agreement with Lilly immediately prior to the completion of this offering, pursuant to which we will agree that, upon the request of Lilly, we will use our reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of our common stock retained by Lilly following this offering.

Demand registration. Lilly will be able to request registration under the Securities Act of all or any portion of our shares covered by the agreement and we will be obligated, subject to limited exceptions, to register such shares as requested by Lilly. Lilly will be able to request that we

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complete two demand registrations, in the aggregate, and four underwritten offerings, in the aggregate, in a twelve-month period, in each case subject to limitations on minimum offering size. Lilly will be able to designate the terms of each offering effected pursuant to a demand registration.

Piggyback registration. If we at any time intend to file on our behalf or on behalf of any of our other security holders a registration statement in connection with a public offering of any of our securities on a form and in a manner that would permit the registration for offer and sale of our common stock held by Lilly, Lilly will have the right to include its shares of our common stock in that offering.

Registration expenses. We will be generally responsible for all registration expenses in connection with the performance of our obligations under the registration rights provisions in the registration rights agreement. Lilly is responsible for its own internal fees and expenses, any applicable underwriting discounts or commissions and any stock transfer taxes.

Indemnification. Generally, the agreement will contain indemnification and contribution provisions by us for the benefit of Lilly and, in limited situations, by Lilly for the benefit of us with respect to the information provided by or failed to be provided by Lilly included or omitted, as applicable, in any registration statement, prospectus or related document.

Transfer. If Lilly transfers shares covered by the agreement, it will be able to transfer the benefits of the registration rights agreement to transferees of at least 5% of the shares of our common stock outstanding immediately following the completion of this offering, provided that each transferee agrees to be bound by the terms of the registration rights agreement.

Term. The registration rights will remain in effect with respect to any shares covered by the agreement until:

•: such shares have been sold pursuant to an effective registration statement under the Securities Act;
•: such shares have been sold to the public pursuant to Rule 144 under the Securities Act;
•: such shares may be sold to the public pursuant to Rule 144 under the Securities Act without being subject to the volume restrictions in such rule; or
•: such shares have been sold in a transaction in which the transferee is not entitled to the benefits of the registration rights agreement.

Directed Share Program

Policy Concerning Related Person Transactions

Prior to the completion of this offering, our board of directors will adopt a written policy, which we refer to as the related person transaction approval policy, for the review of any transaction, arrangement or relationship in which we are a participant, if the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or beneficial holders of more than 5% of our total equity (or their immediate family members), each of whom we refer to as a related person, has a direct or indirect material interest. This policy was not in effect when we entered into the transactions described above.

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Each of the agreements between us and Lilly and its subsidiaries that have been entered into prior to the completion of this offering, and any transactions contemplated thereby, will be deemed to be approved and not subject to the terms of such policy. If a related person, other than Lilly and its affiliates, proposes to enter into such a transaction, arrangement or relationship, which we refer to as a related person transaction, the related person must report the proposed related person transaction to our Audit Committee. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Audit Committee. In approving or rejecting such proposed transactions, the Audit Committee will be required to consider relevant facts and circumstances. The Audit Committee will approve only those transactions that, in light of known circumstances, are deemed to be in our best interests. In the event that any member of the Audit Committee is not a disinterested person with respect to the related person transaction under review, that member will be excluded from the review and approval or rejection of such related person transaction; provided, however, that such Audit Committee member may be counted in determining the presence of a quorum at the meeting of the Audit Committee at which such transaction is considered. If we become aware of an existing related person transaction which has not been approved under the policy, the matter will be referred to the Audit Committee. The Audit Committee will evaluate all options available, including ratification, revision or termination of such transaction. In the event that management determines that it is impractical or undesirable to wait until a meeting of the Audit Committee to consummate a related person transaction, the chairman of the Audit Committee may approve such transaction in accordance with the related person transaction approval policy. Any such approval must be reported to the Audit Committee at its next regularly scheduled meeting.

A copy of our related person transaction approval policy will be available on our website upon completion of this offering.

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DESCRIPTION OF MATERIAL INDEBTEDNESS

Senior Notes Offering

On August 28, 2018, we issued $2,000,000,000 aggregate principal amount of our Senior Notes in a private placement, which we refer to as the "Senior Notes Offering." The Senior Notes are comprised of $500,000,000 aggregate principal amount of our 3.912% Senior Notes due 2021, $750,000,000 aggregate principal amount of our 4.272% Senior Notes due 2023 and $750,000,000 aggregate principal amount of our 4.900% Senior Notes due 2028. The interest rate payable on each series of Senior Notes is subject to adjustment if Moody's Investor Services, Inc. or Standard & Poor's Financial Services LLC downgrades, or subsequently upgrades, its ratings on the respective series of Senior Notes. We will pay the net proceeds that we received in the Senior Notes Offering to Lilly in connection with the Separation, subject to certain limitations. See "The Separation and Distribution Transactions—The Separation" and "Use of Proceeds."

The Senior Notes are governed by an indenture and supplemental indenture between us and Deutsche Bank Trust Company Americas, as trustee, which we refer to collectively as the "indenture." The indenture contains certain covenants, including limitations on our and certain of our subsidiaries' ability to incur liens or engage in sale leaseback transactions. The indenture also contains restrictions on our ability to consolidate, merge or sell substantially all of our assets. In addition, the indenture contains other customary terms, including certain events of default, upon the occurrence of which, the Senior Notes may be declared immediately due and payable.

Pursuant to the indenture, we are able to redeem the Senior Notes of any series, in whole or in part, at any time by paying a "make whole" premium, plus accrued and unpaid interest to, but excluding, the date of redemption. Upon the occurrence of a change of control of us and a downgrade of the Senior Notes below an investment grade rating by two or more ratings agencies (or one rating agency, if only one rating agency rates the Senior Notes), we are, in certain circumstances, required to make an offer to purchase each of the Senior Notes at a price equal to 101% of the aggregate principal amount of the Senior Notes together with accrued and unpaid interest to, but excluding, the date of repurchase.

Credit Facilities

On September 5, 2018, we entered into a revolving credit agreement with a syndicate of banks providing for a five-year $750 million senior unsecured revolving credit facility, with the ability (subject to certain conditions) to incur additional incremental commitments of up to $250 million (the "Revolving Facility"), and a term credit agreement with a syndicate of banks providing for a three-year senior unsecured term credit facility in an amount of $500 million (the "Term Facility" and, together with the Revolving Facility, the "Credit Facilities"). The Credit Facilities will not be available for borrowings until the date on which certain conditions, including the completion of this offering, are satisfied. The commitments with respect to the Credit Facilities will terminate if this offering is not completed by June 30, 2019. The Credit Facilities are not guaranteed by our subsidiaries.

Additionally, we will pay a ticking fee on the commitments of each lender with respect to the Term Facility during the period from and including the date of execution of the specific documentation relating to the Term Facility but excluding the date on which such commitments with respect to the Term Facility terminate. With respect to the Revolving Facility, we will pay a facility fee on the aggregate amount of the Revolving Facility (whether drawn or undrawn) during the period from and including the date of execution of the specific documentation relating to the Revolving Facility but excluding the date on which commitments under the Revolving Facility terminate. The applicable margins, the ticking fee and the facility fee are determined based on public ratings of our senior unsecured non-credit enhanced credit rating. Based on the public ratings as of the closing

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date of the Credit Facilities, (A) the interest rate for revolving loans (i) comprising each ABR Borrowing (as defined in the Revolving Facility) shall bear interest at the Alternate Base Rate (as defined in the Revolving Facility) plus 0.10% and (ii) comprising each Eurocurrency Borrowing (as defined in the Revolving Facility) shall bear interest at the Adjusted Eurocurrency Rate (as defined in the Revolving Facility) for the applicable interest period in effect for such borrowing plus 1.10% and (B) the interest rate for term loans (i) comprising each ABR Borrowing (as defined in the Term Facility) shall bear interest at the Alternate Base Rate (as defined in the Term Facility) plus 0.25% and (ii) comprising each Eurocurrency Borrowing (as defined in the Term Facility) shall bear interest at the Adjusted Eurocurrency Rate (as defined in the Term Facility) for the applicable interest period in effect for such borrowing plus 1.25%. Interest on base rate borrowings, the ticking fee and the facility fee are generally payable quarterly in arrears; however, for loans bearing interest based on a Eurocurrency rate, interest is payable on the last day of the applicable interest period and, in the case of any interest period of more than three months' duration, each day prior to the last day of such interest period that occurs at intervals of three months' duration after the first day of such interest period.

We may voluntarily prepay loans and/or reduce the commitment under the Credit Facilities, in whole or in part, without penalty or premium, subject to certain minimum amounts and increments and the payment of customary breakage costs. No mandatory prepayment is required under the Credit Facilities. The Term Facility is subject to amortization payments, payable on the last day of each quarter.

The Credit Facilities contain a financial covenant requiring us to not exceed a maximum consolidated leverage ratio and a financial covenant to maintain a minimum interest coverage ratio. In addition, the Credit Facilities contain customary affirmative and negative covenants that, among other things, limit or restrict our and/or our subsidiaries' ability, subject to certain exceptions, to incur liens, merge, consolidate or sell or otherwise transfer assets, to enter into transactions with our affiliates and incur subsidiary indebtedness. The Credit Facilities also contain customary events of default.

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DESCRIPTION OF CAPITAL STOCK

In connection with this offering, we will amend and restate our articles of incorporation and bylaws. Copies of the forms of our amended and restated articles of incorporation and bylaws are filed as exhibits to the registration statement of which this prospectus forms a part. The provisions of our articles of incorporation and bylaws and relevant sections of the Indiana Business Corporation Law (the "IBCL"), are summarized below. The following summary is qualified in its entirety by the provisions of our amended and restated articles of incorporation and bylaws and is subject to the applicable provisions of the IBCL.

Authorized Capitalization

Our authorized capital stock shall consist of 5,000,000,000 shares of common stock, no par value, and 1,000,000,000 shares of preferred stock, no par value. Following the completion of this offering, 356,190,000 shares of common stock and no shares of preferred stock shall be issued and outstanding.

Common Stock

Holders of our common stock are entitled to the rights set forth below.

Voting Rights

Each outstanding share of our common stock will be entitled to one vote on all matters submitted to a vote of our shareholders. Directors will be elected by a plurality of the votes entitled to be cast. Our shareholders will not have cumulative voting rights. Except as otherwise provided in our amended and restated articles of incorporation or as required by law, all matters to be voted on by our shareholders other than matters relating to the election and removal of directors shall be approved if votes cast in favor of the matter exceed the votes cast opposing the matter at a meeting at which a majority of the outstanding shares entitled to vote on such matter is represented in person or by proxy.

Dividend Rights

Holders of our common stock will share equally in any dividend declared by our board of directors, subject to the rights of the holders of any outstanding preferred stock.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock would be entitled to share ratably in our assets that are legally available for distribution to shareholders. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our common stock.

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Registration Rights

Lilly will be entitled to certain rights relating to the registration of our shares of common stock pursuant to a registration rights agreement. See "Certain Relationships and Related Party Transactions — Relationship with Lilly — Registration Rights Agreement."

Other Rights

Our shareholders have no preemptive or other rights to subscribe for additional shares. All outstanding shares are, and all shares offered by this prospectus will be, when sold, validly issued, fully paid and nonassessable.

Preferred Stock

Our board of directors is authorized to provide for one or more series of preferred stock and to fix the terms of such preferred stock, including the preferences, powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including the dividend rate, conversion rights, voting rights, redemption rights and liquidation preferences and to fix the number of shares to be included in any such series without any further vote or action by our shareholders. Any preferred stock so issued may rank senior to our common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up, or both. In addition, any such shares of preferred stock may have class or series voting rights. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the shareholders and may adversely affect the voting and other rights of the holders of our common stock. Our board of directors has not authorized the issuance of any shares of preferred stock, and we have no agreements or plans for the issuance of any shares of preferred stock.

Anti-Takeover Effects of Our Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws

Our amended and restated articles of incorporation and our amended and restated bylaws will contain certain provisions that may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a shareholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares held by shareholders.

Special Meetings

Our amended and restated bylaws will provide that special meetings of holders of common stock may be called only by our board of directors or the Chairman of the board of directors. Holders of our common stock will not be permitted to call a special meeting or to require that our board of directors call a special meeting of shareholders.

Advance Notice Procedures

Our amended and restated bylaws will establish an advance notice procedure for the nomination, other than by or at the direction of our board of directors, of candidates for election as directors as well as for other shareholder proposals to be considered at annual meetings of shareholders. In general, our amended and restated bylaws will provide that notice of intent to

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nominate a director or raise business at such meetings must be received by us not less than 120 days nor more than 150 days prior to the date on which our proxy statement is released to shareholders in connection with the previous year's annual meeting, or in the event that no annual meeting was held in the previous year, or the date of the annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year's proxy statement, notice by the proposing shareholder to be timely must be received not later than the close of business on the later of 120 days in advance of such meeting or 10 days following the date on which public disclosure of the date of the meeting is first made and, in each case, must contain certain specified information concerning the person to be nominated or the matters to be brought before the meeting and concerning the shareholder submitting the proposal.

Classified Board

Our amended and restated articles of incorporation and our amended and restated bylaws will provide for our board of directors to be divided into three classes of directors, as nearly equal in number as possible, serving staggered terms of office. Approximately one-third of our board of directors will be elected each year to three-year terms of office, and our directors (other than directors appointed by holders of preferred stock) may be removed only for cause and only upon the affirmative vote of holders of at least 66 ² / 3 % of our outstanding voting stock.

Under Section 23-1-39-1 of the IBCL, only our board of directors can amend, and shareholders do not have the right to amend, our amended and restated bylaws.

Conflicts of Interest; Corporate Opportunities

In order to address potential conflicts of interest between us and Lilly, our amended and restated articles of incorporation will contain certain provisions regulating and defining the conduct of our affairs to the extent that they may involve Lilly and its officers and directors and our rights, powers, duties and liabilities and those of our officers, directors and shareholders in connection with our relationship with Lilly. In general, these provisions recognize that we and Lilly may engage in the same or similar business activities and lines of business or have an interest in the same areas of corporate opportunities and that we and Lilly will continue to have contractual and business relations with each other, including officers of Lilly serving as our directors.

Our amended and restated articles of incorporation will provide that Lilly will have no duty to communicate information regarding a corporate opportunity to us or to refrain from engaging in the same or similar lines of business or doing business with any of our clients, customers or vendors. Moreover, our amended and restated articles of incorporation will provide that for so long as Lilly owns a majority of all our outstanding voting shares, in the event that any of our directors or officers who is also a director, officer and/or employee of Lilly acquires knowledge of a potential transaction or matter that may be a corporate opportunity for us and Lilly, such director and/or officer shall to the fullest extent permitted by law have fully satisfied and fulfilled his or her fiduciary duty, if any, with respect to such corporate opportunity, and we, to the fullest extent permitted by law, renounce any interest or expectancy in such business opportunity, and waive any claim that such business opportunity constituted a corporate opportunity that should have been presented to us or any of our affiliates, if he or she acts in a manner consistent with the following policy:

•: such corporate opportunity offered to any person who is on our board of directors (but is not an officer) and who is also a director, officer and/or employee of Lilly shall belong to us only if such opportunity is expressly offered to such person solely in his or her capacity as our director and otherwise shall belong to Lilly; and

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•: such corporate opportunity offered to any person who is our officer and also is a director, officer and/or employee of Lilly shall belong to us unless such opportunity is expressly offered to such person solely in his or her capacity as a director, officer and/or employee of Lilly, in which case such opportunity shall belong to Lilly.

Our amended and restated articles of incorporation also provide special approval procedures that may be utilized if it is deemed desirable by Lilly, us, our affiliates or any other party, that we take action with specific regard to transactions or opportunities presenting potential conflicts of interest, out of an abundance of caution, to ensure that such transactions are not voidable, or that such an opportunity or opportunities are effectively disclaimed. These special procedures include the following:

•: the material facts of the transaction and the director's or officer's interest are disclosed or known to the board of directors or duly appointed committee of the board of directors and the board of directors or such committee authorizes, approves or ratifies the transaction by the affirmative vote or consent of a majority of the directors (or committee members) who have no direct or indirect interest in the transaction and, in any event, of at least two directors (or committee members); and
•: the material facts of the transaction and the director's interest are disclosed or known to the shareholders entitled to vote and they authorize, approve or ratify such transaction by vote.

Any person purchasing or otherwise acquiring any interest in any shares of our common stock will be deemed to have consented to these provisions of the amended and restated articles of incorporation.

Certain Provisions of the Indiana Business Corporation Law

Shareholder Action by Unanimous Written Consent

Under Chapter 29 of the IBCL, any action required or permitted to be taken by the holders of common stock may be effected only at an annual meeting or special meeting of such holders, and shareholders may act in lieu of such meetings only by unanimous written consent.

Control Share Acquisitions

Our amended and restated articles of incorporation provide that Chapter 42 of the IBCL does not apply to us. However, we could elect to be subject to Chapter 42 in the IBCL in the future. Chapter 42 of the IBCL is designed to protect minority shareholders in the event that a shareholder acquires shares of a corporation's voting stock (referred to as control shares) within one of several specified ranges (one-fifth or more but less than one-third, one-third or more but less than a majority, or a majority or more). Upon the acquisition of control shares, the approval of the rights of the acquirer to vote the shares in excess of each level of ownership must be obtained from a majority of the disinterested shareholders before the acquiring shareholder may vote such shares. Under certain circumstances, including in the event that shareholder approval is not obtained, the shares held by the acquirer may be redeemed by the corporation at the fair value of the shares as determined by the control share acquisition provision.

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Certain Business Combinations

Under the business combinations provision of the IBCL, or Chapter 43, any shareholder who acquires a 10%-or-greater ownership position in an Indiana corporation with a class of voting shares registered under Section 12 of the Exchange Act (and that, like us, has not opted-out of this provision) is prohibited for a period of five years from completing a business combination (generally a merger, significant asset sale or disposition or significant issuance of additional shares) with the corporation unless, prior to the acquisition of such 10% interest, the board of directors of the corporation approved either the acquisition of such interest or the proposed business combination. If such board approval is not obtained, then five years after a 10% shareholder has become such, a business combination with the 10% shareholder is permitted if all provisions of the articles of the corporation are complied with and either a majority of disinterested shareholders approves the transaction or all shareholders receive a price per share determined in accordance with the fair price criteria of the business combinations provision of the IBCL. An Indiana corporation may elect to remove itself from the protection provided by the Indiana business combinations provision, but such an election remains ineffective for 18 months and does not apply to a combination with a shareholder who acquired a 10% ownership position prior to the election.

Limitations on Liability and Indemnification of Officers and Directors

Chapter 37 of the IBCL authorizes every Indiana corporation to indemnify its officers and directors under certain circumstances against liability incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, to which the officers or directors are made a party by reason of their relationship to the corporation. Officers and directors may be indemnified where they have acted in good faith; in the case of official action, the individual reasonably believed that the conduct was in the corporation's best interests and in all other cases, the individual reasonably believed that the conduct was not against the best interests of the corporation; and in the case of criminal proceedings, the individual either had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful. Chapter 37 also requires every Indiana corporation to indemnify any of its officers or directors (unless limited by the articles of incorporation of the corporation) who were wholly successful, on the merits or otherwise, in the defense of any such proceeding against reasonable expenses incurred in connection with the proceeding. A corporation may also, under certain circumstances, pay for or reimburse the reasonable expenses incurred by an officer or director who is a party to a proceeding in advance of final disposition of the proceeding. Chapter 37 states that the indemnification provided for therein is not exclusive of any other rights to which a person may be entitled under the articles of incorporation, bylaws or resolutions of the board of directors or shareholders.

Our amended and restated articles of incorporation and amended and restated bylaws provide for indemnification, to the fullest extent permitted by the IBCL, of our directors, officers and employees against liability and reasonable expenses that may be incurred by them, arising out of any threatened, pending or completed investigation, claim, suit or proceeding, whether civil, administrative, investigative or criminal, in which they may become involved by reason of being or having been a director, officer or employee. To be entitled to indemnification, (a) those persons must have been wholly successful in the claim or action, or (b) the board of directors, independent legal counsel or the shareholders must have determined that such persons acted in good faith in what they reasonably believed to be in our best interest, or in the case of conduct not in the individual's official capacity with us, did not act in opposition to our best interest. In addition, in any criminal action, such persons must have had no reasonable cause to believe that their conduct was unlawful. Our amended and restated bylaws provide for mandatory advancement of expenses to

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such persons provided certain conditions are met, including provision of a written undertaking to repay such advancements, should it be determined that the person is not entitled to indemnification.

The IBCL permits us to purchase insurance on behalf of our directors, officers, employees and agents against liabilities arising out of their positions with us, whether or not such liabilities would be within the above indemnification provisions. Pursuant to this authority, we will maintain such insurance for our directors, officers and employees and those of our subsidiaries, subject to certain exclusions and deductible and maximum amounts, against loss from claims arising in connection with their acting in their respective capacities, including claims under the Securities Act.

Listing

We have been authorized to list our common stock on the NYSE under the symbol "ELAN."

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company, N.A.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common stock. Future sales of our common stock in the public market, or the perception that sales may occur, could materially adversely affect the prevailing market price of our common stock at such time and our ability to raise equity capital in the future.

Sale of Restricted Securities

Upon completion of this offering, we will have 356,190,000 shares of our common stock outstanding (or 365,625,000 shares, if the underwriters exercise their option to purchase additional shares in full). Of these shares, all shares sold in this offering will be freely tradable without further restriction or registration under the Securities Act, except that any shares purchased by our affiliates, as that term is defined in Rule 144 under the Securities Act, and shares purchased in this offering by participants in our directed share program who are subject to lock-up restrictions or are otherwise restricted from reselling such shares by Rule 144 of the Securities Act. Shares purchased by our affiliates would be subject to the Rule 144 resale restrictions described below. Of the remaining outstanding shares, 293,290,000 shares will be deemed "restricted securities" under the Securities Act. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are described below.

Lock-Up Arrangements and Registration Rights

In connection with this offering, we, each of our directors and executive officers and Lilly have entered into lock-up agreements that restrict the sale of our securities for up to 180 days after the date of this prospectus, subject to certain exceptions or an extension in certain circumstances.

In addition, following the expiration of the lock-up period, Lilly will have the right, subject to certain conditions, to require us to register the sale of its shares of our common stock under federal securities laws. See "Certain Relationships and Related Party Transactions — Registration Rights Agreement."

Following the lock-up period described above, all of the shares of our common stock that are restricted securities or are held by Lilly as of the date of this prospectus will be eligible for sale in the public market in compliance with Rules 144 or 701 under the Securities Act.

Rule 144

The shares of our common stock sold in this offering will generally be freely transferable without restriction or further registration under the Securities Act, except that any shares of our common stock held by an "affiliate" of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption under Rule 144 or otherwise. Rule 144 permits our common stock that has been acquired by a person who is an affiliate of ours, or has been an affiliate of ours within the past three months, to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:

•: one percent of the total number of shares of our common stock outstanding; or
•: the average weekly reported trading volume of our common stock for the four calendar weeks prior to the sale.

Such sales are also subject to specific manner of sale provisions, a six-month holding period requirement (or a one-year holding period if the sale occurs within 90 days of the date of this prospectus), notice requirements and the availability of current public information about us.

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All of our common stock eligible for sale under Rule 144 immediately upon the closing of this offering will be subject to the lock-up arrangements described above.

Rule 144 also provides that a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has for at least six months (or one year if the sale occurs within 90 days of the date of this prospectus) beneficially owned shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock subject only to the availability of current public information regarding us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned for at least one year shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock under Rule 144 without regard to the current public information requirements of Rule 144.

Rule 701

Rule 701 generally allows a shareholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.

Additional Registration Statements

We intend to file a registration statement on Form S-8 under the Securities Act to register 11,000,000 shares of our common stock to be issued or reserved for issuance under our equity incentive plans. Such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.

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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS

The following is a general discussion of the material U.S. federal income and estate tax consequences to non-U.S. holders (as defined below) of the purchase, ownership and disposition of our common stock. This discussion does not provide a complete analysis of all potential U.S. federal income and estate tax considerations relating thereto, and does not address any tax considerations related to the Distribution. This description is based on the Code and existing and proposed U.S. Treasury regulations promulgated thereunder, administrative pronouncements, judicial decisions, and interpretations of the foregoing, all as of the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion is limited to non-U.S. holders who hold shares of our common stock as capital assets within the meaning of Section 1221 of the Code (generally for investment). Moreover, this discussion is for general information only and does not address all of the tax consequences that may be relevant to you in light of your particular circumstances, nor does it discuss special tax provisions, which may apply to you if you are subject to special treatment under U.S. federal income tax laws, such as for certain financial institutions or financial services entities, insurance companies, tax-exempt entities, tax-qualified retirement plans, "qualified foreign pension funds" (and entities all of the interests of which are held by qualified foreign pension funds), dealers in securities or currencies, entities that are treated as partnerships or other pass-through entities for U.S. federal income tax purposes (and partners or beneficial owners therein), "controlled foreign corporations," "passive foreign investment companies," former U.S. citizens or long-term residents, persons that have a "functional currency" other than the U.S. dollar, corporations that accumulate earnings to avoid U.S. federal income tax, accrual method taxpayers who are required to recognize income for U.S. federal income tax purposes no later than when such income is taken into account in applicable financial statements, persons deemed to sell common stock under the constructive sale provisions of the Code, and persons that hold common stock as part of a straddle, hedge, conversion transaction, or other integrated investment. In addition, this summary does not address the alternative minimum tax or any state, local or foreign taxes or any U.S. federal tax laws other than U.S. federal income and estate tax laws.

You are urged to consult your own tax advisor concerning the U.S. federal income tax consequences of purchasing, owning and disposing of our common stock, as well as the application of any state, local, foreign income and other tax laws and tax treaties.

As used in this section, a "non-U.S. holder" is a beneficial owner of our common stock (other than a partnership or any other entity treated as a pass-through entity for U.S. federal income tax purposes) that is not, for U.S. federal income tax purposes:

•: an individual who is a citizen or resident of the U.S.;
•: a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the U.S., 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 (i) a court within the U.S. 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 or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a domestic trust.

A modified definition of "non-U.S. holder" applies for U.S. federal estate tax purposes (as discussed below).

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If you are an individual, you are a resident alien if you are a lawful permanent resident of the U.S. (e.g., a green card holder) and you may, in many cases, be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being present in the U.S. for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in and including the current calendar year. For these purposes, all the days present in the U.S. in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted. Resident aliens are subject to U.S. federal income tax as if they are U.S. citizens. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the purchase, ownership or disposition of our common stock.

If a partnership or other entity treated as a pass-through entity for U.S. federal income tax purposes is a beneficial owner of our common stock, the tax treatment of a partner in the partnership or an owner of the other pass-through entity will depend upon the status of the partner or owner and the activities of the partnership or other pass-through entity. Any partnership, partner in such a partnership or owner of another pass-through entity holding shares of our common stock should consult its own tax advisor as to the particular U.S. federal income tax consequences applicable to it.

INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF OTHER FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND APPLICABLE TAX TREATIES.

Distributions on Common Stock

We initially expect to pay quarterly distributions on shares of our common stock (as discussed in the section entitled "Dividend Policy"). If we pay distributions on shares of our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a non-U.S. holder's adjusted tax basis in shares of our common stock. Any remaining excess will be treated as gain realized on the sale or other disposition of our common stock. See "— Dispositions of Common Stock."

Subject to the discussion below regarding effectively connected income, any dividend paid to a non-U.S. holder on our common stock will generally be subject to U.S. federal withholding tax at a 30% rate. The withholding tax might not apply, however, or might apply at a reduced rate, under the terms of an applicable income tax treaty. You are urged to consult your own tax advisors regarding your entitlement to benefits under a relevant income tax treaty. Generally, in order for us or our paying agent to withhold tax at a lower treaty rate, a non-U.S. holder must certify its entitlement to treaty benefits. A non-U.S. holder generally can meet this certification requirement by providing a valid IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable form or documentation), as applicable, to us or our paying agent. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the holder's behalf, the holder will be required to provide appropriate documentation to the agent. Even if our current or accumulated earnings or profits are less than the amount of the distribution, the applicable withholding agent may elect to treat the entire distribution as a dividend for U.S. federal withholding tax purposes. A non-U.S. holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.

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Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder and, if required by an applicable income tax treaty, are attributable to a permanent establishment (or, in certain cases involving individual holders, a fixed base) maintained by the non-U.S. holder in the U.S., are generally not subject to such withholding tax. To obtain this exemption, a non-U.S. holder must provide us with a valid IRS Form W-8ECI properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax (provided certain certification and disclosure requirements are satisfied), are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition to the graduated tax described above, such effectively connected dividends received by corporate non-U.S. holders may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.

The foregoing discussion is subject to the discussion below under "— Backup Withholding and Information Reporting and "— Other Withholding Taxes."

Dispositions of Common Stock

Subject to the discussion below on backup withholding and other withholding requirements, gain realized by a non-U.S. holder on a sale, exchange or other disposition of our common stock generally will not be subject to U.S. federal income or withholding tax, unless:

•: the gain (i) is effectively connected with the conduct by the non-U.S. holder of a U.S. trade or business and (ii) if required by an applicable income tax treaty, is attributable to a permanent establishment (or, in certain cases involving individual holders, a fixed base) maintained by the non-U.S. holder in the U.S. (in which case the special rules described below apply);
•: the non-U.S. holder is an individual who is present in the U.S. for 183 or more days in the taxable year of such disposition and certain other conditions are met (in which case the gain would be subject to a flat 30% tax, or such reduced rate as may be specified by an applicable income tax treaty, which may be offset by certain U.S. source capital losses, provided the non-U.S holder has timely filed U.S. federal income tax returns with respect to such losses); or
•: we are, or become, a "United States real property holding corporation" (a "USRPHC"), for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition of our common stock and the non-U.S. holder's holding period for our common stock.

Generally, a corporation is a USRPHC if the fair market value of its "United States real property interests" equals 50% or more of the sum of the fair market value of (a) its worldwide real property interests and (b) its other assets used or held for use in a trade or business. The tax relating to stock in a USRPHC does not apply to a non-U.S. holder whose holdings, actual and constructive, amount to 5% or less of our common stock at all times during the applicable period, provided that our common stock is regularly traded on an established securities market. No assurance can be provided that our common stock will be regularly traded on an established securities market at all times for purposes of the rules described above. Although there can be no assurances in this regard, we believe we have not been and are not currently a USRPHC, and do not anticipate being a USRPHC in the future. You are urged to consult your own tax advisor about the consequences that could result if we are, or become, a USRPHC.

If any gain from the sale, exchange or other disposition of our common stock, (1) is effectively connected with a U.S. trade or business conducted by a non-U.S. holder and (2) if required by an applicable income tax treaty, is attributable to a permanent establishment (or, in certain cases

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involving individuals, a fixed base) maintained by such non-U.S. holder in the U.S., then the gain generally will be subject to U.S. federal income tax at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. If the non-U.S. holder is a corporation, under certain circumstances, that portion of its earnings and profits that is effectively connected with its U.S. trade or business, subject to certain adjustments, generally would also be subject to a "branch profits tax." The branch profits tax rate is generally 30%, although an applicable income tax treaty might provide for a lower rate.

Backup Withholding and Information Reporting

Any dividends that are paid to a non-U.S. holder must be reported annually to the IRS and to the non-U.S. holder. Copies of these information returns also may be made available to the tax authorities of the country in which the non-U.S. holder resides under the provisions of various treaties or agreements for the exchange of information. Dividends paid on our common stock and the gross proceeds from a taxable disposition of our common stock may be subject to additional information reporting and may also be subject to U.S. federal backup withholding if such non-U.S. holder fails to comply with applicable U.S. information reporting and certification requirements. Provision of an IRS Form W-8 appropriate to the non-U.S. holder's circumstances will generally satisfy the certification requirements necessary to avoid the additional information reporting and backup withholding.

Backup withholding is not an additional tax. Any amounts so withheld under the backup withholding rules will be refunded by the IRS or credited against the non-U.S. holder's U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.

Other Withholding Taxes

Provisions commonly referred to as "FATCA" impose withholding (separate and apart from, but without duplication of, the withholding tax described above) at a rate of 30% on payments of U.S.-source dividends (including our dividends) and, beginning January 1, 2019, on gross proceeds from the sale or other disposition of domestic corporate stock (including our stock), paid to "foreign financial institutions" (which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied, or an exemption applies. An intergovernmental agreement between the U.S. and an applicable foreign country may modify these requirements. Accordingly, the entity through which our common stock is held will affect the determination of whether such withholding is required. If FATCA withholding is imposed, a beneficial owner that is not a foreign financial institution generally will be entitled to a refund of any amounts withheld by filing a U.S. federal income tax return containing the required information (which may entail significant administrative burden). Non-U.S. holders are urged to consult their own tax advisors regarding the effects of FATCA on their investment in our common stock.

U.S. Federal Estate Tax

Shares of our common stock owned or treated as owned by an individual who is not a U.S. citizen or resident (as specifically determined for U.S. federal estate tax purposes) at the time of such individual's death will be included in such individual's gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.

THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS AND TREATIES.

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UNDERWRITING

We have entered into an underwriting agreement with the underwriters named below with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are the representatives of the underwriters.


Underwriters			Number of Shares

Goldman Sachs & Co. LLC
J.P. Morgan Securities LLC
Morgan Stanley & Co. LLC
Barclays Capital Inc.
BNP Paribas Securities Corp.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Deutsche Bank Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Evercore Group L.L.C.
Cowen and Company, LLC
Academy Securities, Inc.
Drexel Hamilton, LLC
Mischler Financial Group, Inc.
Samuel A. Ramirez & Company, Inc.
The Williams Capital Group, L.P.

Total			62,900,000

The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.

The underwriters have an option to buy up to an additional 9,435,000 shares from us to cover sales by the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts and commissions to be paid by us to the underwriters. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase 9,435,000 additional shares.


Paid by us		No Exercise		Full Exercise

Per Share	$		$
Total	$		$

Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. After the initial offering of the shares, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters' right to reject any order in whole or in part.

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We, our executive officers and directors and Lilly have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of our common stock during the period from the date of this prospectus continuing through the date that is 180 days after the date of this prospectus, except with the prior written consent of each of the representatives. See "Shares Eligible for Future Sale" for a discussion of certain transfer restrictions.

At our request, the underwriters have reserved up to 3% of the shares of our common stock offered by this prospectus for sale, at the initial public offering price, to our independent directors, officers and certain employees, to the extent permitted under applicable regulations in the United States and in various countries. Pursuant to the underwriting agreement, the sales will be made by Morgan Stanley & Co. LLC through a directed share program. The number of shares of common stock available for sale to the general public in this offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not purchased by these persons will be offered by the underwriters to the general public on the same terms as the other shares. We have agreed to indemnify Morgan Stanley & Co. LLC in connection with the directed share program, including for the failure of any participant to pay for its shares. Other than the underwriting discount described on the front cover of this prospectus, the underwriters will not be entitled to any commission with respect to shares of common stock sold pursuant to the directed share program. Shares sold pursuant to the directed share program will be subject to a 180-day lock-up restriction.

Prior to the offering, there has been no public market for the shares. The initial public offering price will be negotiated among us and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be our historical performance, estimates of our business potential and earnings prospects, an assessment of management and the consideration of the above factors in relation to market valuation of companies in related businesses.

We have been authorized to list our common stock on the NYSE under the symbol "ELAN."

In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A "covered short position" is a short position that is not greater than the amount of additional shares for which the underwriters' option described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. "Naked" short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the

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representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on the NYSE, in the over-the-counter market or otherwise.

We estimate that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $18.0 million, of which $0.3 million will be payable by us and $17.7 million will be payable by Lilly. We have agreed to reimburse the underwriters for expenses related to the clearance of the offering with the Financial Industry Regulatory Authority ("FINRA") up to $40,000 and the qualification of the common stock under state securities laws up to $15,000. We have also agreed to reimburse the underwriters for expenses related to the Directed Share Program up to $25,000.

We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act.

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to Lilly and its subsidiaries, including us, and to persons and entities with relationships with Lilly and its subsidiaries, including us, for which they received or will receive customary fees and expenses. In particular, certain of the underwriters acted as initial purchasers in the Senior Notes Offering and are lenders under the Credit Facilities. Furthermore, certain underwriters (not in their capacity as such) or their affiliates have separately been engaged to advise Lilly in connection with a strategic review of its animal health businesses, including the potential Distribution. In connection with such engagement, Goldman Sachs & Co. LLC has been granted a right of first refusal, subject to certain limitations, to provide services with respect to certain of our future transactions and has received $7.5 million of advisory fees that FINRA has deemed to be underwriting compensation received in connection with this offering.

In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities and/or instruments (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.

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European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), an offer to the public of the common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of the common stock may be made at any time under the following exemptions under the Prospectus Directive:

(a): to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b): to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representatives for any such offer; or
(c): in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares of the common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an "offer to the public" in relation to the common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the common stock to be offered so as to enable an investor to decide to purchase the common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression "Prospectus Directive" means Directive 2003/71/EC (as amended), including by Directive 2010/73/EU, and includes any relevant implementing measure in the Relevant Member State.

This European Economic Area selling restriction is in addition to any other selling restrictions set out below.

United Kingdom

In the UK, this prospectus is only addressed to and directed to qualified investors who are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); or (ii) high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). Any investment or investment activity to which this prospectus relates is available only to relevant persons and will only be engaged with relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.

Canada

The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principals that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the

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purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Hong Kong

The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) ("Companies (Winding Up and Miscellaneous Provisions) Ordinance") or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) ("Securities and Futures Ordinance"), or (ii) to "professional investors" as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.

Singapore

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA")) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for six months after that corporation has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation's securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore ("Regulation 32").

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Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferable for six months after that trust has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.

Japan

The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended) (the "FIEA"). The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.

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LEGAL MATTERS

Barnes & Thornburg LLP, Indianapolis, Indiana, has passed upon the validity of the common stock offered hereby on behalf of us. Certain legal matters will be passed upon on behalf of us by Weil, Gotshal & Manges LLP, New York, New York. Certain legal matters will be passed upon on behalf of the underwriters by Ropes & Gray LLP.

EXPERTS

The combined financial statements of Elanco as of December 31, 2017 and 2016, and for each of the years in the three-year period ended December 31, 2017 have been included herein in reliance upon the reports of Ernst & Young LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus. For purposes of this section, the term registration statement means the original registration statement and any and all amendments including the schedules and exhibits to the original registration statement or any amendment. This prospectus, filed as part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules thereto as permitted by the rules and regulations of the SEC. For further information about us and our common stock, you should refer to the registration statement, including the exhibits. This prospectus summarizes provisions that we consider material of certain contracts and other documents to which we refer you. Because the summaries may not contain all of the information that you may find important, you should review the full text of those documents.

The registration statement, including its exhibits and schedules, may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling 1-800-SEC-0330. Copies of such materials are also available by mail from the Public Reference Branch of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549 at prescribed rates. In addition, the SEC maintains a website at (http://www.sec.gov) from which interested persons can electronically access the registration statement, including the exhibits and schedules to the registration statement.

We have not authorized anyone to give you any information or to make any representations about us or the transactions we discuss in this prospectus other than those contained in this prospectus or in any free writing prospectus we have prepared. If you are given any information or representations about these matters that is not discussed in this prospectus or in any free writing prospectus we have prepared, you must not rely on that information. This prospectus is not an offer to sell or a solicitation of an offer to buy securities anywhere or to anyone where or to whom we are not permitted to offer or sell securities under applicable law.

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INDEX TO FINANCIAL STATEMENTS


		Page

Audited Combined Financial Statements of Elanco Animal Health Incorporated (the Animal Health Businesses of Eli Lilly and Company) :
Report of Independent Registered Public Accounting Firm		F-2
Combined Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015		F-3
Combined Statements of Comprehensive Loss for the Years Ended December 31, 2017, 2016 and 2015		F-4
Combined Balance Sheets as of December 31, 2017 and 2016		F-5
Combined Statements of Equity for the Years Ended December 31, 2017, 2016 and 2015		F-6
Combined Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015		F-7
Notes to Combined Financial Statements		F-8
Unaudited Condensed Combined Financial Statements of Elanco Animal Health Incorporated (the Animal Health Businesses of Eli Lilly and Company):
Unaudited Condensed Combined Statements of Operations for the Six Months Ended June 30, 2018 and 2017		F-41
Unaudited Condensed Combined Statements of Comprehensive Income (Loss) for the Six Months Ended June 30, 2018 and 2017		F-42
Unaudited Condensed Combined Balance Sheets as of June 30, 2018 and December 31, 2017		F-43
Unaudited Condensed Combined Statements of Equity for the Six Months Ended June 30, 2018 and 2017		F-44
Unaudited Condensed Combined Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017		F-45
Notes to Unaudited Condensed Combined Financial Statements		F-46

F-1

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Eli Lilly and Company:

Opinion on the Financial Statements

We have audited the accompanying combined balance sheets of the Animal Health Businesses of Eli Lilly and Company to be divested (the Company) as of December 31, 2017 and 2016, the related combined statements of operations, comprehensive loss, equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the "combined financial statements"). In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2017.

Indianapolis, Indiana
May 25, 2018

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Animal Health Businesses of Eli Lilly to be Divested

Combined Statements of Operations


		Year Ended December 31,

(Dollars in millions)		2017			2016			2015

Revenue	$	2,889.0		$	2,913.5		$	2,909.1
Costs, expenses and other:
Cost of sales		1,493.9			1,409.0			1,533.7
Research and development		251.7			265.8			291.0
Marketing, selling and administrative		779.8			784.8			916.0
Amortization of intangible assets (Note 8)		221.2			170.7			163.0
Asset impairment, restructuring and other special charges (Note 5)		375.1			308.4			263.3
Other — net, (income) expense		(0.1	)		(2.8	)		1.6

		3,121.6			2,935.9			3,168.6

Loss before income taxes		(232.6	)		(22.4	)		(259.5	)
Income tax expense (benefit) (Note 11)		78.1			25.5			(48.7	)

Net loss	$	(310.7	)	$	(47.9	)	$	(210.8	)

See notes to combined financial statements.

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Animal Health Businesses of Eli Lilly to be Divested

Combined Statements of Comprehensive Loss


		Year Ended December 31,

(Dollars in millions)		2017			2016			2015

Net loss	$	(310.7	)	$	(47.9	)	$	(210.8	)
Other comprehensive income (loss):
Change in foreign currency translation gains (losses)		210.1			(230.7	)		(143.6	)
Change in defined benefit pension and retiree health benefit plans, net of taxes		(9.8	)		(4.3	)		(11.8	)

Other comprehensive income (loss), net of taxes		200.3			(235.0	)		(155.4	)

Comprehensive loss	$	(110.4	)	$	(282.9	)	$	(366.2	)

See notes to combined financial statements.

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Animal Health Businesses of Eli Lilly to be Divested

Combined Balance Sheets


		December 31,

(Dollars in millions)		2017			2016

Assets
Current Assets
Cash and cash equivalents	$	323.4		$	258.8
Accounts receivable, net of allowances of $9.8 (2017) and $11.0 (2016)		567.4			585.0
Other receivables		34.5			45.7
Inventories (Note 6)		1,062.3			875.6
Prepaid expenses and other		136.1			182.3

Total current assets		2,123.7			1,947.4

Noncurrent Assets
Investments (Note 7)		12.3			9.0
Goodwill (Note 8)		2,969.2			2,576.5
Other intangibles, net (Note 8)		2,672.8			2,621.0
Other noncurrent assets		242.0			204.0
Property and equipment, net (Note 9)		920.3			741.8

Total assets	$	8,940.3		$	8,099.7



Liabilities and Equity
Current Liabilities
Accounts payable	$	203.8		$	228.2
Employee compensation		89.3			83.2
Sales rebates and discounts		155.0			148.6
Income taxes payable (Note 11)		4.8			7.5
Other current liabilities		179.7			151.4

Total current liabilities		632.6			618.9

Noncurrent Liabilities
Accrued retirement benefits (Note 12)		139.0			113.8
Deferred taxes (Note 11)		251.9			227.5
Other noncurrent liabilities		126.0			111.6

Total liabilities		1,149.5			1,071.8

Commitments and Contingencies (Note 13)
Equity
Net parent company investment		8,047.4			7,484.8
Accumulated other comprehensive loss (Note 14)		(256.6	)		(456.9	)

Total equity		7,790.8			7,027.9

Total liabilities and equity	$	8,940.3		$	8,099.7

See notes to combined financial statements.

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Animal Health Businesses of Eli Lilly to be Divested

Combined Statements of Equity


(Dollars in millions)		Net Parent Company Investment			Accumulated Other Comprehensive Loss			Total Equity

Balance at January 1, 2015	$	2,506.1		$	(66.5	)	$	2,439.6
Net loss		(210.8	)		—			(210.8	)
Other comprehensive loss, net of tax		—			(155.4	)		(155.4	)
Transfers to/from Lilly, net		5,366.6			—			5,366.6

Balance at December 31, 2015		7,661.9			(221.9	)		7,440.0
Net loss		(47.9	)		—			(47.9	)
Other comprehensive loss, net of tax		—			(235.0	)		(235.0	)
Transfers to/from Lilly, net		(129.2	)		—			(129.2	)

Balance at December 31, 2016		7,484.8			(456.9	)		7,027.9
Net loss		(310.7	)		—			(310.7	)
Other comprehensive income, net of tax		—			200.3			200.3
Transfers to/from Lilly, net		873.3			—			873.3

Balance at December 31, 2017	$	8,047.4		$	(256.6	)	$	7,790.8

See notes to combined financial statements.

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Animal Health Businesses of Eli Lilly to be Divested

Combined Statements of Cash Flows


		Year Ended December 31,

(Dollars in millions)		2017			2016			2015

Cash Flows from Operating Activities
Net loss	$	(310.7	)	$	(47.9	)	$	(210.8	)
Adjustments to Reconcile Net Loss to Cash Flows from Operating Activities:
Depreciation and amortization		318.4			254.4			236.9
Change in deferred income taxes		(13.4	)		(5.9	)		(76.2	)
Stock-based compensation expense		25.0			20.4			13.4
Asset impairment charges		110.6			98.3			57.5
Gain on sale of assets		(19.6	)		—			—
Other non-cash operating activities, net		10.0			6.0			1.5
Other changes in operating assets and liabilities, net of acquisitions and divestitures:
Receivables — (increase) decrease		48.4			(80.7	)		(94.6	)
Inventories — (increase) decrease		(39.0	)		(89.1	)		14.9
Other assets — (increase) decrease		52.5			(36.7	)		(52.4	)
Accounts payable and other liabilities — increase (decrease)		(8.4	)		37.1			116.4

Net Cash Provided by Operating Activities		173.8			155.9			6.6
Cash Flows from Investing Activities
Purchases of property and equipment		(98.6	)		(110.3	)		(100.1	)
Disposals of property and equipment		37.6			7.4			20.3
Proceeds from sale of product rights (Note 4)		—			—			410.0
Cash paid for acquisitions, net of cash acquired (Note 4)		(882.1	)		(45.0	)		(5,283.1	)
Other investing activities, net		(21.5	)		(34.2	)		(42.5	)

Net Cash Used for Investing Activities		(964.6	)		(182.1	)		(4,995.4	)
Cash Flows from Financing Activities
Net transactions with Lilly		848.3			(149.6	)		5,353.2
Other financing activities, net		(0.8	)		—			—

Net Cash Provided by (Used for) Financing Activities		847.5			(149.6	)		5,353.2
Effect of exchange rate changes on cash and cash equivalents		7.9			(26.0	)		(19.8	)

Net increase (decrease) in cash and cash equivalents		64.6			(201.8	)		344.6
Cash and cash equivalents at beginning of year		258.8			460.6			116.0

Cash and Cash Equivalents at End of Year	$	323.4		$	258.8		$	460.6

See notes to combined financial statements.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements

(Tables present dollars in millions)

Note 1: Nature of Business and Basis of Preparation

Nature of Business

Eli Lilly and Company (Lilly) intends to divest substantially all of its animal health businesses through a series of equity transactions. The businesses to be divested are currently held in a combination of dedicated legal entities and commingled entities, which include activities of both Lilly and the divested businesses. Lilly will complete a corporate reorganization prior to the divestiture through which it will transfer the assets, liabilities and businesses to be divested to a single holding company (Elanco Parent). Elanco Parent will ultimately serve as parent company for the businesses to be divested by Lilly.

The accompanying combined financial statements represents the assets, liabilities and results of operations related to the animal health businesses to be transferred to Elanco Parent, which includes the animal health businesses that share people, manufacturing locations and activities. The combined animal health businesses to be transferred from Lilly to Elanco Parent are referred to throughout these combined financial statements as Elanco, the Company, we, us or our.

We are an animal health company that innovates, develops, manufactures and markets products for companion and food animals. We have operations throughout the world with a significant portion of our business in the United States.

Basis of Preparation

The accompanying combined financial statements have been prepared on a standalone basis and are derived from Lilly's consolidated financial statements and accounting records. The combined financial statements reflect the financial position, results of operations and cash flows related to the animal health businesses that will be transferred to Elanco Parent and are prepared in conformity with accounting principles generally accepted in the United States (GAAP). Lilly will transfer to Elanco Parent only the assets, liabilities and operations for business activities that will constitute the ongoing animal health businesses. These businesses operate on an integrated basis with shared people, manufacturing facilities, distribution centers, product types and the associated facilities that are being transferred to Elanco Parent.

These combined financial statements include the attribution of certain assets and liabilities that historically have been held at the Lilly corporate level but which are specifically identifiable or attributable to the businesses being transferred to Elanco Parent. All intercompany transactions and accounts within Elanco have been eliminated. All transactions between us and Lilly are considered to be effectively settled in the combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the combined statements of cash flows as a financing activity and in the combined balance sheets as net parent company investment.

These combined financial statements include an allocation of expenses related to certain Lilly corporate functions, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue, headcount and other measures. We consider the expense methodology and results to be reasonable for all periods presented. However,

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 1: Nature of Business and Basis of Preparation (Continued)

the allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for the periods presented. It is impractical to estimate what the standalone costs of Elanco would have been in the historical periods.

The income tax amounts in these combined financial statements have been calculated based on a separate return methodology and presented as if our operations were separate taxpayers in the respective jurisdictions. We file income tax returns in the U.S. federal jurisdiction and various state, local and non-U.S. jurisdictions. Certain of these income tax returns are filed on a consolidated or combined basis with Eli Lilly and Company and/or its subsidiaries.

Lilly maintains various benefit and combined stock-based compensation plans at a corporate level and other benefit plans at a country level. Our employees participate in such programs and the portion of the cost of those plans related to our employees is included in our financial statements. However, the combined balance sheets do not include any equity issued related to stock-based compensation plans or any net benefit plan obligations unless the benefit plan covers only our dedicated employees or where the legal obligation associated with the benefit plan will transfer to Elanco.

The equity balance in these combined financial statements represents the excess of total assets over total liabilities, including intercompany balances between us and Lilly (net parent company investment) and accumulated other comprehensive loss. Net parent company investment is primarily impacted by contributions from Lilly which are the result of treasury activities and net funding provided by or distributed to Lilly. See Note 16 for further information.

Note 2: Summary of Significant Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates.

Revenue recognition

We recognize revenue from sales of products at the time title of goods passes to the buyer and the buyer assumes the risks and rewards of ownership. Provisions for returns, discounts and rebates are established in the same period the related sales are recognized.

Research and development expenses and acquired in-process research and development

Research and development expenses include the following:

•: Research and development costs, which are expensed as incurred.
•: Milestone payment obligations incurred prior to regulatory approval of the product, which are accrued when the event requiring payment of the milestone occurs.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 2: Summary of Significant Accounting Policies (Continued)

•: Acquired in-process research and development (IPR&D) expense, which includes the initial costs of IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use.

Foreign Currency Translation

Operations in our subsidiaries outside the United States (U.S.) are recorded in the functional currency of each subsidiary which is determined by a review of the environment where each subsidiary primarily generates and expends cash. The results of operations for our subsidiaries outside the U.S. are translated from functional currencies into U.S. dollars using the weighted average currency rate for the period. Assets and liabilities are translated using the period end exchange rates. The U.S. dollar effects that arise from translating the net assets of these subsidiaries are recorded in other comprehensive loss.

Other significant accounting policies

Our other significant accounting policies are described in the remaining appropriate notes to the combined financial statements.

Note 3: Implementation of New Financial Accounting Pronouncements

The following table provides a brief description of accounting standards that had not yet been adopted as of December 31, 2017 and could have a material effect on our financial statements:

Standard	Description	Effective Date	Effect on the financial statements or other significant matters


Accounting Standards Update 2014-09 and various other related updates, Revenue from Contracts with Customers	This standard replaced existing revenue recognition standards and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity can apply the new revenue standard retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. We applied the latter approach.	This standard became effective January 1, 2018, and we adopted on that date.	Our evaluation of our contracts subject to this standard is complete and we do not expect the application of the new standard to these contracts to have a material impact to our combined statements of operations or balance sheets at initial implementation. We are also evaluating the new disclosures required by the standard to determine what additional information will need to be disclosed.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 3: Implementation of New Financial Accounting Pronouncements (Continued)

Standard	Description	Effective Date	Effect on the financial statements or other significant matters


Accounting Standards Update 2016-02, Leases	This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities, including leases classified as operating leases under current GAAP, on the balance sheet and requiring additional disclosures about leasing arrangements. This standard requires a modified retrospective approach to adoption.	This standard is effective January 1, 2019, with early adoption permitted. We intend to adopt this standard on January 1, 2019.	We are in the process of determining the impact on our combined financial statements. We have selected a software solution to be compatible with our enterprise software system. Development of our selected solution is ongoing, as it is not yet fully compliant with the requirements of the standard. The timely readiness of the lease software system is critical to implement an efficient and effective adoption of the standard.
Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory	This standard requires entities to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of transfer. This standard requires a modified retrospective approach to adoption.	This standard became effective January 1, 2018, and we adopted on that date.	We currently estimate that the cumulative effect of initially applying the standard will result in a decrease to net parent company investment of $1.8 million.

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 3: Implementation of New Financial Accounting Pronouncements (Continued)

Standard	Description	Effective Date	Effect on the financial statements or other significant matters


Accounting Standards Update 2017-07, Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost	This standard was issued to improve the transparency and comparability among organizations by requiring entities to separate their net periodic pension cost and net periodic postretirement benefit cost into a service cost component and other components. Currently, the costs of the other components along with the service cost component are classified based upon the function of the employee. This standard requires entities to classify the service cost component in the same financial statement line item or items as other compensation costs arising from services rendered by pertinent employees. The other components of net benefit cost will be presented separately from the line items that include the service cost component. When applicable, the service cost component is the only component eligible for capitalization. An entity should apply the new standard retrospectively for the classification of the service cost and other components and prospectively for the capitalization of the service cost component.	This standard became effective January 1, 2018, and we adopted on that date.	Upon adoption of this standard, pension and postretirement benefit cost components other than service costs will be presented in other — net, (income) expense. The application of the new standard did not change combined net income at initial implementation and we do not expect it to have a material impact on an ongoing basis.

Note 4: Acquisitions

During 2017, 2016, and 2015, we completed the acquisitions of Boehringer Ingelheim Vetmedica, Inc.'s U.S. feline, canine and rabies vaccine portfolio and other related assets (BIVIVP), certain rights to Aratana Therapeutics, Inc.'s (Aratana) Galliprant ® and Novartis Animal Health (Novartis AH), respectively. These transactions were accounted for as business combinations under the acquisition method of accounting. Under this method, the assets acquired and liabilities assumed were recorded at their respective fair values as of the acquisition date in our combined financial statements. The determination of estimated fair value required management to make significant estimates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where applicable, has been recorded as goodwill. The results of operations of these acquisitions are included in our combined financial statements from the dates of acquisition.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 4: Acquisitions (Continued)

Boehringer Ingelheim Vetmedica, Inc. Vaccine Portfolio Acquisition

On January 3, 2017, we acquired BIVIVP in a cash transaction for $882.1 million. Under the terms of the agreement, we acquired a manufacturing and research and development site, a U.S. vaccine portfolio including vaccines used for the treatment of bordetella, Lyme disease, rabies and parvovirus, among others.

The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:


Estimated Fair Value at January 3, 2017

Inventories ⁽¹⁾	$	108.6
Marketed products ⁽²⁾		297.0
Property and equipment		148.2
Other assets and liabilities — net		8.2

Total identifiable net assets		562.0
Goodwill ⁽³⁾		320.1

Total consideration transferred — net of cash acquired	$	882.1

(1): The fair value for inventories include a purchase accounting adjustment to write up the inventory value, which resulted in incremental cost of sales of $42.7 million in 2017. The fair value was determined by estimating the expected sales price of the inventories, reduced for all costs expected to the incurred and a profit on those costs.
(2): These intangible assets, which are being amortized on a straight-line basis over their estimated useful lives, were expected to have a weighted average useful life of 10 years.
(3): The goodwill recognized from this acquisition is attributable primarily to expected synergies from combining the operations of BIVIVP with our legacy business, future unidentified projects and products, and the assembled workforce of BIVIVP. The goodwill associated with this acquisition is deductible for tax purposes.

Our combined statement of operations for the year ended December 31, 2017 included BIVIVP revenues of $216.7 million. We are unable to provide the results of operations attributable to BIVIVP as those operations were substantially integrated into our legacy business.

Had BIVIVP been acquired on January 1, 2016, the unaudited pro forma combined revenues of Elanco and BIVIVP would have been $2.89 billion and $3.14 billion for the years ended December 31, 2017 and 2016, respectively. It is impractical to determine the pro forma impact on loss before tax attributable to BIVIVP for 2017 and 2016.

Galliprant Acquisition

On April 22, 2016, we acquired from Aratana, certain rights to Galliprant , a canine pain treatment for osteoarthritis for a total purchase price of $88.6 million, which consisted of an upfront payment of $45.0 million and contingent consideration of $43.6 million. The contingent consideration represented the fair value of potential future payments to Aratana based on the probability of achieving contingent milestones and royalties. At the time of the acquisition, Galliprant was approved in the U.S. and was still under development outside the U.S.

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 4: Acquisitions (Continued)

Under the terms of the agreement, we were granted co-promotion rights in the U.S. through December 31, 2018, at which time we will control commercialization in the U.S. We received full commercialization rights outside the U.S. The agreement requires payments by us to Aratana associated with certain development, success-based regulatory and sales-based milestones and royalties. As of December 31, 2017, Aratana is eligible to receive up to $8.0 million of potential development and success-based regulatory milestones. Aratana is also eligible to receive up to $75.0 million of potential sales-based milestones. Aratana is eligible to receive royalties based on a percentage of net sales of Galliprant , dependent on the timing and geography of the net sales. There is no cap on the amount of royalties that may be paid pursuant to this arrangement.

The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:


Estimated Fair Value at April 22, 2016

Deferred tax assets	$	15.3
Acquired in-process research and development		31.6
Marketed products ⁽¹⁾		57.0
Deferred tax liabilities		(15.3	)

Total consideration		88.6
Less: Contingent consideration		(43.6	)

Total cash paid	$	45.0

(1): These intangible assets, which are being amortized on a straight-line basis over their estimated useful lives, were expected to have a weighted average useful life of 20 years.

Pro forma information has not been included because this acquisition did not have a material impact on the Company's results of operation for the years ended December 31, 2016 and 2015.

Novartis AH Acquisition

On January 1, 2015, we acquired from Novartis AG all of the shares of certain Novartis subsidiaries and the assets and liabilities of other Novartis subsidiaries that were exclusively related to the Novartis AH business in an all-cash transaction for a total purchase price of $5.28 billion.

As a condition to the clearance of the transaction under the Hart-Scott-Rodino Antitrust Improvements Act, following the closing of the acquisition of Novartis AH, we divested certain animal health assets in the U.S. related to the Sentinel® canine parasiticide franchise to Virbac Corporation for approximately $410 million.

The acquired Novartis AH business consisted of the research and development, manufacture, marketing, sale and distribution of veterinary products to prevent and treat diseases in pets, farm animals and farmed fish. Under the terms of the agreement, we acquired manufacturing sites, research and development facilities, a global commercial infrastructure and portfolio of products, a pipeline of projects in development and employees.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 4: Acquisitions (Continued)

The following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:


Estimated Fair Value at January 1, 2015

Inventories ⁽¹⁾	$	380.2
Acquired in-process research and development		298.0
Marketed products ⁽²⁾		1,953.0
Property and equipment		199.9
Assets held for sale (primarily the U.S. Sentinel rights)		422.7
Accrued retirement benefits		(108.7	)
Deferred income taxes		(60.1	)
Other assets and liabilities — net		(73.0	)

Total identifiable net assets		3,012.0
Goodwill ⁽³⁾		2,271.1

Total consideration transferred — net of cash acquired	$	5,283.1

(1): The fair value for inventories include a purchase accounting adjustment to write up the inventory value, which resulted in incremental cost of sales of $153.0 million in 2015. The fair value was determined by estimating the expected sales price of the inventories, reduced for all costs expected to the incurred and a profit on those costs.
(2): These intangible assets, which are being amortized on a straight-line basis over their estimated useful lives, were expected to have a weighted average useful life of 19 years.
(3): The goodwill recognized from this acquisition is attributable primarily to expected synergies from combining the operations of Novartis AH with our legacy business, future unidentified projects and products, and the assembled workforce of Novartis AH. Approximately $1.0 billion of the goodwill associated with this acquisition is deductible for tax purposes.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 5: Asset Impairment, Restructuring and Other Special Charges

The Company has historically participated in Lilly's cost-reduction initiatives. The Company's total charges related to asset impairment, restructuring and other special charges, including integration of acquired businesses, in our combined statements of operations consisted of the following:


		2017			2016		2015

Cash expense:
Severance and other	$	162.0		$	42.1	$	59.5
Integration		90.3			154.8		140.8
Facility exit costs		31.8			13.2		5.5

Total cash expense		284.1			210.1		205.8

Non-cash expense:
Asset impairment		110.6			98.3		57.5

Total non-cash expense		110.6			98.3		57.5

Gain on sale of fixed assets		(19.6	)		—		—

Total	$	375.1		$	308.4	$	263.3

Severance and other costs recognized during the years ended December 31, 2017, 2016 and 2015 were incurred as a result of actions taken to reduce our cost structure, including severance, curtailment loss and special termination benefits costs recognized in 2017 associated with the U.S. voluntary early retirement program offered by Lilly, related to our employees.

Integration costs recognized during the years ended December 31, 2017, 2016 and 2015 were related to our integration efforts as a result of our acquired businesses.

Asset impairment recognized during the year ended December 31, 2017 were primarily related to intangible asset impairments for a certain marketed product and for acquired IPR&D assets. Asset impairment recognized during the years ended December 31, 2016 and 2015 resulted primarily from intangible asset impairments due to product rationalization and to charges related to site closures resulting from our acquisition and integration of Novartis AH, including the closure of a manufacturing facility in Ireland in 2016. See Note 8 for further detail relating to intangible asset impairments.

Gain on sale of fixed assets for the year ended December 31, 2017 represent gain on disposal of two sites that we previously closed as part of our acquisition and integration of Novartis AH.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 5: Asset Impairment, Restructuring and Other Special Charges (Continued)

The following table summarizes the activity in our reserves established in connection with these restructuring activities:


		Facility exit costs			Severance and other			Total

Beginning balance at January 1, 2015	$	—		$	2.8		$	2.8
Charges		5.5			59.5			65.0
Reserve adjustments		(1.7	)		(1.4	)		(3.1	)
Cash paid		—			(50.8	)		(50.8	)

Balance at December 31, 2015		3.8			10.1			13.9
Charges		13.2			42.1			55.3
Reserve adjustments		(0.6	)		(3.2	)		(3.8	)
Cash paid		(4.9	)		(22.4	)		(27.3	)

Balance at December 31, 2016		11.5			26.6			38.1
Charges		31.8			162.0			193.8
Reserve adjustments		1.4			(3.9	)		(2.5	)
Cash paid		(9.8	)		(141.6	)		(151.4	)

Ending balance at December 31, 2017	$	34.9		$	43.1		$	78.0

Substantially all of the reserves are expected to be paid in the next 12 months. The Company believes that the reserves are adequate.

Note 6: Inventories

We state all inventories at the lower of cost or market. We use the last-in, first-out (LIFO) method for the majority of our inventories located in the continental U.S. Other inventories are valued by the first-in, first-out (FIFO) method. FIFO cost approximates current replacement cost.

Inventories at December 31 consisted of the following:


		2017			2016

Finished products	$	452.0		$	409.5
Work in process		580.0			452.9
Raw materials and supplies		70.4			59.6

Total (approximates replacement cost)		1,102.4			922.0
Decrease to LIFO cost		(40.1	)		(46.4	)

Inventories	$	1,062.3		$	875.6

Inventories valued under the LIFO method comprised $231.4 million and $274.0 million of total inventories at December 31, 2017 and 2016, respectively.

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 7: Financial Instruments

Financial instruments that potentially subject us to credit risk consist principally of trade receivables. Collateral is generally not required. The risk associated with this concentration is mitigated by our ongoing credit-review procedures and insurance.

A large portion of our cash, which is legally owned by us and is recognized on the combined balance sheets, is held by a few major financial institutions. Lilly monitors the exposure with these institutions and does not expect any of these institutions to fail to meet their obligations. We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. The cost of these investments approximates fair value.

As of December 31, 2017 and 2016, we had $12.3 million and $9.0 million, respectively, of cost and equity method investments.

The following table summarizes the fair value information at December 31 for contingent consideration liabilities measured at fair value on a recurring basis:


			Fair Value Measurements Using

Financial statement line item		Carrying Amount	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value

December 31, 2017
Other current liabilities-contingent consideration	$	1.3	—	—	$	1.3	$	1.3
Other noncurrent liabilities-contingent consideration		45.2	—	—		45.2		45.2
December 31, 2016
Other current liabilities-contingent consideration		4.7	—	—		4.7		4.7
Other noncurrent liabilities-contingent consideration		41.5	—	—		41.5		41.5

Note 8: Goodwill and Other Intangibles

Goodwill

Goodwill was $3.0 billion and $2.6 billion as of December 31, 2017 and 2016, respectively. Goodwill results from excess consideration in a business combination over the fair value of

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 8: Goodwill and Other Intangibles (Continued)

identifiable net assets acquired. Goodwill is not amortized but is reviewed for impairment at least annually and when impairment indicators are present. Goodwill may be impaired if the carrying amount of a reporting unit exceeds the fair value of that reporting unit, calculated as based on discounted cash flows. The implied fair value of goodwill is then determined by subtracting the fair value of all identifiable net assets other than goodwill from the fair value of the reporting unit. An impairment charge would be recorded for the excess, if any, of carrying amount of goodwill over the implied fair value. The estimated fair value is based on a number of assumptions, including the projected future cash flows and associated growth rate, the discount rate and the terminal value. In assessing the reasonableness of the estimated fair value, we also consider the reasonableness of the implied EBITDA multiple derived based on the estimated fair value. See Note 4 for further discussion of goodwill resulting from recent business combinations. The remaining change in goodwill is primarily the result of foreign exchange translation adjustments.

No impairments occurred with respect to the carrying value of goodwill for the years ended December 31, 2017, 2016 and 2015.

Other Intangibles

The components of intangible assets other than goodwill at December 31 were as follows:


		2017							2016

Description		Carrying Amount, Gross		Accumulated Amortization			Carrying Amount, Net		Carrying Amount, Gross		Accumulated Amortization			Carrying Amount, Net

Finite-lived intangible assets:
Marketed products	$	3,151.2	$	(599.8	)	$	2,551.4	$	2,815.5	$	(404.4	)	$	2,411.1
Other		54.1		(29.9	)		24.2		70.8		(41.1	)		29.7

Total finite-lived intangible assets		3,205.3		(629.7	)		2,575.6		2,886.3		(445.5	)		2,440.8
Indefinite-lived intangible assets:
Acquired in-process research and development		97.2		—			97.2		180.2		—			180.2

Other intangibles	$	3,302.5	$	(629.7	)	$	2,672.8	$	3,066.5	$	(445.5	)	$	2,621.0

Marketed products consist of the amortized cost of the rights to assets acquired in business combinations and approved for marketing in a significant global jurisdiction. For transactions other than a business combination, we capitalize milestone payments incurred at or after the product has obtained regulatory approval for marketing.

Other finite-lived intangibles consist primarily of the amortized cost of licensed platform technologies that have alternative future uses in research and development, manufacturing technologies and customer relationships from business combinations.

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 8: Goodwill and Other Intangibles (Continued)

Acquired IPR&D consists of the related costs capitalized, adjusted for subsequent impairments, if any. The costs of acquired IPR&D projects acquired directly in a transaction other than a business combination are capitalized if the projects have an alternative future use; otherwise, they are expensed immediately. The fair values of acquired IPR&D projects acquired in business combinations are capitalized as other intangible assets.

Several methods may be used to determine the estimated fair value of other intangibles acquired in a business combination. We utilize the "income method" for other intangibles. This method is a Level 3 fair value measurement and applies a probability weighting that considers the risk of development and commercialization to the estimated future net cash flows that are derived from projected revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each asset independently. The acquired IPR&D assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are tested for impairment and amortized over the remaining useful life or written off, as appropriate.

See Note 4 for further discussion of intangible assets acquired in recent business combinations.

Other indefinite-lived intangible assets are reviewed for impairment at least annually and when impairment indicators are present. The fair value of the indefinite lived intangible assets (acquired IPR&D) is estimated using the same assumptions as used for goodwill and by applying a probability weighting that reflects the risk of development and commercialization to the estimated future net cash flows that are derived from projected revenues and estimated costs. Finite-lived intangible assets are reviewed for impairment when an indicator of impairment is present. We compare the carrying amounts of the assets with the estimated undiscounted future cash flows. In the event the carrying amount exceeds the undiscounted cash flows, an impairment charge is recorded for the amount by which the carrying amount of the asset exceeds the estimated fair value, which is determined based on discounted future cash flows.

During 2017, we had impairment charges of $94.5 million (comprised of $56.5 million impairment of finite-lived intangible assets and $38.0 million impairment of indefinite-lived intangible assets) charged to asset impairment, restructuring and other special charges on the combined statements of operations. The impairment of finite-lived intangible assets primarily related to competitive pressures for a certain marketed product resulting in a reduction of projected cash flows. The impairment of indefinite-lived intangible assets primarily related to revised projections of fair value due to competitive pressures and to a lesser extent product rationalization. During 2016, we had impairment charges of $14.0 million primarily related to indefinite-lived intangible assets charged to asset impairment, restructuring and other special charges on the combined statements of operations. During 2015, we had impairment charges of $32.2 million (comprised of $22.5 million impairment of finite-lived intangible assets and $9.7 million impairment of indefinite-lived intangible assets) charged to asset impairment, restructuring and other special charges on the combined statements of operations. The impairments in 2016 and 2015 were related to product rationalization.

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 8: Goodwill and Other Intangibles (Continued)

Intangible assets with finite lives are capitalized and are amortized over their estimated useful lives, ranging from 3 to 20 years. As of December 31, 2017, the remaining weighted-average amortization period for finite-lived intangible assets is approximately 15 years.

The estimated amortization expense for each of the next five years associated with our finite-lived intangible assets as of December 31, 2017 is as follows:


		2018		2019		2020		2021		2022

Estimated amortization expense	$	196.5	$	196.2	$	196.2	$	195.4	$	193.6

Note 9: Property and Equipment

Property and equipment is stated on the basis of cost. Provisions for depreciation of buildings and equipment are computed generally by the straight-line method at rates based on their estimated useful lives (12 to 50 years for buildings and 3 to 25 years for equipment). We review the carrying value of long-lived assets for potential impairment on a periodic basis and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Impairment is determined by comparing projected undiscounted cash flows to be generated by the asset to its carrying value. If an impairment is identified, a loss is recorded equal to the excess of the asset's net book value over its fair value, and the cost basis is adjusted.

At December 31, property and equipment consisted of the following:


		2017			2016

Land	$	25.1		$	17.7
Buildings		557.7			457.8
Equipment		994.5			880.8
Construction in progress		177.1			146.6

		1,754.4			1,502.9
Less accumulated depreciation		(834.1	)		(761.1	)

Property and equipment, net	$	920.3		$	741.8

Depreciation expense related to property and equipment and rental expense for all leases was as follows:


		2017		2016		2015

Depreciation expense	$	79.8	$	75.7	$	71.6
Rental expense		47.1		41.8		37.7

The future minimum rental commitments under non-cancelable operating leases that are expected to transfer to Elanco are as follows:


		2018		2019		2020		2021		2022		After 2022

Lease commitments	$	20.0	$	18.1	$	16.7	$	15.1	$	12.5	$	27.3

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 10: Stock-Based Compensation

Lilly maintains various stock-based compensation programs for the benefit of its officers, directors and certain employees including employees of the Company. As we receive the employee services in consideration for the participation of the Company's employees in these plans, stock-based compensation expense for the awards granted to our employees has been reflected in the combined statements of operations.

Lilly's stock-based compensation granted to our employees consists of performance awards (PAs), shareholder value awards (SVAs) and restricted stock units (RSUs). The stock-based compensation expense has been derived from the equity awards granted by Lilly to our employees. The compensation expense is based on the fair value of stock-based awards which is recognized as compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period. The awards are settled by Lilly.

As the stock-based compensation plans are Lilly's plans and the awards are settled by Lilly, the offset to the expense has been recognized through net parent company investment on the combined balance sheets.

Stock-based compensation expense related to our employees for years ended December 31, 2017, 2016 and 2015 was $25.0 million, $20.4 million and $13.4 million, respectively.

Performance Award Program

PAs have been granted to certain of our officers and management and are settled in shares of Lilly's common stock. The number of PA shares actually issued, if any, varies depending on the achievement of certain pre-established earnings-per-share targets over a two-year period. PA shares are accounted for at fair value based upon the closing stock price on the date of grant and fully vest at the end of the measurement period. The fair values of PAs granted for the years ended December 31, 2017, 2016 and 2015 were $73.54, $72.00 and $70.34, respectively. The number of PA shares that will vest for the PA program is dependent upon Lilly's earnings achieved during the vesting period. Pursuant to this program, approximately 69,144 shares, 20,329 shares and 25,197 shares were issued by Lilly to our employees during the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, the total remaining unrecognized compensation cost related to nonvested PAs was $6.2 million, which will be amortized over the weighted-average remaining requisite service period of 12 months.

Shareholder Value Award Program

SVAs have been granted to certain of our officers and management and are settled in shares of Lilly's common stock. The number of shares actually issued, if any, varies depending on Lilly's stock price at the end of the three-year vesting period compared to pre-established target stock prices. We measure the fair value of the SVA unit on the grant date using a Monte Carlo simulation model. The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. Expected volatilities utilized in the model are based on implied volatilities from traded options on Lilly's stock, historical volatility of Lilly's stock price and other factors. Similarly, the dividend yield is based on historical experience and Lilly's estimate of future dividend yields. The risk-free interest rate is

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 10: Stock-Based Compensation (Continued)

derived from the U.S. Treasury yield curve in effect at the time of grant. The weighted-average fair values of the SVA units granted during the years ended December 31, 2017, 2016 and 2015 were $66.25, $48.68 and $54.81, respectively, determined using the following assumptions:


(Percents)	2017		2016		2015

Expected dividend yield	2.50	%	2.00	%	2.50	%
Risk-free interest rate	1.38		0.92		0.79
Volatility	22.91		21.68		20.37

Pursuant to this program, Lilly issued approximately 35,063 shares, 36,071 shares and 21,956 shares to our employees during the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, the total remaining unrecognized compensation cost related to nonvested SVAs was $3.7 million, which will be amortized over the weighted-average remaining requisite service period of 20 months.

Restricted Stock Units

RSUs have been granted to certain of our employees and are payable in shares of Lilly's common stock. RSU shares are accounted for at fair value based upon Lilly's closing stock price on the date of grant. The corresponding expense is amortized over the vesting period, typically three years. The fair values of RSU awards granted during the years ended December 31, 2017, 2016 and 2015 were $72.47, $71.46 and $71.69, respectively. The number of shares ultimately issued by Lilly for the RSU program remains constant with the exception of forfeitures. Pursuant to this program, 57,224, 26,468 and 32,695 RSUs were settled by Lilly with its shares to our employees during the years ended December 31, 2017, 2016 and 2015, respectively. As of December 31, 2017, the total remaining unrecognized compensation cost related to nonvested RSUs was $12.9 million, which will be amortized over the weighted-average remaining requisite service period of 21 months.

Note 11: Income Taxes

2017 Tax Act

In December 2017, the President of the U.S. signed into law the Tax Cuts and Jobs Act (2017 Tax Act). The 2017 Tax Act includes significant changes to the U.S. corporate income tax system, such as the reduction in the corporate income tax rate from 35 percent to 21 percent, transition to a territorial tax system, changes to business related exclusions, deductions and credits, and modifications to international tax provisions, including a one-time repatriation transition tax (also known as the 'Toll Tax') on unremitted foreign earnings.

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Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 11: Income Taxes (Continued)

GAAP requires that the income tax accounting effects from a change in tax laws or tax rates be recognized in continuing operations in the reporting period that includes the enactment date of the change. These effects include, among other things, re-measuring deferred tax assets and liabilities, evaluating deferred tax assets for valuation allowances and assessing the impact of the Toll Tax and certain other provisions of the 2017 Tax Act. Our accounting for the tax effects of the enactment of the 2017 Tax Act was not complete as of December 31, 2017; however, in certain cases, as described below, we have made a reasonable estimate. In other cases, we have not been able to make a reasonable estimate and continued to account for those items based on our existing accounting model under ASC 740, Income Taxes and the provisions of the tax laws that were in effect immediately prior to enactment. For the items for which we were able to determine a reasonable estimate, we recognized a provisional benefit of $33.1 million, which is included as a component of income tax expense (benefit) from continuing operations. This amount represents $33.1 million attributable to the re-measurement of deferred taxes and no amount for the Toll Tax.

Our estimate of the impact of the 2017 Tax Act is based upon our analysis and interpretations of currently available information. Uncertainties remain regarding the impact of the 2017 Tax Act due to future regulatory and rulemaking processes, prospects of additional corrective or supplemental legislation and potential trade or other litigation. These uncertainties, along with our completion of the calculations and potential changes in our initial assumptions as new information becomes available, could cause the actual charge to ultimately differ materially from the provisional amount recorded in 2017 related to the enactment of the 2017 Tax Act.

We have included provisional amounts based upon reasonable estimates for the following:

•: Toll Tax

The 2017 Tax Act imposes a one-time Toll Tax on unremitted foreign earnings and profits (E&P) at two different tax rates, with a higher tax rate applied to amounts held in cash and liquid assets. We have not yet completed our calculations of the items composing the Toll Tax, including the total post-1986 E&P of our foreign subsidiaries and amounts held as cash and liquid assets; therefore, we have not recorded a provisional amount for federal and state income taxes. The amount is also subject to change as we assimilate the new laws and subsequent regulations, interpretations and guidance as they are issued. The impact to state income tax expense is also subject to change based upon revisions ultimately made to the Toll Tax calculation, changes in our assumptions related to state taxation of the income used to calculate the Toll Tax and future guidance that may be issued.

•: Re-measurement of deferred tax assets and liabilities

The 2017 Tax Act reduced the U.S. corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. GAAP requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when these temporary differences are to be realized or settled. As a result, we determined the amount recorded to income tax expense in continuing operations by using temporary differences that approximated our deferred tax balances at the date of enactment considering any material transactions that occurred between the enactment date and December 31, 2017. We assessed the need for valuation allowances as a result of re-measuring existing temporary differences and considering tax attribute balances; changes recorded to valuation

F-24

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 11: Income Taxes (Continued)

allowances are also reflected in the 2017 Tax Act — provisional adjustment. Re-measurement of the deferred tax assets and liabilities in addition to assessment of valuation allowances is subject to uncertainties given that approximated balances were utilized for the enactment date and tax accounting method changes may be considered.

Under GAAP, the effect of a change in tax law is recorded as a component of the income tax expense (benefit) related to continuing operations in the period of enactment.

•: Executive compensation

The 2017 Tax Act includes changes to the taxation of executive compensation. We have recorded a provisional amount based upon our estimates, interpretations of the new law and external guidance.

We could not make a reasonable estimate; therefore, we did not record a provisional amount for the following items:

•: The 2017 Tax Act includes an international tax provision for the taxation of Global Intangible Low-Taxed Income (GILTI) effective January 1, 2018. Questions have surfaced as to whether the income taxes related to GILTI should be recorded in the period the tax arises or whether deferred taxes should be established for basis differences that upon reversal might be subject to GILTI. ASC 740 does not provide clear guidance on this topic and companies are allowed to make an accounting policy election. We have recorded no provisional amount for GILTI deferred taxes as more time is needed to analyze the data in order to make an accounting policy election.
•: The 2017 Tax Act includes significant changes to the U.S. international tax provisions, including GILTI, Base Erosion Anti-abuse Tax and Foreign Derived Intangible Income. For purposes of analyzing valuation allowances for net operating loss and tax credit carryforwards, we recorded no provisional amount for release of valuation allowances as more time is needed to analyze the data.

We will continue to assess the impact of the 2017 Tax Act on our combined financial statements during the measurement period, which should be no longer than one year from the 2017 Tax Act enactment date. As discussed above, the 2017 Tax Act included numerous changes to the U.S. tax system. We have made a good faith effort to identify items for which no reasonable estimate was made; however, additional items requiring accounting may be identified as we complete our analysis and new information becomes available. Therefore, no reasonable estimate has been made for items in the new tax law that have not been identified.

Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.

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Table of Contents

Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 11: Income Taxes (Continued)

Following is the composition of income (loss) before income tax expense (benefit):


		2017			2016			2015

Federal	$	(133.2	)	$	(12.5	)	$	(51.1	)
Foreign		(99.4	)		(9.9	)		(208.4	)

Loss before income taxes	$	(232.6	)	$	(22.4	)	$	(259.5	)

Following is the composition of income tax expense (benefit):


		2017			2016			2015

Current:
Foreign	$	91.6		$	31.1		$	28.0
State		(0.1	)		0.3			(0.5	)

Total current tax expense		91.5			31.4			27.5
Deferred:
Federal		42.6			18.4			(12.6	)
Foreign		(16.6	)		(26.8	)		(66.9	)
State		(6.3	)		2.5			3.3
2017 Tax Act — provisional		(33.1	)		—			—

Total deferred tax benefit		(13.4	)		(5.9	)		(76.2	)

Income taxes	$	78.1		$	25.5		$	(48.7	)

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 11: Income Taxes (Continued)

Significant components of our deferred tax assets and liabilities as of December 31 are as follows:


		2017			2016

Deferred tax assets:
Compensation and benefits	$	34.8		$	46.0
Accruals and reserves		12.0			16.9
Tax credit carryovers		19.2			15.8
Tax loss carryovers		144.9			58.7
Other		26.6			36.4

Total gross deferred tax assets		237.5			173.8
Valuation allowances		(127.7	)		(39.1	)

Total deferred tax assets		109.8			134.7
Deferred tax liabilities:
Intangibles		(165.2	)		(192.9	)
Property and equipment		(43.1	)		(55.1	)
Other		(7.4	)		(12.6	)

Total deferred tax liabilities		(215.7	)		(260.6	)

Deferred tax liabilities — net	$	(105.9	)	$	(125.9	)

Deferred tax assets and liabilities reflect the provisional impact of re-measurement resulting from the 2017 Tax Act.

The deferred tax assets and related valuation allowance amounts for U.S. federal and state net operating losses and tax credits shown above have been reduced for differences between financial reporting and tax return filings.

At December 31, 2017, we have tax credit carryovers of $19.2 million available to reduce future income taxes; $1.8 million, if unused, will expire by 2037. The remaining portion of the tax credit carryovers is related to federal tax credits of $4.5 million and state tax credits of $12.9 million, all of which are fully reserved.

At December 31, 2017, we had net operating losses and other carryovers for international and U.S. federal income tax purposes of $628.1 million: $0.7 million will expire by 2022; $540.1 million will expire between 2023 and 2037; and $87.3 million of the carryovers will never expire. Net operating losses and other carryovers for international and U.S. federal income tax purposes are partially reserved. Deferred tax assets related to state net operating losses of $23.2 million are fully reserved.

As described in our significant accounting policies, we have prepared our income taxes on a stand-alone tax basis, and as a result, tax credit and net operating loss carryovers may not be available for our use in future periods as they may have already been used in Lilly consolidated or combined tax return filings or they may be retained by Lilly upon our separation.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 11: Income Taxes (Continued)

The movements in the valuation allowance are as follows:


		2017			2016

January 1	$	(39.1	)	$	(20.5	)
Increase		(97.4	)		(21.1	)
Release		8.8			2.5

December 31	$	(127.7	)	$	(39.1	)

The 2017 Tax Act introduces international tax provisions that significantly change the U.S. taxation of foreign earnings. At December 31, 2017, no U.S. taxes or foreign withholding taxes have been accrued on unremitted earnings of our foreign subsidiaries as they are considered indefinitely reinvested for continued use in our foreign operations. This provisional amount is subject to change based upon final calculations of the Toll Tax.

Cash payments of income taxes were as follows:


		2017		2016		2015

Cash payments of income taxes	$	35.7	$	53.6	$	17.5

The 2017 Tax Act provides an election to taxpayers subject to the Toll Tax to make payments over an eight year period with the first payment due on the original filing due date of the 2017 federal income tax return. While the Toll Tax calculation is provisional, we believe we will not owe a Toll Tax liability. However, we intend to make this election in the event that our final calculation indicates an amount due; therefore, future cash payments of income taxes may include Toll Tax installments.

The following is a reconciliation of the income tax expense (benefit) applying the U.S. federal statutory rate to income before income taxes to reported income tax expense:


		2017			2016			2015

Income tax at the U.S. federal statutory tax rate	$	(81.4	)	$	(7.8	)	$	(90.8	)
Add (deduct):
International operations and change in foreign tax rates		55.6			8.4			38.4
State taxes		5.4			2.8			2.4
Income tax credits		(1.8	)		(1.7	)		(1.5	)
Foreign inclusion items		4.2			2.4			0.1
Change in uncertain tax positions		6.2			5.2			1.5
Change in valuation allowance		122.2			18.1			1.7
2017 Tax Act — provisional		(33.1	)		—			—
Other		0.8			(1.9	)		(0.5	)

Income taxes	$	78.1		$	25.5		$	(48.7	)

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 11: Income Taxes (Continued)

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:


		2017			2016			2015

Beginning balance at January 1	$	25.7		$	25.5		$	18.5
Additions based on tax positions related to the current year		7.9			7.4			3.7
Additions for tax positions of prior years		—			—			6.4
Settlements		(4.0	)		(7.1	)		(2.4	)
Changes related to the impact of foreign currency translation		—			(0.1	)		(0.7	)

Ending balance at December 31	$	29.6		$	25.7		$	25.5

The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $29.6 million and $25.7 million at December 31, 2017 and 2016, respectively. Upon our separation, these tax benefits may not be available to us as the tax benefits are attributed to the legal entity which may remain with Lilly.

We file income tax returns in the U.S. federal jurisdiction and various state, local and non-U.S. jurisdictions. Certain of these income tax returns are filed on a consolidated or combined basis with Eli Lilly and Company and/or its subsidiaries. We are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations in most major taxing jurisdictions for years before 2013.

As part of Lilly, we are included in its U.S. tax examinations by the Internal Revenue Service. The U.S. examination of tax years 2010-2012 commenced during the fourth quarter of 2013 and was effectively settled in 2016 with an immaterial impact to cash tax payments, gross uncertain tax positions and combined returns of operations. The U.S. examination of 2013-2015 began in 2016. While we believe it is reasonably possible that this audit could reach resolution within the next 12 months, the IRS examination of tax years 2013 - 2015 remains ongoing. Therefore, it is not possible to reasonably estimate the change to unrecognized tax benefits and the related future cash flows.

We recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense (benefit). We recognized income tax (benefit) expense related to interest and penalties as follows:


		2017		2016		2015

Income tax expense (benefit)	$	2.5	$	5.5	$	2.6

At December 31, 2017 and 2016, our accruals for the payment of interest and penalties totaled $17.0 million and $14.5 million, respectively.

Note 12: Retirement Benefits

Shared Lilly Plans

Our employees participated in defined benefit pension and other postretirement plans sponsored by Lilly, which include participants of Lilly's other business. Such plans are accounted

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 12: Retirement Benefits (Continued)

for as multiemployer plans in these combined financial statements and as a result, no asset or liability was recorded by the Company to recognize the funded status of these plans.

We recorded expense of $73.7 million, $11.3 million and $26.2 million for the years ended December 31, 2017, 2016 and 2015, respectively, relating to our employees' participation in Lilly sponsored plans. Included in the 2017 amount was $67.0 million related to a curtailment loss and special termination benefits for early retirement incentives offered by Lilly to our employees as part of a voluntary early retirement program for the U.S. plan and which has been recorded in asset impairment, restructuring and other special charges. No contributions have been recognized in the combined financial statements as we are not required to make contributions to these plans.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 12: Retirement Benefits (Continued)

Pension Plans

There are also certain defined benefit pension plans that our employees participate in that are either dedicated to our employees or where the plan assets and liabilities that relate to our employees are legally required to transfer to Elanco at the time of our separation from Lilly. The plans in Switzerland represent approximately 88 percent of our global benefit obligation. We use a measurement date of December 31 to develop the change in benefit obligation, change in plan assets, funded status and amounts recognized in the combined balance sheets at December 31 for our defined benefit pension plans, which were as follows:


		2017			2016

Change in benefit obligation:
Benefit obligation at beginning of year	$	225.0		$	234.7
Service cost		10.5			9.3
Interest cost		1.8			1.8
Actuarial (gain) loss		24.4			(1.6	)
Benefits paid		(18.5	)		(19.8	)
Foreign currency exchange rate changes and other adjustments		15.4			0.6

Benefit obligation at end of year		258.6			225.0
Change in plan assets:
Fair value of plan assets at beginning of year		123.7			127.4
Actual return on plan assets		13.3			(1.4	)
Employer contribution		3.9			15.3
Benefits paid		(18.5	)		(19.8	)
Foreign currency exchange rate changes and other adjustments		9.1			2.2

Fair value of plan assets at end of year		131.5			123.7

Funded status		(127.1	)		(101.3	)
Unrecognized net actuarial loss		29.1			17.2
Unrecognized prior service cost		0.7			0.6

Net amount recognized	$	(97.3	)	$	(83.5	)



Amounts recognized in the combined balance sheet consisted of:
Noncurrent assets	$	2.4		$	3.0
Other current liabilities		(0.3	)		(0.3	)
Accrued retirement benefits		(129.2	)		(104.0	)
Accumulated other comprehensive loss before income taxes		29.8			17.8

Net amount recognized	$	(97.3	)	$	(83.5	)

The unrecognized net actuarial loss and unrecognized prior service cost for these pension plans have not yet been recognized in net periodic pension costs and are included in accumulated other comprehensive loss at December 31, 2017.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 12: Retirement Benefits (Continued)

During 2018, we expect the following components of accumulated other comprehensive loss to be recognized as components of net periodic benefit cost:


Unrecognized net actuarial loss	$	1.7
Unrecognized prior service cost		0.1

Total	$	1.8

We do not expect any plan assets to be returned to us in 2018.

The following represents our weighted-average assumptions related to these pension plans as of December 31:


(Percents)	2017		2016		2015

Discount rate for benefit obligation	1.1	%	1.0	%	1.0	%
Discount rate for net benefit costs	1.0		1.0		1.2
Rate of compensation increase for benefit obligation	2.1		3.1		3.0
Rate of compensation increase for net benefit costs	3.1		3.0		2.0
Expected return on plan assets for net benefit costs	4.4		4.9		4.4

We annually evaluate the expected return on the plan assets in these pension plans. In evaluating the expected rate of return, we consider many factors, with a primary analysis of current and projected market conditions; asset returns and asset allocations; and the views of leading financial advisers and economists. We may also review our historical assumptions compared with actual results, as well as the assumptions and trend rates utilized by similar plans, where applicable.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:


		2018		2019		2020		2021		2022		2022-2026

Benefit payments	$	5.5	$	6.0	$	6.0	$	6.1	$	6.3	$	33.8

Amounts relating to these pension plans with projected benefit obligations in excess of plan assets were as follows at December 31:


		2017		2016

Projected benefit obligation	$	251.6	$	218.7
Fair value of plan assets		121.8		114.4

Amounts relating to these defined benefit pension plans with accumulated benefit obligations in excess of plan assets were as follows at December 31:


		2017		2016

Accumulated benefit obligation	$	223.1	$	180.6
Fair value of plan assets		121.8		114.4

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 12: Retirement Benefits (Continued)

The total accumulated benefit obligation for these defined benefit pension plans was $230.3 million and $186.9 million at December 31, 2017 and 2016, respectively.

Net pension expense related to these plans included the following components:


		2017			2016			2015

Service cost	$	10.5		$	9.3		$	8.4
Interest cost		1.8			1.8			2.9
Expected return on plan assets		(2.4	)		(3.4	)		(4.5	)
Amortization of prior service cost		0.1			0.1			—
Amortization of net actuarial loss		1.4			1.0			0.3

Net pension expense	$	11.4		$	8.8		$	7.1

The following represents the amounts recognized for these plans in other comprehensive loss for the years ended December 31, 2017, 2016 and 2015:


		2017			2016			2015

Actuarial loss arising during period	$	(17.0	)	$	(6.1	)	$	(13.9	)
Amortization of prior service cost included in net loss		0.1			0.1			—
Amortization of net actuarial loss included in net loss		1.4			1.0			0.3
Foreign currency exchange rate changes and other		3.5			3.0			0.3

Total other comprehensive loss during period	$	(12.0	)	$	(2.0	)	$	(13.3	)

Benefit Plan Investments

Our benefit plan investment policies are set with specific consideration of return and risk requirements in relationship to the respective liabilities. Our plan assets in our Switzerland pension plans represent approximately 92 percent of our plan assets for these pension plans. Given the long-term nature of our liabilities, these plans have the flexibility to manage an above-average degree of risk in the asset portfolios. At the investment-policy level, there are no specifically prohibited investments. However, within individual investment manager mandates, restrictions and limitations are contractually set to align with our investment objectives, ensure risk control and limit concentrations.

We manage our portfolio to minimize concentration of risk by allocating funds within asset categories. In addition, within a category we use different managers with various management objectives to eliminate any significant concentration of risk.

The investment strategy is to diversify in four major categories with a designated percentage invested in each including 25% fixed income securities, 48% equity securities, a share of 10% in Real Estate Switzerland and 17% in other alternative investments (senior loans, hedge funds and insurance-linked securities). Each category is diversified and comprised of the following:

•: Fixed-income securities — Swiss Bonds, Global Aggregates, Global Aggregate Corporates and Emerging Markets Local Currencies.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 12: Retirement Benefits (Continued)

•: Equity investments — Swiss Equities, World Equities MSCI, Low Volatility Equities (to reduce risk), Emerging Markets Equities and real estate investment trusts.
•: Real Estate in Switzerland — investment foundations and funds
•: Other investments — represents primarily private equity like investments, hedge funds, insurance-linked securities, cash and mark-to-market derivatives.

We determine the fair value of the investments based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses for all investments except hedge funds, private equity-like investments and real estate.

We determine the fair value of investments using the value reported by the partnership, adjusted for known cash flows and significant events through our reporting date. Values provided by the partnerships are primarily based on analysis of and judgments about the underlying investments. Inputs to these valuations include underlying NAVs, discounted cash flow valuations, comparable market valuations, and may also include adjustments for currency, credit, liquidity and other risks as applicable. The vast majority of these private partnerships provide us with annual audited financial statements including their compliance with fair valuation procedures consistent with applicable accounting standards.

We determine the fair value of real estate investments based on the NAV provided by the fund manager, These NAVs are developed with inputs including discounted cash flow, independent appraisal and market comparable analyses.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 12: Retirement Benefits (Continued)

The fair values of these pension plan assets as of December 31, 2017 by asset category are as follows:


				Fair Value Measurements Using

Asset Class		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Investments Valued at Net Asset Value ⁽¹⁾

Public equity securities	$	0.8	$	0.6	$	—	$	—	$	0.2
Fixed income:
Developed markets		29.9		8.2		0.1		—		21.6
Emerging markets		7.2		0.6		0.3		—		6.3
Private alternative investments:
Hedge funds		6.8		—		—		—		6.8
Equity-like funds		52.7		—		—		—		52.7
Real estate		20.2		—		—		—		20.2
Other		13.9		0.1		0.1				13.7

Total	$	131.5	$	9.5	$	0.5	$	—	$	121.5

(1): Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2017. The activity in the Level 3 investments during the year ended December 31, 2017 was not material.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 12: Retirement Benefits (Continued)

The fair values of these pension plan assets as of December 31, 2016 by asset category are as follows:


				Fair Value Measurements Using

Asset Class		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Investments Valued at Net Asset Value ⁽¹⁾

Public equity securities	$	46.2	$	0.1	$	—	$	—	$	46.1
Fixed income:
Developed markets		31.0		9.1		—		—		21.9
Emerging markets		5.6		—		—		—		5.6
Private alternative investments:
Hedge funds		6.4		—		—		—		6.4
Other		34.5		21.7		—		—		12.8

Total	$	123.7	$	30.9	$	—	$	—	$	92.8

(1): Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy.

No material transfers between Level 1, Level 2, or Level 3 occurred during the year ended December 31, 2016. The activity in the Level 3 investments during the year ended December 31, 2016 was not material.

In 2018, we expect to contribute approximately $6 million to these pension plans to satisfy minimum funding requirements for the year. Additional discretionary contributions are not expected to be significant.

Retiree Health Benefit Plan

There is a retiree health benefit plan where the plan liabilities that relate to our employees are legally required to transfer to Elanco at the time of separation from Lilly. The accrued retirement benefits for this plan were $9.8 million and $9.8 million as of December 31, 2017 and 2016, respectively.

Defined Contribution Plans

Lilly has defined contribution savings plans that include certain of our employees worldwide. The purpose of these plans is generally to provide additional financial security during retirement by providing employees with an incentive to save. Our contributions to the plans are based on our employee contributions and the level of our match. Expenses related to our employees under the plans totaled $22.1 million, $19.6 million and $16.2 million for the years ended December 31, 2017, 2016, and 2015, respectively.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 13: Contingencies

We are a party to various legal actions in the normal course of business. We record a liability if there is a claim for which it is probable we will make a payment and the amount is estimable. At December 31, 2017 and 2016 we had no liabilities established related to litigation as there are no claims which were probable and estimable. We have not historically had any significant litigation expense and are not currently subject to any claim.

Note 14: Other Comprehensive Loss

The following table summarizes the activity related to each component of other comprehensive loss:


(Amounts presented net of taxes)		Foreign Currency Translation Gains (Losses)			Defined Benefit Pension and Retiree Health Benefit Plans			Accumulated Other Comprehensive Loss

Beginning balance at January 1, 2015	$	(63.0	)	$	(3.5	)	$	(66.5	)
Net other comprehensive income (loss)		(143.6	)		(11.8	)		(155.4	)

Balance at December 31, 2015		(206.6	)		(15.3	)		(221.9	)
Net other comprehensive income (loss)		(230.7	)		(4.3	)		(235.0	)

Balance at December 31, 2016		(437.3	)		(19.6	)		(456.9	)
Net other comprehensive income (loss)		210.1			(9.8	)		200.3

Ending balance at December 31, 2017	$	(227.2	)	$	(29.4	)	$	(256.6	)

Note 15: Geographic Information

We operate as a single operating segment engaged in the development, manufacturing, marketing and sales of animal health products worldwide for both food animals ("FA") and companion animals ("CA"). Consistent with our operational structure, our President and Chief Executive Officer ("CEO"), as the chief operating decision maker, makes resource allocation and business process decisions globally across our consolidated business. Strategic decisions are managed globally with global functional leaders responsible for determining significant costs/investments and with regional leaders responsible for overseeing the execution of the global strategy. Our global research and development organization is responsible for development of new products. Our manufacturing organization is responsible for the manufacturing and supply of products and for the optimization of our supply chain. Regional leaders are responsible for the distribution and sale of our products and for local direct costs. The business is also supported by global corporate staff functions. Managing and allocating resources at the global corporate level enables our CEO to assess the overall level of resources available and how to best deploy these resources across functions, product types, regional commercial organizations and research and development projects in line with our overarching long-term corporate-wide strategic goals, rather than on a product or geographic basis. Consistent with this decision-making process, our CEO uses consolidated, single-segment financial information for purposes of evaluating performance,

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 15: Geographic Information (Continued)

allocating resources, setting incentive compensation targets, as well as forecasting future period financial results.

Our products include Rumensin®, Optaflexx®, Denagard®, Tylan®, Maxiban® and other products for livestock and poultry, as well as Trifexis®, Interceptor®, Comfortis® and other products for companion animals. Our results for the year ended December 31, 2017 includes the results of operations from BIVIVP, which was acquired on January 3, 2017 (Note 4).

We have a single customer that accounted for 12.9%, 11.7% and 9.1% of revenue for the years ended December 31, 2017, 2016 and 2015, respectively, and that represented accounts receivable of $88.0 million and $52.8 million as of December 31, 2017 and 2016, respectively.

We are exposed to the risk of changes in social, political and economic conditions inherent in foreign operations and our results of operations and the value of our foreign assets are affected by fluctuations in foreign currency exchange rates.

The following table summarizes our revenue activity:


		2017		2016		2015

CA Disease Prevention	$	660.2	$	628.4	$	591.2
CA Therapeutics		260.8		255.6		245.2
CA Other		143.8		89.5		82.9
FA Future Protein & Health		649.2		630.8		633.2
FA Ruminants Swine		1,175.0		1,309.2		1,356.6

Total Revenue	$	2,889.0	$	2,913.5	$	2,909.1

Selected geographic area information was as follows:


		2017		2016		2015

Geographic Information
Revenue — to unaffiliated customers ⁽¹⁾ :
United States	$	1,373.0	$	1,361.6	$	1,318.9
International		1,516.0		1,551.9		1,590.2

Revenue	$	2,889.0	$	2,913.5	$	2,909.1



Long-lived assets ⁽²⁾ :
United States	$	604.7	$	463.8	$	406.8
United Kingdom		204.4		190.6		240.3
Other foreign countries		190.2		173.0		223.1

Long-lived assets	$	999.3	$	827.4	$	870.2

(1): Revenue is attributed to the countries based on the location of the customer.
(2): Long-lived assets consist of property and equipment, net, and certain noncurrent assets.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 16: Related Party Transactions

The Company has not historically operated as a standalone business and has various relationships with Lilly whereby Lilly provides services to the Company.

Transfers to/from Lilly, net

As discussed in the basis of preparation, net parent company investment is primarily impacted by contributions from Lilly which are the result of treasury activity and net funding provided by or distributed to Lilly. For the years ended December 31, 2017, 2016, and 2015, the net transfers (to)/from Lilly were $873.3 million, ($129.2) million and $5,366.6 million, respectively. The most significant activity impacting these transfers was the financing by Lilly of Elanco's acquisitions in the amount of $882.1 million for BIVIVP in 2017, $45.0 million for Galliprant in 2016, and $5,283.1 million for Novartis AH business in 2015. Other activities that impacted the net transfers to/from Lilly, but to a lesser extent, include corporate overhead and other allocations, income taxes, retirement benefits and centralized cash management.

Corporate Overhead and Other Allocations

The financial information in these combined financial statements does not necessarily include all the expenses that would have been incurred had the Company been a separate, standalone entity. Lilly provides the Company certain services, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. The Company provides Lilly certain services related to manufacturing support. Our combined financial statements reflect an allocation of these costs. When specific identification is not practicable, a proportional cost method is used, primarily based on sales, and headcount.

The allocations of services from Lilly to the Company were reflected as follows in the combined statements of operations:


		2017		2016		2015

Cost of sales	$	31.8	$	32.5	$	25.9
Research and development		2.8		2.3		6.3
Marketing, selling and administrative		117.1		110.5		123.8

Total	$	151.7	$	145.3	$	156.0

The Company provides Lilly certain services related to manufacturing support. Allocations of manufacturing support from the Company to Lilly of $6.2 million, $5.5 million and $6.3 million for the years ended December 31, 2017, 2016 and 2015, respectively, reduced cost of sales in the combined statements of operations.

The financial information herein may not necessarily reflect the combined financial position, results of operations and cash flows of the Company in the future or what they would have been had the Company been a separate, standalone entity during the periods presented. Management believes that the methods used to allocate expenses to the Company are reasonable.

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Animal Health Businesses of Eli Lilly to be Divested

Notes to Combined Financial Statements (Continued)

(Tables present dollars in millions)

Note 16: Related Party Transactions (Continued)

Stock-based Compensation

As discussed in Note 10, the Company's employees participate in Lilly stock-based compensation plans, the costs of which have been allocated to the Company and recorded in cost of sales, research and development, and marketing, selling and administrative expenses in the combined statements of operations. Stock-based compensation costs related to the Company's employees were $25.0 million, $20.4 million and $13.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Retirement Benefits

As discussed in Note 12, the Company's employees participate in defined benefit pension and other postretirement plans sponsored by Lilly, the costs of which have been recorded in the combined statement of operations in cost of sales, research and development, and marketing, selling and administrative expenses and for 2017 in asset impairment, restructuring, and other special charges for the portion related to curtailment and special termination benefits. The costs of such plans related to the Company's employees were $73.7 million, $11.3 million and $26.2 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Centralized Cash Management

Lilly uses a centralized approach to cash management and financing of operations. The majority of the Company's business is party to Lilly's cash pooling arrangements to maximize Lilly's availability of cash for general operating and investing purposes. Under these cash pooling arrangements, cash balances are swept regularly from the Company's accounts. Cash transfers to and from Lilly's cash concentration accounts and the resulting balances at the end of each reporting period are reflected in net parent company investment in the combined balance sheets.

Debt

Lilly's third-party debt and the related interest expense have not been allocated to the Company for any of the periods presented as the Company was not the legal obligor of the debt and Lilly borrowings were not directly attributable to the Company's businesses.

Commercial Operations

The Company sells certain products to and receives certain goods and services from a customer/vendor, whose chairman and Chief Executive Officer is a member of Lilly's Board of Directors. These product sales resulted in revenue of $24.8 million, $14.3 million and $16.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. These product sales resulted in accounts receivable of $2.0 million and $0.8 million at December 31, 2017 and 2016, respectively. The purchase of goods and services resulted in cost of sales and operating expenses of $5.9 million, $7.1 million and $3.6 million for the years ended December 31, 2017, 2016 and 2015, respectively. The purchase of goods and services resulted in accounts payable of $0.3 million and $0.4 million at December 31, 2017 and 2016, respectively.

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Table of Contents

Condensed Combined Statements of Operations

(Unaudited)

Animal Health Businesses of Eli Lilly to be Divested

(Dollars in millions)


		Six Months Ended June 30,

		2018		2017

Revenue	$	1,506.4	$	1,437.6
Costs, expenses and other:
Cost of sales		791.5		712.7
Research and development		126.6		127.9
Marketing, selling and administrative		371.1		388.4
Amortization of intangible assets		98.6		109.4
Asset impairments, restructuring and other special charges (Note 4)		70.4		165.6
Other — net, (income) expense		10.7		1.6

		1,468.9		1,505.6

Income (loss) before income taxes		37.5		(68.0	)
Income tax expense		27.6		60.5

Net income (loss)	$	9.9	$	(128.5	)

See notes to condensed combined financial statements.

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Table of Contents

Condensed Combined Statements of Comprehensive Income (Loss)

(Unaudited)

Animal Health Businesses of Eli Lilly to be Divested

(Dollars in millions)


		Six Months Ended June 30,

		2018			2017

Net income (loss)	$	9.9		$	(128.5	)
Other comprehensive income (loss), net of tax		(104.3	)		235.8

Comprehensive income (loss)	$	(94.4	)	$	107.3

See notes to condensed combined financial statements.

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Table of Contents

Condensed Combined Balance Sheets

Animal Health Businesses of Eli Lilly to be Divested

(Dollars in millions)


		June 30, 2018			December 31, 2017

		(Unaudited)
Assets
Current Assets
Cash and cash equivalents	$	321.0		$	323.4
Accounts receivable, net of allowances of $9.1 (2018) and $9.8 (2017)		587.8			567.4
Other receivables		35.9			34.5
Inventories (Note 5)		1,005.6			1,062.3
Prepaid expenses and other		106.6			136.1

Total current assets		2,056.9			2,123.7

Noncurrent Assets
Investments (Note 6)		12.8			12.3
Goodwill		2,932.3			2,969.2
Other intangibles, net		2,534.9			2,672.8
Other noncurrent assets		162.8			242.0
Property and equipment, net of accumulated depreciation of $835.8 (2018) and $834.1 (2017)		877.7			920.3

Total assets	$	8,577.4		$	8,940.3



Liabilities and Equity
Current Liabilities
Accounts payable	$	193.9		$	203.8
Employee compensation		65.4			89.3
Sales rebates and discounts		127.6			155.0
Other current liabilities		171.5			184.5

Total current liabilities		558.4			632.6
Noncurrent Liabilities
Accrued retirement benefits		142.6			139.0
Deferred taxes		175.5			251.9
Other noncurrent liabilities		114.3			126.0

Total liabilities		990.8			1,149.5

Commitments and Contingencies (Note 8)
Equity
Net parent company investment		7,947.5			8,047.4
Accumulated other comprehensive loss		(360.9	)		(256.6	)

Total equity		7,586.6			7,790.8

Total liabilities and equity	$	8,577.4		$	8,940.3

See notes to condensed combined financial statements.

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Condensed Combined Statements of Equity

(Unaudited)

Animal Health Businesses of Eli Lilly to be Divested

(Dollars in millions)


					Accumulated Other Comprehensive Income (Loss)

		Net Parent Company Investment			Foreign Currency Translation			Defined Benefit Pension and Retiree Health Benefit Plans			Total			Total Equity

Balance at December 31, 2016	$	7,484.8		$	(437.3	)	$	(19.6	)	$	(456.9	)	$	7,027.9
Net loss		(128.5	)		—			—			—			(128.5	)
Other comprehensive income, net of tax		—			233.3			2.5			235.8			235.8
Transfers to/from Lilly, net		824.6			—			—			—			824.6

Balance at June 30, 2017	$	8,180.9		$	(204.0	)	$	(17.1	)	$	(221.1	)	$	7,959.8



Balance at December 31, 2017	$	8,047.4		$	(227.2	)	$	(29.4	)	$	(256.6	)	$	7,790.8
Adoption of Accounting Standards Update 2016-16		(0.3	)											(0.3	)
Net income		9.9			—			—			—			9.9
Other comprehensive income (loss), net of tax		—			(105.7	)		1.4			(104.3	)		(104.3	)
Transfers to/from Lilly, net		(109.5	)		—			—			—			(109.5	)

Balance at June 30, 2018	$	7,947.5		$	(332.9	)	$	(28.0	)	$	(360.9	)	$	7,586.6

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Condensed Combined Statements of Cash Flows

(Unaudited)

Animal Health Businesses of Eli Lilly to be Divested

(Dollars in millions)


		Six Months Ended June 30,

		2018			2017

Cash Flows from Operating Activities
Net income (loss)	$	9.9		$	(128.5	)
Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities:
Depreciation and amortization		149.6			156.1
Change in deferred income taxes		10.8			(0.6	)
Stock-based compensation expense		13.3			12.5
Asset impairment charges		97.9			43.8
Gain on sale of assets		—			(16.0	)
Other changes in operating assets and liabilities, net of acquisitions and divestitures		(98.3	)		20.2
Other non-cash operating activities, net		0.7			3.1

Net Cash Provided by Operating Activities		183.9			90.6

Cash Flows from Investing Activities
Net purchases of property and equipment		(56.5	)		(10.0	)
Cash paid for acquisitions, net of cash acquired		—			(882.1	)
Other investing activities, net		(1.0	)		(11.7	)

Net Cash Used for Investing Activities		(57.5	)		(903.8	)

Cash Flows from Financing Activities
Net transactions with Lilly		(122.8	)		812.1
Other financing activities, net		(0.9	)		(0.2	)

Net Cash Provided by (Used for) Financing Activities		(123.7	)		811.9

Effect of exchange rate changes on cash and cash equivalents		(5.1	)		6.9

Net increase (decrease) in cash and cash equivalents		(2.4	)		5.6
Cash and cash equivalents at January 1		323.4			258.8

Cash and Cash Equivalents at June 30	$	321.0		$	264.4

See notes to condensed combined financial statements.

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Table of Contents

Notes to Condensed Combined Financial Statements

(Unaudited)

(Tables present dollars in millions)

Note 1: Nature of Business and Basis of Presentation

Nature of Business

The accompanying unaudited condensed combined financial statements represent the assets, liabilities and results of operations related to the animal health businesses to be transferred to Elanco Parent, which includes the animal health businesses that share people, manufacturing locations and activities. The combined animal health businesses to be transferred from Lilly to Elanco Parent are referred to throughout these unaudited condensed combined financial statements as Elanco, the Company, we, us or our.

Basis of Presentation

We have prepared the accompanying unaudited condensed combined financial statements in accordance with the requirements for interim reporting and, therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States (GAAP). In our opinion, the financial statements reflect all adjustments (including those that are normal and recurring) that are necessary for a fair presentation of the results of operations for the periods shown. In preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from those estimates.

The information included in this interim report should be read in conjunction with our combined financial statements and accompanying notes included elsewhere in this prospectus.

The accompanying unaudited condensed combined financial statements have been prepared on a standalone basis and are derived from Lilly's consolidated financial statements and accounting records. The unaudited condensed combined financial statements reflect the financial position, results of operations and cash flows related to the animal health businesses that will be transferred to Elanco Parent and are prepared in conformity with accounting principles generally accepted in the United States (GAAP). Lilly will transfer to Elanco Parent only the assets, liabilities and operations for business activities that will constitute the ongoing animal health businesses. These businesses operate on an integrated basis with shared people, manufacturing facilities, distribution centers, product types and the associated facilities that are being transferred to Elanco Parent.

These unaudited condensed combined financial statements include the attribution of certain assets and liabilities that historically have been held at the Lilly corporate level but which are specifically identifiable or attributable to the businesses being transferred to Elanco Parent. All intercompany transactions and accounts within Elanco have been eliminated. All transactions

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Table of Contents

Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 1: Nature of Business and Basis of Presentation (Continued)

between us and Lilly are considered to be effectively settled in the unaudited condensed combined financial statements at the time the transaction is recorded. The total net effect of the settlement of these intercompany transactions is reflected in the condensed combined statements of cash flows as a financing activity and in the condensed combined balance sheets as net parent company investment.

These unaudited condensed combined financial statements include an allocation of expenses related to certain Lilly corporate functions, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. These expenses have been allocated to us based on direct usage or benefit where specifically identifiable, with the remainder allocated primarily on a pro rata basis of revenue, headcount and other measures. We consider the expenses methodology and results to be reasonable for all periods presented. However, the allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent, publicly traded company for the periods presented. It is impractical to estimate what the standalone costs of Elanco would have been in the historical periods.

The income tax amounts in these unaudited condensed combined financial statements have been calculated based on a separate return methodology and presented as if our operations were separate taxpayers in the respective jurisdictions. We file income tax returns in the United States (U.S.) federal jurisdiction and various state, local and non-U.S. jurisdictions. Certain of these income tax returns are filed on a consolidated or combined basis with Eli Lilly and Company and/or its subsidiaries.

Lilly maintains various benefit and combined stock-based compensation plans at a corporate level and other benefit plans at a country level. Our employees participate in such programs and the portion of the cost of those plans related to our employees is included in our financial statements. However, the condensed combined balance sheets do not include any equity issued related to stock-based compensation plans or any net benefit plan obligations unless the benefit plan covers only our dedicated employees or where the legal obligation associated with the benefit plan will transfer to Elanco.

The equity balance in these unaudited condensed combined financial statements represents the excess of total assets over liabilities, including intercompany balances between us and Lilly (net parent company investment) and accumulated other comprehensive loss. Net parent company investment is primarily impacted by contributions from Lilly which are the result of treasury activities and net funding provided by or distributed to Lilly. See Note 10 for further information.

Note 2: Revenue

Effective January 1, 2018, we adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09) and other related updates. The new standard has been applied to contracts for which performance had not been completed as of the date of adoption. Revenue presented for periods prior to 2018 were accounted for under previous standards and has not been adjusted. Revenue and net income for the six months ended June 30, 2018 do not differ materially from amounts that would have resulted from application of the previous standards.

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Table of Contents

Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 2: Revenue (Continued)

Product Sales

We recognize revenue primarily from product sales to customers. Revenue from sales of products is recognized at the point where the customer obtains control of the goods and we satisfy our performance obligation, which generally is at the time we ship the product to the customer. Payment terms differ by jurisdiction and customer, but payment terms in most of our major jurisdictions typically range from 30 to 100 days from date of shipment. Revenue for our product sales has not been adjusted for the effects of a financing component as we expect, at contract inception, that the period between when we transfer control of the product and when we receive payment will be one year or less. Any exceptions are either not material or we collect interest for payments made after the due date. Provisions for rebates and discounts, and returns are established in the same period the related sales are recognized. We generally ship product shortly after orders are received; therefore, we generally only have a few days of orders received but not yet shipped at the end of any reporting period. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are imposed on our sales of product and collected from a customer.

Significant judgments must be made in determining the transaction price for our sales of products related to anticipated rebates and discounts, and returns. The following describe the most significant of these judgments:

Sales Rebates and Discounts — Background and Uncertainties

•: Most of our animal health products are sold to wholesale distributors. We initially invoice our customers at contractual list prices. Contracts with direct and indirect customers may provide for various rebates and discounts that may differ in each contract. As a consequence, to determine the appropriate transaction price for our product sales at the time we recognize a sale to a direct customer, we must estimate any rebates or discounts that ultimately will be due to the direct customer and other customers in the distribution chain under the terms of our contracts. Significant judgments are required in making these estimates.
•: The rebate and discount amounts are recorded as a deduction to arrive at our net product sales. We estimate these accruals using an expected value approach.
•: In determining the appropriate accrual amount, we consider our historical experience with similar incentives programs and current sales data to estimate the impact of such programs on revenue and continually monitor the impact of this experience and adjust as necessary. Although we accrue a liability for rebates related to these programs at the time we record the sale, the rebate related to that sale is typically paid up to six months after rebate or incentive period expires. Because of this time lag, in any particular period our rebate adjustments may incorporate revisions of accruals for several periods.

Our sales rebates and discounts are based on specific agreements and the majority relate to sales in the U.S. The liability for sales rebates and discounts in the U.S. represents approximately

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Table of Contents

Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 2: Revenue (Continued)

70% of our total liability with the next largest country representing approximately 6% of our total liability.

The following table summarizes the activity in the sales rebates and discounts liability in the United States:


		Six Months Ended June 30,

		2018			2017

Beginning balance at January 1	$	104.3		$	105.6
Reduction of Revenue		100.7			136.3
Payments		(116.4	)		(133.7	)

Ending balance at June 30	$	88.6		$	108.2

Adjustments to revenue recognized as a result of changes in estimates for the judgments described above during the six months ended June 30, 2018, for product shipped in previous periods were not material.

Sales Returns — Background and Uncertainties

•: We estimate a reserve for future product returns related to product sales using an expected value approach. This estimate is based on several factors, including: local returns policies and practices; returns as a percentage of revenue; an understanding of the reasons for past returns; estimated shelf life by product; and estimate of the amount of time between shipment and return to estimate the impact of sales returns. Adjustments to the returns reserve have been and may in the future be required based on revised estimates to our assumptions, which would have an impact on our combined results of operations. We record the return amounts as a deduction to arrive at our net product sales.
•: Actual product returns have been less than 2 percent of our net revenue for the six months ended June 30, 2018 and 2017 and have not fluctuated significantly as a percentage of revenue.

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Table of Contents

Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 2: Revenue (Continued)

Disaggregation of Revenue

The following table summarizes our revenue disaggregated by product category:


		Six Months Ended June 30,

		2018		2017

Companion Animal Disease Prevention	$	415.3	$	379.3
Companion Animal Therapeutics		130.6		118.3
Companion Animal Other ^(a)		41.6		71.6
Food Animal Future Protein & Health		339.3		291.5
Food Animal Ruminants Swine		579.6		576.9

Revenue	$	1,506.4	$	1,437.6

(a): The Companion Animal Other for the six months ended June 30, 2018 and 2017 reflects an equine product not core to our business exited in 2018 to facilitate comparability. Revenue from this product was $1.6 million and $1.5 million for the six months ended June 30, 2018 and 2017, respectively.

Note 3: Implementation of New Financial Accounting Pronouncements

The following table provides a brief description of accounting standards that were effective January 1, 2018 and were adopted on that date:


Standard	Description	Effect on the financial statements or other significant matters

Accounting Standards Update 2014-09 and various other related updates, Revenue from Contracts with Customers	This standard replaced existing revenue recognition standards and requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity can apply the new revenue standard retrospectively to each prior reporting period presented or with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. We applied the latter approach.	Application of the new standard to applicable contracts had no impact to net parent company investment as of January 1, 2018. Disclosures required by the new standard are included in Note 2.

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Table of Contents

Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 3: Implementation of New Financial Accounting Pronouncements (Continued)


Standard	Description	Effect on the financial statements or other significant matters

Accounting Standards Update 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory	This standard requires entities to recognize the income tax consequences of intra-entity transfers of assets other than inventory at the time of transfer. This standard requires a modified retrospective approach to adoption.	The cumulative effect of initially applying the standard resulted in a decrease to net parent company investment of approximately $0.3 million. Adoption of this standard did not result in a material change in net income for the six months ended June 30, 2018.
Accounting Standards Update 2017-07, Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost	This standard was issued to improve the transparency and comparability among organizations by requiring entities to separate their net periodic pension cost and net periodic postretirement benefit cost into a service cost component and other components. Previously, the costs of the other components along with the service cost component were classified based upon the function of the employee. This standard requires entities to classify the service cost component in the same financial statement line item or items as other compensation costs arising from services rendered by pertinent employees. The other components of net benefit cost are now presented separately from the line items that include the service cost component. When applicable, the service cost component is now the only component eligible for capitalization. An entity should apply the new standard retrospectively for the classification of the service cost and other components and prospectively for the capitalization of the service cost component.	Upon adoption of this standard, pension and postretirement benefit cost components other than service costs are presented in other — net, (income) expense. Retrospective application was not material to the combined statement of operations for the six months ended June 30, 2017. We do not expect application of the new standard to have a material impact on an ongoing basis.

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Table of Contents

Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 3: Implementation of New Financial Accounting Pronouncements (Continued)

The following table provides a brief description of the accounting standard that has not yet been adopted and could have a material effect on our financial statements:

Note 4: Asset Impairment, Restructuring, and Other Special Charges

The Company has historically participated in Lilly's cost-reduction initiatives. The Company's total charges related to asset impairment, restructuring and other special charges, including integration of acquired businesses, in our condensed combined statements of operations consisted of the following:


		Six Months Ended June 30,

		2018			2017

Cash expense:
Severance	$	(2.6	)	$	56.3
Integration		5.6			68.7
Exit costs		9.7			12.8

Total cash expense		12.7			137.8

Non-cash expense
Asset impairment		57.7			43.8

Total non-cash expense		57.7			43.8

Gain on sale of fixed assets		—			(16.0	)

Total	$	70.4		$	165.6

Severance costs recognized during the six months ended June 30, 2017 were incurred as a result of actions taken to reduce our cost structure.

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 4: Asset Impairment, Restructuring, and Other Special Charges (Continued)

Integration costs recognized during the six months ended June 30, 2018 and 2017 were related to our integration efforts as a result of our acquired businesses.

Exit costs primarily represent contract termination costs and reserves for costs related to facilities which we have exited.

Asset impairment and other special charges recognized during the six months ended June 30, 2018 resulted primarily from $19.9 million of intangible asset impairments and $37.8 million of fixed asset impairments. The intangible asset impairments primarily related to revised projections of fair value due to product rationalization. The fixed asset impairments were primarily due to our decision to dispose of a manufacturing facility in the United States and to the suspension of commercial activities for Imrestor®.

Asset impairment recognized during the six months ended June 30, 2017 resulted primarily from intangible asset impairments related to revised projections of fair value due to product rationalization and to a lessor extent competitive pressures. The fair value measurements utilized to determine the intangible asset impairments in 2018 and 2017 represent level three fair value measurements.

Gain on sale of fixed assets for the six months ended June 30, 2017 represent gain on disposal of a site that we previously closed as part of our acquisition and integration of Novartis AH.

The following table summarizes the activity in our reserves established in connection with these restructuring activities:


		Exit costs			Severance			Total

Balance at December 31, 2016	$	11.5		$	26.6		$	38.1
Charges		12.8			56.3			69.1
Cash paid		(7.1	)		(42.5	)		(49.6	)

Balance at June 30, 2017	$	17.2		$	40.4		$	57.6



Balance at December 31, 2017	$	34.9		$	43.1		$	78.0
Charges		9.7			(2.6	)		7.1
Cash paid		(9.9	)		(28.4	)		(38.3	)

Balance at June 30, 2018	$	34.7		$	12.1		$	46.8

Substantially all of the reserves are expected to be paid in the next 12 months. The Company believes that the reserves are adequate.

Note 5: Inventories

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 5: Inventories (Continued)

Inventories consisted of the following:


		June 30, 2018			December 31, 2017

Finished products	$	400.0		$	452.0
Work in process		578.6			580.0
Raw materials and supplies		69.0			70.4

Total (approximates replacement cost)		1,047.6			1,102.4
Decrease to LIFO cost		(42.0	)		(40.1	)

Inventories	$	1,005.6		$	1,062.3

During the six months ended June 30, 2018, we recognized $40.2 million of inventory write-offs in cost of sales primarily related to the suspension of commercial activities for Imrestor.

Note 6: Financial Instruments

A large portion of our cash, which is legally owned by us and is recognized on the condensed combined balance sheets, is held by a few major financial institutions. Lilly monitors the exposure with these institutions and does not expect any of these institutions to fail to meet their obligations. We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents. The cost of these investments approximates fair value.

As of June 30, 2018 and December 31, 2017, we had $12.8 million and $12.3 million, respectively, of cost and equity method investments.

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 6: Financial Instruments (Continued)

The following table summarizes the fair value information at June 30, 2018 and December 31, 2017 for contingent consideration liabilities measured at fair value on a recurring basis:


			Fair Value Measurements Using

Financial statement line item		Carrying Amount	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value

June 30, 2018
Other current liabilities- contingent consideration	$	15.9	—	—	$	15.9	$	15.9
Other noncurrent liabilities- contingent consideration		41.1	—	—		41.1		41.1
December 31, 2017
Other current liabilities- contingent consideration		1.3	—	—		1.3		1.3
Other noncurrent liabilities- contingent consideration		45.2	—	—		45.2		45.2

Contingent consideration liabilities relate to Galliprant for which the fair value was estimated using a discounted cash flow analysis and Level 3 inputs, including projections representative of a market participant view for the probability of achieving potential future payments to Aratana Therapeutics, Inc. and an estimated discount rate. The amount to be paid is dependent upon certain development, success-based regulatory, and sales-based milestones. In addition, the amount of royalties to be paid is calculated as a percentage of net sales dependent upon the timing and geography and will, therefore, vary directly with increases and decreases in net sales of Galliprant . There is no cap on the amount that may be paid pursuant to this arrangement. During the six months ended June 30, 2018 as a result of an increase in the projected cash flows related to Galliprant, we increased the fair value of the contingent consideration liabilities by $8.5 million. The additional expense was recognized in other-net, (income) expense.

Note 7: Income Taxes

During the periods presented in the combined financial statements, Elanco was generally included in the tax grouping of other Lilly entities within the respective entity's tax jurisdiction; however, in certain jurisdictions, Elanco filed separate tax returns. The income tax expense included in these combined financial statements has been calculated using the separate return basis as if Elanco filed separate tax returns. As a result, tax credit and net operating loss carryovers may not be available for our use in future periods as they may have already been used in Lilly consolidated or combined tax return filings or they may be retained by Lilly upon separation.

During the six months ended June 30, 2018 we incurred $27.6 million of income tax expense despite earning $37.5 million of income before taxes. Our effective tax rate was 73.6% and the income tax expense recorded relates primarily to our foreign jurisdictions as a valuation allowance was recorded on net operating loss assets generated in the U.S. due to certain asset impairment,

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 7: Income Taxes (Continued)

restructuring, and other special charges. During the six months ended June 30, 2017 despite reporting a $68.0 million loss before income taxes, we incurred $60.5 million of income tax expense. The tax expense recorded relates primarily to income generated in certain foreign jurisdictions as a valuation allowance was recorded on net operating loss assets generated in the U.S.

In December 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (2017 Tax Act), which includes significant changes to the U.S. corporate income tax system, including a reduction in the corporate income tax rate, transition to a territorial tax system, and modifications to the international tax provisions. At June 30, 2018, our accounting for the 2017 Tax Act is incomplete; however, we expect to complete our accounting by December 2018. As discussed in our 2017 combined financial statements, we recorded provisional adjustments for effects that we were able to reasonably estimate. Those effects included the one-time repatriation transition tax (also known as the 'Toll Tax'), re-measurement of deferred tax assets and liabilities, unremitted earnings, executive compensation, and uncertain tax positions. At December 31, 2017, we were not able to make reasonable estimates for Global Intangible Low-Taxed Income (GILTI) deferred taxes or valuation allowances; therefore, we did not record provisional amounts. We are still evaluating the effects of the GILTI provisions and assessing our valuation allowances, and we have not yet determined our accounting policy election with respect to GILTI deferred taxes or the application of intra-entity transfers of inventory; therefore, the estimated annual effective tax rate reflects GILTI as a period expense. For the six months ended June 30, 2018, we have not made any additional measurement-period adjustments related to these provisional items as we are continuing to collect and analyze additional information as well as evaluate the interpretations and assumptions made. Updates to our calculations may result in material changes to the provisional adjustments recorded at December 31, 2017 and the estimated annual effective tax rate.

As part of Lilly, we are included in its U.S. tax examinations by the Internal Revenue Service ("IRS"). The U.S. examination of tax years 2013-2015 began in 2016. While we believe it is reasonably possible that this audit could reach resolution within the next 12 months, the IRS examination of tax years 2013-2015 remains ongoing. Therefore, it is not possible to reasonably estimate the change to unrecognized tax benefits and the related future cash flows.

Note 8: Contingencies

We are a party to various legal actions in the normal course of business. We record a liability if there is a claim for which it is probable we will make a payment and the amount is estimable. At June 30, 2018 and December 31, 2017 we had no liabilities established related to litigation as there are no claims which were probable and estimable. We have not historically had any significant litigation expense and are not currently subject to any claim.

Note 9: Geographic Information

We operate as a single operating segment engaged in the development, manufacturing, marketing and sales of animal health products worldwide for both food animals and companion animals. Consistent with our operational structure, our President and Chief Executive Officer ("CEO"), as the chief operating decision maker, makes resource allocation and business process

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 9: Geographic Information (Continued)

decisions globally across our consolidated business. Strategic decisions are managed globally with global functional leaders responsible for determining significant cost/investments and with regional leaders responsible for overseeing the execution of the global strategy. Our global research and development organization is responsible for development of new products. Our manufacturing organization is responsible for the manufacturing and supply of products and for the optimization of our supply chain. Regional leaders are responsible for the distribution and sale of our products and for local direct costs. The business is also supported by global corporate staff functions. Managing and allocating resources at the global corporate level enables our CEO to assess the overall level of resources available and how to best deploy these resources across functions, product types, regional commercial organizations and research and development projects in line with our overarching long-term corporate-wide strategic goals, rather than on a product or geographic basis. Consistent with this decision-making process, our CEO uses consolidated, single-segment financial information for purposes of evaluating performance, allocating resources, setting incentive compensation targets, as well as forecasting future period financial results.

We have a single customer that accounted for 11.7% and 13.1% of revenue for the six months ended June 30, 2018 and 2017, respectively. The product sales resulted in accounts receivable of $82.3 million and $88.0 million as of June 30, 2018 and December 31, 2017, respectively.

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 9: Geographic Information (Continued)

Selected geographic area information was as follows:


		Six Months Ended June 30,

		2018		2017

Revenue — to unaffiliated customers ⁽¹⁾
United States	$	726.4	$	733.2
International		780.0		704.4

Revenue	$	1,506.4	$	1,437.6


		June 30, 2018		December 31, 2017

Long-lived assets ⁽²⁾
United States	$	561.1	$	604.7
United Kingdom		194.7		204.4
Other foreign countries		189.3		190.2

Long-lived assets	$	945.1	$	999.3

(1): Revenue is attributed to the countries based on the location of the customer.
(2): Long-lived assets consist of property and equipment, net, and certain noncurrent assets.

Note 10: Related Party Transactions

The Company has not historically operated as a standalone business and has various relationships with Lilly whereby Lilly provides services to the Company.

Transfers to/from Lilly, net

As discussed in the basis of preparation, net parent company investment is primarily impacted by contributions from Lilly which are the result of treasury activity and net funding provided by or distributed to Lilly. For the six months ended June 30, 2018 and 2017, the net transfers (to)/from Lilly were $(109.5) million and $824.6 million, respectively. The most significant activity impacting the 2017 transfer was the financing by Lilly of Elanco's acquisitions in the amount of $882.1 million for Boehringer Ingelheim Vetmedica, Inc.'s United States feline, canine, and rabies vaccine portfolio and other related assets in 2017. Other activities that impacted the net transfers to/from Lilly include corporate overhead and other allocations, income taxes, retirement benefits, and centralized cash management.

Corporate Overhead and Other Allocations

Lilly provides the Company certain services, including executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations. The Company provides Lilly certain services related to manufacturing support.

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 10: Related Party Transactions (Continued)

Our combined financial statements reflect an allocation of these costs. When specific identification is not practicable, a proportional cost method is used, primarily based on sales, and headcount.

The allocations of services from Lilly to the Company were reflected as follows in the condensed combined statements of operations:


		Six Months Ended June 30,

		2018		2017

Cost of sales	$	14.8	$	15.3
Research and development		1.5		1.4
Marketing, selling and administrative		54.8		55.0

Total	$	71.1	$	71.7

The Company provides Lilly certain services related to manufacturing support. Allocations of manufacturing support from the Company to Lilly of $2.4 million and $3.0 million for the six months ended June 30, 2018 and 2017, respectively, reduced cost of sales in the condensed combined statements of operations.

Stock-based Compensation

The Company's employees participate in Lilly stock-based compensation plans, the costs of which have been allocated to the Company and recorded in cost of sales, research and development, and marketing, selling and administrative expenses in the condensed combined statements of operations. Stock-based compensation costs related to the Company's employees were $13.3 million and $12.5 million for the six months ended June 30, 2018 and 2017, respectively.

Retirement Benefits

The Company's employees participate in defined benefit pension and other postretirement plans sponsored by Lilly, the costs of which have been recorded in the condensed combined statement of operations in cost of sales, research and development, and marketing, selling and administrative expenses. The costs of such plans related to the Company's employees were $1.3 million and $3.4 million for the six months ended June 30, 2018 and 2017, respectively.

Centralized Cash Management

Lilly uses a centralized approach to cash management and financing of operations. The majority of the Company's business is party to Lilly's cash pooling arrangements to maximize Lilly's

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Notes to Condensed Combined Financial Statements (Continued)

(Unaudited)

(Tables present dollars in millions)

Note 10: Related Party Transactions (Continued)

availability of cash for general operating and investing purposes. Under these cash pooling arrangements, cash balances are swept regularly from the Company's accounts. Cash transfers to and from Lilly's cash concentration accounts and the resulting balances at the end of each reporting period are reflected in net parent company investment in the condensed combined balance sheets.

Debt

Commercial Operations

The Company sells certain products to and receives certain goods and services from a customer/vendor, whose chairman and Chief Executive Officer is a member of Lilly's Board of Directors. These product sales resulted in revenue of $12.2 million and $11.2 million for the six months ended June 30, 2018 and 2017, respectively. The product sales resulted in accounts receivable of $1.5 million and $2.0 million at June 30, 2018 and December 31, 2017, respectively. The purchase of goods and services resulted in cost of sales and operating expenses of $1.9 million and $4.2 million for the six months ended June 30, 2018 and 2017, respectively. The purchase of goods and services resulted in accounts payable of $0.6 million and $0.3 million at June 30, 2018 and December 31, 2017, respectively.

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62,900,000 Shares

Elanco Animal Health Incorporated

Common Stock

Goldman Sachs & Co. LLC
J.P. Morgan
Morgan Stanley

Barclays
BNP PARIBAS
BofA Merrill Lynch
Citigroup
Credit Suisse
Deutsche Bank Securities

Evercore ISI
Cowen
Academy Securities
Drexel Hamilton
Mischler Financial Group, Inc.
Ramirez & Co., Inc.
The Williams Capital Group, L.P.

Through and including , 2018 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to an unsold allotment or subscription.

Table of Contents

PART II — INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth all costs and expenses, other than the underwriting discount, paid or payable by us in connection with the sale of our common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the listing fee for the NYSE.


		Amount Paid or to be Paid

SEC registration fee	$	207,132
FINRA filing fee	$	225,500
NYSE listing fee	$	295,000
Blue sky qualification fees and expenses	$	15,000
Printing and engraving expenses	$	575,000
Legal fees and expenses	$	4,000,000
Accounting fees and expenses	$	12,600,000
Transfer agent and registrar fees and expenses	$	10,000
Miscellaneous expenses	$	72,368

Total	$	18,000,000	⁽¹⁾

(1): $17.7 million of these estimated costs and expenses are expected to be paid by Lilly.

Item 14. Indemnification of Officers and Directors.

The Registrant is an Indiana corporation. The Registrant's officers and directors are and will be indemnified under Indiana law and the Amended and Restated Articles of Incorporation and Amended and Restated Bylaws of the Registrant against certain liabilities. Chapter 37 of the Indiana Business Corporation Law (the "IBCL") requires every Indiana corporation to indemnify any of its officers or directors (unless limited by the articles of incorporation of the corporation) who were wholly successful, on the merits or otherwise, in the defense of any proceeding to which the officer or director was a party because the officer or director is or was an officer or director of the Registrant against reasonable expenses incurred in connection with the proceeding. A corporation may also, under certain circumstances, pay for or reimburse the reasonable expenses incurred by an officer or director who is a party to a proceeding in advance of final disposition of the proceeding. The Registrant's Amended and Restated Articles of Incorporation do not contain any provision limiting such indemnification.

Chapter 37 of the IBCL also authorizes every Indiana corporation to indemnify its officers and directors under certain circumstances against liability incurred in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, to which the officers or directors are made a party by reason of their relationship to the corporation. Officers and directors may be indemnified where they have acted in good faith; in the case of official action, the individual reasonably believed that the conduct was in the corporation's best interests and in all other cases, the individual reasonably believed that the conduct was not against the best interests of the corporation; and in the case of criminal proceedings, the individual either had reasonable cause to believe his or her conduct was lawful or no reasonable cause to believe his or her conduct was unlawful. Chapter 37 states that the indemnification provided for therein is not exclusive of any other rights to which a person may be entitled under the articles of incorporation, bylaws or resolutions of the board of directors or shareholders.

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The Amended and Restated Articles of Incorporation and Amended and Restated Bylaws provide for indemnification, to the fullest extent permitted by the IBCL, of directors, officers and employees of the corporation against liability and reasonable expense that may be incurred by them, arising out of any threatened, pending or completed investigation, claim, suit or proceeding, whether civil, administrative, investigative or criminal, in which they may become involved by reason of being or having been a director, officer or employee. To be entitled to indemnification, (a) those persons must have been wholly successful in the claim or action, or (b) the board of directors, independent legal counsel or the shareholders must have determined that such persons acted in good faith in what they reasonably believed to be in the corporation's best interest, or in the case of conduct not in the individual's official capacity with the corporation, did not act in opposition to the corporation's best interest. In addition, in any criminal action, such persons must have had no reasonable cause to believe that their conduct was unlawful. The Amended and Restated Bylaws provide for mandatory advancement of expenses to such persons provided certain conditions are met, including provision of a written undertaking to repay such advancements, should it be determined that the person is not entitled to indemnification.

The IBCL permits the Registrant to purchase insurance on behalf of directors, officers, employees and agents against liabilities arising out of their positions with the corporation, whether or not such liabilities would be within the above indemnification provisions. Pursuant to this authority, the corporation will maintain such insurance for directors, officers and employees, subject to certain exclusions and deductible and maximum amounts, against loss from claims arising in connection with their acting in their respective capacities, including claims under the Securities Act of 1933, as amended (the "Securities Act").

Reference is made to the form of underwriting agreement to be filed as Exhibit 1.1 hereto for provisions providing that the underwriters are obligated under certain circumstances to indemnify our directors, officers and controlling persons against certain liabilities.

Item 15. Recent Sales of Unregistered Securities

Senior Notes

On August 28, 2018, the Company sold $500,000,000 aggregate principal amount of its 3.912% Senior Notes due 2021 (the "2021 Notes"), $750,000,000 aggregate principal amount of its 4.272% Senior Notes due 2023 (the "2023 Notes") and $750,000,000 aggregate principal amount of its 4.900% Senior Notes due 2028 (the "2028 Notes" and, together with the 2021 Notes and the 2023 Notes, the "Notes") to Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Barclays Capital Inc., BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. LLC, Academy Securities, Inc., Drexel Hamilton, LLC, Mischler Financial Group, Inc., Samuel A. Ramirez & Company, Inc., and The Williams Capital Group, L.P., as initial purchasers (the "Initial Purchasers"), in reliance on Section 4(a)(2) under the Securities Act. The Notes were resold by the Initial Purchasers to qualified institutional buyers in reliance on Rule 144A and/or non-U.S. persons in offshore transactions in reliance on Regulation S. The Initial Purchasers received customary discounts in connection with the transaction. The net proceeds from the sale of the Notes will be paid to Lilly as consideration for the portion of its animal health businesses Lilly is contributing to us.

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Item 16. Exhibits and Financial Statement Schedules

(a): Exhibits:


Exhibit No.		Description

1.1		Form of Underwriting Agreement
3.1	*	Form of Amended and Restated Articles of Incorporation of Elanco Animal Health Incorporated to be in effect prior to the completion of the offering made under this Registration Statement
3.2	*	Form of Amended and Restated Bylaws of Elanco Animal Health Incorporated to be in effect prior to the completion of the offering made under this Registration Statement
4.1	*	Form of Certificate of Common Stock
4.2	*	Indenture, dated August 28, 2018, between Elanco Animal Health Incorporated and Deutsche Bank Trust Company Americas, as trustee
4.3	*	First Supplemental Indenture, dated August 28, 2018, between Elanco Animal Health Incorporated and Deutsche Bank Trust Company Americas, as trustee
4.4	*	Registration Rights Agreement, dated August 28, 2018, between Elanco Animal Health Incorporated and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several initial purchasers
5.1		Opinion of Barnes & Thornburg LLP
10.1	*	Form of Master Separation Agreement
10.2	*	Form of Transitional Services Agreement
10.3		Form of Tax Matters Agreement
10.4	*	Form of Employee Matters Agreement
10.5	*	Form of Toll Manufacturing and Supply Agreement
10.6	*	Form of Registration Rights Agreement
10.7	*	Form of Transitional Trademark License Agreement
10.8	*	Form of Intellectual Property and Technology License Agreement
10.9		2002 Lilly Stock Plan, as amended, is incorporated by reference to Appendix C to Eli Lilly and Company's proxy statement on Schedule 14A filed March 19, 2018
10.10		The Eli Lilly and Company Bonus Plan, as amended, is incorporated by reference to Exhibit 10.7 to Eli Lilly and Company's Report on Form 10-K for the year ended, December 31, 2013
10.11		Form of Performance Award under the 2002 Lilly Stock Plan, is incorporated by reference to Exhibit 10.2 to Eli Lilly and Company's Report on Form 10-K for the year ended December 31, 2017
10.12		Form of Shareholder Value Award under the 2002 Lilly Stock Plan, is incorporated by reference to Exhibit 10.3 to Eli Lilly and Company's Report on Form 10-K for the year ended December 31, 2017

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10.13		The Lilly Deferred Compensation Plan, as amended, is incorporated by reference to Exhibit 10.5 to Eli Lilly and Company's Report on Form 10-K for the year ended, December 31, 2013
10.14		The Eli Lilly and Company Executive Officer Incentive Plan, is incorporated by reference to Appendix B to Eli Lilly and Company's proxy statement on Schedule 14A filed March 7, 2011 (SEC File No. 001-06351, Film No. 11666753)
10.15		2007 Change in Control Severance Pay Plan for Select Employees, as amended, is incorporated by reference to Exhibit 10 to Eli Lilly and Company's Report on Form 10-Q for the quarter ended September 30, 2010 (SEC File No. 001-06351, Film No. 101149876)
10.16	*	The Elanco Corporate Bonus Plan
10.17	*	Form of 2018 Elanco Stock Plan
10.18	*	Form of Elanco Animal Health Incorporated Directors' Deferral Plan
10.19	*	Director Letter Agreement between Emu Holdings Company and R. David Hoover, dated as of May 25, 2018
10.20	*	Form of 2018 Change in Control Severance Pay Plan for Select Employees
10.21	*	Form of Elanco Animal Health Incorporated Restricted Stock Unit Awards Agreement
10.22	*	Form of Elanco Animal Health Incorporated Nonqualified Stock Option Award Agreement
10.23	*	The Lilly Severance Pay Plan
10.24		Revolving Loan Credit Agreement, dated as of September 5, 2018, among Elanco Animal Health Incorporated, as borrower, JPMorgan Chase Bank, N.A., as administrative agent and the other Lenders party thereto
10.25		Term Loan Credit Agreement, dated as of September 5, 2018, among Elanco Animal Health Incorporated, as borrower, JPMorgan Chase Bank, N.A., as administrative agent and the other Lenders party thereto
21.1	*	List of Subsidiaries of Elanco Animal Health Incorporated
23.1		Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
23.2		Consent of Barnes & Thornburg LLP (included in Exhibit 5.1)
24.1	*	Power of Attorney (included on signature page)

*: Previously filed.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the

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registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Indianapolis, State of Indiana, on September 6, 2018.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on September 6, 2018.


Signature		Title

/s/ JEFFREY N. SIMMONS Jeffrey N. Simmons		President and Chief Executive Officer (Principal Executive Officer) and Director
/s/ LUCAS E. MONTARCE Lucas E. Montarce		Acting Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ R. DAVID HOOVER R. David Hoover		Chairman
/s/ KAPILA K. ANAND Kapila K. Anand		Director
/s/ MICHAEL J. HARRINGTON Michael J. Harrington		Director
/s/ LAWRENCE E. KURZIUS Lawrence E. Kurzius		Director
/s/ CARL. L. MCMILLIAN Carl L. McMillian		Director

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/s/ DAVID A. RICKS David A. Ricks		Director
/s/ AARTI S. SHAH Aarti S. Shah		Director
/s/ JOSHUA L. SMILEY Joshua L. Smiley		Director

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Exhibit 1.1

Form of

Elanco Animal Health Incorporated

Common Stock

Underwriting Agreement

[ · ], 2018

Goldman Sachs & Co. LLC

J.P. Morgan Securities LLC

Morgan Stanley & Co. LLC

As representatives (the “Representatives”) of the several Underwriters

named in Schedule I hereto,

c/o Goldman Sachs & Co. LLC

200 West Street

New York, New York 10282-2198

c/o J.P. Morgan Securities LLC

383 Madison Avenue

New York, New York 10179

c/o Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

Ladies and Gentlemen:

Elanco Animal Health Incorporated, an Indiana corporation (the “Company”), proposes, subject to the terms and conditions stated in this agreement (this “Agreement”), to issue and sell to the Underwriters named in Schedule I hereto (the “Underwriters”) an aggregate of [ · ] shares (the “Firm Shares”) and, at the election of the Underwriters, up to [ · ] additional shares (the “Optional Shares”) of common stock, no par value (“Stock”), of the Company (the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the “Shares”).

The master separation agreement, transitional services agreement, tax matters agreement, employee matters agreement, toll manufacturing and supply agreement, transitional trademark license agreement, intellectual property and technology license agreement and registration rights agreement, each as described under the heading “Certain Relationships and Related Party Transactions” in the Pricing Prospectus and the Prospectus are referred to, collectively, as the “Separation Agreements.”

Morgan Stanley & Co. LLC (“Morgan Stanley”) has agreed to reserve a portion of the Shares to be purchased by it under this Agreement for sale to the Company’s

directors, officers, employees and business associates and other parties related to the Company (collectively, “Participants”), as set forth in the Prospectus (as defined in Section 1(a)) under the heading “Underwriting” (the “Directed Share Program”). The Shares to be sold by Morgan Stanley and its affiliates pursuant to the Directed Share Program, at the direction of the Company, are referred to hereinafter as the “Directed Shares.” Any Directed Shares not orally confirmed for purchase by any Participant by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Prospectus.

1. Assuming that each of the transactions described under “The Separation and Distribution Transactions—The Separation” in the Pricing Prospectus were completed on or prior to the date hereof, the Company represents and warrants to, and agrees with, each of the Underwriters that:

(a) A registration statement on Form S-1 (File No. 333-226536) (the “Initial Registration Statement”) in respect of the Shares has been filed with the Securities and Exchange Commission (the “Commission”); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to the Representatives, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a “Rule 462(b) Registration Statement”), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the “Act”), which became effective upon filing, no other document with respect to the Initial Registration Statement has been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or, to the Company’s knowledge, threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act is hereinafter called a “Preliminary Prospectus”; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the “Registration Statement”; the Preliminary Prospectus relating to the Shares that was included in the Registration Statement immediately prior to the Applicable Time (as defined in Section 1(c) hereof) is hereinafter called the “Pricing Prospectus”; such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the “Prospectus” ; and any “issuer free writing prospectus” as defined in Rule 433 under the Act relating to the Shares is hereinafter called an “Issuer Free Writing Prospectus”);

(b) (A) No order preventing or suspending the use of any Preliminary Prospectus or any Issuer Free Writing Prospectus has been issued by the Commission, and (B) each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the

Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with the Underwriter Information (as defined in Section 9(b) of this Agreement);

(c) For the purposes of this Agreement, the “Applicable Time” is [ · ] p.m. (Eastern time) on the date of this Agreement. The Pricing Prospectus, as supplemented by the information listed on Schedule II(c) hereto, taken together (collectively, the “Pricing Disclosure Package”), as of the Applicable Time, did not, and as of each Time of Delivery (as defined in Section 4(a) of this Agreement) will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Free Writing Prospectus does not conflict with the information contained in the Registration Statement, the Pricing Prospectus or the Prospectus and each Issuer Free Writing Prospectus, as supplemented by and taken together with the Pricing Disclosure Package, as of the Applicable Time, did not, and as of each Time of Delivery will not, include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to statements or omissions made in reliance upon and in conformity with the Underwriter Information;

(d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement and the Prospectus, on the date when such prospectus, amendment or supplement is filed and as of the Time of Delivery, will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to each part of the Registration Statement, as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, and as of each Time of Delivery, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with the Underwriter Information;

(e) The Company and its subsidiaries, when taken together as a whole, have not, since the date of the latest audited financial statements included in the Pricing Prospectus, (i) sustained any material loss or material interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree or (ii) entered into any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole, in each case, otherwise than as set forth or contemplated in the Pricing Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Pricing Prospectus, there has not been (x) any change in the capital stock (other than as a result of (i) the exercise, if any, of stock options or the

award, if any, of stock options or restricted stock in the ordinary course of business pursuant to the Company’s equity plans that are described in the Pricing Prospectus and the Prospectus or (ii) the issuance, if any, of stock upon conversion of Company securities as described in the Pricing Prospectus and the Prospectus) or long-term debt of the Company or any of its subsidiaries or (y) any Material Adverse Effect (as defined below), in each case otherwise than as set forth or specifically contemplated in the Pricing Prospectus; as used in this Agreement, “Material Adverse Effect” shall mean any material adverse change or effect, or any development involving a prospective material adverse change or effect, in or affecting (i) the business, properties, senior management, financial position, stockholders’ equity or results of operations of the Company and its subsidiaries, taken as a whole, except as set forth or contemplated in the Pricing Prospectus, or (ii) the ability of the Company to perform its obligations under this Agreement and the Separation Agreements, including the issuance and sale of the Shares, or to consummate the transactions contemplated in the Pricing Prospectus and the Prospectus;

(f) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Pricing Prospectus or such as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases (subject to the effects of (i) bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights or remedies of creditors generally; (ii) the application of general principles of equity; and (iii) applicable law and public policy with respect to rights to indemnity and contribution) with such exceptions as (x) do not materially interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries or (y) would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(g) The Company and each Significant Subsidiary (as defined in Rule 1-02(x) of Regulation S-X under the Act) of the Company has been (i) duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, with power and authority (corporate and other) to own its properties and conduct its business as described in the Pricing Prospectus, and (ii) duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except, in the case of clause (ii) where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and each Significant Subsidiary of the Company has been listed in the Registration Statement;

(h) The Company has an authorized capitalization as set forth in the Pricing Prospectus and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and conform in all material respects to the description of the Stock contained in the Pricing Disclosure Package and Prospectus; and all of the issued shares of capital stock of each Significant Subsidiary of the Company have been duly and validly authorized and issued, are fully

paid and non-assessable and (except as described in the Pricing Prospectus in connection with the transactions contemplated by the Separation Agreements and except, in the case of any foreign subsidiary, for directors’ qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except for such liens or encumbrances described in the Pricing Prospectus and the Prospectus;

(i) The Shares have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform in all material respects to the description of the Stock contained in the Pricing Disclosure Package and the Prospectus; and the issuance of the Shares is not subject to any preemptive or similar rights;

(j) The issue and sale of the Shares and the compliance by the Company with this Agreement and each of the Separation Agreements and the consummation of the transactions contemplated in this Agreement, each of the Separation Agreements and the Pricing Prospectus will not conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, charge or encumbrance upon any property or assets of the Company or its subsidiaries, or constitute a default under, (A) any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (B) the certificate of incorporation or by-laws (or other applicable organizational document) of the Company or any of its Significant Subsidiaries, or (C) any statute or any judgment, order, decree, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties, except, in the case of (A) and (C), as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement and each of the Separation Agreements, except such as have been obtained under the Act, the approval by the Financial Industry Regulatory Authority (“FINRA”) of the underwriting terms and arrangements and such consents, approvals, orders, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters;

(k) Neither the Company nor any of its Significant Subsidiaries is (i) in violation of its certificate of incorporation or by-laws (or other applicable organizational document), (ii) in violation of any statute or any judgment, order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or (iii) in default in the performance or observance of any obligation, agreement, term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which it is a party or by which it or any of its properties or assets may be bound, except in the case of (ii) and (iii) for such violations or defaults as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(l) This Agreement conforms in all material respects to the description thereof contained in the Pricing Prospectus and Prospectus;

(m) The statements set forth in the Pricing Prospectus and Prospectus under the caption “Description of Capital Stock,” insofar as they purport to constitute a summary of the terms of the Stock, and under the captions “Business—Regulatory,” “Business—Intellectual Property,” “Certain Relationships and Related Party Transactions,” “Material U.S. Federal Income and Estate Tax Considerations for Non-U.S. Holders,” “Description of Material Indebtedness” and “Underwriting,” insofar as they purport to describe the provisions of the laws and documents referred to therein, fairly summarize the matters referred to therein in all material respects;

(n) Other than as set forth in the Pricing Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and, to the Company’s knowledge, no such proceedings are threatened or contemplated by governmental authorities or others;

(o) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof, will not be an “investment company”, as such term is defined in the Investment Company Act of 1940, as amended;

(p) At the time of filing the Initial Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or any offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Act) of the Shares, and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined under Rule 405 under the Act;

(q) Ernst & Young LLP, which has certified certain financial statements of the Company and its subsidiaries, is an independent public accountant as required by the Act and the rules and regulations of the Commission thereunder;

(r) The financial statements included in the Registration Statement, the Pricing Prospectus and the Prospectus, together with the related schedules and notes, present fairly, in all material respects, the combined financial position of the Company and its subsidiaries at the dates indicated and the combined statements of operations, comprehensive loss, equity and cash flows of the Company and its subsidiaries for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved. The supporting schedules, if any, present fairly in accordance with GAAP the information required to be stated therein. The selected financial data, the summary financial information and any other financial information included in the Registration Statement, the Pricing Prospectus and the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein, except as disclosed therein. Except as included therein, no historical or pro forma financial statements or supporting schedules are required to be included in the Registration Statement, the Pricing Prospectus or the Prospectus under the Act or the rules and regulations promulgated thereunder. All disclosures contained in the Registration

Statement, the Pricing Prospectus and the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Item 10 of Regulation S-K of the Act, to the extent applicable;

(s) The Company maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company is not aware of any material weaknesses in its internal control over financial reporting (it being understood that the Company is not required as of the date hereof to comply with Section 404 of the Sarbanes-Oxley Act of 2002);

(t) Since the date of the latest audited financial statements included in the Pricing Prospectus, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;

(u) The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) that comply with the requirements of the Exchange Act; such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company’s principal executive officer and principal financial officer by others within those entities; and such disclosure controls and procedures are effective;

(v) The Company has all requisite corporate power and authority to execute and deliver, and to perform its obligations under, this Agreement and each of the Separation Agreements. This Agreement has been duly and validly authorized, executed and delivered by the Company. Each Separation Agreement has been duly authorized, and when executed and delivered by the Company or its applicable subsidiary and, assuming due authorization, execution and delivery by each of the other parties thereto, will constitute a valid and legally binding agreement of the Company or such subsidiary enforceable against the Company or such subsidiary in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by equitable principles relating to enforceability;

(w) None of the Company or any of its subsidiaries or any of their respective directors, officers or employees, nor, to the knowledge of the Company, any agent, affiliate or other person acting on behalf of the Company or any of its subsidiaries has (i) made, offered, promised or authorized any unlawful contribution, gift, entertainment or other unlawful expense; (ii) made, offered, promised or authorized any direct or indirect unlawful payment; or (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, the Bribery Act 2010 of the United Kingdom or any other applicable anti-bribery or anti-corruption law (collectively, the “Anti-Corruption Laws”); and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries, or to the knowledge of the Company, any investigation with respect to the Anti-Corruption Laws is pending or threatened. The Company and its subsidiaries will not use, directly or indirectly, the proceeds of the offering of the Shares hereunder in furtherance of an offer, payment,

promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of the Anti-Corruption Laws;

(x) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with the requirements of applicable anti-money laundering laws, including, but not limited to, the Bank Secrecy Act of 1970, as amended by the USA PATRIOT ACT of 2001, and the rules and regulations promulgated thereunder, and the anti-money laundering laws of the various jurisdictions in which the Company and its subsidiaries conduct business (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened;

(y) None of the Company or any of its subsidiaries or any of their respective directors, officers or employees, nor, to the knowledge of the Company, any agent or affiliate of the Company or any of its subsidiaries is currently the subject or the target of any sanctions administered or enforced by: (i) the U.S. Government, including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury, or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person,” (ii) the European Union, (iii) Her Majesty’s Treasury, or (iv) the United Nations Security Council, or other sanctions authority with jurisdiction over the Company or any of its subsidiaries (collectively, “Sanctions”). None of the Company or any of its subsidiaries nor any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries has engaged in, or is now engaged in, any dealings or transactions with or for the benefit of any person or entity that is (or at the relevant time was) the subject or target of Sanctions, or has otherwise violated Sanctions. The Company will not directly or, to the Company’s knowledge, indirectly use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity except as permitted by applicable law (i) to fund any activities of or business with any person that, at the time of such funding, is the subject or the target of Sanctions, (ii) to fund or facilitate any activities of or business in any country or territory that is subject to comprehensive Sanctions (which, for the avoidance of doubt, currently consist of Cuba, Iran, Syria, North Korea and the Crimea Territory of Ukraine) or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions;

(z) The Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as are, in the Company’s reasonable judgment, commercially reasonable for the conduct of the Company’s and its subsidiaries’ businesses taken as a whole; and neither the Company nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that material capital improvements or other material expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when

such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business;

(aa) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, there exists no dispute with, or grievance, arbitration, unfair labor practice charge or labor disturbance (including, without limitation, any strike, lockout, picketing, work stoppages or work slow down) by current or former employees or other service providers of the Company or any of its subsidiaries, and, to the Company’s knowledge, none is contemplated or threatened;

(bb) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), whether or not subject to ERISA, established or maintained by the Company or any of its subsidiaries or with respect to which the Company as a result of being a member of a “Controlled Group” (within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) has or would have any liability (each, a “Plan”) has been established and maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code; (ii) no prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any Plan, excluding transactions effected pursuant to a statutory or administrative exemption; (iii) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur; (iv) to the Company’s knowledge, there is no pending audit or investigation by the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation (the “PBGC”) or any other governmental agency or any foreign regulatory agency with respect to any Plan and (v) no increase in the Company’s and its subsidiaries’ “accumulated post-retirement benefit obligations” (within the meaning of Accounting Standards Codification Topic 715-60) compared to the amount of such obligations in the Company’s and its subsidiaries’ most recently completed fiscal year has occurred or is reasonably likely to occur. For each Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, the minimum funding standard of Section 412 of the Code or Section 302 of ERISA, as applicable, has been satisfied (without taking into account any waiver thereof or extension of any amortization period) and is reasonably expected to be satisfied in the future (without taking into account any waiver thereof or extension of any amortization period). Neither the Company nor any member of its Controlled Group has incurred, nor reasonably expects to incur, any material liability under Title IV of ERISA (other than contributions to the Plan or premiums to the PBGC, in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan,” within the meaning of Section 4001(a)(3) of ERISA);

(cc) Except as described in the Pricing Prospectus or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Company and its subsidiaries (a) possess all licenses, certificates, permits and other authorizations issued by, and (b) have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses in the manner described in the Pricing Prospectus; and (ii) neither

the Company nor any of its subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course;

(dd) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Company and its subsidiaries have operated and currently are in compliance with all applicable laws, rules and regulations of the jurisdictions in which they are conducting business; and (ii) each of the Company and its subsidiaries is and has been in compliance with all statutes, rules or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product under development, manufactured or distributed by the Company or its subsidiaries;

(ee) Except as described in the Pricing Prospectus in connection with the transactions contemplated by the Separation Agreements (i) the Company and its subsidiaries each own or possess adequate rights to use all patents, patent applications, trademarks, service marks, trade names, service names, trademark registrations, service mark registrations, copyrights, licenses, works of authorship, data, databases, software, technology and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, “Intellectual Property”) used in or necessary for the conduct of their respective businesses as currently conducted and as described in the Pricing Prospectus with respect to products currently marketed and sold, (ii) the Company and its subsidiaries (x) each owns, free and clear of all liens, encumbrances, equities or claims, except for such liens, encumbrances, equities or claims described in the Pricing Prospectus or non-exclusive licenses granted in the ordinary course of business, all Intellectual Property described in the Pricing Prospectus as being owned by it (“Company Intellectual Property”) and (y) have valid and sufficient rights to use in their respective businesses Intellectual Property owned by Eli Lilly and Company, and (iii) except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company Intellectual Property and the conduct of the respective businesses of the Company and its subsidiaries does not conflict with, infringe, misappropriate or otherwise violate any Intellectual Property rights of any third party. Except as described in the Pricing Prospectus or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) there is no pending or, to the Company’s knowledge, threatened action, suit proceeding or claim by others, and the Company and its subsidiaries have not received any written notice of any such claim, (x) challenging the Company or its subsidiaries’ rights to any Company Intellectual Property, (y) challenging the validity, enforceability or scope of any Company Intellectual Property, or (z) asserting infringement, misappropriation, violation or conflict with any such rights of others in connection with Company Intellectual Property or the conduct of the Company and its subsidiaries; (ii) to the Company’s knowledge, there is no infringement by third parties of any Company Intellectual Property; (iii) the Company and its subsidiaries have taken commercially reasonable measures to protect the confidentiality, integrity and availability of trade secrets, financial and other sensitive information, personally identifiable data and information technology in the Company’s and its subsidiaries’ possession, custody or control, and are in material compliance with all applicable written policies and contractual

requirements of the Company and its subsidiaries, laws and regulations regarding data privacy, data security or personally identifiable information; and (iv) to the Company’s knowledge, there have been no past nor are there any current or ongoing security breaches of, or unauthorized access to, the Company’s or its subsidiaries’ confidential information and operational technology infrastructure;

(ff) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the Company and its subsidiaries (a) are, and have been, in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, requirements, decisions, judgments, decrees, orders and the common law relating to pollution or the protection of the environment, natural resources, or human health or safety as related to environmental protection, including those relating to the generation, storage, treatment, use, handling, transportation, Release or threat of Release of Hazardous Materials (collectively, “Environmental Laws”), (b) have received and are in compliance with all permits, licenses, certificates or other authorizations or approvals required of them under applicable Environmental Laws to conduct their respective businesses, (c) have not received notice of any actual or potential liability under or relating to, or actual or potential violation of, any Environmental Laws, including liability for the investigation or remediation of any Release or threat of Release of Hazardous Materials, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice, (d) are not conducting or paying for, in whole or in part, any investigation, response, remediation or other corrective action pursuant to any Environmental Law at any site or facility, nor is it a party to any order, decree or agreement that imposes any obligation or liability under any Environmental Law, and (e) no lien, charge, encumbrance or restriction has been recorded pursuant to any Environmental Law with respect to any assets, facility or property owned or leased by the Company or any of its subsidiaries, as applicable, which would adversely affect the operation of any such assets, facility or property as currently operated; (ii) there are no costs or liabilities associated with Environmental Laws relating to the Company or its subsidiaries; (iii) the Company and its subsidiaries are not aware of any facts or issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws, including the Release or threat of Release of Hazardous Materials, that could reasonably be expected to have an effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries; (iv) none of the Company and its subsidiaries currently anticipates material capital expenditures relating to any Environmental Laws; and (v) there has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials by, relating to or caused by the Company or any of its subsidiaries (or, to the knowledge of the Company and its subsidiaries, any other entity (including any predecessor) for whose acts or omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or any of its subsidiaries, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in the Company or any of its subsidiaries incurring any liability under any Environmental Law. Except as described in the Pricing Prospectus, there are no administrative or judicial proceedings to which a governmental entity is a party that are pending, or, to the knowledge of an officer of the Company, threatened against the Company or any of its subsidiaries under any

Environmental Laws, other than such proceedings for which the Company reasonably believes no monetary sanctions of $100,000 or more will be imposed. “Hazardous Materials” means any substance, material or waste defined, classified or otherwise characterized as “hazardous,” “toxic,” or “radioactive,” or as a “pollutant” or “contaminant” or words of similar meaning or effect under Environmental Laws, including petroleum (including crude oil or any fraction thereof) and petroleum products and asbestos and asbestos containing materials. “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into, from or through any building or structure;

(gg) The Company and each of its subsidiaries have filed all federal, state, local and foreign tax returns required to be filed through the date hereof (taking into account valid and timely requested extensions of time to file), and have paid all taxes due, and no tax deficiency has been, or could reasonably be expected to be, determined adversely to the Company or any of its subsidiaries or any of their respective properties or assets, except, in each case, as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect;

(hh) No subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company;

(ii) No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its subsidiaries, on the other, that is required by the Act to be described in the Registration Statement and the Prospectus and that is not so described in such documents;

(jj) No person has the right to require the Company or any of its subsidiaries to register any securities for sale under the Securities Act by reason of the filing of the Registration Statement with the Commission or the issuance and sale of the Shares by the Company;

(kk) The statistical and market-related data included in the Pricing Prospectus are based on or derived from sources that the Company believes to be reliable in all material respects and such data are consistent with the sources from which they are derived and, to the extent required, the Company has obtained the written consent to the use of such data from such sources;

(ll) The Company has not taken, directly or indirectly, any action designed to cause or result in, or which has constituted or which would reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company in connection with the offering of the Shares (it being understood that the Company makes no representation with respect to any action taken by any Underwriter or their affiliates);

(mm) To the Company’s knowledge, no consent, approval, authorization or order of, or qualification with, any governmental body or agency, other than those obtained, is

required in connection with the offering of the Directed Shares in any jurisdiction where the Directed Shares are being offered; and

(nn) The Company has not offered, or caused Morgan Stanley or any Morgan Stanley Entity (as defined in Section 10) to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customer’s or supplier’s level or type of business with the Company, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products.

2. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $[ · ], the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2 (provided that the purchase price per Optional Share shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Shares but not payable on the Optional Shares), that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by the Representatives so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder.

The Company, on the basis of the representations, warranties and agreements set forth herein and subject to the terms and conditions set forth herein, hereby grants to the Underwriters the right to purchase at their election up to [ · ] Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering sales of shares in excess of the number of Firm Shares, provided that the purchase price per Optional Share shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Shares but not payable on the Optional Shares. Any such election to purchase Optional Shares may be exercised only by written notice from the Representatives to the Company, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by the Representatives but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless the Representatives and the Company otherwise agree in writing, earlier than two or later than ten business days after the date of such notice.

3. Upon the authorization by the Representatives of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Pricing Prospectus and the Prospectus.

4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive or book-entry form, and in such authorized denominations and registered in such names

as the Representatives may request upon at least forty-eight hours’ prior notice to the Company shall be delivered by or on behalf of the Company to the Representatives, through the facilities of the Depository Trust Company (“DTC”), for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company to the Representatives at least forty-eight hours in advance. The Company will cause the certificates, if any, representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the “Designated Office”). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on [ · ], 2018 or such other time and date as the Representatives and the Company may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York City time, on the date specified by the Representatives in the written notice given by the Representatives of the Underwriters’ election to purchase such Optional Shares, or such other time and date as the Representatives and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the “First Time of Delivery”, each such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the “Second Time of Delivery”, and each such time and date for delivery is herein called a “Time of Delivery”.

(b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 8 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 8(q) hereof, will be delivered at the offices of Ropes & Gray LLP, Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199 (the “Closing Location”), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at 4:00 p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.

5. The Company agrees with each of the Underwriters:

(a) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Time of Delivery which shall be disapproved by the Representatives promptly after reasonable notice thereof; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any amendment or supplement to the Prospectus has been filed and to furnish the Representatives with copies thereof; to file promptly all material required to be filed by the Company with the Commission pursuant to Rule 433(d) under the Act; to advise the

Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus in respect of the Shares, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or other prospectus or suspending any such qualification, to promptly use its best efforts to obtain the withdrawal of such order;

(b) Promptly from time to time to take such action as the Representatives may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as the Representatives may reasonably request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction;

(c) Prior to 10:00 a.m., New York City time, on the New York Business Day next succeeding the date of this Agreement, or as promptly as reasonably practicable thereafter (or such later time as may be agreed to by the Company and the Representatives on behalf of the Underwriters), and in any event within the time required by law, and from time to time, to furnish the Underwriters with written and electronic copies of the Prospectus in New York City in such quantities as the Representatives may reasonably request, and, if the delivery of a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus in order to comply with the Act, to notify the Representatives and upon the Representatives’ request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many written and electronic copies as the Representatives may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance; and in case any Underwriter is required to deliver a prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Act) in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon the Representatives’ reasonable request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many written and electronic copies as the Representatives may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act;

(d) To make generally available to its stockholders as soon as practicable (which may be satisfied by filing such information with the Commission’s Electronic Data,

Gathering, Analysis and Retrieval System (“EDGAR”)), but in any event not later than sixteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158);

(e)

(1) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus (the “Lock-Up Period”), not to (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, or file with or confidentially submit to the Commission a registration statement under the Act relating to, any securities of the Company that are substantially similar to the Shares, including but not limited to any options or warrants to purchase Stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities, or publicly disclose the intention to make any offer, sale, pledge, grant, transfer, disposition, filing or submission or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Stock or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Stock or such other securities, in cash or otherwise, without the prior written consent of each of the Representatives. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) Shares issued to Eli Lilly and Company at or prior to the First Time of Delivery in connection with the transactions contemplated in the Separation Agreements and as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, (C) any shares of Stock issued by the Company upon the exercise of options to purchase shares of Stock or upon the vesting of restricted stock awards or the issuance by the Company of any securities convertible into, exchangeable for or that represent the right to receive Shares, in each case pursuant to the 2018 Elanco Stock Plan as disclosed in the Registration Statement, the Pricing Prospectus and the Prospectus, (D) the filing of any registration statement on Form S-8 relating to Shares issued pursuant to the 2018 Elanco Stock Plan, (E) the entry into an agreement providing for the issuance of Stock or any securities convertible into or exercisable for Stock, and the issuance of any such securities pursuant to such an agreement, in connection with (x) the acquisition by the Company or any of its subsidiaries of the securities, business, property or other assets of another person or entity, including pursuant to an employee benefit plan assumed by the Company in connection with such acquisition or (y) joint ventures, commercial relationships or other strategic transactions, provided that the aggregate number of Shares issued or issuable pursuant to this clause (E) does not exceed 5% of the outstanding shares of Stock and prior to any such issuance each recipient of any such securities shall have executed and delivered to the Representatives an agreement substantially in the form of Annex II hereto and (F) the filing with or confidential submission to the Commission of a registration statement under the Act relating to the Distribution (as such term is defined in the Pricing Prospectus), provided that no securities of the Company may be offered

for sale, sold or exchanged pursuant to such registration statement during the Lock-Up Period.

(2) If the Representatives, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up letter described in Section 8(o) hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Annex I hereto through a major news service at least two business days before the effective date of the release or waiver.

(f) During a period of three years from the effective date of the Registration Statement, so long as the Company is subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act, to furnish to the Representatives copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to the Representatives as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); provided that no documents or other information need to be furnished pursuant to this Section 5(f) to the extent they are available on EDGAR or the investor section of the Company’s website;

(g) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Pricing Prospectus under the caption “Use of Proceeds”;

(h) To use its best efforts to list, subject to notice of issuance, the Shares on the New York Stock Exchange (the “Exchange”);

(i) To file with the Commission such information on Form 10-Q or Form 10-K as may be required by Rule 463 under the Act;

(j) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 3a(c) of the Commission’s Informal and Other Procedures (16 CFR 202.3a);

(k) Upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Company’s trademarks, servicemarks and corporate logo for use on the website, if any, operated by such Underwriter for the purpose of facilitating the on-line offering of the Shares (the “License”); provided , however , that the License shall be used solely for the purpose described above, is granted without any fee and may not be assigned or transferred;

(l) To deliver to each Underwriter (or its agent), on the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial

Owners of Legal Entity Customers (the “Certification”), together with copies of identifying documentation, if necessary, and the Company undertakes to provide such additional supporting documentation as each Underwriter may reasonably request in connection with the verification of the Certification; and

6. (a) The Company represents and agrees that, without the prior consent of the Representatives, it and its affiliates and any other person acting on its or their behalf (other than the Underwriters, as to which no statement is given) have not made and will not make any offer relating to the Shares that would constitute a “free writing prospectus,” as defined in Rule 405 under the Act; each Underwriter represents and agrees that, without the prior consent of the Company and the Representatives, it has not made and will not make any offer relating to the Shares that would constitute a free writing prospectus required to be filed with the Commission; any such free writing prospectus the use of which has been consented to by the Company and the Representatives is listed on Schedule II(a) hereto;

(b) The Company has complied and will comply with the requirements of Rule 433 under the Act applicable to any Issuer Free Writing Prospectus, including timely filing with the Commission or retention where required and legending; and the Company represents that it has satisfied and agrees that it will satisfy the conditions under Rule 433 under the Act to avoid a requirement to file with the Commission any electronic road show; and

(c) The Company agrees that if at any time following issuance of an Issuer Free Writing Prospectus any event occurred or occurs as a result of which such Issuer Free Writing Prospectus would conflict with the information in the Registration Statement, the Pricing Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, the Company will give prompt notice thereof to the Representatives and, if requested by the Representatives, will prepare and furnish without charge to each Underwriter an Issuer Free Writing Prospectus or other document which will correct such conflict, statement or omission; provided , however , that this covenant shall not apply to any statements or omissions in an Issuer Free Writing Prospectus made in reliance upon and in conformity with the Underwriter Information.

7. The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing, reproduction and filing of the Registration Statement, any Preliminary Prospectus, any Issuer Free Writing Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) reasonable expenses in connection with the qualification of the Shares for offering and sale under state or foreign securities laws as provided in Section 5(b) hereof, including up to a maximum of $15,000 of fees and disbursements of counsel for the Underwriters in connection with such qualification and in

connection with the Blue Sky survey; (iv) all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program, up to a maximum of $25,000, and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program; (v) reasonable fees and expenses in connection with listing the Shares on the Exchange; (vi) reasonable filing fees incident to, and up to a maximum of $40,000 of fees and disbursements of counsel for the Underwriters in connection with, any required review by FINRA of the terms of the sale of the Shares; (vii) the cost of preparing stock certificates; (viii) the cost and charges of any transfer agent or registrar; (ix) all expenses incurred by the Company in connection with any “road show” presentation to potential investors; and (x) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 9, 10 and 13 hereof, (A) the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make, (B) the Company will bear all of the Company’s (but not the Underwriters’) travel expenses and the Underwriters will bear all of the Underwriters’ (but not the Company’s) travel expenses, in each case, in connection with any “roadshow” presentation to investors and (C) notwithstanding clause (B), the Company, on the one hand, and the Underwriters, on the other hand, shall each pay 50% of the cost of any chartered plane, jet or other aircraft used in connection with any “roadshow” presentation to investors.

8. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of the Applicable Time and such Time of Delivery, true and correct, the condition that the Company shall have performed all of its obligations hereunder theretofore to be performed, and the following additional conditions:

(a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Act within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; all material required to be filed by the Company pursuant to Rule 433(d) under the Act shall have been filed with the Commission within the applicable time period prescribed for such filing by Rule 433; if the Company has elected to rely upon Rule 462(b) under the Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 p.m., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; no stop order suspending or preventing the use of the Pricing Prospectus, Prospectus or any Issuer Free Writing Prospectus shall have been initiated or threatened by the Commission; and all requests for additional information on the part of the Commission shall have been complied with to the Representatives’ reasonable satisfaction;

(b) Ropes & Gray LLP, counsel for the Underwriters, shall have furnished to the Representatives such written opinion and letter, dated such Time of Delivery, in form and substance satisfactory to the Representatives, and such counsel shall have received

such papers and information as they may reasonably request to enable them to pass upon such matters;

(c) Weil, Gotshal & Manges LLP, counsel for the Company, shall have furnished to the Representatives their written opinion and letter, dated such Time of Delivery, in form and substance satisfactory to the Representatives;

(d) Barnes & Thornburg LLP, Indiana counsel for the Company, shall have furnished to the Representatives their written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives;

(e) PricewaterhouseCoopers AG, Swiss counsel for the Company, shall have furnished to the Representatives their written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives;

(f) Buren N.V., Dutch counsel for the Company, shall have furnished to the Representatives their written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives;

(g) The General Counsel of the Company shall have furnished to the Representatives its written opinion, dated such Time of Delivery, in form and substance satisfactory to the Representatives;

(h) On the date of the Prospectus at a time prior to the execution of this Agreement, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, Ernst & Young LLP shall have furnished to the Representatives a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to the Representatives;

(i) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Pricing Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Pricing Prospectus, and (ii) since the respective dates as of which information is given in the Pricing Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change or effect, or any development involving a prospective change or effect, in or affecting (x) the business, properties, senior management, financial position, stockholders’ equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or specifically contemplated in the Pricing Prospectus or (y) the ability of the Company to perform its obligations under this Agreement and the Separation Agreements, including the issuance and sale of the Shares, or to consummate the transactions contemplated in the Pricing Prospectus and the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the Representatives’ judgment so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Pricing Prospectus and the Prospectus;

(j) On or after the Applicable Time (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities by any “nationally recognized

statistical rating organization”, as defined in Section 3(a)(62) of the Exchange Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities;

(k) On or after the Applicable Time there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the Exchange or on the Nasdaq Global Market; (ii) a suspension or material limitation in trading in the Company’s securities on the Exchange; (iii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the Representatives’ judgment makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Pricing Prospectus and the Prospectus;

(l) The Shares to be sold at such Time of Delivery shall have been duly listed, subject to notice of issuance, on the Exchange;

(m) FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements to the offering of the Shares;

(n) Each Separation Agreement shall have been executed in the form filed as an exhibit to the Registration Statement and the transactions and agreements contemplated by the Separation Agreements to have occurred as of such Time of Delivery shall have been consummated substantially in accordance with the terms of the Separation Agreements and the descriptions thereof contained in the Pricing Prospectus and the Prospectus;

(o) The Company shall have obtained and delivered to the Underwriters executed copies of an agreement from each of the Company’s officers, directors and stockholders, substantially to the effect set forth in Annex II hereto in form and substance satisfactory to the Representatives;

(p) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement;

(q) The Company shall have furnished or caused to be furnished to the Representatives at such Time of Delivery certificates of officers of the Company satisfactory to the Representatives as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (i) of this Section and as to such other matters as the Representatives may reasonably request; and

(r) The Company shall have furnished or caused to be furnished to the Representatives a certificate of the chief financial officer of the Company to the effect that (i) certain financial and operating data identified by the Representatives was prepared utilizing information derived from the appropriate financial, accounting and corporate records of the Company and its subsidiaries, (ii) such information was accurate and correct in all material respects, and (iii) such information did not omit to state a material fact necessary in order to make such statements in light of the circumstances under which they were made not misleading.

9. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus, any “roadshow” as defined in Rule 433(h) under the Act (a “roadshow”), or any “issuer information” filed or required to be filed pursuant to Rule 433(d) under the Act, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided , however , that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, in reliance upon and in conformity with the Underwriter Information.

(b) Each Underwriter, severally and not jointly, will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or any roadshow, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, or any amendment or supplement thereto, or any Issuer Free Writing Prospectus, or any roadshow, in reliance upon and in conformity with the Underwriter Information; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. As used in this Agreement with respect to an Underwriter and an applicable document, “Underwriter Information” shall mean the written information furnished to the Company by such

Underwriter through the Representatives expressly for use therein; it being understood and agreed upon that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the concession and reallowance figures appearing in the [fifth] paragraph under the caption “Underwriting”, and the information contained in the [ninth], [tenth] and [eleventh] paragraphs under the caption “Underwriting”.

(c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; provided that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under the preceding paragraphs of this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided further that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under the preceding paragraphs of this Section 9. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in

connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the offering of the Shares to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint.

(e) The obligations of the Company under this Section 9 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each employee, officer and director of each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act and each broker-dealer or other affiliate of any Underwriter; and the obligations of the Underwriters under this Section 9 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company (including any person who, with his or her consent, is named in the Registration Statement as about to become a director of the Company) and to each person, if any, who controls the Company within the meaning of the Act.

10. (a) The Company agrees to indemnify and hold harmless Morgan Stanley, each person, if any, who controls Morgan Stanley within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act and each affiliate of Morgan Stanley within the meaning of Rule 405 of the Act (“Morgan Stanley Entities”) from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement or alleged untrue statement of a

material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of Morgan Stanley Entities.

(b) In case any proceeding (including any governmental investigation) shall be instituted involving any Morgan Stanley Entity in respect of which indemnity may be sought pursuant to Section 10(a), the Morgan Stanley Entity seeking indemnity, shall promptly notify the Company in writing and the Company, upon request of the Morgan Stanley Entity, shall retain counsel reasonably satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley Entity and any others the Company may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Morgan Stanley Entity shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Morgan Stanley Entity unless (i) the Company shall have agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Company and the Morgan Stanley Entity and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not, in respect of the legal expenses of the Morgan Stanley Entities in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Morgan Stanley Entities. Any such separate firm for the Morgan Stanley Entities shall be designated in writing by Morgan Stanley. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Morgan Stanley Entities from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time a Morgan Stanley Entity shall have requested the Company to reimburse it for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the Company agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Company of the aforesaid request and (ii) the Company shall not have reimbursed the Morgan Stanley Entity in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of Morgan Stanley, effect any settlement of any pending or threatened proceeding in respect of which any Morgan Stanley Entity is or could have been a party and indemnity could have been sought hereunder by such Morgan Stanley Entity, unless such settlement includes an unconditional release of the Morgan Stanley Entities from all liability on claims that are the subject matter of such proceeding.

(c) To the extent the indemnification provided for in Section 10(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then the Company in lieu of indemnifying the Morgan Stanley

Entity thereunder, shall contribute to the amount paid or payable by the Morgan Stanley Entity as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand from the offering of the Directed Shares or (ii) if the allocation provided by clause 10(c)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 10(c)(i) above but also the relative fault of the Company on the one hand and of the Morgan Stanley Entities on the other hand in connection with any statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand in connection with the offering of the Directed Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Directed Shares (before deducting expenses) and the total underwriting discounts and commissions received by the Morgan Stanley Entities for the Directed Shares, bear to the aggregate initial public offering price (as set forth in Schedule II(c)) of the Directed Shares. If the loss, claim, damage or liability is caused by an untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact, the relative fault of the Company on the one hand and the Morgan Stanley Entities on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement or the omission or alleged omission relates to information supplied by the Company or by the Morgan Stanley Entities and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(d) The Company and the Morgan Stanley Entities agree that it would not be just or equitable if contribution pursuant to this Section 10 were determined by pro rata allocation (even if the Morgan Stanley Entities were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 10(c). The amount paid or payable by the Morgan Stanley Entities as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by the Morgan Stanley Entities in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 10, no Morgan Stanley Entity shall be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received with respect to the Directed Shares distributed to the public exceeds the amount of any damages that such Morgan Stanley Entity has otherwise been required to pay. The remedies provided for in this Section 10 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity.

11. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, the Representatives may in their discretion arrange for the Representatives or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter, the Representatives do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to the Representatives to purchase such Shares on such terms. In the event that, within the respective prescribed

periods, the Representatives notify the Company that they have so arranged for the purchase of such Shares, or the Company notifies the Representatives that it has so arranged for the purchase of such Shares, the Representatives or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments or supplements to the Registration Statement or the Prospectus which in the Representatives’ opinion may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares.

(b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the Representatives and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of Shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

(c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the Representatives and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 7 hereof and the indemnity and contribution agreements in Sections 9 and 10 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default.

12. The respective indemnities, rights of contribution, agreements, representations, warranties and other statements of the Company, the several Underwriters and the Morgan Stanley Entities, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, the Company, or any officer or director or controlling person of the Company or any Morgan Stanley Entity, and shall survive delivery of and payment for the Shares.

13. If this Agreement shall be terminated pursuant to Section 11 hereof, the Company shall not then be under any liability to any Underwriter except as provided in

Sections 7, 9 and 10 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Underwriters through the Representatives for reasonable out-of-pocket expenses approved in writing by the Representatives, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter except as provided in Sections 7, 9 and 10 hereof.

14. In all dealings hereunder, the Representatives shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the Representatives.

All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Representatives in care of Goldman Sachs & Co. LLC, 200 West Street, New York, New York 10282-2198, Attention: Registration Department, J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179, Attention: Equity Syndicate Desk and Morgan Stanley & Co. LLC, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Registration Statement, Attention: Secretary. Any such statements, requests, notices or agreements shall take effect upon receipt thereof.

In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.

15. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and, to the extent provided in Sections 9, 10 and 12 hereof, the officers and directors of the Company, each person who controls the Company or any Underwriter, the Morgan Stanley Entities and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase.

16. Time shall be of the essence of this Agreement. As used herein, the term “business day” shall mean any day when the Commission’s office in Washington, D.C. is open for business.

17. The Company acknowledges and agrees that (i) the purchase and sale of the Shares pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other, (ii) in connection therewith and with the process leading to such transaction each Underwriter is acting solely as a principal and not the agent or fiduciary of the Company, (iii) no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto

(irrespective of whether such Underwriter has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate. The Company agrees that it will not claim that the Underwriters, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

18. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Underwriters, or any of them, with respect to the subject matter hereof.

19. This Agreement and any transaction contemplated by this Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws that would result in the application of any other law than the laws of the State of New York. The Company agrees that any suit or proceeding arising in respect of this Agreement or any transaction contemplated by this Agreement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in The City and County of New York and the Company agrees to submit to the jurisdiction of, and to venue in, such courts.

20. The Company and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

21. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument.

22. Notwithstanding anything herein to the contrary, the Company is authorized to disclose to any persons the U.S. federal and state income tax treatment and tax structure of the potential transaction and all materials of any kind (including tax opinions and other tax analyses) provided to the Company relating to that treatment and structure, without the Underwriters imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, “tax structure” is limited to any facts that may be relevant to that treatment.

If the foregoing is in accordance with the Representatives’ understanding, please sign and return to us five counterparts hereof, and upon the acceptance hereof by the Representatives, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters and the Company. It is understood that the Representatives’ acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company for examination upon request, but without warranty on the part of the Representatives as to the authority of the signers thereof.

[Signature pages follow]

		Very truly yours,

		Elanco Animal Health Incorporated


		By:
			Name:
			Title:

Accepted as of the date hereof:

Goldman Sachs & Co. LLC


By:
	Name:
	Title:


J.P. Morgan Securities LLC


By:
	Name:
	Title:


Morgan Stanley & Co. LLC


By:
	Name:
	Title:

On behalf of each of the Underwriters

SCHEDULE I

Underwriter	Total Number of Firm Shares to be Purchased	Number of Optional Shares to be Purchased if Maximum Option Exercised
Goldman Sachs & Co. LLC	[ · ]	[ · ]

J.P. Morgan Securities LLC	[ · ]	[ · ]

Morgan Stanley & Co. LLC	[ · ]	[ · ]

Barclays Capital Inc.	[ · ]	[ · ]

BNP Paribas Securities Corp.	[ · ]	[ · ]

Citigroup Global Markets Inc.	[ · ]	[ · ]

Credit Suisse Securities (USA) LLC	[ · ]	[ · ]

Deutsche Bank Securities Inc.	[ · ]	[ · ]

Merrill Lynch, Pierce, Fenner & Smith Incorporated	[ · ]	[ · ]

Evercore Group L.L.C.	[ · ]	[ · ]

Cowen and Company, LLC	[ · ]	[ · ]

Academy Securities, Inc.	[ · ]	[ · ]

Drexel Hamilton, LLC	[ · ]	[ · ]

Mischler Financial Group, Inc.	[ · ]	[ · ]

Samuel A. Ramirez & Company, Inc.	[ · ]	[ · ]

The Williams Capital Group, L.P.	[ · ]	[ · ]

Total	[ · ]	[ · ]

SCHEDULE II

(a) Issuer Free Writing Prospectuses not included in the Pricing Disclosure Package:

Electronic roadshow dated [ · ]

(b) Additional Documents Incorporated by Reference:

None

The initial public offering price per share for the Shares is $[ · ]

The number of Firm Shares purchased by the Underwriters is [ · ]

ANNEX I

Form of Press Release

Elanco Animal Health Incorporated
[Date]

Elanco Animal Health Incorporated (the “Company”) announced today that Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, the lead book-running managers in the Company’s recent public sale of [ ] shares of the Company’s common stock, are [waiving] [releasing] a lock-up restriction with respect to [ ] shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on [ ], 20[ ], and the shares may be sold on or after such date.

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

Exhibit 5.1

	11 S. Meridian Street
	Indianapolis, IN 46204-3535
	317-236-1313
	317-231-7433 (Fax)
	www.btlaw.com

September 6, 2018

Elanco Animal Health Incorporated
2500 Innovation Way
Greenfield, Indiana 46140

Ladies and Gentlemen:

We have acted as special counsel to Elanco Animal Health Incorporated, an Indiana corporation (the “ Company ”), in connection with the Registration Statement on Form S-1, File No. 333-226536 (the “ Registration Statement ”) filed by the Company with the Securities and Exchange Commission (the “ Commission ”) under the Securities Act of 1933, as amended (the “ Securities Act ”). The Registration Statement relates to the issuance and sale by the Company of the number of shares of common stock, no par value, of the Company, up to 100,000,000, (the “ Shares ”) set forth on the cover page of the Registration Statement, which includes a number of shares subject to the underwriters’ over-allotment option, as described in the Registration Statement.

As special Indiana counsel, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the Registration Statement and the exhibits thereto and such documents, corporate records and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, including, without limitation (a) the Articles of Incorporation of the Company, (b) the Bylaws of the Company, (c) certain resolutions adopted by the board of directors of the Company, (d) the form of underwriting agreement to be executed by the Company, and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters named therein, which has been filed as Exhibit 1.1 to the Registration Statement (the “ Underwriting Agreement ”), and (e) a form of the share certificate representing the common stock of the Company.

As to questions of fact material to this opinion, we have relied on certificates or comparable documents of public officials and of officers and representatives of the Company. In rendering the opinion expressed below, we have assumed without verification the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies, and the authenticity of the originals of such copies. We further assume that, prior to issuance of the Shares, the restatement of the Articles of Incorporation of the Company in the form approved by the Company’s board of directors reflecting the increase in the authorized shares of common stock of the Company authorized by the board shall have been approved by the Company’s sole shareholder, filed with the Indiana Secretary of State and become effective.

Based on the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that the Shares have been duly authorized by all necessary

corporate action of the Company and, when the price at which the Shares will be sold has been approved by the Pricing Committee of the Board of Directors of the Company and when the Shares have been duly issued and delivered against payment therefor in accordance with the terms of the Underwriting Agreement, the Shares will be validly issued, fully paid and non-assessable.

We do not express any opinion herein concerning any law other than the Indiana Business Corporation Law.

We hereby consent to the filing of this opinion letter as Exhibit 5.1 to the Registration Statement and to the use of our name under the caption “Legal Matters” in the Prospectus included in the Registration Statement. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act.

	Very truly yours,


	/s/ Barnes & Thornburg LLP

Exhibit 10.3

FORM OF TAX MATTERS AGREEMENT

BY AND BETWEEN

ELI LILLY AND COMPANY

AND

ELANCO ANIMAL HEALTH INCORPORATED

Dated as of [ · ], 2018

TABLE OF CONTENTS

Page

Section 1.

Definition of Terms

Section 2.

Allocation of Tax Liabilities

Section 2.01

General Rule

Section 2.02

Allocation of Taxes

Section 2.03

Determination of Taxes Attributable to the Animal Health Business

Section 2.04

Certain Taxes Allocated Under Other Transaction Documents

Section 2.05

Company Liability

Section 2.06

Lilly Liability

Section 3.

Preparation and Filing of Tax Returns

Section 3.01

Lilly’s Responsibility

Section 3.02

Company’s Responsibility

Section 3.03

Tax Returns for Separation Taxes

Section 3.04

Tax Reporting Practices

Section 3.05

Consolidated or Combined Tax Returns

Section 3.06

Right to Review Tax Returns

Section 3.07

Company Carrybacks and Claims for Refund

Section 3.08

Apportionment of Tax Attributes

Section 4.

Tax Payments

Section 4.01

Payment of Taxes With Respect to Joint Returns

Section 4.02

Payment of Taxes With Respect to Separate Returns

Section 4.03

Indemnification Payments

Section 5.

Tax Refunds

Section 5.01

Tax Refunds

Section 6.

Tax-Free Status

Section 6.01

Restrictions on the Company

Section 6.02

Restrictions on Lilly

Section 6.03

Procedures Regarding Opinions and Rulings

Section 6.04

Liability for Tax-Related Losses

Section 7.

Assistance and Cooperation

Section 7.01

Assistance and Cooperation

Section 7.02

Income Tax Return Information

Section 7.03

Reliance by Lilly

Section 7.04

Reliance by the Company

Section 8.

Tax Records

Section 8.01

Retention of Tax Records

Section 8.02

Access to Tax Records

Section 8.03

Preservation of Privilege

Section 9.

Tax Contests

Section 9.01		Notice	25
Section 9.02		Control of Tax Contests	25

Section 10.	Effective Date		27

Section 11.	Treatment of Payments		27
Section 11.01		Treatment of Tax Indemnity Payments	27
Section 11.02		Interest Under This Agreement	27

Section 12.	Disagreements		27
Section 12.01		Discussion	27
Section 12.02		Escalation	27
Section 12.03		Referral to Tax Advisor	27
Section 12.04		Injunctive Relief	28

Section 13.	General Provisions		28
Section 13.01		Counterparts; Entire Agreement; Conflicting Agreements	28
Section 13.02		No Construction Against Drafter	29
Section 13.03		Governing Law	29
Section 13.04		Assignability	29
Section 13.05		Third Party Beneficiaries	29
Section 13.06		Notices	29
Section 13.07		Severability	30
Section 13.08		Force Majeure	30
Section 13.09		Late Payments	30
Section 13.10		Expenses	30
Section 13.11		Further Action	30
Section 13.12		Headings	31
Section 13.13		Survival	31
Section 13.14		Waivers of Default	31
Section 13.15		Specific Performance	31
Section 13.16		Amendments	31
Section 13.17		Interpretation	31
Section 13.18		Waiver of Jury Trial	32
Section 13.19		Submission to Jurisdiction; Waivers	32
Section 13.20		The Company Subsidiaries	32

FORM OF TAX MATTERS AGREEMENT

This TAX MATTERS AGREEMENT (this “ Agreement ”), dated as of [ · ], 2018, is by and between Eli Lilly and Company, an Indiana corporation (“ Lilly ”), and Elanco Animal Health Incorporated, an Indiana corporation (the “ Company ”) (Lilly and the Company are sometimes collectively referred to herein as the “ Parties ” and, as the context requires, individually referred to herein as a “ Party ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in the Master Separation Agreement by and between Lilly and the Company, dated as of the date hereof (the “ Separation Agreement ”).

RECITALS

WHEREAS, the Company is a direct wholly-owned Subsidiary of Lilly;

WHEREAS, the Lilly Board has determined that it is appropriate and advisable to separate the Animal Health Business from the other businesses conducted by Lilly (the “ Separation ”);

WHEREAS, the Lilly Board and the Company Board have each approved the acquisition by the Company and its Subsidiaries of all Animal Health Assets, and the assumption by the Company and its Subsidiaries of the Animal Health Liabilities, all as more fully described in the Transaction Documents;

WHEREAS, the Lilly Board has further determined that it is appropriate and advisable, on the terms and conditions contemplated by the Separation Agreement, to cause the Company to offer and sell for its own account a number of shares of Company Common Stock in an initial public offering of the Company Common Stock, to be registered pursuant to a registration statement on Form S-1 (the “ IPO ”), immediately following the consummation of which Lilly will continue to own at least 80.1% of the outstanding shares of Company Common Stock;

WHEREAS, substantially simultaneously with the entry into this Agreement, pursuant to the Separation Agreement and the Corporate Reorganization, Lilly is contributing to the Company the outstanding Stock of the Specified Entities, which collectively own substantially all of the Animal Health Assets, and are responsible for substantially all of the Animal Health Liabilities (collectively, the “ Contribution ”);

WHEREAS, following the consummation of the IPO, Lilly intends at a time (or times) to be determined by Lilly, to transfer shares of Company Common Stock to holders of shares of Lilly Common Stock by means of (a) one or more dividend distributions by Lilly to holders of Lilly Common Stock of shares of Company Common Stock, (b) one or more offers to holders of Lilly Common Stock to exchange their shares of Lilly Common Stock for shares of Company Common Stock, or (c) any combination thereof (any such transaction, a “ Distribution ”);

WHEREAS, if Lilly determines not to effect a Distribution, Lilly may determine instead to effect a disposition of its Company Common Stock pursuant to one or more public or private offerings for sale or other similar transactions (any such transaction, an “ Other Disposition ”) or continue to hold its shares of Company Common Stock;

WHEREAS, for U.S. federal income Tax purposes, the Contribution and the Distribution, if effected, taken together, are intended to qualify as a tax-free spin-off under Section 355 and Section 368(a)(1)(D) of the Code;

WHEREAS, as of the date hereof, Lilly is the common parent of an affiliated group of corporations, including the Company, which has elected to file consolidated U.S. federal income Tax returns; and

WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties of liabilities for certain Taxes arising prior to, at the time of, and subsequent to the IPO, and to provide for and agree upon other matters relating to Taxes.

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

Section 1. Definition of Terms . For purposes of this Agreement (including the recitals hereof), the following terms shall have the following meanings:

“ Active Trade or Business ” means, with respect to the Company, the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations thereunder) of the Animal Health Business as conducted immediately prior to the IPO, or, with respect to another Separation Transaction intended to qualify as tax-free pursuant to Section 355 of the Code or the analogous provisions of state or local Law, the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations thereunder, or the analogous provisions of state or local Law) by the relevant Company Entity of the Animal Health Business relating to such Company Entity as conducted immediately prior to such Separation Transaction.

“ Adjustment Request ” means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (i) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (ii) any claim for equitable recoupment or other offset, and (iii) any claim for refund or credit of Taxes previously paid.

“ Affiliate ” of any Person means a Person that controls, is controlled by, or is under common control with such Person. As used in this definition, “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, or the power to appoint and remove a majority of the directors, managers or persons holding similar power in respect of such entity, whether through ownership of voting securities or other interests, by contract or otherwise. It is expressly agreed that, from and after the date of the closing of the IPO, solely for purposes of this Agreement, (i) no member of the Company Group shall be deemed to be an Affiliate of any member of the Lilly Group and (ii) no member of the Lilly Group shall be deemed to be an Affiliate of any member of the Company Group.

“ Agreement ” means this Tax Matters Agreement.

“ Animal Health Assets ” has the meaning set forth in the Separation Agreement.

“ Animal Health Business ” has the meaning set forth in the Separation Agreement.

“ Animal Health Liabilities ” has the meaning set forth in the Separation Agreement.

“ Board Certificate ” has the meaning set forth in Section 6.01(d) .

“ Business Day ” has the meaning set forth in the Separation Agreement.

“ Code ” means the U.S. Internal Revenue Code of 1986, as amended.

“ Company ” has the meaning set forth in the preamble hereto.

“ Company Capital Stock ” means all classes or series of capital stock of the Company, including (i) the Company Common Stock, (ii) all options, warrants and other rights to acquire such capital stock and (iii) all instruments properly treated as stock in the Company for U.S. federal income Tax purposes.

“ Company Carryback ” means any net operating loss, net capital loss, excess Tax credit, or other similar Tax Item of any member of the Company Group which may or must be carried from one Tax Period to another prior Tax Period under the Code or other applicable Tax Law.

“ Company Common Stock ” has the meaning set forth in the Separation Agreement.

“ Company Entity ” means an entity which will be a member of the Company Group immediately after the IPO.

“ Company Group ” means (i) the Company and its Affiliates, as determined immediately after the IPO, (ii) the Transferred Entities, and (iii) any entity which (A) was an Affiliate of Lilly or an Affiliate of a member of the Company Group, (B) conducted solely or predominantly the Animal Health Business, and (C) is no longer an Affiliate of Lilly as of the IPO.

“ Company Separate Return ” means any Tax Return of or including any member of the Company Group (including any consolidated, combined or unitary return) that does not include any member of the Lilly Group.

“ Company Tax Notice ” has the meaning set forth in Section 4.01(b) .

“ Contribution ” has the meaning set forth in the recitals hereto.

“ Controlling Party ” has the meaning set forth in Section 9.02(c) .

“ Corporate Reorganization ” has the meaning set forth in the Separation Agreement.

“ Deconsolidation Date ” means the last date on which the Company qualifies as a member of the affiliated group (as defined in Section 1504 of the Code) of which Lilly is the common parent.

“ Dispute ” has the meaning set forth in Section 12 .

“ Distribution ” has the meaning set forth in the recitals hereto.

“ Distribution Date ” means the date or dates on which the Distribution occurs.

“ Effective Date ” has the meaning set forth in the Separation Agreement.

“ Fifty-Percent or Greater Interest ” has the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.

“ Filing Date ” has the meaning set forth in Section 6.04(d) .

“ Final Determination ” means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a Tax Period, (i) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the Laws of a state, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such Tax Period (as the case may be); (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the Laws of a state, local, or foreign taxing jurisdiction; (iv) by any allowance of a refund or credit in respect of an overpayment of a Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (v) by a final settlement resulting from a treaty-based competent authority determination; or (vi) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties.

“ Gain Recognition Agreement ” means a gain recognition agreement as described in Treasury Regulations Section 1.367(a)-8 or any successor provision thereto.

“ Group ” means the Lilly Group or the Company Group, or both, as the context requires.

“ Income Tax ” means all Taxes based upon, measured by, or calculated with respect to (i) net income or profits (including any capital gains, minimum Tax or any Tax on items of tax preference, but not including sales, use, real or personal property, gross or net receipts, value added, excise, leasing, transfer or similar Taxes), or (ii) multiple bases (including corporate franchise, doing business and occupation Taxes) if one or more bases upon which such Tax is determined is described in clause (i) of this definition, together with any interest, penalty, additions to tax, or additional amounts in respect of the foregoing.

“ Indemnitee ” has the meaning set forth in Section 11.02 .

“ Indemnitor ” has the meaning set forth in Section 11.02 .

“ Internal Distribution ” means any Separation Transaction or series of Separation Transactions (other than the Contribution and the Distribution) that is intended to qualify as a

tax-free transaction under Section 355 and/or Section 368(a)(1)(D) of the Code, as described in the Tax Opinions.

“ Internal Restructuring ” has the meaning set forth in Section 6.01(e) .

“ IPO ” has the meaning set forth in the recitals hereto.

“ IRS ” means the U.S. Internal Revenue Service, or any successor agency.

“ Joint Return ” means any Tax Return that actually includes, by election or otherwise, one or more members of the Lilly Group together with one or more members of the Company Group.

“ Lilly ” has the meaning set forth in the preamble hereto.

“ Lilly Affiliated Group ” means the affiliated group (as that term is defined in Section 1504 of the Code and the Treasury Regulations thereunder) of which Lilly is the common parent.

“ Lilly Business ” has the meaning set forth in the Separation Agreement.

“ Lilly Federal Consolidated Income Tax Return ” means any U.S. federal Income Tax Return for the Lilly Affiliated Group.

“ Lilly Group ” means Lilly and its Affiliates, excluding any entity that is a member of the Company Group, as determined immediately after the IPO.

“ Lilly Separate Return ” means any Tax Return of or including any member of the Lilly Group (including any consolidated, combined or unitary return) that does not include any member of the Company Group.

“ Lilly Services ” has the meaning set forth in the Transitional Services Agreement.

“ Local Transfer Agreements ” has the meaning set forth in the Separation Agreement.

“ Non-Controlling Party ” has the meaning set forth in Section 9.02(c) .

“ Notified Action ” has the meaning set forth in Section 6.03(a) .

“ Other Disposition ” has the meaning set forth in the recitals hereto.

“ Parties ” and “ Party ” have the meaning set forth in the preamble hereto.

“ Past Practices ” has the meaning set forth in Section 3.04(b) .

“ Payment Date ” means (i) with respect to any Lilly Federal Consolidated Income Tax Return, (A) the due date for any required installment of estimated Taxes determined under Section 6655 of the Code, (B) the due date (determined without regard to extensions) for filing the return determined under Section 6072 of the Code, or (C) the date the return is filed, as the case may be, and (ii) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.

“ Payor ” has the meaning set forth in Section 4.03 .

“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for U.S. federal income Tax purposes.

“ Post-Deconsolidation Period ” means any Tax Period beginning after the Deconsolidation Date and, in the case of any Tax Period beginning before the Deconsolidation Date and ending after the Deconsolidation Date, the portion of such Tax Period beginning on the day after the Deconsolidation Date.

“ Post-IPO Period ” means any Tax Period beginning after the Effective Date and, in the case of any Straddle Period, the portion of such Straddle Period beginning on the day after the Effective Date.

“ Pre-Deconsolidation Period ” means any Tax Period ending on or before the Deconsolidation Date and, in the case of any Tax Period beginning before the Deconsolidation Date and ending after the Deconsolidation Date, the portion of such Tax Period ending on the Deconsolidation Date.

“ Pre-IPO Period ” means any Tax Period ending on or before the Effective Date and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Effective Date.

“ Preliminary Tax Advisor ” has the meaning set forth in Section 12.03 .

“ Prime Rate ” has the meaning set forth in the Separation Agreement.

“ Privilege ” means any privilege that may be asserted under applicable Law, including any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.

“ Proposed Acquisition Transaction ” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulations Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by the Company management or shareholders, is a hostile acquisition, or otherwise, as a result of which the Company would merge or consolidate with any other Person or as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, from the Company and/or one or more holders of outstanding shares of Company Capital Stock, a number of shares of Company Capital Stock that would, when combined with any other changes in ownership of Company Capital Stock pertinent for purposes of Section 355(e) of the Code, comprise 40% or more of (i) the value of all outstanding shares of stock of the Company as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (ii) the total combined voting power of all outstanding shares of voting stock of the Company as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by the Company of a shareholder rights plan or (ii) issuances by the Company that satisfy Safe Harbor VIII (relating to

acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulations Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation. Solely for purposes of this definition, the “Company” shall include any member of the Company Group that was a “controlled corporation” within the meaning of Section 355(a)(1) of the Code in any of the Internal Distributions.

“ Representation Letters ” means the statements of facts and representations, officer’s certificates, representation letters and any other materials delivered or deliverable by Lilly, the Company, or any Affiliates or representatives thereof in connection with the rendering by Tax Advisors of the Tax Opinions.

“ Required Party ” has the meaning set forth in Section 4.03 .

“ Responsible Party ” means, with respect to any Tax Return, the Party having responsibility for preparing and filing such Tax Return under this Agreement.

“ Retention Date ” has the meaning set forth in Section 8.01 .

“ Ruling ” means a private letter ruling issued by the IRS to Lilly to the effect that a transaction will not affect the Tax-Free Status. Any such ruling must assume that the Contribution and the Distribution would have qualified for the Tax-Free Status if the transaction in question did not occur.

“ Ruling Request ” means any letter filed by Lilly with the IRS requesting a Ruling (including all attachments, exhibits, and other materials submitted with such ruling request letter) and any amendment or supplement to such ruling request letter.

“ Section 336(e) Election ” has the meaning set forth in Section 3.04(d) .

“ Section 336(e) Tax Basis ” has the meaning set forth in Section 3.04(d) .

“ Section 6.01(d) Acquisition Transaction ” means any transaction or series of transactions that is not a Proposed Acquisition Transaction but would be a Proposed Acquisition Transaction if the percentage reflected in the definition of Proposed Acquisition Transaction were 25% instead of 40%.

“ Separate Return ” means a Lilly Separate Return or a Company Separate Return, as the case may be.

“ Separation ” has the meaning set forth in the recitals hereto.

“ Separation Agreement ” has the meaning set forth in the preamble hereto.

“ Separation Taxes ” means any Taxes (including, for the avoidance of doubt, Income Taxes and Transfer Taxes) imposed on any member of the Lilly Group or the Company Group arising from, or attributable to, any transfer of assets or liabilities pursuant to the Separation Transactions, other than any Taxes which are Tax-Related Losses.

“ Separation Transactions ” means those transactions undertaken by the Parties and their Affiliates pursuant to the Corporate Reorganization to separate ownership of the Animal Health Business from ownership of the Lilly Business.

“ Straddle Period ” means any Tax Period that begins on or before, and ends after, the Effective Date.

“ Tax ” or “ Taxes ” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, value added, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, alternative minimum, estimated or other tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), imposed by any governmental entity or political subdivision thereof, and any interest, penalty, additions to tax, or additional amounts in respect of the foregoing.

“ Tax Advisor ” means a Tax counsel or accountant of recognized national standing.

“ Tax Attribute ” means a net operating loss, net capital loss, unused investment credit, unused foreign Tax credit, excess charitable contribution, general business credit, research and development credit or any other Tax Item that could reduce a Tax or create a Tax Benefit.

“ Tax Authority ” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

“ Tax Benefit ” means any refund, credit, or other reduction in otherwise required liability for Taxes.

“ Tax Contest ” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).

“ Tax-Free Status ” means the qualification of (i) the Contribution and the Distribution, taken together, as (A) a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code, (B) a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(d), 355(e) and 361(c) of the Code, and (C) a transaction in which Lilly, the Company and the shareholders of the Company recognize no income or gain for U.S. federal income Tax purposes pursuant to Sections 355, 361 and 1032 of the Code, other than, in the case of Lilly and the Company, intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated under Section 1502 of the Code, and (ii) each Internal Distribution as a tax-free transaction under Section 355 and/or Section 368(a)(1)(D) of the Code, as described in the Tax Opinions.

“ Tax Item ” means any item of income, gain, loss, deduction, or credit, or any other item which increases or decreases Taxes paid or payable in any Tax Period.

“ Tax Law ” means the Law of any governmental entity or political subdivision thereof relating to any Tax.

“ Tax Opinions ” means the opinions of Tax Advisors deliverable to Lilly in connection with the Contribution and the Distribution or otherwise with respect to the Separation Transactions.

“ Tax Period ” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.

“ Tax Records ” means any (i) Tax Returns, (ii) Tax Return workpapers, (iii) documentation relating to any Tax Contests, and (iv) any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority, in each case filed with respect to or otherwise relating to Taxes.

“ Tax-Related Losses ” means (i) all Taxes (including interest and penalties thereon) imposed pursuant to any settlement, Final Determination, judgment or otherwise; (ii) all accounting, legal and other professional fees, and court costs incurred in connection with such Taxes, as well as any other out-of-pocket costs incurred in connection with such Taxes; and (iii) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by Lilly (or any Lilly Affiliate) or the Company (or any Affiliate of the Company) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority, in each case, resulting from the failure of the Contribution and the Distribution, or any Internal Distribution, to qualify for the Tax-Free Status.

“ Tax Return ” means any report of Taxes due, any claim for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document required to be filed under the Code or other Tax Law with respect to Taxes, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

“ Transfer Pricing Adjustment ” means any proposed or actual allocation by a Tax Authority of any Tax Item between or among any member of the Lilly Group and any member of the Company Group with respect to any Tax Period ending prior to or including the final Distribution Date or the date of any Other Disposition, as the case may be.

“ Transfer Taxes ” means all transfer, sales, use, excise, stock, stamp, stamp duty, stamp duty reserve, stamp duty land, documentary, filing, recording, registration, value-added and other similar Taxes (excluding, for the avoidance of doubt, any income, gains, profit or similar Taxes, however assessed), together with any interest, penalty, additions to tax, or additional amounts in respect of the foregoing.

“ Transferred Entities ” has the meaning set forth in the Separation Agreement.

“ Transition Services BEAT Amount ” means the amount of any Taxes imposed under Section 59A of the Code which are or become payable as a result of “base erosion payments” paid or accrued by any member of the Lilly Group to a foreign Person which is “related” to such member of the Lilly Group (in each case within the meaning of Section 59A(d) of the Code) in respect of Lilly Services supplied to a member of the Company Group pursuant to the Transitional Services Agreement, which amount shall be calculated for a given taxable year by comparing (x) the amount of Taxes imposed on the Lilly Group under Section 59A of the Code for such taxable year without regard to any amounts paid or accrued to any foreign Person in respect of such Lilly Services and (y) the amount of Taxes imposed on the Lilly Group under Section 59A of the Code for such taxable year, in each case as determined by Lilly.

“ Transitional Services Agreement ” has the meaning set forth in the Separation Agreement.

“ Treasury Regulations ” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

“ Unqualified Tax Opinion ” means an unqualified “will” opinion of a Tax Advisor, which Tax Advisor is acceptable to Lilly and upon which Lilly may rely, to the effect that a transaction will not affect the Tax-Free Status. Any such opinion must assume that the Contribution and the Distribution would have qualified for the Tax-Free Status if the transaction in question did not occur.

Section 2. Allocation of Tax Liabilities .

Section 2.01 General Rule .

(a) Lilly Liability . Lilly shall be liable for, and shall indemnify and hold harmless the Company Group from and against any liability for, Taxes which are allocated to Lilly under this Section 2 .

(b) Company Liability . The Company shall be liable for, and shall indemnify and hold harmless the Lilly Group from and against any liability for, Taxes which are allocated to the Company under this Section 2 .

Section 2.02 Allocation of Taxes Except as provided in Section 2.04 , Section 2.05 or Section 2.06 , Taxes shall be allocated as follows:

(a) Allocation of Taxes Relating to Joint Returns .

(i) Allocation for Pre-IPO Periods . With respect to any Joint Return, Lilly shall be responsible for any and all Taxes due with respect to or required to be reported on any such Tax Return (including any increase in such Tax as a result of a Final Determination) for all Pre-IPO Periods;

(ii) Allocation to the Company for Post-IPO Periods . The Company shall be responsible for any and all Taxes attributable to the Animal Health Business that are due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) for all Post-IPO Periods.

(iii) Allocation to Lilly for Post-IPO Periods . Lilly shall be responsible for any and all Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) other than those Taxes described in Section 2.02(a)(ii) for all Post-IPO Periods.

(b) Allocation of Taxes Relating to Separate Returns .

(i) Lilly shall be responsible for any and all Taxes due with respect to or required to be reported on any Lilly Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

(ii) The Company shall be responsible for any and all Taxes due with respect to or required to be reported on any Company Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.

Section 2.03 Determination of Taxes Attributable to the Animal Health Business . For purposes of Section 2.02(a)(ii) :

(a) The amount of U.S. federal Income Taxes attributable to the Animal Health Business shall be as determined by Lilly on a pro forma basis using the following conventions:

(i) assuming that the members of the Company Group were not included in the Lilly Affiliated Group;

(ii) including only Tax Items of members of the Company Group that were included in the relevant Lilly Federal Consolidated Income Tax Return;

(iii) except as provided in Section 2.03(a)(v) , using all elections, accounting methods and conventions used on the Lilly Federal Consolidated Income Tax Return for such Tax Period;

(iv) applying the highest statutory marginal corporate income Tax rate in effect for such Tax Period;

(v) assuming that the Company Group elects not to carry back any net operating losses; and

(vi) assuming that the Company Group’s utilization of any Tax Attribute carryforward or carryback is limited to the Tax Attributes of the Company Group that would be available if the U.S. federal Income Tax of the Company Group for each taxable year ending after December 31, 2017 were determined in accordance with this Section 2.03(a) .

(b) The amount of Income Taxes attributable to the Animal Health Business with respect to any Joint Return other than a Lilly Federal Consolidated Income Tax Return shall be as determined by Lilly in a manner consistent with the principles set forth in Section 2.03(a) .

(c) The amount of Taxes attributable to the Animal Health Business with respect to any Joint Return not described in Section 2.03(a) or (b) shall be as determined by Lilly on a pro forma basis taking into account only the assets and operations of the Animal Health Business reflected on such Joint Return and in a manner consistent with the past return filing practices of the Lilly Group with respect to such Joint Return (including any past accounting methods, elections and conventions), except as otherwise required by applicable Law.

(d) In the case of any Joint Return for any Straddle Period, the allocation of any Tax Items required to determine any Taxes or other amounts attributable to the Pre-IPO Period and the Post-IPO Period shall be as determined by Lilly in a manner consistent with the past return filing practices of the Lilly Group with respect to such Joint Return (including any past

accounting methods, elections and conventions), except as otherwise required by applicable Law; provided , that property Taxes and other similar periodic Taxes shall be apportioned on a per diem basis.

(e) The amount of Taxes attributable to the Animal Health Business with respect to any Joint Return for any Tax Period shall not be less than zero.

The Company shall reimburse Lilly for all reasonable costs and expenses paid or incurred by the Lilly Group in connection with determining the amount of Taxes attributable to the Animal Health Business with respect to any Joint Return.

Section 2.04 Certain Taxes Allocated Under Other Transaction Documents . The Parties acknowledge and agree that, notwithstanding anything contained herein to the contrary, this Agreement, including Section 2 hereof, shall not (i) apply with respect to any and all Taxes that are expressly allocated pursuant to any Transaction Document (other than this Agreement), for which such other Transaction Document shall govern, or (ii) in any way affect or modify the Parties’ rights and obligations under Section 2.04(c) of the Separation Agreement.

Section 2.05 Company Liability . The Company shall be liable for, and shall indemnify and hold harmless the Lilly Group from and against, any liability for:

(a) any Transition Services BEAT Amount;

(b) any Tax resulting from a breach by the Company of any covenant in this Agreement, the Separation Agreement or any Ancillary Agreement; and

(c) any Tax-Related Losses for which the Company is responsible pursuant to Section 6.04 .

Section 2.06 Lilly Liability . Lilly shall be liable for, and shall indemnify and hold harmless the Company Group from and against, any liability for:

(a) any Separation Tax;

(b) any Tax resulting from a breach by Lilly of any covenant in this Agreement, the Separation Agreement or any Transaction Document; and

(c) any Tax-Related Losses for which Lilly is responsible pursuant to Section 6.04 .

Section 3. Preparation and Filing of Tax Returns .

Section 3.01 Lilly’s Responsibility . Lilly has the exclusive obligation and right to prepare and file, or to cause to be prepared and filed:

(a) All Joint Returns; and

(b) Lilly Separate Returns.

Section 3.02 Company’s Responsibility . The Company shall prepare and file, or shall cause to be prepared and filed, all Tax Returns required to be filed by or with respect to members

of the Company Group other than those Tax Returns which Lilly is required to prepare and file under Section 3.01 or Section 3.03 . The Tax Returns required to be prepared and filed by the Company under this Section 3.02 shall include any Company Separate Returns.

Section 3.03 Tax Returns for Separation Taxes . Tax Returns relating to Separation Taxes shall be prepared and filed when due (including extensions) by Lilly. The Company shall provide, and shall cause its Affiliates to provide, assistance and cooperation to Lilly and its Affiliates in accordance with Section 7 with respect to the preparation and filing of Tax Returns, including providing information required to be provided in Section 7 and, where required by applicable Law and at Lilly’s request, filing any such Tax Returns as prepared by Lilly.

Section 3.04 Tax Reporting Practices .

(a) Lilly General Rule . Except as provided in Section 3.04(c) , Lilly shall prepare any Tax Return which it has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 3.01 , in accordance with reasonable Tax accounting practices selected by Lilly.

(b) Company General Rule . Except as provided in Section 3.04(c) , with respect to any Tax Return for a Tax Period that begins on or before the date that is two (2) years following the Distribution Date that the Company has the obligation and right to prepare and file, or cause to be prepared and filed, under Section 3.02 , such Tax Return shall be prepared in accordance with past practices, accounting methods, elections or conventions (“ Past Practices ”) used with respect to the Tax Returns in question (unless (i) the Company reasonably determines, upon advice from counsel, that there is no reasonable basis for the use of such Past Practices or (ii) there is no adverse effect to Lilly, as determined in Lilly’s reasonable discretion), and to the extent any items are not covered by Past Practices (or in the event that (i) the Company reasonably determines, upon advice from counsel, that there is no reasonable basis for the use of such Past Practices or (ii) there is no adverse effect to Lilly, as determined in Lilly’s reasonable discretion), in accordance with reasonable Tax accounting practices selected by the Company.

(c) Reporting of Separation Transactions . The Tax treatment of the Separation Transactions reported on any Tax Return shall be consistent with the treatment thereof in the Tax Opinions, taking into account the jurisdiction in which such Tax Returns are filed, unless the Responsible Party reasonably determines, upon advice from counsel, that there is no reasonable basis for such Tax treatment. Such treatment reported on any Tax Return for which the Company is the Responsible Party shall be consistent with that on any Tax Return filed or to be filed by Lilly or any member of the Lilly Group or caused or to be caused to be filed by Lilly, unless the Company reasonably determines, upon advice from counsel, that there is no reasonable basis for such Tax treatment. In the event that a Party shall reasonably determine, upon advice from counsel, that there is no reasonable basis for the Tax treatment described in either of the preceding two sentences, such Party shall notify the other Party 20 Business Days prior to filing the relevant Tax Return and the Parties shall attempt in good faith to agree on the manner in which the relevant portion of the Separation Transactions shall be reported.

(d) Protective Section 336(e) Election . After the date hereof, Lilly shall determine, in its sole and absolute discretion, whether to make a protective election under Section 336(e) of the Code and the Treasury Regulations thereunder (and any corresponding or analogous provisions

of state and local Law) in connection with the Distribution with respect to the Company and each other member of the Company Group that is a domestic corporation for U.S. federal Income Tax purposes (a “ Section 336(e) Election ”). If Lilly determines that a Section 336(e) Election would be beneficial:

(i) Lilly, the Company and their respective Affiliates shall cooperate in making the Section 336(e) Election, including by filing any statements, amending any Tax Returns or taking such other actions reasonably necessary to carry out the Section 336(e) Election;

(ii) if the Distribution fails to qualify (in whole or in part) for the Tax-Free Status and the Company or any member of the Company Group realizes an increase in Tax basis as a result of the Section 336(e) Election (the “ Section 336(e) Tax Basis ”), then the cash Tax savings realized by the Company and each member of the Company Group as a result of the Section 336(e) Tax Basis shall be shared between Lilly and the Company in the same proportion as the Taxes giving rise to the Section 336(e) Tax Basis were borne by Lilly and the Company (after giving effect to the indemnification obligations in this Agreement); and

(iii) to the extent the Section 336(e) Election becomes effective, each Party agrees not to take any position (and to cause each of its Affiliates not to take any position) that is inconsistent with the Section 336(e) Election on any Tax Return, in connection with any Tax Contest or otherwise, except as may be required by a Final Determination.

(e) Exception Where Required by a Final Determination. Notwithstanding any provision herein to the contrary, this Section 3.04 shall not require any Party to file a Tax Return reflecting a particular treatment or in accordance with a particular Past Practice where such treatment or Past Practice, as applicable, is proscribed by a Final Determination.

Section 3.05 Consolidated or Combined Tax Returns . The Company will elect and join, and will cause its respective Affiliates to elect and join, in filing any Joint Returns that Lilly determines are required to be filed or that Lilly chooses to file pursuant to Section 3.01(a) .

Section 3.06 Right to Review Tax Returns .

(a) General. The Responsible Party with respect to any material Tax Return shall make the portion of such Tax Return and related workpapers which are relevant to the determination of the other Party’s rights or obligations under this Agreement available for review by the other Party, if requested, to the extent (i) such Tax Return relates to Taxes for which the requesting Party would reasonably be expected to be liable, (ii) the requesting Party would reasonably be expected to be liable in whole or in part for any additional Taxes owing as a result of adjustments to the amount of the Taxes reported on such Tax Return, (iii) such Tax Return relates to Taxes for which the requesting Party would reasonably be expected to have a claim for Tax Benefits under this Agreement, or (iv) the requesting Party reasonably determines that it must inspect such Tax Return to confirm compliance with the terms of this Agreement. The Responsible Party shall (i) use its reasonable best efforts to make such portion of such Tax

Return available for review as required under this paragraph sufficiently in advance of the due date for filing of such Tax Return to provide the requesting Party with a meaningful opportunity to analyze and comment on such Tax Return and (ii) use reasonable efforts to have such Tax Return modified before filing to reflect reasonable comments of the requesting Party, taking into account the person responsible for payment of the Tax (if any) reported on such Tax Return and whether the amount of Tax liability allocable to the requesting Party with respect to such Tax Return is material. The Parties shall attempt in good faith to resolve any issues arising out of the review of such Tax Return.

(b) Material Tax Returns. For purposes of Section 3.06(a) , a Tax Return is “material” if it could reasonably be expected to reflect (A) Tax liability equal to or in excess of $1 million, (B) a credit or credits equal to or in excess of $1 million or (C) a loss or losses equal to or in excess of $3 million, in each case with respect to the requesting Party.

Section 3.07 Company Carrybacks and Claims for Refund . The Company hereby agrees that, unless Lilly consents in writing, (i) no Adjustment Request with respect to any Joint Return shall be filed, and (ii) any available elections to waive the right to claim in any Pre-Deconsolidation Period with respect to any Joint Return any Company Carryback arising in a Post-Deconsolidation Period shall be made, and no affirmative election shall be made to claim any such Company Carryback.

Section 3.08 Apportionment of Tax Attributes . Lilly may in good faith advise the Company in writing of the amount, if any, of any Tax Attributes which Lilly determines, in its sole and absolute discretion, shall be allocated or apportioned to the Company Group under applicable Law; provided , that this Section 3.08 shall not be construed as obligating Lilly to undertake any such determination. The Company and all members of the Company Group shall prepare all Tax Returns in accordance with such written notice. The Company agrees that it shall not dispute Lilly’s allocation or apportionment of Tax Attributes. The Company may request that Lilly undertake a determination of the portion, if any, of any particular Tax Attribute to be allocated or apportioned to the Company Group under applicable Law; to the extent that Lilly determines, in its sole and absolute discretion, not to undertake such determination, or does not otherwise advise the Company of its intention to undertake such determination within 20 Business Days of the receipt of such request, the Company shall be permitted to undertake such determination at its own cost and expense and shall notify Lilly of its determination, which determination shall not be binding upon Lilly.

Section 4. Tax Payments .

Section 4.01 Payment of Taxes With Respect to Joint Returns . In the case of any Joint Return:

(a) Computation and Payment of Tax Due. At least three Business Days prior to any Payment Date for any such Tax Return, Lilly shall compute the amount of Tax required to be paid to the applicable Tax Authority (taking into account the requirements of Section 3.04 relating to consistent accounting practices, as applicable) with respect to such Tax Return on such Payment Date. Lilly shall pay such amount to such Tax Authority on or before such Payment Date (and provide notice and proof of payment to the Company).

(b) Computation and Payment of Liability With Respect To Tax Due. Within 20 Business Days following the earlier of (i) the due date (including extensions) for filing any Joint Return (excluding any Joint Return with respect to payment of estimated Taxes or Taxes due with a request for extension of time to file) or (ii) the date on which such Joint Return is filed, Lilly shall provide the Company with a written notice setting forth the amount of Taxes shown on such Joint Return that are allocable to the Company Group under the provisions of Section 2 (the “ Company Tax Notice ”). The Company shall pay to Lilly the amount of Taxes set forth on the Company Tax Notice, plus interest computed at the Prime Rate on the amount of the payment based on the number of days from the earlier of (i) the due date of the Tax Return (including extensions) or (ii) the date on which such Tax Return is filed, to the date of payment.

(c) Adjustments Resulting in Underpayments. In the case of any adjustment pursuant to a Final Determination with respect to any Joint Return, Lilly shall pay to the applicable Tax Authority when due any additional Tax due with respect to such Joint Return required to be paid as a result of such adjustment pursuant to a Final Determination. Lilly shall compute the amount attributable to the Company Group in accordance with Section 2 and the Company shall pay to Lilly any amount due Lilly (or Lilly shall pay the Company any amount due the Company) under Section 2 within 20 Business Days from the later of (i) the date the additional Tax was paid by the Responsible Party or (ii) the date of receipt of a written notice and demand from the Responsible Party for payment of the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. Any payments required under this Section 4.01(c) shall include interest computed at the Prime Rate based on the number of days from the date the additional Tax was paid by the Responsible Party to the date of the payment under this Section 4.01(c) .

Section 4.02 Payment of Taxes With Respect to Separate Returns . Each Party shall pay, or shall cause to be paid, to the applicable Tax Authority when due all Taxes owed by such Party or a member of such Party’s Group with respect to a Separate Return.

Section 4.03 Indemnification Payments .

(a) If any Party (the “ Payor ”) is required under applicable Tax Law to pay to a Tax Authority a Tax that another Party (the “ Required Party ”) is liable for under this Agreement, the Required Party shall reimburse the Payor within 20 Business Days of delivery by the Payor to the Required Party of an invoice for the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. The reimbursement shall include interest on the Tax payment computed at the Prime Rate based on the number of days from the date of the payment to the Tax Authority to the date of reimbursement under this Section 4.03 .

(b) All indemnification payments under this Agreement shall be made by Lilly directly to the Company or by the Company directly to Lilly, as applicable; provided , however , that if the Parties mutually agree with respect to any such indemnification payment, any member of the Lilly Group, on the one hand, may make such indemnification payment to any member of the Company Group, on the other hand, and vice versa. All indemnification payments shall be treated in the manner described in Section 11.01 .

Section 5. Tax Refunds .

Section 5.01 Tax Refunds . Lilly shall be entitled to any refund (and any interest thereon received from the applicable Tax Authority) of Taxes for which Lilly is liable hereunder, and the Company shall be entitled to any refund (and any interest thereon received from the applicable Tax Authority) of Taxes for which the Company is liable hereunder. A Party receiving a refund to which another Party is entitled hereunder shall pay over such refund to such other Party within 20 Business Days after such refund is received (together with interest computed at the Prime Rate based on the number of days from the date the refund was received to the date the refund was paid over).

Section 6. Tax-Free Status .

Section 6.01 Restrictions on the Company .

(a) The Company agrees that it will not take or fail to take, or permit any Affiliate of the Company, as the case may be, to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in any Representation Letters or the Tax Opinions. The Company agrees that it will not take or fail to take, or permit any Affiliate of the Company, as the case may be, to take or fail to take, any action which adversely affects or could reasonably be expected to adversely affect the Tax-Free Status.

(b) The Company agrees that, from the date hereof until the first Business Day after the two-year anniversary of the final Distribution Date, it will (i) maintain its status as a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, (ii) not engage in any transaction that would result in it ceasing to be a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, (iii) cause each Affiliate of the Company whose Active Trade or Business is relied upon in the Tax Opinions for purposes of qualifying a transaction as tax-free pursuant to Section 355 of the Code or other Tax Law to maintain its status as a company engaged in such Active Trade or Business for purposes of Section 355(b)(2) of the Code and any such other applicable Tax Law, (iv) not engage in any transaction or permit an Affiliate of the Company to engage in any transaction that would result in an Affiliate of the Company described in clause (iii) hereof ceasing to be a company engaged in the relevant Active Trade or Business for purposes of Section 355(b)(2) or such other applicable Tax Law, taking into account Section 355(b)(3) of the Code for purposes of clauses (i) through (iv) hereof, and (v) not dispose of or permit an Affiliate of the Company to dispose of, directly or indirectly, any interest in an Affiliate of the Company described in clause (iii) hereof or permit any such Affiliate of the Company to make or revoke any election under Treasury Regulations Section 301.7701-3.

(c) The Company agrees that, from the date hereof until the first Business Day after the two-year anniversary of the final Distribution Date, it will not and will not permit any Affiliate of the Company described in clause (iii) of Section 6.01(b) to (i) enter into any Proposed Acquisition Transaction or, to the extent the Company has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur (whether by (A) redeeming rights under a shareholder rights plan, (B) finding a tender offer to be

a “permitted offer” under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction, (C) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the Delaware General Corporation Law or any similar corporate statute, any “fair price” or other provision of the Company’s charter or bylaws, (D) amending its certificate of incorporation to declassify its Board of Directors or approving any such amendment, or (E) otherwise); (ii) merge or consolidate with any other Person or liquidate or partially liquidate; (iii) in a single transaction or series of transactions sell or transfer (other than sales or transfers of inventory in the ordinary course of business) all or substantially all of the assets that were transferred to the Company pursuant to the Contribution or sell or transfer 25% or more of the gross assets of any Active Trade or Business or 25% or more of the consolidated gross assets of the Company and its Affiliates (such percentages to be measured based on fair market value as of the initial Distribution Date); (iv) redeem or otherwise repurchase (directly or through an Affiliate of the Company) any Company stock, or rights to acquire stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by Revenue Procedure 2003-48); (v) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of the Company Capital Stock (including, without limitation, through the conversion of one class of Company Capital Stock into another class of Company Capital Stock); or (vi) take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Representation Letters or the Tax Opinions) which in the aggregate (and taking into account any other transactions described in this subparagraph (d)) would be reasonably likely to have the effect of causing or permitting one or more persons (whether or not acting in concert) to acquire directly or indirectly stock representing a Fifty-Percent or Greater Interest in the Company or otherwise jeopardize the Tax-Free Status, unless prior to taking any such action set forth in the foregoing clauses (i) through (vi), (x) the Company shall have requested that Lilly obtain a Ruling in accordance with Section 6.03(a) and Section 6.03(b) to the effect that such transaction will not affect the Tax-Free Status and Lilly shall have received such Ruling in form and substance satisfactory to Lilly in its sole and absolute discretion, (y) the Company shall have provided to Lilly an Unqualified Tax Opinion in form and substance satisfactory to Lilly in its sole and absolute discretion (and in determining whether an opinion is satisfactory, Lilly may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion and Lilly may determine that no opinion would be acceptable to Lilly) to the effect that such transaction will not affect the Tax-Free Status or (z) Lilly shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.

(d) Certain Issuances of Company Capital Stock . If the Company proposes to enter into any Section 6.01(d) Acquisition Transaction or, to the extent the Company has the right to prohibit any Section 6.01(d) Acquisition Transaction, proposes to permit any Section 6.01(d) Acquisition Transaction to occur, in each case, during the period from the date hereof until the first Business Day after the two-year anniversary of the final Distribution Date, the Company shall provide Lilly, no later than ten Business Days following the signing of any written agreement with respect to the Section 6.01(d) Acquisition Transaction, with a written description of such transaction (including the type and amount of any stock to be issued in such transaction) and a certificate of the Board of Directors of the Company to the effect that such Section 6.01(d)

Acquisition Transaction is not a Proposed Acquisition Transaction or any other transaction to which the requirements of Section 6.01(c) apply (a “ Board Certificate ”).

(e) Company Internal Restructuring . The Company shall not engage in, cause or permit any internal restructuring (including by making or revoking any election under Treasury Regulations Section 301.7701-3) involving a member of the Company Group or any contribution, sale or other transfer to the Company or any of its Affiliates of any of the assets directly or indirectly contributed to the Company as described in the Separation Agreement, apart from sales in the ordinary course of business or transactions described in the Corporate Reorganization (any such action, an “ Internal Restructuring ”), during or with respect to any Tax Period (or portion thereof) ending on or prior to the final Distribution Date without obtaining the prior written consent of Lilly. The Company shall provide written notice to Lilly describing any Internal Restructuring proposed to be taken during or with respect to any Tax Period (or portion thereof) beginning after the final Distribution Date and ending on or prior to the two-year anniversary of such Distribution Date, and shall consult with Lilly regarding any such proposed actions reasonably in advance of taking any such proposed actions and shall consider in good faith any comments from Lilly relating thereto.

(f) Gain Recognition Agreements . The Company shall not (i) take any action (including, but not limited to, the sale or disposition of any stock, securities, or other assets), (ii) permit any member of the Company Group to take any such action, (iii) fail to take any action, or (iv) permit any member of the Company Group to fail to take any action, in each case that would cause Lilly or any member of the Lilly Group to recognize gain under any Gain Recognition Agreement. In addition, the Company shall file, and shall cause any member of the Company Group to file, any Gain Recognition Agreement reasonably requested by Lilly which Gain Recognition Agreement is determined by Lilly to be necessary so as to (i) allow for or preserve the tax-free or tax-deferred nature, in whole or part, of any Separation Transaction, or (ii) avoid Lilly or any member of the Lilly Group recognizing gain under any Gain Recognition Agreement.

Section 6.02 Restrictions on Lilly . Lilly agrees that it will not take or fail to take, or permit any Lilly Affiliate, as the case may be, to take or fail to take, any action (i) where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in any Representation Letters or the Tax Opinions, or (ii) which adversely affects or could reasonably be expected to adversely affect the Tax-Free Status; provided , however , that this Section 6.02 shall not be construed as obligating Lilly to consummate the Distribution nor shall it be construed as preventing Lilly from terminating the Separation Agreement pursuant to Section 10.1 thereof.

Section 6.03 Procedures Regarding Opinions and Rulings .

(a) If the Company notifies Lilly that it desires to take one of the actions described in clauses (i) through (vi) of Section 6.01(c) (a “ Notified Action ”), Lilly and the Company shall reasonably cooperate to attempt to obtain the Ruling or Unqualified Tax Opinion referred to in Section 6.01(c) , unless Lilly shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.

(b) Rulings or Unqualified Tax Opinions at the Company’s Request . Lilly agrees that at the reasonable request of the Company pursuant to Section 6.01(c) , Lilly shall cooperate with the Company and use its reasonable best efforts to seek to obtain, as expeditiously as possible, a Ruling from the IRS or an Unqualified Tax Opinion for the purpose of permitting the Company to take the Notified Action. Further, in no event shall Lilly be required to file any Ruling Request under this Section 6.03(b) unless the Company represents that (i) it has read the Ruling Request, and (ii) all information and representations, if any, relating to any member of the Company Group, contained in the Ruling Request documents are (subject to any qualifications therein) true, correct and complete. The Company shall reimburse Lilly for all reasonable costs and expenses, including expenses relating to the utilization of Lilly personnel, incurred by the Lilly Group in obtaining a Ruling or Unqualified Tax Opinion requested by the Company within ten Business Days after receiving an invoice from Lilly therefor.

(c) Rulings or Unqualified Tax Opinions at Lilly’s Request . Lilly shall have the right to obtain a Ruling or an Unqualified Tax Opinion at any time in its sole and absolute discretion. If Lilly determines to obtain a Ruling or an Unqualified Tax Opinion, the Company shall (and shall cause each Affiliate of the Company to) cooperate with Lilly and take any and all actions reasonably requested by Lilly in connection with obtaining the Ruling or Unqualified Tax Opinion (including, without limitation, by making any representation or covenant or providing any materials or information requested by the IRS or Tax Advisor; provided , that the Company shall not be required to make (or cause any Affiliate of the Company to make) any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control). Lilly shall reimburse the Company for all reasonable costs and expenses, including expenses relating to the utilization of the Company personnel, incurred by the Company Group in connection with such cooperation within ten Business Days after receiving an invoice from the Company therefor.

(d) The Company hereby agrees that Lilly shall have sole and exclusive control over the process of obtaining any Ruling, and that only Lilly shall apply for a Ruling. In connection with obtaining a Ruling pursuant to Section 6.03(b) , (i) Lilly shall keep the Company informed in a timely manner of all material actions taken or proposed to be taken by Lilly in connection therewith; (ii) Lilly shall (A) reasonably in advance of the submission of any Ruling Request documents provide the Company with a draft copy thereof, (B) reasonably consider the Company’s comments on such draft copy, and (C) provide the Company with a final copy; and (iii) Lilly shall provide the Company with notice reasonably in advance of, and the Company shall have the right to attend, any formally scheduled meetings with the IRS (subject to the approval of the IRS) that relate to such Ruling. Neither the Company nor any Affiliate of the Company directly or indirectly controlled by the Company shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the Contribution or the Distribution (including the impact of any transaction on the Contribution or the Distribution).

Section 6.04 Liability for Tax-Related Losses .

(a) Notwithstanding anything in this Agreement or the Separation Agreement to the contrary (and in each case regardless of whether any Ruling, Unqualified Tax Opinion or waiver referred to in Section 6.01(c) may have been provided), subject to Section 6.04(c), the Company

shall be responsible for, and shall indemnify and hold harmless Lilly and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of any Tax-Related Losses that are attributable to or result from any one or more of the following: (i) the acquisition (other than pursuant to the Contribution, the IPO, or the Distribution) of all or a portion of the Company’s stock and/or its or its Subsidiaries’ assets by any means whatsoever by any Person; (ii) any negotiations, understandings, agreements or arrangements by the Company with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, or a series of such transactions or events) that cause the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly stock of the Company representing a Fifty-Percent or Greater Interest therein; (iii) any action or failure to act by the Company after the Distribution (including, without limitation, any amendment to the Company’s certificate of incorporation (or other organizational documents), whether through a stockholder vote or otherwise) affecting the voting rights of the Company stock (including, without limitation, through the conversion of one class of Company Capital Stock into another class of Company Capital Stock); (iv) any act or failure to act by the Company or any Affiliate of the Company described in Section 6.01 (regardless whether such act or failure to act may be covered by a Ruling, Unqualified Tax Opinion or waiver described in Section 6.01(c) , a Board Certificate described in Section 6.01(d) , or a consent described in Section 6.01(e) ); or (v) any breach by the Company of its agreement and representation set forth in Section 6.01(a) .

(b) Notwithstanding anything in this Agreement or the Separation Agreement to the contrary, subject to Section 6.04(c), Lilly shall be responsible for, and shall indemnify and hold harmless the Company and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of any Tax-Related Losses that are attributable to, or result from any one or more of the following: (i) the acquisition (other than pursuant to the Contribution, the IPO, or the Distribution) of all or a portion of Lilly’s stock and/or its assets by any means whatsoever by any Person; (ii) any negotiations, agreements or arrangements by Lilly with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, or a series of such transactions or events) that cause the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly stock of Lilly representing a Fifty-Percent or Greater Interest therein; (iii) any act or failure to act by Lilly or a member of the Lilly Group described in Section 6.02 ; or (iv) any breach by Lilly of its agreement and representation set forth in Section 6.02 .

(c)

(i) To the extent that any Tax-Related Loss is subject to indemnity under both Section 6.04(a) and Section 6.04(b) , responsibility for such Tax-Related Loss shall be shared by Lilly and the Company according to relative fault.

(ii) Notwithstanding anything in Section 6.04(b) or Section 6.04(c)(i) or any other provision of this Agreement or the Separation Agreement to the contrary:

(A) with respect to (I) any Tax-Related Loss resulting from Section 355(e) of the Code (other than as a result of an acquisition of a Fifty-Percent or Greater Interest in Lilly) and (II) any other Tax-Related Loss resulting (for the absence of doubt, in whole or in part) from an acquisition after the Distribution of any stock or assets of the Company (or any Affiliate of the Company) by any means whatsoever by any Person or any action or failure to act by the Company affecting the voting rights of the Company stock, the Company shall be responsible for, and shall indemnify and hold harmless Lilly and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of such Tax-Related Loss; and

(B) for purposes of calculating the amount and timing of any Tax-Related Loss for which the Company is responsible under this Section 6.04 , Tax-Related Losses shall be calculated by assuming that Lilly, the Lilly Affiliated Group and each member of the Lilly Group (I) pay Tax at the highest marginal corporate Tax rates in effect in each relevant taxable year and (II) have no Tax Attributes in any relevant taxable year.

(iii) Notwithstanding anything in Section 6.04(a) or Section 6.04(c)(i) or any other provision of this Agreement or the Separation Agreement to the contrary, with respect to (A) any Tax-Related Loss resulting from Section 355(e) of the Code (other than as a result of an acquisition of a Fifty-Percent or Greater Interest in the Company) and (B) any other Tax-Related Loss resulting (for the absence of doubt, in whole or in part) from an acquisition after the Distribution of any stock or assets of Lilly (or any Lilly Affiliate) by any means whatsoever by any Person, Lilly shall be responsible for, and shall indemnify and hold harmless the Company and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of such Tax-Related Loss.

(d) The Company shall pay Lilly the amount of any Tax-Related Losses for which the Company is responsible under this Section 6.04 : (A) in the case of Tax-Related Losses described in clause (i) of the definition of Tax-Related Losses no later than two Business Days prior to the date Lilly files, or causes to be filed, the applicable Tax Return for the year of the Contribution or Distribution, as applicable (the “ Filing Date ”) ( provided , that if such Tax-Related Losses arise pursuant to a Final Determination described in clause (i), (ii) or (iii) of the definition of Final Determination, then the Company shall pay Lilly no later than two Business Days after the date of such Final Determination with interest calculated at the Prime Rate plus two percent, compounded semiannually, from the date that is two Business Days prior to the Filing Date through the date of such Final Determination) and (B) in the case of Tax-Related Losses described in clause (ii) or (iii) of the definition of Tax-Related Losses, no later than two Business Days after the date Lilly pays such Tax-Related Losses. Lilly shall pay the Company the amount of any Tax-Related Losses (described in clause (ii) or (iii) of the definition of Tax-Related Loss) for which Lilly is responsible under this Section 6.04 no later than two Business Days after the date the Company pays such Tax-Related Losses.

Section 7. Assistance and Cooperation .

Section 7.01 Assistance and Cooperation .

(a) The Parties shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters relating to the Parties and their Affiliates including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include making all information and documents in their possession relating to the other Party and its Affiliates available to such other Party as provided in Section 8 . Each of the Parties shall also make available to the other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Parties or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. The Parties shall cooperate pursuant to this Section 7 to seek any competent authority relief that may be available with respect to any Tax detriment that would be suffered by a member of the Lilly Group, on the one hand, or a member of the Company Group, on the other hand, absent such competent authority relief. The Company shall cooperate with Lilly and take any and all actions reasonably requested by Lilly in connection with obtaining the Tax Opinions (including, without limitation, by making any new representation or covenant, confirming any previously made representation or covenant or providing any materials or information requested by any Tax Advisor or Tax Authority; provided , that the Company shall not be required to make or confirm any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control).

(b) Any information or documents provided under this Section 7 shall be kept confidential by the Party receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. Notwithstanding any other provision of this Agreement or any other agreement, (i) neither Lilly nor any Lilly Affiliate shall be required to provide the Company or any Affiliate of the Company or any other Person access to or copies of any information, documents or procedures (including the proceedings of any Tax Contest) other than information, documents or procedures that relate to the Company, the business or assets of the Company or any Affiliate of the Company and (ii) in no event shall Lilly or any Lilly Affiliate be required to provide the Company, any Affiliate of the Company or any other Person access to or copies of any information or documents if such action could reasonably be expected to result in the waiver of any Privilege. In addition, in the event that Lilly determines that the provision of any information or documents to the Company or any Affiliate of the Company could be commercially detrimental, violate any Law or agreement or waive any Privilege, the Parties shall use reasonable best efforts to permit compliance with its obligations under this Section 7 in a manner that avoids any such harm or consequence.

Section 7.02 Income Tax Return Information . The Company and Lilly acknowledge that time is of the essence in relation to any request for information, assistance or cooperation made by Lilly or the Company pursuant to Section 7.01 or this Section 7.02 . The Company and Lilly acknowledge that failure to conform to the reasonable deadlines set by Lilly or the Company could cause irreparable harm. Each Party shall provide to the other Party information and documents relating to its Group required by the other Party to prepare Tax Returns, including, but not limited to, any pro forma returns required by the Responsible Party for purposes of preparing such Tax Returns. Any information or documents the Responsible Party requires to prepare such Tax Returns shall be provided in such form as the Responsible Party reasonably requests and at or prior to the time reasonably specified by the Responsible Party so as to enable the Responsible Party to file such Tax Returns on a timely basis.

Section 7.03 Reliance by Lilly . If any member of the Company Group supplies information to a member of the Lilly Group in connection with a Tax liability and an officer of a member of the Lilly Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Lilly Group identifying the information being so relied upon, the chief financial officer of the Company (or any officer of the Company as designated by the chief financial officer of the Company) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete.

Section 7.04 Reliance by the Company . If any member of the Lilly Group supplies information to a member of the Company Group in connection with a Tax liability and an officer of a member of the Company Group signs a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then upon the written request of such member of the Company Group identifying the information being so relied upon, the chief financial officer of Lilly (or any officer of Lilly as designated by the chief financial officer of Lilly) shall certify in writing that to his or her knowledge (based upon consultation with appropriate employees) the information so supplied is accurate and complete.

Section 8. Tax Records .

Section 8.01 Retention of Tax Records . Each Party shall preserve and keep all Tax Records exclusively relating to the assets and activities of its Group for Pre-Deconsolidation Periods, and Lilly shall preserve and keep all other Tax Records relating to Taxes of the Groups for Pre-Deconsolidation Tax Periods, for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (i) the expiration of any applicable statutes of limitations, or (ii) seven years after the Deconsolidation Date (such later date, the “ Retention Date ”). After the Retention Date, each Party may dispose of such Tax Records upon 60 Business Days’ prior written notice to the other Party. If, prior to the Retention Date, a Party reasonably determines that any Tax Records which it would otherwise be required to preserve and keep under this Section 8 are no longer material in the administration of any matter under the Code or other applicable Tax Law and the other Party agrees, then such first Party may dispose of such Tax Records upon 60 Business Days’ prior notice to the other Party. Any notice of an intent to dispose given pursuant to this Section 8.01 shall include a list of the Tax Records to be disposed of describing in reasonable detail each file, book, or other record accumulation being disposed. The notified Party shall have

the opportunity, at its cost and expense, to copy or remove, within such 60 Business Day period, all or any part of such Tax Records.

Section 8.02 Access to Tax Records . The Parties and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records (and, for the avoidance of doubt, any pertinent underlying data accessed or stored on any computer program or information technology system) in their possession and shall permit the other Party and its Affiliates, authorized agents and representatives and any representative of a Taxing Authority or other Tax auditor direct access, at the cost and expense of such other Party, during normal business hours upon reasonable notice to any computer program or information technology system used to access or store any Tax Records, in each case to the extent reasonably required by the other Party in connection with the preparation of Tax Returns or financial accounting statements, audits, litigation, or the resolution of items under this Agreement.

Section 8.03 Preservation of Privilege . No member of the Company Group shall provide access to, copies of, or otherwise disclose to any Person any documentation relating to Taxes existing prior to the final Distribution Date to which Privilege may reasonably be asserted without the prior written consent of Lilly, such consent not to be unreasonably withheld.

Section 9. Tax Contests .

Section 9.01 Notice . Each of the Parties shall provide prompt notice to the other Party of any written communication from a Tax Authority regarding any pending Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware related to Taxes for Tax Periods for which it is indemnified by the other Party hereunder or for which it may be required to indemnify the other Party hereunder. Such notice shall attach copies of the pertinent portion of any written communication from a Tax Authority and contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters. If an indemnified Party has knowledge of an asserted Tax liability with respect to a matter for which it is to be indemnified hereunder and such Party fails to give the indemnifying Party prompt notice of such asserted Tax liability and the indemnifying Party is entitled under this Agreement to contest the asserted Tax liability, then (i) if the indemnifying Party is precluded from contesting the asserted Tax liability in any forum as a result of the failure to give prompt notice, the indemnifying Party shall have no obligation to indemnify the indemnified Party for any Taxes arising out of such asserted Tax liability, and (ii) if the indemnifying Party is not precluded from contesting the asserted Tax liability in any forum, but such failure to give prompt notice results in a material monetary detriment to the indemnifying Party, then any amount which the indemnifying Party is otherwise required to pay the indemnified Party pursuant to this Agreement shall be reduced by the amount of such detriment.

Section 9.02 Control of Tax Contests .

(a) Separate Returns. In the case of any Tax Contest with respect to any Separate Return, the Party having liability for the Tax pursuant to Section 2 hereof shall have exclusive

control over the Tax Contest, including exclusive authority with respect to any settlement of such Tax liability, subject to Section 9.02(c) and Section 9.02(d) below.

(b) Joint Return . In the case of any Tax Contest with respect to any Joint Return, Lilly shall have exclusive control over the Tax Contest, including exclusive authority with respect to any settlement of such Tax liability, subject to Section 9.02(c) and Section 9.02(d) below.

(c) Settlement Rights . The Controlling Party shall have the sole right to contest, litigate, compromise and settle any Tax Contest without obtaining the prior consent of the Non-Controlling Party. Unless waived by the Parties in writing, in connection with any potential adjustment in a Tax Contest as a result of which adjustment the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement: (i) the Controlling Party shall keep the Non-Controlling Party informed in a timely manner of all actions taken or proposed to be taken by the Controlling Party with respect to such potential adjustment in such Tax Contest; (ii) the Controlling Party shall timely provide the Non-Controlling Party copies of any written materials relating to such potential adjustment in such Tax Contest received from any Tax Authority; (iii) the Controlling Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Tax Authority or judicial authority in connection with such potential adjustment in such Tax Contest; (iv) the Controlling Party shall consult with the Non-Controlling Party and offer the Non-Controlling Party a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such potential adjustment in such Tax Contest; and (v) the Controlling Party shall defend such Tax Contest diligently and in good faith. The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was actually harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party. In the case of any Tax Contest described in Section 9.02(a) or Section 9.02(b) , “ Controlling Party ” means the Party entitled to control the Tax Contest under such Section and “ Non-Controlling Party ” means the other Party.

(d) Tax Contest Participation . Unless waived by the Parties in writing, the Controlling Party shall provide the Non-Controlling Party with written notice reasonably in advance of, and the Non-Controlling Party shall have the right to attend, any formally scheduled meetings with Tax Authorities or hearings or proceedings before any judicial authorities in connection with any potential adjustment in a Tax Contest pursuant to which the Non-Controlling Party may reasonably be expected to become liable to make any indemnification payment to the Controlling Party under this Agreement. The failure of the Controlling Party to provide any notice specified in this Section 9.02(d) to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was actually harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party.

(e) Power of Attorney . Each member of the Company Group shall execute and deliver to Lilly (or such member of the Lilly Group as Lilly shall designate) any power of attorney or other similar document reasonably requested by Lilly (or such designee) in connection with any Tax Contest (as to which Lilly is the Controlling Party) described in this Section 9 . Each member of the Lilly Group shall execute and deliver to the Company (or such member of the Company Group as the Company shall designate) any power of attorney or other similar document requested by the Company (or such designee) in connection with any Tax Contest (as to which the Company is the Controlling Party) described in this Section 9 .

Section 10. Effective Date . This Agreement shall be effective as of the date hereof.

Section 11. Treatment of Payments .

Section 11.01 Treatment of Tax Indemnity Payments . In the absence of any change in Tax treatment under the Code or except as otherwise required by other applicable Tax Law, any Tax indemnity payments made by a Party under this Agreement shall be reported for Tax purposes by the payor and the recipient as distributions or capital contributions, as appropriate, occurring immediately before the Deconsolidation (but only to the extent the payment does not relate to a Tax allocated to the payor in accordance with Section 1552 of the Code or the Treasury Regulations thereunder or Treasury Regulations Section 1.1502-33(d) (or under corresponding principles of other applicable Tax Laws)) or as payments of an assumed or retained liability. Except to the extent provided in Section 11.02 , any Tax indemnity payment made by a Party under this Agreement shall be increased as necessary so that after making all payments in respect of Taxes imposed on or attributable to such indemnity payment, the recipient Party receives an amount equal to the sum it would have received had no such Taxes been imposed.

Section 11.02 Interest Under This Agreement . Notwithstanding anything herein to the contrary, to the extent one Party (“ Indemnitor ”) makes a payment of interest to another Party (“ Indemnitee ”) under this Agreement with respect to the period from the date that the Indemnitee made a payment of Tax to a Tax Authority to the date that the Indemnitor reimbursed the Indemnitee for such Tax payment, the interest payment shall be treated as interest expense to the Indemnitor (deductible to the extent provided by Law) and as interest income by the Indemnitee (includible in income to the extent provided by Law). The amount of the payment shall not be adjusted to take into account any associated Tax Benefit to the Indemnitor or increase in Tax to the Indemnitee.

Section 12. Disagreements .

Section 12.01 Discussion . The Parties mutually desire that friendly collaboration will continue between them. Accordingly, they will use good faith efforts, and they will cause their respective Group members to use good faith efforts, to resolve in an amicable manner all disagreements and misunderstandings connected with their respective rights and obligations under this Agreement, including any amendments hereto. In furtherance thereof, in the event of any dispute or disagreement (a “ Dispute ”) between any member of the Lilly Group and any member of the Company Group as to the interpretation of any provision of this Agreement or the

performance of obligations hereunder, the Tax departments of the Parties shall negotiate in good faith to resolve the Dispute.

Section 12.02 Escalation . If such good faith negotiations do not resolve the Dispute, then the matter, upon written request of either Party, will be referred for resolution to representatives of the Parties at a senior level of management of the Parties pursuant to the procedures set forth in Section 8.02(a) of the Separation Agreement.

Section 12.03 Referral to Tax Advisor . If the Parties are not able to resolve the Dispute through the escalation process referred to above, then the matter will be referred to a Tax Advisor acceptable to each of the Parties to act as an arbitrator in order to resolve the Dispute. In the event that the Parties are unable to agree upon a Tax Advisor within 15 Business Days following the completion of the escalation process, the Parties shall each separately retain an independent, nationally recognized law or accounting firm (each, a “ Preliminary Tax Advisor ”), which Preliminary Tax Advisors shall jointly select a Tax Advisor on behalf of the Parties to act as an arbitrator in order to resolve the Dispute. The Tax Advisor may, in its discretion, obtain the services of any third-party appraiser, accounting firm or consultant that the Tax Advisor deems necessary to assist it in resolving such disagreement. The Tax Advisor shall furnish written notice to the Parties of its resolution of any such Dispute as soon as practical, but in any event no later than 30 Business Days after its acceptance of the matter for resolution. Any such resolution by the Tax Advisor will be conclusive and binding on the Parties. Following receipt of the Tax Advisor’s written notice to the Parties of its resolution of the Dispute, the Parties shall each take or cause to be taken any action necessary to implement such resolution of the Tax Advisor. Each Party shall pay its own fees and expenses (including the fees and expenses of its representatives) incurred in connection with the referral of the matter to the Tax Advisor (and the Preliminary Tax Advisors, if any). All fees and expenses of the Tax Advisor (and the Preliminary Tax Advisors, if any) in connection with such referral shall be shared equally by the Parties.

Section 12.04 Injunctive Relief . Nothing in this Section 12 will prevent either Party from seeking injunctive relief if any delay resulting from the efforts to resolve the Dispute through the process set forth above could result in serious and irreparable injury to either Party. Notwithstanding anything to the contrary in this Agreement, Lilly and the Company are the only members of their respective Group entitled to commence a dispute resolution procedure under this Agreement, and each of Lilly and the Company will cause its respective Group members not to commence any dispute resolution procedure other than through such Party as provided in this Section 12 .

Section 13. General Provisions .

Section 13.01 Counterparts; Entire Agreement; Conflicting Agreements .

(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party and delivered to the other Party. Execution of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic copy of a signature shall be deemed to be, and shall have the same effect as being, executed by an original signature.

(b) The Transaction Documents and the exhibits, the schedules and appendices thereto contain the entire agreement between the Parties with respect to Taxes, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the Parties with respect to such subject matter other than those set forth or referred to herein or therein. All such other agreements shall be of no further effect between the Parties and any rights or obligations existing thereunder shall be fully and finally settled, calculated as of the date hereof.

(c) In the event and to the extent that there shall be a conflict between the provisions of this Agreement and the provisions of any other Ancillary Agreement or a Local Transfer Agreement with respect to Taxes, this Agreement shall control.

Section 13.02 No Construction Against Drafter . The Parties acknowledge that this Agreement and all the terms and conditions contained herein have been fully reviewed and negotiated by the Parties. Having acknowledged the foregoing, the Parties agree that any principle of construction or rule of Law that provides that, in the event of any inconsistency or ambiguity, an agreement shall be construed against the drafter of the agreement shall have no application to the terms and conditions of this Agreement.

Section 13.03 Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of Indiana, without regard to the conflict of laws principles thereof that would result in the application of any Law other than the Laws of the State of Indiana.

Section 13.04 Assignability . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns; provided , however , that no Party may assign its respective rights or delegate its respective obligations under this Agreement without the express prior written consent of the other Party; provided , further , that this Agreement shall be binding on and inure to the benefit of any successor by merger, acquisition of assets, or otherwise, to either of the Parties (including but not limited to any successor of Lilly or the Company succeeding to any Tax Attributes of either Party under Section 381 of the Code), to the same extent as if such successor had been an original party to this Agreement.

Section 13.05 Third Party Beneficiaries . Except for the indemnification rights under this Agreement of any Affiliate of Lilly or the Company in their respective capacities as such, (a) the provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person (including employees of the Parties) except the Parties any rights or remedies hereunder, and (b) there are no third party beneficiaries of this Agreement and this Agreement shall not provide any third person (including employees of the Parties) with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

Section 13.06 Notices . All notices or other communications under this Agreement shall be in writing and shall be deemed to be duly given when (a) delivered in person or (b) deposited in the United States mail or private express mail, postage prepaid, addressed as follows:

If to Lilly, to:

Eli Lilly and Company

Lilly Corporate Center

Indianapolis, Indiana 46285

Attention: General Counsel

If to the Company to:

Elanco Animal Health Incorporated

2500 Innovation Way

Greenfield, Indiana 46140

Attention: General Counsel

Any Party may, by notice to the other Party, change the address to which such notices are to be given.

Section 13.07 Severability . If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.

Section 13.08 Force Majeure . No party shall be deemed in default of this Agreement to the extent that any delay or failure in the performance of its obligations under this Agreement results from any cause beyond its reasonable control and without its fault or negligence, such as acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.

Section 13.09 Late Payments . Except as expressly provided to the contrary in this Agreement, any amount not paid when due pursuant to this Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty (30) days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus 5%.

Section 13.10 Expenses . Except as otherwise specified in this Agreement and except as otherwise agreed in writing between Lilly and the Company, Lilly and the Company shall each be responsible for its own fees, costs and expenses paid or incurred in connection with

preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.

Section 13.11 Further Action . The Parties shall execute and deliver all documents, provide all information, and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, including the execution and delivery to the other Parties and their Affiliates and representatives of such powers of attorney or other authorizing documentation as is reasonably necessary or appropriate in connection with Tax Contests (or portions thereof) under the control of such other Parties in accordance with Section 9 .

Section 13.12 Headings . The table of contents and article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 13.13 Survival . The covenants and other agreements contained herein and the indemnification obligations and liability for the breach of any obligations contained herein, shall survive the Separation and the IPO, and shall remain in full force and effect.

Section 13.14 Waivers of Default . Waiver by either Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party.

Section 13.15 Specific Performance . In the event of any actual or threatened default or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are or are to be thereby aggrieved shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in each case (a) without the requirement of posting any bond or other indemnity and (b) in addition to any other remedy to which it or they may be entitled, at Law or in equity. Such remedies shall be cumulative with and not exclusive of and shall be in addition to any other remedies which any party may have under this Agreement, or at Law or in equity or otherwise, and the exercise by a party hereto of any one remedy shall not preclude the exercise of any other remedy.

Section 13.16 Amendments . No provision of this Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

Section 13.17 Interpretation . Interpretation of this Agreement (except as specifically provided in this Agreement, in which case such specified rules of construction shall govern with respect to this Agreement) shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Article, Section, paragraph and Exhibit are references to the Articles, Sections, paragraphs and Exhibits to this Agreement unless otherwise specified; (c) the terms “hereof”, “herein”, “hereby”, “hereto” and derivative or similar words refer to this entire Agreement, including the Schedules and Exhibits hereto; (d) references to “$” shall mean U.S. dollars; (e) the word “including” and

words of similar import shall mean “including without limitation,” unless otherwise specified; (f) the word “or” shall not be exclusive; (g) references to “written” or “in writing” include in electronic form; (h) provisions shall apply, when appropriate, to successive events and transactions; (i) a reference to any Person includes such Person’s permitted successors and permitted assigns; (j) any reference to “days” means calendar days unless Business Days are expressly specified; and (k) when calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded and, if the last day of such period is not a Business Day, the period shall end on the next succeeding Business Day.

Section 13.18 Waiver of Jury Trial . SUBJECT TO ARTICLE VIII AND SECTIONS 11.15 AND 11.19 OF THE SEPARATION AGREEMENT, EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.18 .

Section 13.19 Submission to Jurisdiction; Waivers . With respect to any Action relating to or arising out of this Agreement, subject to the provisions of Section 12 , each Party irrevocably (a) consents and submits to the exclusive jurisdiction of the courts of the State of Indiana and any court of the United States located in the State of Indiana; (b) waives any objection which such Party may have at any time to the laying of venue of any Action brought in any such court, waives any claim that such Action has been brought in an inconvenient forum and further waives the right to object, with respect to such Action, that such court does not have jurisdiction over such Party; and (c) consents to the service of process at the address set forth for notices in Section 13.06 herein; provided , however , that such manner of service of process shall not preclude the service of process in any other manner permitted under applicable Law.

Section 13.20 The Company Subsidiaries . If, at any time, the Company acquires or creates one or more Subsidiaries that are includable in the Company Group, they shall be subject to this Agreement and all references to the Company Group herein shall thereafter include a reference to such Subsidiaries.

IN WITNESS WHEREOF, each Party has caused this Agreement to be executed on its behalf by a duly authorized officer on the date first set forth above.

	ELI LILLY AND COMPANY

	By:
	Name:
	Title:

	ELANCO ANIMAL HEALTH INCORPORATED

	By:
	Name:
	Title:

[Signature Page to Tax Matters Agreement]

Exhibit 10.24

REVOLVING LOAN CREDIT AGREEMENT

among

ELANCO ANIMAL HEALTH INCORPORATED,

as the “Borrower”

THE LENDERS NAMED HEREIN,

and

JPMORGAN CHASE BANK, N.A., as Administrative Agent,

Dated as of September 5, 2018

Goldman Sachs Bank USA,

JPMorgan Chase Bank, N.A.

as Joint Lead Arrangers and Joint Bookrunners

Goldman Sachs Bank USA,

as Syndication Agent

TABLE OF CONTENTS

ARTICLE I DEFINITIONS	1

Section 1.01. Defined Terms	1
Section 1.02. Classification of Loans and Borrowings	23
Section 1.03. Terms Generally	24
Section 1.04. Accounting Terms, GAAP	24

ARTICLE II AMOUNT AND TERMS OF THE REVOLVING COMMITMENTS AND COMPETITIVE BID PROCEDURE	25

Section 2.01. Commitments	25
Section 2.02. Loans and Borrowings	25
Section 2.03. Requests for Borrowings	26
Section 2.04. Extension of Revolving Maturity Date	26
Section 2.05. Competitive Bid Procedure	27

ARTICLE III LETTERS OF CREDIT	30

Section 3.01. Letters of Credit	30

ARTICLE IV GENERAL PROVISIONS APPLICABLE TO LOANS	35

Section 4.01. Funding of Borrowings	35
Section 4.02. Interest Elections	35
Section 4.03. Termination and Reduction of Revolving Commitments	36
Section 4.04. Repayment of Loans; Evidence of Debt	37
Section 4.05. Incremental Commitments	38
Section 4.06. Prepayment of Loans	39
Section 4.07. Fees	40
Section 4.08. Interest	41
Section 4.09. Alternate Rate of Interest	42
Section 4.10. Increased Costs	43
Section 4.11. Break Funding Payments	45
Section 4.12. Taxes	45
Section 4.13. Payments Generally; Pro Rata Treatment; Sharing of Setoffs	49
Section 4.14. Mitigation Obligations; Replacement of Lenders	51
Section 4.15. Defaulting Lenders	52

ARTICLE V REPRESENTATIONS AND WARRANTIES	53

Section 5.01. Organization; Powers	53
Section 5.02. Authorization	54
Section 5.03. Enforceability	54
Section 5.04. Governmental Approvals	54
Section 5.05. Financial Statements; No Material Adverse Effect	54
Section 5.06. Litigation, Compliance with Laws	55

Section 5.07. Federal Reserve Regulations	55
Section 5.08. Taxes	56
Section 5.09. Employee Benefit Plans	56
Section 5.10. Environmental and Safety Matters	56
Section 5.11. Properties	57
Section 5.12. Investment Company Status	57
Section 5.13. Solvency	57
Section 5.14. Anti-Corruption Laws and Sanctions	57
Section 5.15. Full Disclosure	57

ARTICLE VI CONDITIONS	58

Section 6.01. Conditions Precedent to Closing Date	58
Section 6.02. Conditions Precedent to Effective Date	59
Section 6.03. Conditions Precedent to all Borrowings or Issuance of Letter of Credit	60

ARTICLE VII AFFIRMATIVE COVENANTS	60

Section 7.01. Existence	61
Section 7.02. Business and Properties	61
Section 7.03. Financial Statements, Reports, Etc	61
Section 7.04. Insurance	62
Section 7.05. Obligations and Taxes	62
Section 7.06. Litigation and Other Notices	62
Section 7.07. Inspection of Property; Books and Records	63
Section 7.08. Use of Proceeds	63

ARTICLE VIII NEGATIVE COVENANTS	64

Section 8.01. Consolidations, Mergers, and Sales of Assets	64
Section 8.02. Liens	64
Section 8.03. Limitation on Sale and Leaseback Transactions	66
Section 8.04. Financial Condition Covenants	66
Section 8.05. Priority Indebtedness	67
Section 8.06. Transactions with Affiliates	67

ARTICLE IX EVENTS OF DEFAULT	68

ARTICLE X THE ADMINISTRATIVE AGENT	71

Section 10.01. Administrative Agent	71
Section 10.02. ERISA Matters	73

ARTICLE XI MISCELLANEOUS	75

Section 11.01. Notices	75
Section 11.02. Survival of Agreement	76
Section 11.03. Binding Effect	76

Section 11.04. Successors and Assigns	77
Section 11.05. Expenses, Indemnity	80
Section 11.06. Applicable Law	81
Section 11.07. Waivers, Amendment	81
Section 11.08. Entire Agreement	82
Section 11.09. Severability	83
Section 11.10. Counterparts	83
Section 11.11. Headings	83
Section 11.12. Right of Setoff	83
Section 11.13. Jurisdiction: Consent to Service of Process	83
Section 11.14. WAIVER OF JURY TRIAL	84
Section 11.15. [Reserved]	84
Section 11.16. Confidentiality	84
Section 11.17. USA PATRIOT Act Notice	85
Section 11.18. No Fiduciary Relationship	86
Section 11.19. Acknowledgement and Consent to Bail-In of EEA Financial Institutions	86
Section 11.20. Interest Rate Limitation	86

SCHEDULES:

Schedule 1	Issuing Lenders
Schedule 2.01	Revolving Commitments
Schedule 8.02(a)	Existing Liens
Schedule 8.03	Sale and Leaseback Transactions
Schedule 8.06	Transactions with Affiliates

EXHIBITS:

Exhibit A-1	Form of Competitive Bid Request
Exhibit A-2	Form of Notice of Competitive Bid Request
Exhibit A-3	Form of Competitive Bid
Exhibit A-4	Form of Competitive Bid Accept/Reject Letter
Exhibit A-5	Form of Borrowing Request
Exhibit B	Form of Assignment and Acceptance
Exhibit C	[Reserved]
Exhibit D	Form of Administrative Questionnaire
Exhibit E	Form of Revolving Maturity Date Extension Request
Exhibit F-1	Form of U.S. Tax Compliance Certificate for Foreign Lenders that are not Partnerships for U.S. Federal Income Tax Purposes
Exhibit F-2	Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are not Partnerships for U.S. Federal Income Tax Purposes
Exhibit F-3	Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are Partnerships for U.S. Federal Income Tax Purposes
Exhibit F-4	Form of U.S. Tax Compliance Certificate for Foreign Lenders that are Partnerships for U.S. Federal Income Tax Purposes
Exhibit G	Form of Solvency Certificate

iii

REVOLVING LOAN CREDIT AGREEMENT (as amended and in effect from time to time, the “ Agreement ”) dated as of September 5, 2018, among ELANCO ANIMAL HEALTH INCORPORATED, an Indiana corporation (the “ Borrower ”), the LENDERS (as defined herein), JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”).

The Borrower has requested that the Lenders, on the terms and subject to the conditions herein set forth, extend credit to the Borrower in the form of Revolving Loans or Competitive Loans at any time and from time to time prior to the Revolving Maturity Date in an aggregate principal amount of up to $750,000,000 at any time outstanding.

The proceeds of the Loans made to the Borrower shall be used for general corporate purposes.

Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

Section 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ ABR ” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“ Adjusted Eurocurrency Rate ” shall mean, with respect to any Eurocurrency Borrowing in Dollars for any Interest Period (or, solely for purposes of clause (c) of the defined term “Alternate Base Rate”, for purposes of determining the Alternate Base Rate as of any date), an interest rate per annum equal to (a) the applicable Eurocurrency Rate for Dollars in effect for such Interest Period divided by (b) one minus the Statutory Reserve Rate.

“ Administrative Agent ” shall have the meaning assigned to that term in the preamble.

“ Administrative Agent Fee Letter ” shall mean, that certain Administrative Agent Fee Letter dated as of September 5, 2018 entered into by the Borrower and the Administrative Agent pursuant to which Administrative Fees are payable.

“ Administrative Fees ” shall have the meaning assigned to such term in Section 4.07(b).

“ Administrative Questionnaire ” shall mean an administrative questionnaire delivered by a Lender pursuant to Section 11.04 in the form of Exhibit D.

“ Advance Agent ” shall mean JPMCB, as competitive advance facility agent.

“ Affiliate ” shall mean, when used with respect to a specified Person, another Person that directly, or indirectly, Controls or is Controlled by or is under common Control with the Person specified.

“ Agreement ” shall have the meaning set forth in the preamble.

“ Alternate Base Rate ” shall mean, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1% per annum and (c) the Adjusted Eurocurrency Rate on such day (or if such day is not a Business Day, the immediately preceding Business Day) for a deposit in Dollars with a maturity of one month plus 1% per annum. For purposes of clause (c) above, the Adjusted Eurocurrency Rate on any day shall be based on the rate per annum appearing on the applicable Reuters screen page (currently page LIBOR01) displaying interest rates for Dollar deposits in the London interbank market (or, in the event such rate does not appear on a page of the Reuters screen, on the appropriate page of such other information service that publishes such rate as shall be selected by the Administrative Agent from time to time in its reasonable discretion) at approximately 11:00 a.m., London time, on such day for deposits in dollars with a maturity of one month. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurocurrency Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted Eurocurrency Rate, respectively.

“ Anti-Corruption Laws ” shall mean all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Affiliates from time to time concerning or relating to bribery, corruption or money laundering, including, without limitation, the United States Foreign Corrupt Practices Act of 1977 and the UK Bribery Act of 2010 (and any regulations promulgated thereunder).

“ Applicable Margin ” shall mean, for each Revolving Loan, the applicable rate per annum determined pursuant to the Pricing Grid.

“ Approved Fund ” shall mean any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender.

“ Arrangers ” shall mean Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A.

“ Assignment and Acceptance ” shall mean an assignment and acceptance entered into by a Lender and an Eligible Assignee in the form of Exhibit B, or such other form as shall be approved by the Administrative Agent.

“ Bail-In Action ” shall mean the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“ Bail-In Legislation ” shall mean, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

“ Bankruptcy Event ” shall mean, with respect to any Person, that such Person has become, other than via an Undisclosed Administration, the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in, any such proceeding or appointment; provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority so long as such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“ Basis Point ” shall mean 1/100th of 1%.

“ Beneficial Ownership Certification ” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

“ Beneficial Ownership Regulation ” means 31 C.F.R. § 1010.230.

“ Board of Directors ” shall mean either the board of directors of the Borrower or any duly authorized committee thereof or any committee of officers of the Borrower acting pursuant to authority granted by the board of directors of the Borrower or any committee of such board.

“ Borrower ” shall have the meaning assigned to that term in the preamble.

“ Borrower SEC Documents ” shall mean all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules, exhibits, statements and documents filed by the Borrower under the Securities Act or the Exchange Act, as the case may be, and publicly available on the website of the SEC at www.sec.gov, together with all certifications required pursuant to the Sarbanes-Oxley Act.

“ Borrowing ” shall mean (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest

Period is in effect or (b) a Competitive Loan or group of Competitive Loans of the same Type made on the same date and as to which a single Interest Period is in effect.

“ Borrowing Request ” shall mean a request by the Borrower for a Borrowing in accordance with Section 2.03.

“ Business Day ” shall mean any day (other than a day which is a Saturday, Sunday or legal holiday in the State of New York) on which banks are open for business in New York City; provided , however , that, when used in connection with a Eurocurrency Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market.

“ Capital Lease Obligations ” of any Person shall mean the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. Notwithstanding the foregoing, all leases of any Person (including leases entered into after the Closing Date) that are or would be treated as operating leases in accordance with GAAP as in effect on the Closing Date, shall continue to be accounted for as operating leases (and none of the obligations of the lessee thereunder shall constitute Capital Lease Obligations) for purposes of this Agreement regardless of any change in GAAP after such date that would otherwise require any of the obligations of the lessee thereunder to be treated as Capital Lease Obligations.

“ Capital Stock ” shall mean shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity interests in any Person, and any option, warrant or other right entitling the holder thereof to purchase or otherwise acquire any such equity interest.

issued or fully guaranteed or insured by the United States government; (e) securities or marketable direct obligations with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition; provided, however, that, in case of any investment by a Foreign Subsidiary, “Cash Equivalents” shall also include: (i) certificates of deposit, time deposits, Eurodollar time deposits, bankers’ acceptances or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any commercial bank located in the same jurisdiction as such Foreign Subsidiary whose short-term commercial paper rating at the time of acquisition would meet or exceed those ratings applicable to a Lender set forth in clause (b) hereof, (ii) direct obligations of the sovereign nation (or any agency thereof) in which such Foreign Subsidiary is organized or is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof), in each case maturing within one year from the date of acquisition, (iii) investments of the type and maturity described in clauses (c) through (f) above of obligors located in the same jurisdiction as such Foreign Subsidiary, which Investments or obligors (or the parent of any such obligor) have ratings described in clauses (c) through (f) or equivalent ratings from comparable foreign rating agencies and (iv) shares of money market mutual or similar funds which invest exclusively in assets otherwise satisfying the requirements of this proviso.

A “ Change in Control ” shall be deemed to have occurred if (a) any Person or group of Persons (other than (i) the Borrower and its Subsidiaries, (ii) the Parent or (iii) any employee or director benefit plan or stock plan of the Borrower or a Subsidiary or any trustee or fiduciary with respect to any such plan when acting in that capacity or any trust related to any such plan) shall have acquired beneficial ownership of shares representing more than 35% of the combined voting power represented by the outstanding Voting Stock of the Borrower (within the meaning of Section 13(d) or 14(d) of the Exchange Act and the applicable rules and regulations thereunder), (b) during any period of 12 consecutive months, commencing before and ending after, or commencing after, the Closing Date, individuals who on the first day of such period were directors of the Borrower (together with any replacement or additional directors who were nominated or elected by a majority of directors then in office or approved prior to their election by a majority of directors then in office) cease to constitute a majority of the Board of Directors of the Borrower or (c) a “change of control” (or similar event) occurs under any document relating to Material Debt.

Authority made or issued after the Closing Date; provided that, notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, in each case shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, promulgated or issued.

“ Closing Date ” shall have the meaning assigned to that term in Section 6.01.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

“ Competitive Bids ” shall mean an offer by a Lender to make a Competitive Loan pursuant to Section 2.05.

“ Competitive Bid Accept/Reject Letter ” shall mean a notification made by the Borrower pursuant to Section 2.05(d) in the form of Exhibit A-4.

“ Competitive Bid Rate ” shall mean, as to any Competitive Bid, the Competitive Loan Margin or the Fixed Rate, as applicable, offered by the Lender making such Competitive Bid.

“ Competitive Bid Request ” shall mean a request made pursuant to Section 2.05 in the form of Exhibit A-1.

“ Competitive Borrowing ” shall mean a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted under the bidding procedure described in Section 2.05.

“ Competitive Loan ” shall mean a Loan made pursuant to Section 2.05. Each Competitive Loan shall be a Eurocurrency Loan or a Fixed Rate Loan.

“ Competitive Loan Exposure ” shall mean, with respect to any Lender at any time, the aggregate principal amount of the outstanding Competitive Loans of such Lender.

“ Competitive Loan Margin ” shall mean, with respect to any Competitive Loan bearing interest at a rate based on the Eurocurrency Rate, the marginal rate of interest, if any, to be added to or subtracted from the Eurocurrency Rate in order to determine the interest rate applicable to such Competitive Loan, as specified by the Lender making such Competitive Loan in its related Competitive Bid.

“ Connection Income Taxes ” shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“ Consenting Lender ” shall have the meaning assigned to such term in Section 2.04.

“ Consolidated EBITDA ” shall mean, for any period, Consolidated Net Income for such period plus, without duplication and, other than in the case of clause (i) below, to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of: (a) income tax expense, (b) interest expense (including imputed interest on Capital Lease Obligations), amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Debt (including the Loans), and commissions, discounts and other fees and charges with respect to letters of credit, bankers’ acceptance financing and receivables financings, (c) depreciation and amortization expense (plus, to the extent GAAP then includes amounts as such expense, amounts of such expenses (calculated under the current GAAP) for any prior portion of such period if not otherwise so included), (d) amortization of intangibles (including goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring expenses or losses (including start-up costs, and whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business), (f) any non-cash expenses relating to stock option exercises (if applicable accounting rules so require), (g) any other non-cash charges, (h) [reserved], (i) [reserved], (j) (x) any charges, costs, expenses, accruals or reserves incurred pursuant to any management equity plan, profits interest or stock option plan, any equity-based compensation or equity-based incentive plan, or any other management or employee benefit plan, agreement or pension plan and (y) any charges, costs, expenses, accruals or reserves in connection with the rollover, acceleration or payout of Capital Stock of the Borrower held by management of the Borrower or any of its Subsidiaries, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of: (a) interest income, (b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) any other non-cash income, all as determined on a consolidated basis. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “ Reference Period ”) pursuant to any determination of the Consolidated Leverage Ratio or Consolidated Interest Coverage Ratio, (x) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (y) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. Notwithstanding the foregoing, for purposes of determining Consolidated EBITDA for any period that includes any of the fiscal quarters ending September 30, 2017, December 31, 2017, March 31, 2018 and June 30, 2018, Consolidated EBITDA for such fiscal quarters shall be $99.0 million, $134.0 million, $158.3 million and $161.2 million respectively.

“ Consolidated Interest Charges ” shall mean, for any period, the sum, without duplication, of (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP and (b) the portion of rent expense under capitalized leases that is treated as interest in accordance with GAAP, in each case, of or by the Borrower and its Subsidiaries on a consolidated basis for the most recently completed four fiscal quarter; provided that (i) for purposes of determining Consolidated Interest Charges for the four fiscal quarter period ending December 31, 2018, such amount for the four fiscal quarters then ended shall equal such item for such fiscal quarter multiplied by four; (ii) for purposes of determining Consolidated Interest Charges for the fiscal quarter period ending March 31, 2019, such amount for the four fiscal quarters then ended shall equal such item for the two fiscal quarters then most recently ended multiplied by two; and (iii) for purposes of determining Consolidated Interest Charges for the four fiscal quarter period ending June 30, 2019, such amount for the four fiscal quarters then ended shall equal such item for the three fiscal quarters then most recently ended multiplied by 4/3.

“ Consolidated Interest Coverage Ratio ” shall mean, as at the last day of any four fiscal quarter period, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Charges, in each case, for the most recently completed four fiscal quarters of the Borrower then ended.

“ Consolidated Leverage Ratio ” shall mean, as at the last day of any four fiscal quarter period, the ratio of (a) Consolidated Total Debt as of such date to (b) Consolidated EBITDA for such period.

“ Consolidated Net Income ” shall mean, for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded, without duplication: (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation.

“ Consolidated Net Tangible Assets ” shall mean, with respect to the Borrower, the total amount of its assets (less applicable reserves and other properly deductible items) after deducting (i) all current liabilities (excluding the amount of those which are by their terms extendable or renewable at the option of the obligor to a date more than 12 months after the date as of which the amount is being determined) and (ii) all goodwill, tradenames, trademarks, patents, unamortized debt discount and expense and other like intangible assets, all as set forth on the most recent balance sheet of the Borrower and its consolidated subsidiaries and determined on a consolidated basis in accordance with GAAP.

“ Consolidated Total Debt ” shall mean, at any date, the aggregate principal amount of all third-party Debt for borrowed money (including purchase money Debt), unreimbursed drawings under letters of credit, Capital Lease Obligations and third-party Debt obligations evidenced by notes or similar instruments, in each case of the Borrower and its Subsidiaries outstanding as of such date that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP (except as otherwise provided in the definition of Capital Lease Obligations) plus the aggregate Value of all Sale and Leaseback Transactions minus up to $200,000,000 of cash and Cash Equivalents held in the United States by the Borrower and its Domestic Wholly Owned Subsidiaries; provided that such cash and Cash Equivalents are free of any Liens.

“ Contractual Obligation ” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“ Control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Credit Party ” shall mean the Administrative Agent, each Issuing Lender and each other Lender.

“ Debt ” of any Person, shall mean, without duplication, (i) all obligations of such Person represented by notes, bonds, debentures or similar evidences of indebtedness; (ii) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services other than, in the case of any such deferred purchase price, on normal trade terms, (iii) all rental obligations of such Person as lessee under leases that are Capital Lease Obligations, (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations, contingent or otherwise, of such Person as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (vi) the liquidation value of all preferred capital stock of such Person which is redeemable at the option of the holder thereof or which may become (by scheduled or mandatory redemption) due within one year of the Revolving Maturity Date, (vii) all Guarantees of such Person in respect of obligations of the kind referred to in clauses (i) through (vi) above, (viii) all obligations of the kind referred to in clauses (i) through (vii) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by the applicable Person, whether or not such Person has assumed or become liable for the payment of such obligation and (ix) for the purposes of paragraph (f) of Article IX only, all obligations in respect of Hedge Agreements. The Debt of any Person shall include Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s

ownership interest in or other relationship with such entity, except to the extent the terms of such Debt expressly provide that such Person is not liable therefor.

“ Declining Lender ” shall have the meaning assigned to such term in Section 2.04.

“ Default ” shall mean any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“ Defaulting Lender ” shall mean any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified in such writing, including, if applicable, by reference to a specific Default) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent to funding (specifically identified in such writing, including, if applicable, by reference to a specific Default) cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after a written request by the Administrative Agent or an Issuing Lender, made in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund prospective Loans and participations in then outstanding Letters of Credit; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt by the Administrative Agent or such Issuing Lender of such certification in form and substance reasonably satisfactory to it, or (d) has become the subject of a Bankruptcy Event or (e) has become, or has a Lender Parent that has become, the subject of a Bail-In Action.

“ Dollars ” or “ $ ” shall mean lawful money of the United States of America.

“ Domestic Subsidiary ” shall mean a Subsidiary that is incorporated or organized under the laws of the United States, any state thereof or the District of Columbia.

“ Domestic Wholly Owned Subsidiary ” shall mean a Wholly Owned Subsidiary that is a Domestic Subsidiary.

“ EEA Financial Institution ” shall mean (a) any institution established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any institution established in an EEA Member Country which is a subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“ EEA Member Country ” shall mean any of the member states of the European Union, Iceland, Liechtenstein and Norway.

“ EEA Resolution Authority ” shall mean any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution .

“ Effective Date ” shall have the meaning assigned to that term in Section 6.02.

“ Eligible Assignee ” shall mean (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund and (d) any other Person, other than, in each case, a natural person, a Defaulting Lender or the Borrower or any Subsidiary.

“ Environmental and Safety Laws ” shall mean any and all applicable current and future treaties, laws (including without limitation common law), regulations, legally enforceable requirements, legally binding determinations, orders, decrees, judgments, injunctions, permits, approvals, authorizations, licenses, permissions, or binding agreements issued, promulgated or entered by any Governmental Authority, relating to protection of the environment, to employee health or safety as it pertains to the use or handling of, or exposure to, any Hazardous Substance, to preservation or reclamation of natural resources or to the management, release or threatened release of any Hazardous Substance.

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ ERISA Affiliate ” shall mean any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302 or ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ ERISA Termination Event ” shall mean (i) a “Reportable Event” described in Section 4043 of ERISA and the regulations issued thereunder (other than a “Reportable Event” not subject to the provision for 30-day notice to the PBGC under such regulations), or (ii) the withdrawal of the Borrower or any of its ERISA Affiliates from a “single employer” Plan during a plan year in which it was a “substantial employer”, both of such terms as defined in Section 4001(a) of ERISA, or (iii) the incurrence of liability under Title IV of ERISA with respect to the termination of a Plan, or (iv) the institution of proceedings to terminate a Plan by the PBGC, or (v) the receipt by the Borrower or any ERISA Affiliate of any notice (whether or not written) from the PBGC of any event or condition which the PBGC asserts is reasonably likely to constitute grounds under Section 4042 of ERISA to terminate, or to appoint a trustee to administer, any Plan or (vi) the partial or complete withdrawal of the Borrower or any ERISA Affiliate of the Borrower from, or the Insolvency or Reorganization of, a Multiemployer Plan.

“ EU Bail-In Legislation Schedule ” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

“ Eurocurrency ” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to a Eurocurrency Rate.

“ Eurocurrency Rate ” shall mean with respect to any Eurocurrency Borrowing for any Interest Period, the rate determined by the Administrative Agent by reference to the London interbank offered rate as administered by the ICE Benchmark Administration (or any other Person that takes over the administration of such rate) (the “ LIBOR Screen Rate ”) for deposits in the currency of such Borrowing (as reflected on the applicable Reuters screen page) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for deposits in Dollars with a maturity comparable to such Interest Period. In the event that any such rate is not available at such time for the applicable Interest Period for any reason, then the “Eurocurrency Rate” with respect to such Eurocurrency Borrowing for such Interest Period (the “ Impacted Interest Period ”) shall be the Interpolated Rate; provided , that if at the time that the Administrative Agent shall seek to determine the relevant LIBOR Screen Rate for any Interest Period for a Eurocurrency Borrowing the applicable LIBOR Screen Rate shall not be available for such Interest Period with respect to such Eurocurrency Borrowing for any reason and the Administrative Agent shall determine that it is not possible to determine the Interpolated Rate (which conclusion shall be conclusive and binding absent manifest error), then the “Eurocurrency Rate” with respect to such Eurocurrency Borrowing for the Impacted Interest Period shall be the rate per annum (rounded upwards, if necessary, to the next Basis Point) equal to the arithmetic average of the rates at which deposits in Dollars and for a maturity comparable to such Interest Period are offered with respect to any Eurocurrency Borrowing, to the principal London offices of the Reference Lenders (or, if either Reference Lender does not at the time maintain a London office, the principal London office of any Affiliate of such Reference Lender) in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. It is understood and agreed that the Administrative Agent will not disclose to any party hereto the rates quoted by the individual Reference Lenders. Notwithstanding the foregoing, in the event that any “Eurocurrency Rate”, determined as provided above, would be less than zero, the Eurocurrency Rate shall be deemed to be zero for all purposes of this Agreement.

“ Event of Default ” shall have the meaning assigned to such term in Article IX.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

“ Excluded Taxes ” shall mean any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, any U.S. federal withholding Taxes described in Section 4.12(k)(i), or Section 4.12(k)(ii) imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Revolving Commitment, (c)

Taxes attributable to such Recipient’s failure to comply with Section 4.12(h), Section 4.12(i), Section 4.12(j), and (d) any withholding Taxes imposed under FATCA.

“ FATCA ” shall mean Section 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.

“ Federal Funds Effective Rate ” shall mean, for any day, the rate calculated by the New York Federal Reserve Bank based on such day’s federal funds transactions by depository institutions (as determined in such manner as the New York Federal Reserve Bank shall set forth on its public website from time to time) and published on the next succeeding business day as the federal funds effective rate; provided that such rate shall in no event be less than zero.

“ Federal Reserve Board ” means the Board of Governors of the Federal Reserve System of the United States of America.

“ Fee Letter ” shall mean, that certain Fee Letter dated as of August 7, 2018 entered into by the Borrower and the Arrangers.

“ Financial Officer ” of any corporation shall mean the chief financial officer, principal accounting officer, vice president of finance, controller or treasurer of such corporation.

“ Fitch ” shall mean Fitch Ratings Inc., or any successor rating agency.

“ Fixed Rate ” shall mean, with respect to any Competitive Loan (other than a Eurocurrency Competitive Loan), the fixed rate of interest per annum specified by the Lender making such Competitive Loan in its related Competitive Bid.

“ Fixed Rate Loan ” shall mean a Competitive Loan bearing interest at a Fixed Rate.

“ Foreign Subsidiary ” shall mean any Subsidiary that is not organized under the laws of the United States, any state thereof or the District of Columbia.

“ GAAP ” shall mean generally accepted accounting principles in the United States of America.

“ Governmental Authority ” shall mean the government of any nation, including, but not limited to, the United States of America, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“ Guarantee ” of or by any Person (the “ guarantor ”) shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt or other obligation of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Debt or obligation; provided , that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

“ Hazardous Substances ” shall mean any toxic, radioactive, mutagenic, carcinogenic, noxious, caustic or otherwise hazardous substance, material or waste, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics, including, without limitation, polychlorinated biphenyls, asbestos or asbestos-containing material, and any substance, waste or material regulated under Environmental and Safety Laws.

“ Hedge Agreements ” shall mean all interest rate swaps, caps or collar agreements, foreign exchange transactions or other arrangements dealing with interest rates or currency exchange rates or the exchange of nominal interest obligations or foreign currencies, either generally or under specific contingencies.

“ Incremental Assumption Agreement ” shall mean an Incremental Assumption Agreement in form and substance reasonably satisfactory to the Administrative Agent and the Borrower, among the Borrower, the Administrative Agent and each existing or additional Lender party thereto.

“ Incremental Facility Amount ” shall mean, at any time the excess, if any, of (a) $250,000,000 over (b) the aggregate increase in the Revolving Commitments established under this Agreement or establishment of any Incremental Term Loan, in each case, prior to such time, pursuant to Section 4.05.

“ Incremental Term Loans ” shall have the meaning assigned to such term in Section 4.05(a).

“ Indemnified Taxes ” shall mean (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

“ Insolvency ” shall mean with respect to any Multiemployer Plan, the condition that such plan is insolvent within the meaning of Section 4245 of ERISA.

“ Interest Election Request ” shall mean a request by the Borrower to convert or continue a Borrowing in accordance with Section 4.02.

“ Interest Payment Date ” shall mean (a) with respect to any ABR Loan, the last day of each March, June, September and December, (b) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period and (c) with respect to any Fixed Rate Loan, the last day of the Interest Period applicable to the Borrowing of which such Fixed Rate Loan is a part and, in the case of a Fixed Rate Borrowing with an Interest Period of more than 90 days’ duration (unless otherwise specified in the applicable Competitive Bid Request), each day prior to the last day of such Interest Period that occurs at intervals of 90 days’ duration after the first day of such Interest Period, and any other dates that are specified in the applicable Competitive Bid Request as Interest Payment Dates with respect to such Borrowing.

“ Interest Period ” shall mean (a) as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is 1, 2, 3 or 6 (or, with the consent of all Lenders making Loans as part of such Borrowing, 12) months thereafter (or such shorter interest period as may be agreed to by all Lenders making Loans as part of such Borrowing), in each case as the applicable Borrower may elect and (b) as to any Fixed Rate Borrowing, the period (which shall not be less than seven days or more than 360 days) commencing on the date of such Borrowing and ending on the date specified in the applicable Competitive Bid Request; provided , that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurocurrency Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period referred to above that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“ Interpolated Rate ” shall mean, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the relevant LIBOR Screen Rates) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the applicable LIBOR Screen Rate for the longest period (for which the applicable LIBOR Screen Rate is available) that is shorter than the Impacted Interest Period and (b) the applicable LIBOR Screen Rate for the shortest period (for which such LIBOR Screen Rate is available) that exceeds the Impacted Interest Period, in each case, as of approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. When determining the rate for a period which is less than the shortest period for which the relevant LIBOR Screen Rate is available, the applicable LIBOR Screen Rate for purposes of clause (a)

above shall be deemed to be the overnight screen rate where “overnight screen rate” means, in relation to any currency, the overnight rate for such currency determined by the Administrative Agent from such service as the Administrative Agent may select.

“ IRS ” shall mean the U.S. Internal Revenue Service.

“ Issuing Lender ” shall mean each of the entities listed on Schedule 1 attached hereto. Each Issuing Lender may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Lender, in which case the term “Issuing Lender” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“ JPMCB ” shall mean JPMorgan Chase Bank, N.A.

“ LC Commitment ” shall mean, as to each Issuing Lender, the amount set forth next to the name of such Issuing Lender on Schedule 1 hereto or such greater amount as such Issuing Lender and the Borrower may agree upon in writing.

“ LC Disbursement ” shall mean a payment made by the Issuing Lenders pursuant to a Letter of Credit.

“ LC Exposure ” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Revolving Commitment Percentage of the total LC Exposure at such time.

“ Lender Parent ” shall mean, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.

“ Lenders ” shall mean (a) the financial institutions listed on Schedule 2.01 (other than any such financial institution that has ceased to be a party hereto, pursuant to an Assignment and Acceptance) and (b) any financial institution that has become a party hereto pursuant to an Assignment and Acceptance or an Incremental Assumption Agreement.

“ Letter of Credit ” shall mean any Letter of Credit issued (or deemed issued) pursuant to Article III.

“ Lien ” shall mean any mortgage, lien, pledge, encumbrance, charge or security interest.

“ Loans ” shall mean the loans made by the Lenders to the Borrower pursuant to this Agreement.

“ Loan Documents ” shall mean this Agreement, each Incremental Assumption Agreement, each promissory note held by a Lender pursuant to Section 4.04(e) and any other agreement, instrument or document designated by its terms as a Loan Document.

“ Margin Regulations ” shall mean Regulations T, U and X of the Board as from time to time in effect, and all official rulings and interpretations thereunder or thereof.

“ Material Acquisition ” shall mean any acquisition of property or series of related acquisitions of property that (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the Capital Stock of a Person and (b) involves the payment of consideration by the Borrower and its Subsidiaries in excess of $250,000,000.

“ Material Adverse Effect ” shall mean a material adverse effect on the business, operations, properties or financial condition of the Borrower and its consolidated Subsidiaries, taken as a whole.

“ Material Debt ” shall mean any Debt of the Borrower or its Subsidiaries with an outstanding principal amount in excess of $200,000,000.

“ Material Disposition ” shall mean any disposition of property or series of related dispositions of property that yields gross proceeds to the Borrower and/or any of its Subsidiaries, in the aggregate, in excess of $250,000,000.

“ Moody’s ” shall mean Moody’s Investors Service, Inc. or any successor thereto.

“ Notice of Competitive Bid Request ” shall mean a notification made pursuant to Section 2.05 in the form of Exhibit A-2.

“ NYFRB Rate ” shall mean, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day; or if both such rates are not published for any day that is a Business Day, the rate quoted for such day for a federal funds transaction at 11:00 a.m., New York City time, on such day received by the Administrative Agent from a federal funds broker of recognized standing selected by it; provided that NYFRB Rate shall in no event be less than zero.

“ Obligations ” shall mean the due and punctual payment of (i) the principal of and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on any Loans made by the Lenders to the Borrower pursuant to this Agreement, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, reimbursements, costs, expenses and indemnities of the Borrower to the Lenders and the Issuing Lenders under this Agreement and the other Loan Documents (including any of the foregoing incurred or accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding).

“ OFAC ” shall mean the United States Treasury Department Office of Foreign Assets Control.

“ Other Connection Taxes ” shall mean, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan Document).

“ Other Taxes ” shall mean all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 4.14(b)).

“ Overnight Bank Funding Rate ” shall mean, for any day, the rate comprised of both overnight federal funds and overnight Eurocurrency borrowings by U.S.-managed banking offices of depository institutions (as such composite rate shall be determined by the New York Federal Reserve Bank as set forth on its public website from time to time) and published on the next succeeding business day as an Overnight Bank Funding Rate (from and after such date as the New York Federal Reserve Bank shall commence to publish such composite rate).

“ Parent ” shall mean Eli Lilly and Company, an Indiana corporation.

“ Participant ” shall have the meaning set forth in Section 11.04(f).

“ Participant Register ” shall have the meaning set forth in Section 11.04(g).

“ PBGC ” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“ Permitted Debt ” shall mean (i) Debt of any Subsidiary of the Borrower to the Borrower or another Subsidiary, (ii) Debt of the Borrower to any Subsidiary, (iii) Debt of the Borrower or any Subsidiary as an account party in respect of trade letters of credit, to the extent that such letters of credit are not drawn upon, (iv) Debt consisting of guarantees of loans made to officers, directors or employees of any Subsidiary, (v) unsecured trade accounts payable and other unsecured current Debt incurred in the ordinary course of business and not more than 120 days past due (but excluding any Debt for borrowed money), (vi) Debt with respect to surety, appeal and performance bonds obtained by any Subsidiary in the ordinary course of business, (vii) Debt owed in respect of any netting services, overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing-house transfers of funds and (viii) any replacement, renewal, refinancing or extension of any Debt referenced above that does not exceed the aggregate principal amount (plus associated fees and expenses) of the Debt being replaced, renewed, refinanced or extended (except that accrued and unpaid interest not delinquent in accordance with its terms may be part of any refinancing pursuant to this clause) and that otherwise complies with this Agreement.

“ Person ” shall mean any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“ Plan ” shall mean any “employee pension benefit plan”, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), subject to the provisions of Title IV or Section 302 of ERISA or Section 412 of the Code that is maintained by the Borrower or any ERISA Affiliate for current or former employees, or any beneficiary thereof, of the Borrower or any ERISA Affiliate.

“ Pricing Grid ” shall mean the Facility Fee and Applicable Margin Grid set forth in Annex I.

“ Prime Rate ” shall mean the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.

“ Principal Property ” shall mean any building, structure or other facility together with the underlying land and its fixtures, used primarily for manufacturing, processing or production, owned in the United States and the net book value of such building, structure or other facility exceeds 2% of the Consolidated Net Tangible Assets; provided that no building, structure or other facility will be a Principal Property if, in the good faith opinion of the Board of Directors (or a committee thereof), such building, structure or other facility is not of material importance to the business of the Borrower and its Subsidiaries taken as a whole.

“ PTE ” shall mean a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

“ Qualified IPO ” shall mean the closing of a firmly underwritten public offering pursuant to an effective registration statement under the Securities Act, covering the offer and sale of Capital Stock of the Borrower in the United States on the New York Stock Exchange or the Nasdaq Global Market.

“ Rating Agencies ” shall mean Moody’s, S&P and Fitch.

“ Ratings ” shall have the meaning assigned to such term in Annex I.

“ Recipient ” shall mean the Administrative Agent, any Lender and any Issuing Lender, or any combination thereof (as the context requires).

“ Reference Lenders ” shall mean at least two Lenders as selected by the Borrower; provided that such Lenders agree in their sole discretion to act as Reference Lenders hereunder and the selection of such Lenders is reasonably acceptable to the Administrative Agent.

“ Register ” shall have the meaning set forth in Section 11.04(d).

“ Related Parties ” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, partners, members, trustees, employees, agents, administrators, managers, representatives and advisors of such Person and of such Person’s Affiliates.

“ Reorganization ” shall mean with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

“ Required Lenders ” shall mean, at any time, Lenders having Revolving Credit Exposures, and unused Revolving Commitments representing a majority of the sum of the Revolving Credit Exposures and unused Revolving Commitments at such time; provided that, for purposes of declaring the Revolving Loans to be due and payable pursuant to Article IX, and for all purposes after the loans become due and payable pursuant to Article IX or the Revolving Commitments shall have expired or terminated, the Competitive Loan Exposures of the Lenders shall be included in their respective Revolving Credit Exposures in determining the Required Lenders.

“ Revolving Availability Period ” shall mean the period from and including the Effective Date to (but excluding) the earlier of the Revolving Maturity Date and the date of termination of the Revolving Commitments in accordance with the terms hereof.

“ Revolving Commitments ” shall mean, as to any Lender at any time, its obligation to make Revolving Loans to, and/or participate in Letters of Credit issued for the account of, the Borrower in an aggregate amount not to exceed at any time outstanding the Dollar amount set forth opposite such Lender’s name in Schedule 2.01 under the heading “Revolving Commitment”, as such amount may be reduced from time to time pursuant to Section 4.03 and the other applicable provisions hereof, or increased from time to time pursuant to Section 4.05. The initial aggregate amount of the Revolving Commitments is $750,000,000.

“ Revolving Commitment Percentage ” shall mean, as to any Lender at any time, the percentage which such Lender’s Revolving Commitment then constitutes of the aggregate Revolving Commitments of all Lenders.

“ Revolving Credit Exposure ” shall mean, as at any date of determination with respect to any Lender, an amount in Dollars equal to the sum of (a) the aggregate unpaid principal amount of such Lender’s Revolving Loans on such date and (b) such Lender’s LC Exposure.

“ Revolving Loans ” shall have the meaning set forth in Section 2.01.

“ Revolving Maturity Date ” shall mean the fifth anniversary of the Closing Date, as such date may be extended pursuant to Section 2.04.

“ Revolving Maturity Date Extension Request ” shall mean a request by the Borrower, substantially in the form of Exhibit E or such other form as shall be approved by the Administrative Agent, for the extension of the Revolving Maturity Date pursuant to Section 2.04.

“ Sale and Leaseback Transaction ” shall mean any arrangement with any Person pursuant to which the Borrower or any Subsidiary leases any Principal Property that has been or is to be sold or transferred by the Borrower or the Subsidiary to such Person, other than (1) temporary leases for a term, including renewals at the option of the lessee, of not more than three years, (2) leases between the Borrower and a Subsidiary or between Subsidiaries and (3) leases of a Principal Property executed by the time of, or within 90 days after the latest of, the acquisition, the completion of construction or improvement, or the commencement of commercial operation of the Principal Property.

“ Sanctioned Country ” shall mean, at any time, a country, region or territory that is itself the subject or target of any Sanctions.

“ Sanctioned Person ” shall mean, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State or by the United Nations Security Council, the European Union or any European Union member state or Her Majesty’s Treasury of the United Kingdom , (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any Person or Persons described in the preceding clauses (a) and (b).

“ Sanctions ” shall mean all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state or Her Majesty’s Treasury of the United Kingdom.

“ SEC ” shall mean the Securities and Exchange Commission.

“ S&P ” shall mean Standard & Poor’s Ratings Services, or any successor rating agency.

“ Securities Act ” shall mean the Securities Act of 1933, as amended.

liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) such Person will not have an unreasonably small capital with which to conduct the businesses in which it is engaged as such businesses are now conducted and proposed to be conducted following the determination date. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ Statutory Reserve Rate ” shall mean a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“ subsidiary ” shall mean, with respect to any Person (the “ parent ”) at any date, (a) for purposes of Section 8.03 and Section 8.06 only, any Person the majority of the outstanding Voting Stock (or equivalent voting securities of any Person which is not a corporation) of which is owned, directly or indirectly, by the parent or one or more subsidiaries of the parent of such Person and (b) for all other purposes under this Agreement, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held.

“ Subsidiary ” shall mean a subsidiary of the Borrower.

“ Syndication Agent ” means Goldman Sachs Bank USA.

“ Taxes ” shall mean any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority and all interest, additions to tax, penalties or liabilities with respect thereto.

“ Term Loan Credit Agreement ” shall mean that certain term loan credit agreement dated as of the date hereof among the Borrower, the lenders named therein and JPMCB, as administrative agent.

“ Transactions ” shall mean the execution and delivery by the Borrower of this Agreement, the performance by the Borrower of its obligations hereunder, the borrowings made or to be made hereunder and the use of the proceeds thereof.

“ Type ” when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, “Rate” shall include the Eurocurrency Rate, the Alternate Base Rate and the Fixed Rate.

“ Undisclosed Administration ” shall mean, in relation to a Lender or a Lender Parent, the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator under or based on the law in the country where such Lender is subject to home jurisdiction supervision if applicable law requires that such appointment is not to be publicly disclosed.

“ USA PATRIOT Act ” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

“ Value ” shall mean, with respect to a Sale and Leaseback Transaction, an amount equal to the present value of the lease payments with respect to the term of the lease (reduced by the amount of rental obligations of any sublessee of all or part of the same property) remaining on the date as of which the amount is being determined, without regard to any renewal or extension options contained in the lease, discounted at an interest rate determined by the Borrower at the time of the consummation of such Sale and Leaseback Transaction as long as such interest rate is customary for leases of such type.

“ Voting Stock ” shall mean, as applied to the stock of any corporation, stock of any class or classes (however designated) having by the terms thereof ordinary voting power to elect a majority of the members of the board of directors (or other governing body) of such corporation other than stock having such power only by reason of the happening of a contingency.

“ Wholly Owned Subsidiary ” of any Person, shall mean a subsidiary of such Person of which securities (except for directors’ qualifying shares) or other ownership interests representing 100% of the equity are, at the time any determination is being made, owned by such Person or one or more wholly owned subsidiaries of such Person or by such Person and one or more wholly owned subsidiaries of such Person.

“ Write-Down and Conversion Powers ” shall mean, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

Section 1.02. Classification of Loans and Borrowings . For purposes of this Agreement, Loans may be classified and referred to by Type (e.g. “Eurocurrency Loan”). Borrowings also may be classified by Type (e.g. Eurocurrency Borrowing”).

Section 1.03. Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), unless otherwise expressly stated to the contrary, (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

Section 1.04. Accounting Terms, GAAP . Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided , however , that if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any covenant in Article VIII or any related definition or other financial term used herein to eliminate the effect of any change in GAAP occurring after the Closing Date on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Article VIII or any related definition or other financial term used herein for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under FASB ASC Topic 825 “Financial Instruments” (or any other financial accounting standard having a similar result or effect) to value any Debt of the Borrower or any Subsidiary at “fair value”, as defined therein. For purposes of determining the amount of Debt outstanding hereunder, no effect shall be given to (a) any election by the Borrower to measure an item of Debt using fair value (as permitted by Financial Accounting Standards Board Accounting Standards Codification 825-10-25 (formerly known as FASB 159) or any similar accounting standard) or (b) any change in accounting for leases pursuant to GAAP resulting from the implementation of Financial Accounting Standards Board ASU No. 2016-02, Leases (Topic 842), to the extent such adoption would require recognition of a lease liability where such lease (or similar arrangement) would not have required a lease liability under GAAP as in effect on December 31, 2017.

ARTICLE II

Amount and Terms of the Revolving Commitments and Competitive Bid Procedure

Section 2.01. Commitments . Subject to the terms and conditions set forth herein, each Lender agrees to make revolving loans (“ Revolving Loans ”) to the Borrower from time to time during the Revolving Availability Period in Dollars in an aggregate principal amount that will not result in (i) such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving Commitment or (ii) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures exceeding the total Revolving Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.

Section 2.02. Loans and Borrowings . (a) Each Revolving Loan shall be made as part of a Borrowing consisting of the same Type made by the Lenders ratably in accordance with their respective Revolving Commitments. Each Competitive Loan shall be made in accordance with the procedures set forth in Section 2.05.

(b) The failure of any Lender to make any Revolving Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Revolving Commitments and Competitive Bids of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make such Revolving Loans or Competitive Loans as required.

(c) Subject to Section 4.09, (i) each Revolving Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith and (ii) each Competitive Borrowing shall be comprised entirely of Eurocurrency Loans or Fixed Rate Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. Each Competitive Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000.

(d) At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $3,000,000; provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments. There shall not at any time be more than a total of 10 Eurocurrency Borrowings outstanding.

(e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Revolving Maturity Date.

Section 2.03. Requests for Borrowings . To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurocurrency Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing, and (b) in the case of an ABR Borrowing, not later than 1:00 p.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by fax or email to the Administrative Agent of a written Borrowing Request in the form of Exhibit A-5. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;

(iv) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

(v) the location and number of the account of the Borrower to which funds are to be disbursed, which shall comply with the requirements of Section 4.01.

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each applicable Lender of the details thereof and of the amount of such Lender’s Revolving Loan to be made as part of the requested Borrowing.

Section 2.04. Extension of Revolving Maturity Date . The Borrower may, by delivery of a Revolving Maturity Date Extension Request to the Administrative Agent (which shall promptly deliver a copy to each of the Lenders), request that the Lenders extend the Revolving Maturity Date for an additional period of one year; provided that there shall be no more than two extensions of the Revolving Maturity Date pursuant to this Section and in no event shall the extended Revolving Maturity Date be more than five (5) years after the effective date of such extension. Each Lender shall, by notice to the Borrower and the Administrative Agent given not later than the 20th day after the date of the Administrative Agent’s receipt of the Borrower’s Revolving Maturity Date Extension Request, advise the Borrower whether or not it agrees to the requested extension (each Lender agreeing to a requested extension being called a “ Consenting Lender ”, and each Lender declining to agree to a requested extension being called a “ Declining Lender ”). Any Defaulting Lender and any Lender that has not so advised the Borrower and the Administrative Agent by such day shall be deemed to have declined to agree to such extension and shall be a Declining Lender; provided that a Declining Lender (other than a Defaulting Lender)

may, with the written consent of the Borrower, elect to become a Consenting Lender by providing written notice of such election to the Borrower and the Administrative Agent at any time prior to the Existing Maturity Date (as defined below). If Lenders constituting the Required Lenders shall have agreed to a Revolving Maturity Date Extension Request within the 20-day period described above, then the Revolving Maturity Date shall, as to the Consenting Lenders, be extended to the first anniversary of the Revolving Maturity Date theretofore in effect (such Revolving Maturity Date theretofore in effect being called the “ Existing Maturity Date ”). The decision to agree or withhold agreement to any Revolving Maturity Date Extension Request shall be at the sole discretion of each Lender. The Revolving Commitment of any Declining Lender shall terminate on the Existing Maturity Date. The principal amount of any outstanding Revolving Loans made by Declining Lenders, together with any accrued interest thereon and any accrued fees and other amounts payable to or for the account of such Declining Lenders hereunder, shall be due and payable on the Existing Maturity Date, and on the Existing Maturity Date the Borrower shall also make such other prepayments of their Revolving Loans pursuant to Section 4.06 as shall be required in order that, after giving effect to the termination of the Revolving Commitments of, and all payments to, Declining Lenders pursuant to this sentence, the aggregate Revolving Credit Exposures would not exceed the aggregate Revolving Commitments. Notwithstanding the foregoing provisions of this paragraph, the Borrower shall have the right, pursuant to Section 4.14(b), at any time on or prior to the Existing Maturity Date, to replace a Declining Lender with one or more Lenders or other financial institutions (subject, in the case of any such other financial institution, to the consent of the Administrative Agent and each Issuing Lender, such consent not to be unreasonably withheld or delayed) that will agree to the applicable Revolving Maturity Date Extension Request, and each such replacement Lender or financial institution shall for all purposes constitute a Consenting Lender. Notwithstanding the foregoing, (a) no extension of the Revolving Maturity Date pursuant to this paragraph shall become effective unless on the date on which the Borrower delivers the applicable Revolving Maturity Date Extension Request, the conditions set forth in Section 6.03(c) (with Section 5.05 being deemed for this purpose to refer to the most recent financial statements delivered pursuant to Section 7.03(a)) shall be satisfied and no Default shall have occurred and be continuing and the Administrative Agent shall have received a certificate executed by a Financial Officer of the Borrower certifying the same and dated as of the date of Revolving Maturity Date Extension Request and (b) the Revolving Availability Period and the Revolving Maturity Date, as such terms are used in reference to Letters of Credit issued or to be issued by any Issuing Lender, will not be extended without the prior written consent of such Issuing Lender.

Section 2.05. Competitive Bid Procedure.

(a) Subject to the terms and conditions set forth herein, from time to time during the Revolving Availability Period the Borrower may request Competitive Bids and the Borrower may (but shall not have any obligation to) accept Competitive Bids and borrow Competitive Loans; provided that (i) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures shall not exceed the total Revolving Commitments and (ii) in the event the Revolving Maturity Date shall have been extended as provided in Section 2.04, the sum of the LC Exposures attributable to Letters of Credit expiring after any Existing Maturity Date and the Competitive Loans maturing after such Existing Maturity Date shall not exceed the aggregate Revolving

Commitments of the Consenting Lenders. To request Competitive Bids, the Borrower shall hand deliver or telecopy or other electronic communication to the Advance Agent a duly completed Competitive Bid Request in the form of Exhibit A-1 hereto, to be received by the Advance Agent, in the case of a Eurocurrency Borrowing, not later than 10:00 a.m., New York City time, four Business Days before the date of the proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, two Business Days before the date of the proposed Borrowing. A Competitive Bid Request that does not conform substantially to Exhibit A-1 may be rejected in the Advance Agent’s sole discretion, and the Advance Agent shall promptly notify the Borrower of such rejection by telecopy or other electronic communication. Each Competitive Bid Request shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be a Eurocurrency Borrowing or a Fixed Rate Borrowing;

(iv) the Interest Period to be applicable to such Borrowing, which shall be a period contemplated by the definition of the term “Interest Period”; and

(v) the location and number of the account of the Borrower to which funds are to be disbursed, which shall comply with the requirements of Section 4.01.

Promptly following receipt of a Competitive Bid Request in accordance with this Section, the Advance Agent shall deliver to the Lenders a Notice of Competitive Bid Request, inviting the Lenders to submit Competitive Bids.

(b) Each Lender may (but shall not have any obligation to) make one or more Competitive Bids to the Borrower in response to a Competitive Bid Request. Each Competitive Bid by a Lender must be received by the Advance Agent by telecopy or other electronic communication, in the form of Exhibit A-3 hereto, in the case of a Eurocurrency Competitive Borrowing, not later than 9:30 a.m., New York City time, three Business Days before the proposed date of such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 11:30 a.m., New York City time, one Business Day before the proposed date of such Competitive Borrowing. Competitive Bids that do not conform substantially to the format of Exhibit A-3 may be rejected by the Advance Agent, and the Advance Agent shall notify the applicable Lender as promptly as practicable. Each Competitive Bid shall specify (i) the principal amount of the Competitive Loan that the Lender is willing to make (which shall be a minimum of $5,000,000 and an integral multiple of $1,000,000, and which may equal the entire principal amount of the Competitive Borrowing Request by the Borrower), (ii) the Competitive Bid Rate or Rates at which the Lender is prepared to make such Competitive Loan (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) and (iii) the Interest Period applicable to each such Competitive Loan and the last day thereof.

(c) The Advance Agent shall promptly notify the Borrower by telecopy or other electronic communication of the Competitive Bid Rate and the principal amount specified in each Competitive Bid and the identity of the Lender that shall have made such Competitive Bid.

(d) Subject only to the provisions of this paragraph, the Borrower may accept or reject any Competitive Bid. The Borrower shall notify the Advance Agent by telephone, confirmed by telecopy or other electronic communication in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it has decided to accept or reject each Competitive Bid, in the case of a Eurocurrency Competitive Borrowing, not later than 2:00 p.m., New York City time, three Business Days before the date of the proposed Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later than 2:00 p.m., New York City time, on the proposed date of the Competitive Borrowing; provided that (i) the failure of the Borrower to give such notice shall be deemed to be a rejection of each Competitive Bid, (ii) the aggregate amount of the Competitive Bids accepted by the Borrower shall not exceed the aggregate amount of the requested Competitive Borrowing specified in the related Competitive Bid Request, (iii) to the extent necessary to comply with clause (ii) above, the Borrower may accept Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in the case of multiple Competitive Bids at such Competitive Bid Rate, shall be made pro rata in accordance with the amount of each such Competitive Bid and (iv) except pursuant to clause (iii) above, no Competitive Bid shall be accepted for a Competitive Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000; provided further that if a Competitive Loan must be in an amount less than $5,000,000 because of the provisions of clause (iii) above, such Competitive Loan may be for a minimum of $1,000,000 or any integral multiple of $100,000 thereof, and in calculating the pro rata allocation of acceptances of portions of multiple Competitive Bids at a particular Competitive Bid Rate pursuant to clause (iii) the amounts shall be rounded to integral multiples of $100,000 in a manner which shall be in the discretion of the Borrower. A notice given by the Borrower pursuant to this paragraph (d) shall be irrevocable.

(e) The Advance Agent shall promptly notify each bidding Lender by telecopy or other electronic communication, whether or not its Competitive Bid has been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and each successful bidder will thereupon become bound, subject to the terms and conditions hereof, to make the Competitive Loan in respect of which its Competitive Bid has been accepted.

(f) If the Advance Agent shall elect to submit a Competitive Bid in its capacity as a Lender, it shall submit such Competitive Bid directly to the Borrower at least one quarter of an hour earlier than the time by which the other Lenders are required to submit their Competitive Bids to the Advance Agent pursuant to paragraph (b) of this Section 2.05.

(g) All notices required by this Section 2.05 shall be given in accordance with Section 11.01.

ARTICLE III

Letters of Credit

Section 3.01. Letters of Credit .

(a) General . Subject to the terms and conditions set forth herein, the Borrower may request the issuance under the Revolving Commitments of Letters of Credit for its own account or for the account of any Subsidiary, in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Lender, at any time and from time to time during the Revolving Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower (on behalf of itself or its Subsidiary) with, the applicable Issuing Lender relating to any Letter of Credit, the terms and conditions of this Agreement shall control. At the request of the Borrower (on behalf of itself or its Subsidiary), any Letter of Credit may be issued for the joint and several account of the Borrower and any of its Subsidiary.

(b) Notice of Issuance; Amendment; Renewal; Extension; Certain Conditions . To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower (on behalf of itself or its Subsidiary) shall hand deliver or telecopy or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Lender) to the Issuing Lender and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, the date of issuance, amendment, renewal or extension, the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section 3.01), the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Lender, the Borrower (on behalf of itself or its Subsidiary) shall also submit a letter of credit application on such Issuing Lender’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit, the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $75,000,000, (ii) the sum of the total Revolving Credit Exposures plus the total Competitive Loan Exposures shall not exceed the total Revolving Commitments, (iii) the portion of the LC Exposure attributable to Letters of Credit issued by each Issuing Lender shall not exceed the LC Commitment of such Issuing Lender and (iv) in the event the Revolving Maturity Date shall have been extended as provided in Section 2.04, the sum of the LC Exposures attributable to Letters of Credit expiring after any Existing Maturity Date and the Competitive Loans maturing after such Existing Maturity Date shall not exceed the total Revolving Commitments of the Consenting Lenders. The issuance of any Letter of Credit shall be subject to the customary procedures of the applicable Issuing Lender, and no Issuing Lender shall be required to issue any Letter of Credit of a type not approved for issuance by it. Notwithstanding anything in the contrary in this Agreement, no Issuing Lender

shall be under any obligation to issue, renew, amend or extend any Letter of Credit if: (a) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Lender from issuing, renewing, amending or extending the Letter of Credit, or any law, rule, regulation or treaty applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance, renewal, amendment or extension of letters of credit generally or the Letter of Credit in particular or shall impose upon the Issuing Lender with respect to the Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Lender is not otherwise compensated hereunder) not in effect on the Closing Date; or (b) the issuance, renewal, amendment or extension of the Letter of Credit would violate one or more policies of the Issuing Lender.

(c) Expiration Date . Each Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after the then-current expiration date of such Letter of Credit at the time of such renewal or extension) and (ii) the date that is five Business Days prior to the Revolving Maturity Date.

(d) Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof), and effective upon the date of such issuance or amendment, and without any further action on the part of the applicable Issuing Lender or the Lenders, the applicable Issuing Lender hereby grants to each Lender, and each Lender hereby acquires from such Issuing Lender, a participation in such Letter of Credit equal to such Lender’s Revolving Commitment Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of such Issuing Lender, such Lender’s Revolving Commitment Percentage of each LC Disbursement made by such Issuing Lender and not reimbursed on or before the date due as provided in paragraph (e) of this Section 3.01, or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Commitments, or any force majeure or other event that under any rule of law or uniform practices to which any Letter of Credit is subject (including Section 3.14 of ISP 98 or any successor publication of the International Chamber of Commerce) permits a drawing to be made under such Letter of Credit after the expiration thereof or of the Revolving Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement . If the Issuing Lender shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 2:00 p.m., New York City time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such date,

or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 2:00 p.m., New York City time, on the Business Day immediately following the day that the Borrower receives such notice; provided that the Borrower (on behalf of itself or its Subsidiary) may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 that such payment be financed with a Revolving Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Revolving Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Revolving Commitment Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Revolving Commitment Percentage of the payment then due from the Borrower, in the same manner as provided in Section 4.01 with respect to Revolving Loans made by such Lender (and Section 4.01 shall apply, mutatis mutandis , to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to such Issuing Lender the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to such Issuing Lender or, to the extent that the Lenders have made payments pursuant to this paragraph to reimburse such Issuing Lender, then to such Lenders and the Issuing Lenders as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse such Issuing Lender for any LC Disbursement (other than the funding of Revolving Loans as contemplated above) shall not constitute a Revolving Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute . The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section 3.01 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of:

(i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein;

(ii) any amendment or waiver of or any consent to departure from all or any of the provisions of any Letter of Credit or this Agreement;

(iii) the existence of any claim, setoff, defense or other right that the Borrower, any other party guaranteeing, or otherwise obligated with, the Borrower, any Subsidiary or other Affiliate thereof or any other Person may at any time have against the beneficiary under any Letter of Credit, the Issuing Lenders, the Administrative Agent or any Lender or any other Person, whether in connection with this Agreement or any other related or unrelated agreement or transaction;

(iv) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect;

(v) payment by the Issuing Lenders under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit;

(vi) any force majeure or other event that under any rule of law or uniform practices to which any Letter of Credit is subject (including Section 3.14 of ISP 98 or any successor publication of the International Chamber of Commerce) permits a drawing to be made under a Letter of Credit after the expiration thereof or of the Revolving Commitments; and

(vii) any other act or omission to act or delay of any kind of the Issuing Lenders, the Lenders, the Administrative Agent or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 3.01, constitute a legal or equitable discharge of the Borrower’s obligations hereunder.

None of the Administrative Agent, the Lenders or the Issuing Lenders or any of their Affiliates, directors, officers, employees and agents, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances specified in clauses (i) through (vi) above), or for any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Lenders; provided that the foregoing shall not be construed to excuse an Issuing Lender from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Lender’s failure to exercise the agreed standard of care (as set forth below) in determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that the Issuing Lenders shall have exercised the agreed standard of care in the absence of gross negligence or willful misconduct on the part of an Issuing Lender. Without limiting the generality of the foregoing, it is understood that an Issuing Lender may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit, without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit; provided that such Issuing Lender shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures . The applicable Issuing Lender shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Lender shall promptly notify the Administrative Agent and the Borrower for whose account such Letter of Credit was issued by telephone (confirmed by telecopy or by electronic communication) of such demand for payment and whether the Issuing Lender has made or will make an LC Disbursement thereunder; provided that any failure to give

or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Lender and the Lenders with respect to any such LC Disbursement.

(h) Interim Interest . If an Issuing Lender shall make any LC Disbursement, unless the Borrower shall reimburse (including with the proceeds of Revolving Loans as provided in Section 3.01(e)) such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement at the rate per annum specified in Section 4.08(a); provided that, if the Borrower fails to reimburse (including with the proceeds of Revolving Loans as provided in Section 3.01(e)) such LC Disbursement when due pursuant to paragraph (e) of this Section 3.01, then Section 4.08(d) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Lender, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section 3.01 to reimburse such Issuing Lender shall be for the account of such Lender to the extent of such payment.

(i) Resignation or Removal of the Issuing Lenders . An Issuing Lender may resign at any time by giving at least 30 days’ prior written notice to the Administrative Agent and the Borrower, and may be removed at any time by the Borrower by notice to the Issuing Lenders and the Administrative Agent. Upon the acceptance of any appointment as an Issuing Lender hereunder by a Lender that shall agree to serve as successor Issuing Lender, such successor shall succeed to and become vested with all the interests, rights and obligations of the retiring Issuing Lender and the retiring Issuing Lender shall be discharged from its obligations to issue additional Letters of Credit hereunder. At the time such removal or resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 4.07(c)(ii). The acceptance of any appointment as an Issuing Lender hereunder by a successor Lender shall be evidenced by an agreement entered into by such successor, in a form satisfactory to the Borrower and the Administrative Agent, and, from and after the effective date of such agreement, (i) such successor Lender shall have all the rights and obligations of the previous Issuing Lender under this Agreement and the other Loan Documents and (ii) references herein and in the other Loan Documents to the term “Issuing Lender” shall be deemed to refer to such successor or to any previous Issuing Lender, or to such successor and all previous Issuing Lenders, as the context shall require. After the resignation or removal of the Issuing Lender hereunder, the retiring Issuing Lender shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Lender under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit.

(j) LC Exposure Determination . For all purposes of this Agreement, the amount of a Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at the time of determination.

ARTICLE IV

General Provisions Applicable to Loans

Section 4.01. Funding of Borrowings . (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds in Dollars to the account of the Administrative Agent or an Affiliate thereof, most recently designated by it for such purpose by notice to the Lenders, (x) by 2:00 p.m., New York City time in the case of Eurocurrency Loans and (y) by 3:00 p.m., New York city time in the case of ABR Loans. The Administrative Agent will make Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent (or such other account as may be designated by the Borrower). If a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, the Administrative Agent shall return the amounts so received to the respective Lenders.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section 4.01 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, or (ii) in the case of the Borrower, the interest rate on the applicable Borrowing; provided that no repayment by the Borrower pursuant to this sentence shall be deemed to be a prepayment for purposes of Section 4.11. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

Section 4.02. Interest Elections . (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Competitive Borrowings, which may not be converted or continued.

(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.03:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or Eurocurrency Borrowing; and

(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing.

Section 4.03. Termination and Reduction of Revolving Commitments . (a) Unless previously terminated, the Revolving Commitments shall terminate on the Revolving Maturity Date; provided that if the Qualified IPO has not been consummated on or prior to June 30, 2019, the Revolving Commitments shall automatically terminate on such date.

(b) The Borrower may at any time terminate, or from time to time reduce, the Revolving Commitments; provided that (i) each reduction of the Revolving Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any

concurrent prepayment of the Loans, (i) the outstanding Revolving Credit Exposure would exceed the aggregate Revolving Commitments or (ii) the sum of the Revolving Credit Exposures plus the Competitive Loan Exposures would exceed the total Revolving Commitments.

(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent or an affiliate thereof shall advise the applicable Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of any Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other financing arrangements, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revolving Commitments shall be permanent. Each reduction of the Revolving Commitments shall be made ratably among the applicable Lenders in accordance with their respective Revolving Commitments.

Section 4.04. Repayment of Loans; Evidence of Debt . (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender, on the Revolving Maturity Date, (i) the then unpaid principal amount of the Revolving Loans of such Lender and (ii) the then unpaid principal amount of each Competitive Loan of such Lender.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain a Register pursuant to Section 11.04(d) and an account for each applicable Lender in which it shall record (i) the amount of each Loan made hereunder and any promissory note evidencing such Loan, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the Register and the accounts of each Lender maintained pursuant to paragraphs (b) and (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein absent manifest error of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or make any entry therein or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. In the event of any conflict between the records maintained by any Lender and the records maintained by the Administrative Agent in such matters, the records of the Administrative Agent shall control in the absence of manifest error. In the event of any

conflict between the Register and any other records maintained the Administrative Agent in such matters, the Register shall control in the absence of manifest error.

(e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent.

Section 4.05. Incremental Commitments .

(a) The Borrower may, by written notice to the Administrative Agent, (x) request additional Revolving Commitments and/or (y) request an establishment of a new term loan (the “ Incremental Term Loans ”), as applicable, in an aggregate amount not to exceed the Incremental Facility Amount at such time, from one or more Persons who will become Lenders (which may include any existing Lender willing to provide the same, in its own sole and absolute discretion, provided that any Lender that does not respond to such request shall be deemed to have declined to provide the same); provided that (i) each such Person, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent and, in the case of additional Revolving Commitments, the Issuing Lenders (which approvals shall not be unreasonably withheld), (ii) in the case of additional Revolving Commitments, such Revolving Commitments shall be subject to the same terms as the other Revolving Commitments in effect under this Agreement and (iii) in the case of any Incremental Term Loans, (A) the scheduled final maturity date of such Incremental Term Loans shall be no earlier than the Revolving Maturity Date and (B) such Incremental Term Loans shall be on terms (other than pricing and letters of credit and other revolving credit related terms not generally applicable to term loans) substantially similar to the Revolving Loans. Such notice shall set forth (i) the amount of the additional Revolving Commitments and/or the Incremental Term Loans, as applicable, being requested (which shall be in minimum increments of $1,000,000 and a minimum amount of $25,000,000 or equal to the remaining Incremental Facility Amount), and (ii) the date on which such additional Revolving Commitments and/or Incremental Term Loan, as applicable, are requested to become effective (which shall not be less than 10 Business Days or more than 60 days after the date of such notice, unless otherwise agreed to by the Administrative Agent).

(b) The Borrower and each additional Lender, shall execute and deliver to the Administrative Agent an Incremental Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Revolving Commitment and/or Incremental Term Loans of such Lender. The Lenders hereby irrevocably authorize the Administrative Agent to enter into any Incremental Assumption Agreement and/or any amendment to any other Loan Document as may be reasonably necessary in order to establish the new Incremental Term Loans pursuant to this Section 4.05 and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such Incremental Term Loans, in each case consistent with this Section 4.05.

(c) Each of the parties hereto hereby agrees that the Administrative Agent may take any and all actions as may be reasonably necessary to ensure that, after giving effect to any increase in the Revolving Commitments pursuant to Section 4.05(a), the outstanding Revolving Loans are held by the Lenders in accordance with their new Revolving Commitment Percentages. This may be accomplished at the discretion of the Administrative Agent by (i) requiring the outstanding Revolving Loans to be prepaid with the proceeds of a new Revolving Borrowing, (ii) causing non-increasing Lenders to assign (at par, with accrued interest and fees) portions of their outstanding Revolving Loans to Persons who are becoming Lenders (or increasing their Revolving Commitments), or (iii) any combination of the foregoing. Any prepayment or assignment described in this paragraph (b) shall be subject to Section 4.11, but shall otherwise be without premium or penalty.

(d) Notwithstanding the foregoing, no increase in any Revolving Commitment and/or the establishment of the Incremental Term Loans, as applicable, shall become effective under this Section 4.05 unless, (i) on the date thereof, the conditions set forth in paragraphs (b) and (e) of Section 6.02 shall be satisfied and the Administrative Agent shall have received a certificate to that effect dated such date and executed by the President, a Vice President or a Financial Officer of the Borrower, and (ii) the Administrative Agent shall have received (with sufficient copies for each of the Lenders) legal opinions, board resolutions and certificates consistent with those delivered on the Effective Date under paragraphs (b) and (f) of Section 6.01.

(e) Notwithstanding anything to the contrary, this Section 4.05 shall supersede any provisions in Section 4.13 or Section 11.07 to the contrary.

Section 4.06. Prepayment of Loans . (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section; provided that no Borrower shall have the right to prepay any Competitive Loan without the prior consent of the Lender thereof.

(b) The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Revolving Loans in whole or in part without premium or penalty; provided that (i) such notice must be in a form reasonably acceptable to the Administrative Agent and be received by the Administrative Agent not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of any Eurocurrency Borrowing and (B) on the date of prepayment of any ABR Borrowing; (ii) any prepayment of Eurocurrency Loan shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof; (iii) any prepayment of ABR Borrowing shall be in a principal amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding; provided that in the event such notice is given in connection with a conditional termination of the Revolving Commitments as contemplated by Section 4.03, then such notice of prepayment may be revoked in accordance with Section 4.03 (subject to, for the avoidance of doubt, payments required under Section 4.11). Each such notice shall specify the date and amount of such prepayment and the Type(s) of the Revolving Loans to be prepaid and, if Eurocurrency Loans are to be prepaid, the Interest Period(s) of such Revolving Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such

Lender’s pro rata share of such prepayment (based on such Lender’s pro rata share in respect of the relevant Borrowing). The prepayment amount specified in such notice shall be due and payable on the date specified therein. Prepayments shall be accompanied by accrued interest to the extent required by Section 4.08. Any prepayment of a Eurocurrency Loan shall be accompanied by any additional amounts required pursuant to Section 4.11. Subject to Section 4.15, each prepayment of Revolving Loans shall be applied to the Revolving Loans of the Lenders in accordance with their respective pro rata shares in respect of each of the relevant Borrowing.

(c) If at any time, (i) the aggregate Revolving Credit Exposure exceeds the aggregate Revolving Commitments, or (ii) the sum of the Revolving Credit Exposure plus the Competitive Loan Exposure exceeds the aggregate Revolving Commitments, the Borrower shall immediately repay the Revolving Loans, and/or the Competitive Loans, and/or cash collateralize any outstanding Letters of Credit in an aggregate principal amount sufficient to cause the remaining outstanding Loans and the LC Exposure not to exceed the aggregate Revolving Commitments.

Section 4.07. Fees . (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee, which shall accrue at the facility fee rate set forth in the Pricing Grid from time to time, on the daily amount of the Revolving Commitments of such Lender (whether used or unused) during the period from and including the Closing Date to but excluding the date on which such Revolving Commitments terminate; provided , that if such Lender continues to have any Revolving Credit Exposure after its Revolving Commitments terminate, then such facility fee shall continue to accrue on the daily amount of such Lender’s Revolving Credit Exposure from and including the date on which its Revolving Commitments terminate to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the Closing Date; provided that any facility fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b) The Borrower agrees to pay to the Administrative Agent, for its own account, the administrative, auction and other fees separately agreed upon between the Borrower and the Administrative Agent (collectively, the “ Administrative Fees ”) pursuant to the Administrative Agent Fee Letter.

(c) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender (including the Issuing Lenders) a participation fee with respect to its participations in Letters of Credit, which shall accrue at a rate per annum equal to the Applicable Margin applicable to interest on Eurocurrency Revolving Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which the Revolving Commitments terminate and the date on which such Lender

ceases to have any LC Exposure and (ii) to each Issuing Lender a fronting fee, which shall accrue at the rate per annum mutually agreed by such Issuing Lender and the Borrower on the average daily amount of the portion of the LC Exposure attributable to Letters of Credit issued by such Issuing Lender (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which the Revolving Commitments terminate and the date on which there ceases to be any LC Exposure, as well as each of the Issuing Lender’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder; provided that if Goldman Sachs Bank USA or JPMCB is the Issuing Lender, the fronting fee shall be payable by the Borrower at the rate set forth in the Fee Letter. Participation fees and the fronting fees shall be payable on the last day of March, June, September and December of each year, commencing on the first such date to occur after the Effective Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. Any other fees payable to the Issuing Lenders pursuant to this paragraph shall be payable promptly after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of facility fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

Section 4.08. Interest . (a) The Revolving Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin.

(b) (i) The Revolving Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted Eurocurrency Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin and (ii) the Eurocurrency Competitive Loans shall bear interest at the Adjusted Eurocurrency Rate for the Interest Period in effect for such Borrowing plus (or minus, as applicable) the applicable Competitive Loan Margin.

(d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2.0% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2.0% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

(e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, upon termination of the Revolving Commitments; provided that

(i) interest accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at a time when the Alternate Base Rate is based on clause (a) of the first sentence of the definition of Alternate Base Rate shall be computed on the basis of a year of 365 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Eurocurrency Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

Section 4.09. Alternate Rate of Interest .

(a) If prior to the commencement of any Interest Period for a Eurocurrency Borrowing:

(i) the Administrative Agent shall have determined (which determination shall be made in good faith and shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period; or

(ii) the Administrative Agent is advised by the Required Lenders (or, in the case of a Eurocurrency Competitive Loan, the Lender that is required to make such Eurocurrency Competitive Loan) that the Eurocurrency Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy or by other electronic communication as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurocurrency Borrowing shall be ineffective, (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing and (iii) any request by the Borrower for a Eurocurrency Competitive Borrowing shall be ineffective; provided that (x) if the circumstances giving rise to such notice do not affect all the Lenders, then requests by the Borrower for Eurocurrency Competitive Borrowings may be made to Lenders that are not affected thereby and (y) if the circumstances giving rise to such notice affect only one Type of Borrowing, then the other Types of Borrowings shall be permitted.

(b) If at any time the Administrative Agent determines (which determination shall be conclusive absent manifest error) that (i) the circumstances set forth in clause (a)(i) have arisen and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in clause (a)(i) have not arisen but either (w) the supervisor for the administrator of the Eurocurrency Rate has made a public statement that the administrator of the Eurocurrency Rate is insolvent (and there is no successor administrator that will continue publication of the Eurocurrency Rate), (x) the administrator of the Eurocurrency Rate has made a public statement identifying a specific date after which the Eurocurrency Rate will permanently or indefinitely cease to be published by it (and there is no successor administrator that will continue publication of the Eurocurrency Rate), (y) the supervisor for the administrator of the Eurocurrency Rate has made a public statement identifying a specific date after which the Eurocurrency Rate will permanently or indefinitely cease to be published or (z) the supervisor for the administrator of the Eurocurrency Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the Eurocurrency Rate may no longer be used for determining interest rates for loans, then the Administrative Agent and the Borrower shall endeavor to establish an alternate rate of interest to the Eurocurrency Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable (but for the avoidance of doubt, such related changes shall not include a reduction of the Applicable Margin); provided that, if such alternate rate of interest as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement. Notwithstanding anything to the contrary in Section 11.07, such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have received, within five Business Days of the date notice of such alternate rate of interest is provided to the Lenders, a written notice from the Required Lenders stating that such Required Lenders object to such amendment. Until an alternate rate of interest shall be determined in accordance with this clause (b) (but, in the case of the circumstances described in clause (ii) of the first sentence of this Section 4.09(b), only to the extent the Eurocurrency Rate for the applicable currency and such Interest Period is not available or published at such time on a current basis), (x) any Interest Election Request that requests the conversion of any Revolving Borrowing to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective and (y) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

Section 4.10. Increased Costs . (a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except for any such reserve requirement which is reflected in the Adjusted Eurocurrency Rate) or Issuing Lender;

(ii) impose on any Lender or Issuing Lender, the London interbank market, any other condition, cost or expense (other than Taxes) affecting this Agreement or

Eurocurrency Loans or Fixed Rate Loans made by such Lender or any Letter of Credit or participations therein; or

(iii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of the term “Excluded Taxes” and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

and the result of any of the foregoing shall be to increase the cost to such Lender or other Recipient of making , continuing, converting to or maintaining any Eurocurrency Loan or Fixed Rate Loan or issuing or participating in Letters of Credit by an amount deemed by such Lender or other Recipient to be material or to reduce the amount of any sum received or receivable by such Lender or other Recipient hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender or other Recipient to be material, then the Borrower will pay to such Lender or other Recipient such additional amount or amounts as will compensate such Lender or other Recipient for such additional costs actually incurred or reduction actually suffered.

(b) If any Lender or Issuing Lender determines that any Change in Law affecting such Lender or Issuing Lender or any lending office of such Lender or Issuing Lender or such Lender’s or Issuing Lender’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s or Issuing Lender’s capital or on the capital of such Lender’s or Issuing Lender’s holding company, if any, as a consequence of this Agreement or the Loans or participations in Letters of Credit held by such Lender, or the Letters of Credit issued by such Issuing Lender, to a level below that which such Lender or Issuing Lender or such Lender’s or Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Lender’s policies and the policies of such Lender’s or Issuing Lender’s holding company with respect to capital adequacy and liquidity) by an amount deemed by such Lender or Issuing Lender to be material, then from time to time the Borrower will pay to such Lender or Issuing Lender such additional amount or amounts as will compensate such Lender or Issuing Lender or such Lender’s or Issuing Lender’s holding company for any such reduction suffered.

(c) A certificate of a Lender or Issuing Lender setting forth the amount or amounts necessary to compensate such Lender or Issuing Lender or its holding company as specified in paragraph (a) or (b) of this Section, and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined, shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or Issuing Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Failure or delay on the part of any Lender or Issuing Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or Issuing Lender pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender or Issuing Lender notifies

the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Lender’s intention to claim compensation therefor; provided further , that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof.

(e) Notwithstanding the foregoing provisions of this Section, a Lender shall not be entitled to compensation pursuant to this Section in respect of any Competitive Loan if the Change in Law that would otherwise entitle it to such compensation shall have been publicly announced prior to submission of the Competitive Bid pursuant to which such Competitive Loan was made.

(f) The obligations of the Borrower under this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

Section 4.11. Break Funding Payments . In the event of (a) the payment or prepayment of any principal of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 4.06(b) and is revoked in accordance therewith), (d) the failure to borrow any Competitive Loan after accepting the Competitive Bid to make such Competitive Loan or (e) the assignment of any Eurocurrency Loan or Fixed Rate Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 4.14, then, in any such event, the Borrower shall compensate each Lender for the out-of-pocket loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the present value of the excess, if any, of (i) its cost of obtaining the funds for the Loan being paid, prepaid, refinanced or not borrowed (assumed to be the Eurocurrency Rate applicable thereto) for the period from the date of such payment, prepayment, refinancing or failure to borrow or refinance to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow or refinance, the Interest Period for such Loan which would have commenced on the date of such failure) over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender in reemploying the funds so paid, prepaid or not borrowed or refinanced for such period or Interest Period, as the case may be. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section and setting forth in reasonable detail the manner in which such amount or amounts shall have been determined shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. The obligations of the Borrower under this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

Section 4.12. Taxes . (a) Any and all payments to the Lenders or the Administrative Agent hereunder or under any Loan Document by the Borrower or on behalf of the

Borrower (including as guarantor of the obligations of the Borrower) shall be made free and clear of and without deduction or withholding for any and all current or future Taxes, except as required by applicable law. If under any applicable law (as determined in the good faith discretion of the Borrower or the Administrative Agent) the Borrower shall be required to deduct or withhold any Indemnified Tax from any such payment, (i) the sum payable shall be increased by the amount (an “ Additional Amount ”) necessary so that after making all required deductions or withholdings (including deductions and withholdings applicable to Additional Amounts payable under this Section 4.12) such Recipient shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions or withholdings and (iii) the Borrower shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, the Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

(c) The Borrower shall indemnify each Recipient for the full amount of Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 4.12) paid or payable by, or required to be withheld or deducted from a payment to, such Recipient and any liability (including penalties, interest and expenses (including reasonable attorney’s fees and expenses)) arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared by a Lender, or by an Administrative Agent on its own behalf or on behalf of a Lender, and setting forth in reasonable detail the manner in which such amount shall have been determined, absent manifest error, shall be final, conclusive and binding for all purposes. Such indemnification shall be made within 30 days after the date such Lender or Administrative Agent, as the case may be, makes written demand therefor, which written demand shall be made within 60 days of the date such Lender or Administrative Agent receives written demand for payment of such Indemnified Taxes from the relevant Governmental Authority.

(d) Each Lender shall severally, but not jointly, indemnify the Administrative Agent, within 30 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.04(g) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent, absent manifest error, shall be final, conclusive and binding for all purposes. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or

otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).

(e) If a Recipient receives a refund, which in its sole discretion exercised in good faith is in respect of any Indemnified Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid Additional Amounts pursuant to this Section 4.12, it shall within 30 days from the date of such receipt pay over such refund to the Borrower (but only to the extent of indemnity payments made, or Additional Amounts paid, by the Borrower under this Section 4.12 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such Recipient and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); provided , however , that the Borrower, upon the request of such Recipient, agrees to repay the amount paid over to the Borrower pursuant to this Section 4.12(e) (plus penalties, interest or other charges) to such Recipient in the event such Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 4.12(e), in no event will such Recipient be required to pay any amount to the Borrower pursuant to this Section 4.12(e) the payment of which would place such Recipient in a less favorable net after-Tax position than such Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.

(f) As soon as practicable after the date of any payment of Indemnified Taxes by the Borrower to the relevant Governmental Authority, the Borrower will deliver to the Administrative Agent at its address referred to in Section 11.01, the original or a certified copy of a receipt issued by such Governmental Authority evidencing payment thereof, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(g) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 4.12 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Revolving Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

treaty, (ii) executed copies of IRS Form W-8ECI, (iii) in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest,” (x) a certificate substantially in the form of Exhibit F-1 to the effect that such Non-U.S. Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10-percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed copies of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or (iv) to the extent a Non-U.S. Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9 and/or another certification documents from each beneficial owner, as applicable; provided that if the Non-U.S. Lender is a partnership and one or more direct or indirect partners of such Non-U.S. Lender are claiming the portfolio interest exemption, such Non-U.S. Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner, in each case of (i)-(iv), properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or reduced rate of, U.S. federal withholding tax on payments by the Borrower under this Agreement. Each Lender that is a U.S. person as defined in Section 7701(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent two copies of IRS Form W-9, or any subsequent or substitute versions thereof or successors thereto, certifying that such Lender is entitled to a complete exemption from U.S. federal backup withholding tax on payments made pursuant to this Agreement. Such forms shall be delivered by each Lender on or before the date it becomes a party to this Agreement and on or before the date, if any, such Lender changes its applicable lending office by designating a different lending office (a “ New Lending Office ”), unless each of the applicable lending office prior to such designation and the New Lending Office are located within the United States. In addition, each Lender shall deliver such forms promptly upon the obsolescence, inaccuracy or invalidity of any form previously delivered by such Lender or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so. Notwithstanding any other provision of this Section 4.12(h), a Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 4.12(h) that such Lender is not legally able to deliver.

(i) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement or any other Loan Document, shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation that in such Lender’s reasonable judgment such completion, execution or submission would not materially prejudice the legal position of such Lender or subject such Lender to any material unreimbursed cost or expense.

(j) If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with

the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this paragraph (j), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(k) The Borrower shall not be required to indemnify any Lender, or to pay any Additional Amounts to any Lender, in respect of any withholding Tax pursuant to paragraph (a) or (c) above to the extent that (i) the obligation to withhold amounts with respect to such withholding tax was in effect and would apply to amounts payable to such Lender on the date such Lender became a party to this Agreement or, with respect to payments to a New Lending Office, the date such Lender designated such New Lending Office with respect to a Loan; provided , however , that this clause (i) shall not apply to any Lender if the assignment, participation, transfer or designation of a New Lending Office was made at the request of the Borrower; and provided further , however , that this clause (i) shall not apply (x) to the extent the indemnity payment or Additional Amounts any Lender would be entitled to receive (without regard to this clause (i)) do not exceed the indemnity payment or Additional Amounts that the Lender making the assignment, participation, transfer or designation of such New Lending Office would have been entitled to receive in the absence of such assignment, participation, transfer or designation or (y) to the extent the obligation to withhold such amounts is an obligation of, or an obligation in respect of payments made by any Affiliate of the Borrower other than the Borrower, or (ii) the obligation to pay such Additional Amounts would not have arisen but for a failure by such Lender to comply with the provisions of paragraph (h), (i) or (j) of this Section 4.12.

(l) Nothing contained in this Section 4.12 shall require any Lender (or Participant) or the Administrative Agent to make available any of its Tax returns (or any other information that it deems to be confidential or proprietary).

(m) For the purposes of this Section 4.12, the term “Lender” shall include any Issuing Lender.

Administrative Agent shall designate from time to time, except that payments pursuant to Sections 4.10, 4.11 or 4.12 and 11.05 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in Dollars.

(b) If at any time insufficient funds are received by and available to the Administrative Agents to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal (including reimbursement of LC Disbursements) then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

(c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or in respect of its participations in any Letters of Credit resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans, and accrued interest thereon or its participations in Letters of Credit than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans, and Letters of Credit of such other Lenders to the extent necessary so that the benefit of all such payments shall be shared by such Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans, and participations in Letters of Credit; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or its Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

applicable Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lenders with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 4.01(b), 4.12(d) or 4.12(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

Section 4.14. Mitigation Obligations; Replacement of Lenders . (a) If any Lender requests compensation under Section 4.10, or if the Borrower is required to pay any Additional Amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 4.12, then such Lender shall use reasonable efforts to file any certificate or document requested by the Borrower (consistent with legal and regulatory restrictions), to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such filing, designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 4.10 or 4.12, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If (i) any Lender requests compensation under Section 4.10, (ii) the Borrower is required to pay any Additional Amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 4.12, (iii) any Lender becomes a Defaulting Lender, (iv) any Lender becomes a Declining Lender or (v) any Lender refuses to consent to any amendment, waiver or other modification of this Agreement requested by the Borrower that requires the consent of a greater percentage of the Lenders than the Required Lenders and such amendment, waiver or other modification is consented to by the Required Lenders, then, in each case, the Borrower may, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 11.04), all its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans held by it and any and all rights and interests related thereto) to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment and, in the case of clause (v) above, provides its consent to such requested amendment, waiver, or other modification of this Agreement); provided that (1) the Borrower shall have received the prior written consent of the Administrative Agent which consent shall not unreasonably be withheld or delayed, (2) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Loans (other than Competitive Loans), accrued interest thereon, accrued fees and all other amounts payable to it hereunder (including any amounts under Section 4.11), from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other

amounts), (3) in the case of any such assignment resulting from a claim for compensation under Section 4.10 or payments required to be made pursuant to Section 4.12, such Lender has declined or is unable to designate a different lending office in accordance with Section 4.14(a) and such assignment will result in a reduction in such compensation or payments and (4) in the case of any such assignment resulting from a Lender being a Declining Lender, the assignee shall have agreed to the applicable Revolving Maturity Date Extension Request.

Section 4.15. Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(a) facility fees shall cease to accrue on the unfunded portion of the Revolving Commitment of such Defaulting Lender pursuant to Section 4.07(a);

(b) the Revolving Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders or any other requisite Lenders have taken or may take any action hereunder or under any other Loan Document (including any consent to any amendment, waiver or other modification pursuant to Section 11.07); provided that any amendment, waiver or other modification requiring the consent of all Lenders or all Lenders affected thereby shall, except as otherwise provided in Section 11.07, require the consent of such Defaulting Lender in accordance with the terms hereof;

(i) all or any part of the LC Exposure (other than any portion thereof attributable to unreimbursed LC Disbursements with respect to which such Defaulting Lender shall have funded its participation as contemplated by Sections 3.01(e) and 3.01(f)) of such Defaulting Lender shall be reallocated among the non-Defaulting Lenders in accordance with their respective Revolving Commitment Percentages but only to the extent that the sum of all non-Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not exceed the sum of all non-Defaulting Lenders’ Revolving Commitments;

(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one Business Day following notice by the Administrative Agent cash collateralize for the benefit of the applicable Issuing Lenders the portion of such Defaulting Lender’s LC Exposure that has not been reallocated for so long as such LC Exposure is outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii) above, the Borrower shall not be required to pay participation fees to such Defaulting Lender pursuant to Section 4.07(c) with respect to such portion of such Defaulting Lender’s LC Exposure for so long as such Defaulting Lender’s LC Exposure is cash collateralized;

(iv) if any portion of the LC Exposure of such Defaulting Lender is reallocated pursuant to clause (i) above, then the fees payable to the Lenders pursuant to Sections 4.07(a) and 4.07(c) shall be adjusted to give effect to such reallocation; and

(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of the Issuing Lenders or any other Lender hereunder, all participation fees payable under Section 4.07(c) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Lenders until and to the extent that such LC Exposure is reallocated and/or cash collateralized; and

(d) so long as such Lender is a Defaulting Lender, no Issuing Lender shall be required to issue, amend, renew or extend any Letter of Credit, unless it is satisfied that the related exposure and the Defaulting Lender’s then outstanding LC Exposure will be fully covered by the Revolving Commitments of the non-Defaulting Lenders and/or cash collateralized by the Borrower in accordance with Section 4.15(c), and participating interests in any such issued, amended, renewed or extended Letter of Credit will be allocated among the non-Defaulting Lenders in a manner consistent with Section 4.15(c)(i) (and such Defaulting Lender shall not participate therein).

In the event that (i) a Bankruptcy Event with respect to a Lender Parent shall occur following the date hereof and for so long as such Bankruptcy Event shall continue or (ii) any Issuing Lender has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, such Issuing Lender shall not be required to issue, amend, renew or extend any Letter of Credit, unless such Issuing Lender shall have entered into arrangements with the Borrower or the applicable Lender satisfactory to such Issuing Lender to defease any risk to it in respect of such Lender hereunder.

In the event that the Administrative Agent, the Borrower and the Issuing Lenders each agree that a Defaulting Lender has adequately remedied all matters that caused the applicable Lender to be a Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Revolving Commitment and on such date such Lender shall purchase at par such of the Revolving Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Revolving Loans in accordance with its Revolving Commitment Percentage.

ARTICLE V

Representations and Warranties

The Borrower represents and warrants to each of the Lenders and the Administrative Agent that:

Section 5.01. Organization; Powers . The Borrower (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all

requisite corporate power and authority to own its property and assets and to carry on its business as now conducted and as proposed to be conducted and (c) is qualified to do business in every jurisdiction where such qualification is required, except where the failure so to qualify would not result in a Material Adverse Effect. The Borrower has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement and, to borrow hereunder.

Section 5.02. Authorization . The Transactions (a) are within the Borrower’s corporate powers and have been duly authorized by all requisite corporate action and (b) do not (i) violate (A) any provision of any law, statute, rule or regulation (including, without limitation, the Margin Regulations), (B) any provision of the certificate of incorporation or other constitutive documents or by-laws of the Borrower, (C) any order of any Governmental Authority or (D) any provision of any indenture, agreement or other instrument to which the Borrower is a party or by which it or any of its property is or may be bound, (ii) conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under (A) any such indenture, agreement or other instrument or (B) any document relating to Material Debt, or (iii) result in the creation or imposition of any lien upon any property or assets of the Borrower or any Subsidiary other than, in the case of clauses (i)(A), (i)(C), (i)(D), (ii)(A) and (iii), any such violations, conflicts, breaches, defaults or liens that, individually or in the aggregate, would not have a Material Adverse Effect or, in the case of clause (i)(A), result in a violation of law by any Administrative Agent or Lender.

Section 5.03. Enforceability . This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document constitutes or, when executed and delivered, will constitute, a legal, valid and binding obligation of the Borrower party hereto or thereto, enforceable in accordance with its terms (subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity)).

Section 5.04. Governmental Approvals . No action, consent or approval of, registration or filing with or other action by any Governmental Authority is required in connection with the Transactions except such as have, or on or prior to the Closing Date will have, been obtained or made and are in full force and effect and except for those the failure to obtain which could not reasonably be expected to have a Material Adverse Effect.

Section 5.05. Financial Statements; No Material Adverse Effect . (a) The Borrower has heretofore furnished to the Administrative Agent and the Lenders (i) its consolidated balance sheet and statements of income, stockholders’ equity and cash flows as of and for the fiscal year ended December 31, 2017, reported on by Ernst & Young LLP, independent public accountants, and (ii) its unaudited consolidated balance sheets and statements of income, stockholders’ equity and cash flows as of and for the fiscal quarters ended March 31, 2018 and June 30, 2018 and the portions of the fiscal year then ended. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance

with GAAP, subject, in the case of such quarterly financial statements, to normal year-end adjustments and the absence of certain footnotes.

(b) Except as disclosed in the Borrower SEC Documents as filed prior to or on the Closing Date (but excluding any risk factor disclosures contained under the heading “Risk Factors”, any disclosure of risks included in any “forward looking statements” disclaimer or any other statements that are similarly non-specific, predictive or forward looking in nature, but in each case, other than any specific factual information contained therein), there has been no material adverse effect on the business, operation, properties or financial condition of the Borrower and its Subsidiaries taken as a whole since December 31, 2017.

Section 5.06. Litigation, Compliance with Laws . (a) Except as disclosed in the Borrower SEC Documents as filed prior to or on the Closing Date (but excluding any risk factor disclosures contained under the heading “Risk Factors”, any disclosure of risks included in any “forward looking statements” disclaimer or any other statements that are similarly non-specific, predictive or forward looking in nature, but other than any specific factual information contained therein), there are no actions, proceedings or investigations filed or (to the knowledge of the Borrower) threatened against the Borrower or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal which question the validity or legality of this Agreement, the Transactions or any action taken or to be taken pursuant to this Agreement and no order or judgment has been issued or entered restraining or enjoining the Borrower from the execution, delivery or performance of this Agreement nor is there any other action, proceeding or investigation filed or (to the knowledge of the Borrower) threatened against the Borrower or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable likelihood of an adverse determination and that, if adversely determined, would be reasonably likely to result in a Material Adverse Effect.

(b) Except as disclosed in the Borrower SEC Documents as filed prior to or on the Closing Date (but excluding any risk factor disclosures contained under the heading “Risk Factors”, any disclosure of risks included in any “forward looking statement” disclaimer or any statements that are similarly non-specific, predictive or forward looking in nature, but in each case, other than any specific factual information contained therein), neither the Borrower nor any Subsidiary is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would be reasonably likely to result in a Material Adverse Effect.

Section 5.07. Federal Reserve Regulations .

(a) Neither the Borrower nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying margin stock (as defined in Regulation U).

(b) No part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose which entails a violation of, or which is inconsistent with, the provisions of the Margin Regulations.

Section 5.08. Taxes . The Borrower and the Subsidiaries have filed or caused to be filed all U.S. federal and state, local and foreign Tax returns which are required to be filed by them, and have paid or caused to be paid all Taxes required to have been paid by them, other than (i) any Taxes or assessments the validity of which is being contested in good faith by appropriate proceedings, and with respect to which appropriate accounting reserves have, to the extent required by GAAP, been set aside or (ii) where such failure to file or pay would not reasonably be expected to result in a Material Adverse Effect.

Section 5.09. Employee Benefit Plans . The present aggregate value of accumulated benefit obligations of each Plan and each foreign employee pension benefit plan required to be funded (based on those assumptions used for disclosure of such obligations in corporate financial statements in accordance with GAAP) did not, as of the most recent statements available, exceed the aggregate value of the assets for each plan by an amount in the aggregate for all such plans that would reasonably be expected to have a Material Adverse Effect. Except as would not individually or in the aggregate be reasonably expected to have a Material Adverse Effect, (a) no ERISA Termination Event has occurred and (b) each Plan has been established and administered in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations.

Section 5.10. Environmental and Safety Matters . Except as disclosed in the Borrower SEC Documents as filed prior to or on the Closing Date (but excluding any risk factor disclosures contained under the heading “Risk Factors”, any disclosure of risks included in any “forward looking statement” disclaimer or any statements that are similarly non-specific, predictive or forward looking in nature, but in each case, other than any specific factual information contained therein), and other than exceptions to any of the following that would not in the aggregate have a Material Adverse Effect: (a) the Borrower and the Subsidiaries comply and have complied with all applicable Environmental and Safety Laws; (b) there are and have been no Hazardous Substances at any property owned, leased or operated by the Borrower now or in the past, or at any other location, that could reasonably be expected to result in the Borrower or any Subsidiary incurring costs or liabilities under any Environmental and Safety Law, (c) there are no past, present, or, to the knowledge of the Borrower and the Subsidiaries, anticipated future facts, events or conditions, that would reasonably be expected to prevent the Borrower or any of the Subsidiaries from, or increase the costs to the Borrower or any of the Subsidiaries of, complying with applicable Environmental and Safety Laws or obtaining or renewing all material permits, approvals, authorizations, licenses or permissions required of any of them pursuant to any such law, (d) the Borrower and the Subsidiaries have not received notice of any actual or potential liability under or relating to, or actual or potential violation of, any Environmental and Safety Law, including liability for the investigation or remediation of any release or threat of release of Hazardous Substances, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice and (e) the Borrower and the Subsidiaries are not conducting or paying for, in whole or in part, any investigation, response, remediation or other corrective action pursuant to any Environmental and Safety Law at any site or facility, nor is it a party to any order, decree or agreement that imposes any obligation or liability under any Environmental and Safety Law.

Section 5.11. Properties . (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal properties that are material to the business of the Borrower and its Subsidiaries taken as a whole, except where the failure to have such title or interests, as applicable, could not reasonably be expected to result in a Material Adverse Effect.

(b) Each of the Borrower and its Subsidiaries owns, is licensed to use, or otherwise has the right to use, all trademarks, tradenames, copyrights, patents and other intellectual properties that are material to the business of the Borrower and its Subsidiaries taken as a whole, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 5.12. Investment Company Status . Neither the Borrower nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

Section 5.13. Solvency . The Borrower and its Subsidiaries, on a consolidated basis, are and, upon the initial Borrowing of any Loans, will be Solvent.

Section 5.14. Anti-Corruption Laws and Sanctions . The Borrower has implemented and maintains in effect policies and procedures reasonably designed to promote compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and except as disclosed in the Borrower SEC Documents as filed prior to or on the Closing Date (but excluding any risk factor disclosures contained under the heading “Risk Factors”, any disclosure of risks included in any “forward looking statement” disclaimer or any statements that are similarly non-specific, predictive or forward looking in nature, but in each case, other than any specific factual information contained therein), the Borrower, its Subsidiaries and, to the knowledge of the Borrower, its officers, directors, employees and agents (with respect to such directors and agents, to the extent they are acting in their capacity as such), are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Borrower or any Subsidiary, or (b) to the knowledge of the Borrower or any Subsidiary, any of their respective directors, officers, employees or agents that will act in any capacity in connection with or benefit from the credit facilities established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions.

with the SEC, and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were or are made (after giving effect to all amendment sand supplements thereto). As of the Closing Date, the information included in the Beneficial Ownership Certification is true and correct in all respects.

ARTICLE VI

Conditions

Section 6.01. Conditions Precedent to Closing Date . The closing of this Agreement shall occur on the date (the “ Closing Date ”) on which the following conditions are satisfied:

(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission or other electronic communication) of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

(b) The Administrative Agent shall have received, with a counterpart or copy for each Lender, such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and other legal matters relating to the Borrower, the Loan Documents or the Transactions, all in form and substance reasonably satisfactory to the Administrative Agent.

(c) The representations and warranties of the Borrower set forth in the Loan Documents shall be true and correct in all material respects on and as of the Closing Date, except to the extent such representations and warranties expressly relate to an earlier date; provided that to the extent such representations and warranties are qualified by materiality or “Material Adverse Effect”, such representations and warranties shall be true and correct in all respects.

(d) The Administrative Agent shall have received a certificate dated the Closing Date signed by a Vice President, President, Chief Executive Officer or Financial Officer of the Borrower confirming compliance with the condition set forth in Section 6.01(c) above.

(e) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date pursuant to the Fee Letter, the Administrative Agent Fee Letter and any other fee letter or letter agreement executed in connection with the Transactions, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any Loan Document.

(f) The Administrative Agent (or its counsel) shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Closing

Date) from Weil, Gotshal & Manges LLP and Barnes & Thornburg LLP counsel for the Borrower, and covering such customary matters relating to the Borrower and the Loan Documents as the Administrative Agent or the Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinion.

(g) KYC Information:

(i) Upon the reasonable request of any Lender made at least ten days prior to the Closing Date, the Borrower shall have provided to such Lender the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including the USA PATRIOT Act, in each case at least three days prior to the Closing Date.

(ii) At least five days prior to the Closing Date, any Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall deliver a Beneficial Ownership Certification in relation to such Borrower.

Section 6.02. Conditions Precedent to Effective Date . The Revolving Commitments shall become effective and available for drawing hereunder on the date (the “ Effective Date ”) the following conditions precedent shall have been satisfied:

(a) The Closing Date shall have occurred;

(b) The representations and warranties of the Borrower set forth in the Loan Documents shall be true and correct in all material respects on and as of the Effective Date; provided that, (i) to the extent such representations and warranties expressly relate to an earlier date, they shall be true and correct in all material respects as of such earlier date and (ii) to the extent such representations and warranties are qualified by materiality or “Material Adverse Effect”, such representations and warranties shall be true and correct in all respects.

(c) The Administrative Agent shall have received a certificate dated the Effective Date signed by a Vice President, President, Chief Executive Officer or Financial Officer of the Borrower confirming compliance with the condition set forth in Section 6.02(b) above.

(d) The Administrative Agent shall have received a certificate dated the Effective Date signed by a Financial Officer of the Borrower, substantially in the form of Exhibit G, with respect to the solvency on such date of the Borrower and the Subsidiaries, on a consolidated basis, after giving effect to the transactions to be consummated on the Effective Date.

(e) No Default shall have occurred and be continuing as of the Effective Date.

(f) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date pursuant to the Fee Letter, the Administrative Agent Fee Letter and any other fee letter or letter agreement executed in connection with the

Transactions, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any Loan Document.

(g) The Qualified IPO of the Borrower shall have been completed.

Section 6.03. Conditions Precedent to all Borrowings or Issuance of Letter of Credit . The obligation of each Lender to make a Loan hereunder on the occasion of any Borrowing (other than a Borrowing made solely to refinance outstanding Borrowings that does not increase the aggregate principal amount of the Loans of any Lender outstanding), and of the Issuing Lenders to issue, amend, renew or extend any Letter of Credit is subject to the satisfaction of the following conditions:

(a) The Administrative Agent shall have received a Borrowing Request in accordance with Section 2.03 or a notice requesting the issuance, amendment, renewal or extension of a Letter of Credit under Section 3.01(b), as the case may be.

(b) The Effective Date shall have occurred.

(c) The representations and warranties of the Borrower set forth in the Loan Documents (other than the representation and warranty set forth in Section 5.05(b)) shall be true and correct in all material respects on and as of the date of any such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as applicable; provided that, (i) to the extent such representations and warranties expressly relate to an earlier date, they shall be true and correct in all material respects as of such earlier date and (ii) to the extent such representations and warranties are qualified by materiality or “Material Adverse Effect”, such representations and warranties shall be true and correct in all respects.

(d) At the time of and immediately after giving effect to such Borrowing, or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

Each Borrowing and the issuance, amendment, renewal or extension of each Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (c) and (d) of this Section 6.03.

ARTICLE VII

Affirmative Covenants

The Borrower covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any fees or any other amounts payable hereunder shall be unpaid or any Letter of Credit shall remain outstanding, unless the Required Lenders shall otherwise consent in writing, it will, and will cause each of the Subsidiaries to, on and after the Closing Date:

Section 7.01. Existence . Do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises that are material to the business of the Borrower and its Subsidiaries as a whole, except as expressly permitted under Section 8.01 and Section 8.06 and except, in the case of any Subsidiary, where the failure to do so would not result in a Material Adverse Effect.

Section 7.02. Business and Properties . Comply in all respects with all applicable laws, rules, regulations and orders of any Governmental Authority (including Environmental and Safety Laws and ERISA), whether now in effect or hereafter enacted except instances that could not, in the aggregate, reasonably be expected to result in a Material Adverse Effect; and at all times maintain and preserve all property material to the conduct of the business of the Borrower and its Subsidiaries as a whole and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted consistent with past practice, except where the failure to do so would not result in a Material Adverse Effect. The Borrower will maintain in effect and enforce policies and procedures reasonably designed to promote compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

Section 7.03. Financial Statements, Reports, Etc . In the case of the Borrower, furnish to the Administrative Agent for distribution to each Lender:

(a) on or before the date on which such financial statements are required to be filed with the SEC (after giving effect to any permitted extensions) or, if such financial statements are not required to be filed with the SEC, on or before the date that is 95 days after the end of each such fiscal year of the Borrower, its audited consolidated balance sheet and related statements of income, cash flows, shareholders’ equity and footnotes as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by Ernst & Young LLP or other independent registered public accounting firm of recognized national standing to the effect that such consolidated financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP;

(b) on or before the date on which such financial statements are required to be filed with the SEC (after giving effect to any permitted extensions) with respect to each of the first three quarterly accounting periods in each fiscal year of the Borrower or, if such financial statements are not required to be filed with the SEC, on or before the date that is 50 days after the end of each such quarterly accounting period, its consolidated balance sheet and related statements of income, cash flows and footnotes as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by its Financial Officer as presenting fairly, in all material respects, the condensed financial position and results of operations and cash flows of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP;

(c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of a Financial Officer of the Borrower (i) setting forth in reasonable detail the calculations necessary to demonstrate compliance with the requirements of Section 8.04 on the date of such financial statements and (ii) stating whether any Event of Default or Default exists on the date of such certificate and, if any Event of Default or Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto;

(d) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 8-K which the Borrower shall have filed with the SEC, and copies of all reports distributed to its shareholders;

(e) promptly following any request therefor, information and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” requirements under the USA PATRIOT Act, the Beneficial Ownership Regulation or other applicable anti-money laundering laws; and

(f) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent or any Lender may reasonably request.

Information required to be delivered pursuant to this Section shall be deemed to have been delivered on the date on which the Borrower provides notice (reasonably identifying where the applicable disclosure may be obtained) to the Administrative Agent that such information has been posted on the Borrower’s website on the internet at www.elanco.com, or on the SEC’s website on the internet at www.sec.gov or at another website identified in such notice and accessible by the Lenders without charge.

Section 7.04. Insurance . Keep its insurable properties adequately insured at all times by financially sound and reputable insurers (which may include captive insurers), and maintain such other insurance or self insurance (including product liability insurance), to such extent and against such risks, including fire and other risks insured against by extended coverage, as are customary with companies similarly situated and in the same or similar businesses.

Section 7.05. Obligations and Taxes . Pay, and discharge promptly when due, all material Taxes, assessments and governmental charges imposed upon it or upon its income or profits or in respect of its property, in each case before the same shall become delinquent or in default and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings and adequate reserves with respect thereto shall, to the extent required by GAAP, have been set aside.

Section 7.06. Litigation and Other Notices . Promptly give the Administrative Agent written notice of the following after any executive officer of the Borrower obtains knowledge thereof:

(a) the filing or commencement of any action, suit or proceeding which the Borrower reasonably expects to result in a Material Adverse Effect;

(b) any Event of Default or Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto;

(c) except for matters which could not reasonably be expected to have a Material Adverse Effect, an ERISA Event, setting forth details as to such occurrence and the action, if any, which the Borrower or applicable ERISA Affiliate is required or proposes to take; and

(d) any change in any of the Ratings.

provided , that in each case the Borrower shall not be required to provide separate notice of any event disclosed in any report promptly filed with the SEC if the Borrower has provided notice to the Administrative Agent in accordance with the last paragraph of Section 7.03 to the effect that such information has been posted and reasonably identifying where the applicable disclosure may be obtained.

Section 7.07. Inspection of Property; Books and Records . (a) Keep proper books of record and account in which full, true and correct entries are made of all material dealings and transactions in relation to its business and activities and (b) permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and (in the presence of officers of the Borrower, whether by phone or in person) its independent accountants (in each case subject to the Borrower’s obligations under applicable confidentiality provisions), all at such reasonable times and as often as reasonably requested, all at the expense of the applicable Lenders; provided that during the continuation of any Default (x) any expense of the Lenders in connection with the foregoing shall be for the account of the Borrower and (y) Lenders shall be permitted to discuss the affairs, finances and condition of the Borrower and its Subsidiaries without officers of the Borrower being present.

Section 7.08. Use of Proceeds . The proceeds of the Loans and the Letters of Credit will be used only for general corporate purposes. No part of the proceeds of any Loan will be used, directly or indirectly, for any purpose that entails a violation of any of the regulations of the Board, including the Margin Regulations. The Borrower shall not request any Borrowing or Letter of Credit, or use the proceeds of any Borrowing or any Letter of Credit, and shall procure that its subsidiaries and its and their respective directors, officers, employees and agents shall not use the proceeds of any Borrowing or any Letter of Credit, (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (ii) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, to the extent such activities, businesses or transaction would be prohibited by Sanctions

if conducted by a corporation incorporated in the United States, or (iii) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

ARTICLE VIII

Negative Covenants

The Borrower covenants and agrees with each Lender and the Administrative Agent that so long as this Agreement shall remain in effect or the principal of or interest on any Loan, any fees or any other amounts payable hereunder shall be unpaid or any Letter of Credit shall remain outstanding, unless the Required Lenders shall otherwise consent in writing, it will not, and will not permit any of the Subsidiaries to, on and after the Closing Date:

Section 8.01. Consolidations, Mergers, and Sales of Assets . (a) Consolidate with, merge with or into, or sell, convey transfer, lease or otherwise dispose of all or substantially all of the Borrower’s and its Subsidiaries’ property and assets taken as a whole (in one transaction or a series of related transactions) to, any Person or permit any Person to merge with or into the Borrower unless (a) the Borrower shall be the continuing Person, or the Person (if other than the Borrower) formed by such consolidation or into which the Borrower is merged or that acquired or leased such property and assets (the “ Surviving Person ”), shall be an entity organized and validly existing under the laws of the United States of America or any jurisdiction thereof, and shall expressly assume, all of the Borrower’s payment and performance obligations under the Loan Documents, (b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing and (c) the Borrower delivers to the Administrative Agent a certificate of a Financial Officer of the Borrower stating that such consolidation, merger or transfer complies with this Section 8.01 and that all conditions precedent provided for herein relating to such transaction have been complied with; provided , however , that the foregoing restrictions of this Section 8.01 shall not apply to transactions permitted by Section 8.06. The Surviving Person will succeed to, and except in the case of a lease, be substituted for the Borrower under the Loan Documents.

Section 8.02. Liens . Create, assume or suffer to exist any Lien upon any property, except that the foregoing shall not prevent the Borrower or any Subsidiary from creating, assuming or suffering to exist any of the following Liens:

(a) Liens existing on the Closing Date and, in the case of the Borrower, listed on Schedule 8.02(a) attached hereto;

(b) any Lien existing on property owned or leased by any Person at the time it becomes a Subsidiary; provided that such Lien was not created in anticipation of such person becoming a Subsidiary;

(c) any Lien existing on property at the time of the acquisition thereof by the Borrower or any Subsidiary; provided that such Lien was not created in anticipation of such acquisition;

(d) Liens on any asset or improvement to any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or improving (including constructing) such asset, if such Lien attaches to such asset concurrently with or within 12 months after its acquisition or improvement (including the completion of construction) and the principal amount of the Debt secured by such Lien, together with all other debt secured by a Lien on such property, does not exceed the purchase price of such property or the cost of such improvement;

(e) Liens evidenced by the filing of UCC financing statements relating to factoring or similar arrangements entered into in the ordinary course of business;

(f) any Liens securing Debt of a Subsidiary owing to the Borrower or to another Subsidiary;

(g) Liens for taxes, assessments or governmental charges or levies not yet due or that are being contested in good faith by appropriate proceedings; provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

(h) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business that are not more than 60 days delinquent in accordance with their terms or that are being contested in good faith by appropriate proceedings;

(i) pledges or deposits in connection with workers’ compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements;

(j) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business or any Liens securing industrial development, pollution control or similar revenue bonds;

(k) easements, rights-of-way, restrictions, licenses, reservations, utility easements and other similar encumbrances imposed by law or incurred in the ordinary course of business that do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower and its Subsidiaries, considered as a whole;

(l) any interest or title of a lessor under any lease entered into by the Borrower or any Subsidiary in the ordinary course of its business and covering only the assets so leased;

(m) attachment or judgment Liens in respect of judgments or decrees that have been vacated, discharged or stayed within 30 days from the entry thereof; and attachment or judgment Liens in respect of judgments or decrees that have been bonded pending appeal within 30 days from the entry thereof;

(n) Liens arising from precautionary Uniform Commercial Code financing statement filings with respect to operating leases or consignment arrangements entered into by the Borrower or any Subsidiary in the ordinary course of business;

(o) customary Liens in favor of a banking institution arising by operation of law encumbering deposits (including the right of set-off) held by such banking institutions incurred in the ordinary course of business and that are within the general parameters customary in the banking industry;

(p) Liens arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation;

(q) any extension, renewal or replacement (or successive extensions, renewals or replacements) in whole or in part of any Lien referred to in clauses (a) through (p) above, so long as the principal amount of the Debt or other obligations secured thereby does not exceed the principal amount of Debt or obligations so secured at the time of such extension, renewal or replacement (except that, where an additional principal amount of Debt is incurred to provide funds for the completion of a specific project, the additional principal amount, and any related financing costs, may be secured by the Lien as well) and such Lien is limited to the same property subject to the Lien so extended, renewed or replaced (and improvements on such property); and

(r) Liens securing Debt permitted to be incurred under Section 8.05.

Section 8.03. Limitation on Sale and Leaseback Transactions . Other than the Sale and Leaseback Transactions listed on Schedule 8.03 attached hereto, enter into any Sale and Leaseback Transaction, or permit any Subsidiary to do so, unless (a) the Borrower or such Subsidiary would be entitled to incur Debt, in a principal amount equal to the Value of such Sale and Leaseback Transaction, secured by Liens on the property to be leased (with such property being assumed to be owned by the Borrower or such Subsidiary for purposes of this paragraph) without violating Section 8.05 or (b) the Borrower or such Subsidiary, during the 270 days following the effective date of such Sale and Leaseback Transaction applies an amount equal to the Value of such Sale and Leaseback Transaction to the voluntary retirement of long-term Debt of the Borrower or any Subsidiary (and, in the case of any long-term revolving debt, with a corresponding reduction in revolving commitments thereof) or to the acquisition of one or more Principal Properties .

Section 8.04. Financial Condition Covenants .

(a) Permit the Consolidated Leverage Ratio as of the end of any fiscal quarter of the Borrower (i) commencing with the fiscal quarters ending December 31, 2018 through September 30, 2019 to exceed 4.75:1.00, (ii) commencing with the fiscal quarters ending December 31, 2019 through September 30, 2020 to exceed 4.5:1.00, (iii) commencing with the fiscal quarters ending December 31, 2020 through September 30, 2021 to exceed 4.00:1.00 and

(iv) commencing with the fiscal quarters ending December 31, 2021 and thereafter to exceed 3.50:1.00.

(b) Permit the Consolidated Interest Coverage Ratio as of the end of any fiscal quarter of the Borrower commencing with the fiscal quarter ending December 31, 2018 to be less than 3.50:1.00.

Section 8.05. Priority Indebtedness . Permit (a) the aggregate outstanding principal amount of Debt of the Borrower secured by Liens (other than Debt of the Borrower secured by Liens permitted under Section 8.02(a) through (q)), plus (b) the aggregate outstanding principal amount of Debt of all Subsidiaries (other than Permitted Debt), plus (c) the aggregate Value of all Sale and Leaseback Transactions (other than the Sale and Leaseback Transactions listed on Schedule 8.03), without duplication, to exceed at any time 15% of Consolidated Net Tangible Assets.

Section 8.06. Transactions with Affiliates . Enter into or be a party to any transaction or arrangement, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate in excess of $50,000,000, except (a) any such transaction or arrangements otherwise permitted under this Agreement, in the ordinary course of business and upon fair and reasonable terms no less favorable to the Borrower or the relevant Subsidiary than it would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate, (b) any such transaction or arrangements entered into prior to the Closing Date or contemplated by any agreement identified on Schedule 8.06 hereof and any amendment or replacement thereto, (c) between or among the Borrower or any Subsidiary or between or among one or more Subsidiaries, (d) any such transaction or arrangements with officers, directors, representatives or other employees of the Borrower or any Subsidiary relating specifically to employment as such, (e) the Transactions, the Loans and this Agreement, (f) any dividend or other distribution (whether in cash, securities or other property) with respect to any equity interest in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancelation, or termination of any such equity interests in the Borrower, (g) any other transactions contemplated by this Agreement (including any distribution of proceeds from the Borrower to the Parent), (h) the Master Separation Agreement to be dated on or about the closing of the Qualified IPO, between the Borrower and the Parent (the “ Master Separation Agreement ”), and any amendment or replacement thereto and any related or ancillary or other agreements related thereto or arising thereunder (including (A) the related or ancillary agreements identified on Schedule 8.06 hereof, to be entered into contemporaneously with the Master Separation Agreement, (B) any Additional Transfer Agreements (as defined in the Master Separation Agreement) and (C) any Local Transfer Agreements (as defined in the Master Separation Agreement), whether entered into before or after the date of the Master Separation Agreement), and all the transactions contemplated by the agreements described in this clause (h), (i) the transactions described in the “Project Stallion Macro Step Plan,” dated as of the date of the Master Separation Agreement, or any agreements, deeds, certificates, filings and instruments needed to effectuate such transactions, (j) any other agreements, arrangements, instruments or other documents entered into or transactions effected to

transfer, contribute, assign, convey, distribute or deliver any Animal Health Asset (as defined in the Master Separation Agreement) to the Borrower or any of its Subsidiaries, or to have the Borrower or any of its Subsidiaries accept or assume any of the Animal Health Liabilities (as defined in the Master Separation Agreement) and (k) any other agreements, arrangements, instruments or other documents entered into or transactions effected to transfer, contribute, assign, convey, distribute or deliver any Excluded Asset (as defined in the Master Separation Agreement) from the Borrower or any of its Subsidiaries to the Parent (or its designees), or to have the Parent (or its designees) accept or assume any of Excluded Liabilities (as defined in the Master Separation Agreement) from the Borrower or any of its Subsidiaries.

ARTICLE IX

Events of Default

In case of the happening of any of the following events (each an “ Event of Default ”):

(a) any representation or warranty made or deemed made in or in connection with the execution and delivery of this Agreement or the Borrowings or other extensions of credit hereunder shall prove to have been false or misleading in any material respect when so made, deemed made or furnished;

(b) default shall be made in the payment of any principal of any Loan or LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;

(c) default shall be made in the payment of any interest on any Loan or any fee or any other amount (other than an amount referred to in paragraph (b) above) due hereunder, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;

(d) default shall be made in the due observance or performance of any covenant, condition or agreement contained in Section 7.01 (in the case of the Borrower), Section 7.06(b) and Section 7.08 or Article VIII;

(e) default shall be made in the due observance or performance of any covenant, condition or agreement contained herein (other than those specified in (b), (c) or (d) above) or in any other Loan Document and such default shall continue unremedied for a period of 30 days after notice thereof from any Administrative Agent or any Lender to the Borrower;

(f) the Borrower or any Subsidiary shall (i) fail to pay any principal or interest, regardless of amount, due in respect of one or more items of Debt in an aggregate principal amount greater than or equal to $100,000,000, when and as the same shall become due and payable (giving effect to any applicable grace period) or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any

such Debt if the effect of any failure referred to in this clause (ii) is to cause such Debt to become due prior to its stated maturity;

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Borrower or any Subsidiary, or of a substantial part of the property or assets of the Borrower or any Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary or (iii) the winding up or liquidation of the Borrower or any Subsidiary; and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(h) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in (g) above, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Subsidiary or for a substantial part of the property or assets of the Borrower or any Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due or (vii) take any action for the purpose of effecting any of the foregoing;

(i) one or more judgments for the payment of money in an aggregate amount equal to or greater than $100,000,000 (exclusive of any amount thereof reasonably expected to be covered by insurance) shall be rendered against the Borrower, any Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor (whose liquidated judgment, along with those of any other judgment creditors, exceeds $100,000,000) to levy upon assets or properties of the Borrower or any Subsidiary to enforce any such judgment;

installment or any other payment required to be paid by such entity under Section 412 of the Code or Section 302 of ERISA on or before the due date for such installment or other payment (taking into account any extensions granted) or (v) the Borrower or any ERISA Affiliate shall fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate is required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto (taking into account any extensions granted), and, in the event of the occurrence of any of the events described in clauses (i) through (v) above, there shall result from any such event or events either a liability or a material risk of incurring a liability which is reasonably expected to have a Material Adverse Effect;

(k) a Change in Control shall occur; or

(l) an Event of Default (as defined in the Term Loan Credit Agreement) shall occur and be continuing;

then , and in every such event (other than an event with respect to the Borrower described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, the Administrative Agent may and, at the request of the Required Lenders, shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Revolving Commitments and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrower accrued hereunder (including all amounts of LC Exposure, whether or not the beneficiary of the then outstanding Letters of Credit shall have presented the documents required therein), shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived anything contained herein to the contrary notwithstanding; and, if any event with respect to the Borrower described in paragraph (g) or (h) above shall have occurred and be continuing, the Revolving Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued fees and all other liabilities of the Borrower accrued hereunder (including all amounts of LC Exposure, whether or not the beneficiary of the then outstanding Letters of Credit shall have presented the documents required therein) shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s

risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. After all such Letters of Credit shall have expired or been fully drawn upon, all reimbursement obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto).

ARTICLE X

The Administrative Agent

Section 10.01. Administrative Agent . In order to expedite the transactions contemplated by this Agreement, JPMorgan Chase Bank, N.A. is hereby appointed to act as the Administrative Agent on behalf of the Lenders. Each of the Lenders hereby irrevocably authorizes the Administrative Agent to take such actions on behalf of such Lender or holder and to exercise such powers as are specifically delegated to the Administrative Agent by the terms and provisions hereof, together with such actions and powers as are reasonably incidental thereto. The Administrative Agent is hereby expressly authorized by the Lenders, without hereby limiting any implied authority, (a) to receive on behalf of the Lenders all payments of principal of and interest on the Loans, payments in respect of the Letters of Credit and all other amounts due to the Lenders hereunder, and promptly to distribute to each Lender its proper share of each payment so received; (b) to give notice on behalf of each of the Lenders to the Borrower of any Event of Default of which the Administrative Agent has actual knowledge acquired in connection with its agency hereunder; and (c) to distribute to each Lender copies of all notices, financial statements and other materials delivered by the Borrower pursuant to this Agreement as received by the Administrative Agent. Notwithstanding anything herein to the contrary, none of the Arrangers, Syndication Agent, documentation agents or bookrunners listed on the cover page hereof shall have any duties or obligations under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, an Issuing Lender or a Lender under this Agreement, but all such Persons shall have the benefit of the indemnities provided for hereunder.

and any action or inaction pursuant thereto shall be binding on all the Lenders. The Administrative Agent shall, in the absence of knowledge to the contrary, be entitled to rely on any instrument or document believed by it in good faith to be genuine and correct and to have been signed or sent by the proper Person or Persons. Neither the Administrative Agent nor any of its respective directors, officers, employees or agents shall have any responsibility to the Borrower on account of the failure of or delay in performance or breach by any Lender of any of its obligations hereunder or to any Lender on account of the failure of or delay in performance or breach by any other Lender or the Borrower of any of their respective obligations hereunder or in connection herewith. The Administrative Agent may execute any and all duties hereunder by or through their respective branches, Affiliates, agents or employees and shall be entitled to rely upon the advice of legal counsel selected by them with due care with respect to all matters arising hereunder and shall not be liable for any action taken or suffered in good faith by them in accordance with the advice of such counsel. Without limiting the foregoing, the Administrative Agent may, by notice to the Borrower, designate any of its branches or Affiliates as the Person to receive any or all notices (including Borrowing Requests and Interest Election Requests) to be delivered to the Administrative Agent pursuant to this Agreement.

The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement unless it shall be requested in writing to do so by the Required Lenders.

Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation of the Administrative Agent, the Required Lenders shall have the right to appoint a successor Administrative Agent acceptable to the Borrower; provided that upon the occurrence and during the continuance of an Event of Default, such successor Administrative Agent shall not be required to be acceptable to the Borrower. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent which shall be a bank having a combined capital and surplus of at least $500,000,000 (or any Affiliate of such bank), with an office in the United States. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor bank, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed by the Borrower and such successor. After such Administrative Agent’s resignation hereunder, the provisions of this Article X and Section 11.05 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent.

With respect to the Loans made or Letters of Credit issued or participated in by it hereunder, the Administrative Agent in its individual capacity and not as the Administrative Agent shall have the same rights and powers as any other Lender and may exercise the same as though it were not an Administrative Agent, and such Administrative Agent and its Affiliates may accept

deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not an Administrative Agent.

Each Lender agrees (i) to reimburse the Administrative Agent, on demand, in the amount of its a pro rata share of any expenses incurred for the benefit of the Lenders by the Administrative Agent, including counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, which shall not have been reimbursed by the Borrower and (ii) to indemnify and hold harmless the Administrative Agent and any of its respective directors, officers, employees or agents, on demand, in the amount of such pro rata share, from and against any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, incurred by or asserted against any of them in its capacity as an Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by any of them under this Agreement to the extent the same shall not have been reimbursed by the Borrower; provided that no Lender shall be liable to the Administrative Agent for any portion of such losses, claims, damages, liabilities or related expenses resulting from the gross negligence or willful misconduct of such Administrative Agent or any of its directors, officers, employees or agents. For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the sum of the aggregate Revolving Credit Exposure and unused Revolving Commitments at the time.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement or any related agreement or any document furnished hereunder or thereunder.

It is agreed that the Joint Lead Arrangers, Joint Bookrunner and the Syndication Agent shall, in their capacities as such, have no duties or responsibilities under this Agreement or any other Loan Document. No Joint Lead Arranger, Joint Bookrunner or the Syndication Agent shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on the Joint Lead Arrangers, Joint Bookrunners and the Syndication Agent, in deciding to enter into this Agreement or any other Loan Document or in taking or not taking any action hereunder or thereunder.

Section 10.02. ERISA Matters .

(a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any of its Subsidiary, that at least one of the following is and will be true:

(i) such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Commitments or this Agreement,

(ii) the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Commitments and this Agreement,

(iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Letters of Credit, the Revolving Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Commitments and this Agreement, or

(iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.

(b) In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any of its Subsidiaries, that none of the Administrative Agent, the Arrangers, the Syndication Agent or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Revolving Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

(c) The Administrative Agent and the Arrangers hereby informs the Lenders that each such Person is not undertaking to provide impartial investment advice, or to give advice

in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Letters of Credit, the Revolving Commitments and this Agreement, (ii) may recognize a gain if it extended the Loans, the Letters of Credit or the Revolving Commitments for an amount less than the amount being paid for an interest in the Loans, the Letters of Credit or the Revolving Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, dealaway or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.

ARTICLE XI

Miscellaneous

Section 11.01. Notices . (a) General . Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopy or other electronic communication, as follows:

(i) if to the Borrower, to Treasurer’s Office, 2500 Innovation Way, Greenfield, IN 46140, Attention of Dave Pugh—Treasurer, (Telecopy No.: 1-317-276-1867) (email: pugh_david_r@elanco.com);

(ii) if to the Administrative Agent, 383 Madison Avenue, 24 th Floor, New York, NY 10179, Nick Fattori, (Telecopy No.: 302-634-1417) (email: Nicholas.fattori@chase.com); with a copy to Mary Crews, email: mary.crews@jpmorgan.com;

(iii) if to any Issuing Bank, to it at its address (or fax number) most recently specified by it in a notice delivered to the Administrative Agent and the Borrower (or, in the absence of any such notice, to the address (or fax number) set forth in the Administrative Questionnaire of the Lender that is serving as such Issuing Lender or is an Affiliate thereof); and

(iv) if to a Lender, to it at its address (or telecopy number or email address) set forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender became a party hereto.

given in accordance with this Section; provided that any notice or other communication received by the recipient (i) on or before 5:00 P.M., New York City time, shall be deemed to have been given on the date of receipt or (ii) after 5:00 P.M., New York City time, shall be deemed to have been given on the Business Day following the date of receipt.

(b) Electronic Communications . Notices and other communications to the Lenders and the Issuing Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet and intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices under Article II or Article III to any Lender or any Issuing Lender if such Lender or such Issuing Lender, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Articles by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications or may be rescinded by any such Person by notice to each other such Person; provided further that any notice or other communication received by the recipient (i) on or before 5:00 P.M., New York City time, shall be deemed to have been given on the date of receipt or (ii) after 5:00 P.M., New York City time, shall be deemed to have been given on the Business Day following the date of receipt.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment) and (ii) notices and other communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor.

Section 11.02. Survival of Agreement . All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Loans regardless of any investigation made by the Lenders or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or the Revolving Commitments have not been terminated.

Section 11.03. Binding Effect . This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent and when the Administrative Agent has received copies hereof (by electronic “pdf” or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter shall be binding upon and inure to the benefit of the parties hereto and the Lenders and their respective successors and assigns, except that the Borrower shall not have the right to assign any rights hereunder or any interest herein, except in accordance with Section 8.01, without the prior consent of all the Lenders.

Section 11.04. Successors and Assigns . (a) Whenever in this Agreement any of the parties is referred to, such reference shall be deemed to include the successors and assigns of such party; and all covenants, promises and agreements by or on behalf of any party that are contained in this Agreement shall bind and inure to the benefit of its successors and assigns (including any Affiliate of an Issuing Lender that issues any Letter of Credit).

(b) Each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including all or a portion of its Revolving Commitments and the Loans at the time owing to it); provided , however , that (i) except (1) in the case of an assignment of a Revolving Commitment or a Loan to another Lender, an Affiliate of a Lender or an Approved Fund and (2) in the case of any assignments between Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC, (A) each of the Borrower (so long as no Event of Default shall have occurred and be continuing) and the Administrative Agent, and, in the case of any assignment and delegation of all or a portion of a Revolving Commitment or any Lender’s obligations in respect of its LC Exposure, each Issuing Lender must give its prior written consent to such assignment (which consent in each case shall not be unreasonably withheld, delayed or conditioned) and (B) the amount of the Revolving Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless it shall be the entire amount of such Lender’s Revolving Commitments or Loans, as applicable, or unless such assignment is an assignment by a Declining Lender to an assignee which is or will become a Consenting Lender, (ii) an assignment by a Lender of its Revolving Commitments shall include an assignment by such Lender of its proportionate interest in its LC Exposure; provided further that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within fifteen Business Days after having received notice thereof. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, and a processing and recordation fee of $3,500; provided that such recordation fee shall not be payable for any assignment by or to Goldman Sachs Bank USA or any of its Affiliates. Upon acceptance and recording pursuant to paragraph (e) of this Section 11.04, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five Business Days after the execution thereof, (x) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement and (y) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto (but shall (i) continue to be entitled to the benefits of Sections 4.10, 4.11 4.12 and 11.05 with respect to facts and circumstances occurring prior to the effective date of such assignment, as well as to any fees accrued for its account hereunder and not yet paid and (ii) continue to be subject to the confidentiality provisions hereof). Notwithstanding the foregoing, any Lender assigning its rights and obligations under this Agreement may retain any Competitive Loans made by it outstanding at such time, and in such case shall retain its rights hereunder in respect of any Competitive Loans

so retained until such Competitive Loans have been repaid in full in accordance with this Agreement.

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim; (ii) except as set forth in (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto or the financial condition of the Borrower or the performance or observance by the Borrower of any obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee represents and warrants that it is an Eligible Assignee and is legally authorized to enter into such Assignment and Acceptance; (iv) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.03 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) such assignee will independently and without reliance upon any Administrative Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) such assignee appoints and authorizes the Administrative Agent, to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

(d) The Administrative Agent shall maintain at one of its offices in the United States a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Commitments of, and the principal amount (and stated interest) of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time and any promissory notes evidencing such Loans (the “ Register ”). The entries in the Register shall be conclusive in the absence of manifest error and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of the Loan Documents. No assignment or transfer of any Loan (or portion thereof) or any Note evidencing such Loan shall be effected unless and until it has been recorded in the Register as provided in this Section 11.04(d). Notwithstanding any other provision of this Agreement, any assignment or transfer of all or part of a promissory note shall be registered on the Register only upon surrender for registration of assignment or transfer of the promissory note (and each promissory note shall expressly so provide), accompanied by a duly executed Assignment and Acceptance, and thereupon one or more new promissory notes in the same aggregate principal amount shall be issued to the designated assignee and the old promissory notes shall be marked “cancelled”. The Register shall be available for inspection by the Borrower and any Lender (as to

its own interests hereunder), at any reasonable time and from time to time upon reasonable prior notice.

(e) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee together with an Administrative Questionnaire completed in respect of the assignee (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) above, if applicable, and, if required, the written consent of the Borrower to such assignment, the Administrative Agent shall (i) accept such Assignment and Acceptance and (ii) record the information contained therein in the Register.

(f) Each Lender may sell participations to one or more Eligible Assignees (each, a “ Participant ”), without the consent of any other Person, in all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Commitments and the Loans owing to it); provided , however , that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto or thereto for the performance of such obligations, (iii) each Participant shall be entitled to the benefit of the cost protection provisions contained in Sections 4.10, 4.11 and 4.12 to the same extent as if it was the selling Lender (subject to the requirements and limitations therein, including the requirements under Sections 4.12(h), 4.12(i) and 4.12(j) (it being understood that the documentation required under such Sections shall be delivered to the participating Lender); provided that such Participant agrees to the provisions of Section 4.14 as if it were an assignee under paragraph (c) of this Section and shall not be entitled to receive any greater payment than the amount that could have been claimed by the selling Lender had it continued to hold the interest of such participating bank or other entity, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation, except that all claims made pursuant to such Sections shall be made through such participating Lender and (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such participating Lender in connection with such Lender’s rights and obligations under this Agreement, and such participating Lender shall retain the sole right to enforce the obligations of the Borrower relating to the Loans and to approve any amendment, modification or waiver of any provision of this Agreement (other than amendments, modifications or waivers decreasing any fees payable hereunder or thereunder or the amount of principal of or the rate at which interest is payable on the Loans, extending the final scheduled maturity of the Loans or any date scheduled for the payment of interest on the Loans or extending the Revolving Commitments).

(g) Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement or any other Loan Document (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Revolving Commitments, Loans, Letters of Credit or its other obligations under this Agreement or any other Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Revolving Commitment, Loan, Letter of

Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent shall not have any responsibility for maintaining a Participant Register.

(h) Any Lender or Participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 11.04, disclose to the assignee or Participant or proposed assignee or Participant any information relating to the Borrower furnished to such Lender; provided that, prior to any such disclosure, each such assignee or Participant or proposed assignee or Participant shall be subject to confidentiality provisions at least as restrictive as those contained herein.

(i) The Borrower shall not assign or delegate any rights and duties hereunder, except in accordance with Section 8.01, without the prior written consent of all Lenders.

(j) Any Lender may at any time pledge or otherwise assign all or any portion of its rights under this Agreement to a Federal Reserve Bank or other central banking authority; provided that no such pledge shall release any Lender from its obligations hereunder. In order to facilitate such an assignment to a Federal Reserve Bank, the Borrower shall, at the request of the assigning Lender, duly execute and deliver to the assigning Lender a promissory note or notes evidencing the Loans made by the assigning Lender hereunder.

Section 11.05. Expenses, Indemnity . (a) The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by (i) the Administrative Agent and the Arrangers in connection with entering into this Agreement or in connection with any amendments, modifications or waivers of the provisions hereof or thereof (including the reasonable fees, disbursements and other charges of a single counsel), (ii) the Issuing Lenders in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder or (iii) the Administrative Agent, the Arrangers, the Issuing Lenders or any Lender in connection with the enforcement of their rights in connection with this Agreement and any other Loan Document or in connection with the Loans made or Letters of Credit issued hereunder or thereunder, including the fees and disbursements of counsel for the Administrative Agent, the Arrangers and the Issuing Lenders and, in the case of enforcement, each Lender.

(b) The Borrower agrees to indemnify the Administrative Agent, the Arrangers, the Syndication Agent, the Issuing Lenders, each Lender and each of the Related Parties of the foregoing (each such Person being called an “ Indemnitee ”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees (limited, in the case of counsel fees, to the reasonable fees, disbursements and other charges of a single counsel for all Indemnitees), incurred by or asserted against any Indemnitee arising out of or in connection with (i) the consummation of the transactions contemplated by this Agreement (including the syndication of the credit facilities provided for herein), (ii) any Loan or Letter of Credit or the use of the proceeds therefrom or (iii) any actual or

prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and whether initiated against or by any party to this Agreement, any Affiliate of any of the foregoing or any third party (and regardless of whether any Indemnitee is a party thereto); provided that (x) such indemnity shall not, as to any Indemnitee, be available to the extent that a court of competent jurisdiction has determined by a final non-appealable judgment that such losses, claims, damages, liabilities or related expenses result from the gross negligence or willful misconduct of such Indemnitee and (y) such indemnity shall not apply to losses, claims, damages, liabilities or related expenses that result from disputes solely between Lenders except if such disputes arise as a result of or in connection with any act or omission of the Borrower or any of its Affiliates. Paragraph (b) of this Section shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

(c) To the fullest extent permitted by applicable law, the Borrower shall not assert, or shall not permit any of their respective Affiliates or Related Parties to assert, and each hereby waives, any claim against any Indemnitee (i) for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the Internet) or (ii) on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(d) The provisions of this Section 11.05 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Loans, the invalidity or unenforceability of any term or provision of this Agreement or any investigation made by or on behalf of the Administrative Agent, the Arrangers or any Lender. All amounts due under this Section 11.05 shall be payable on written demand therefor.

Section 11.06. Applicable Law . This Agreement and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the law of the State of New York.

Section 11.07. Waivers, Amendment . (a) No failure or delay of the Administrative Agent or any Lender in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies which they would otherwise have. No waiver of any provision of this Agreement or consent to any departure therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Borrower in

any case shall entitle such party to any other or further notice or demand in similar or other circumstances.

(b) Except as provided in Section 4.05 with respect to any Incremental Term Loans, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower, the Administrative Agent and the Required Lenders; provided , however , that no such agreement shall (i) decrease the principal amount of, or extend the maturity of any scheduled principal payment date or date for the payment of any interest on, any Loan or reimbursement obligation with respect to an LC Disbursement (other than any extension of the Revolving Maturity Date pursuant to Section 2.04), or waive or excuse any such payment or any part thereof, or decrease any fee or the rate of interest on any Loan, without the prior written consent of each Lender directly affected thereby, (ii) increase or extend the availability of the Revolving Commitments or decrease or extend the date for payment of the facility fees or fees in respect of Letters of Credit of any Lender (with the exception of fronting fees payable to the Issuing Lenders, which shall require the consent of the Issuing Lenders) without the prior written consent of such Lender, (iii) amend or modify the provisions of Section 4.13 or Section 11.04(i), the provisions of this Section 11.07 or the definition of the “Required Lenders”, without the prior written consent of each Lender or (iv) change the requirement that disbursements made by any Lender be made ratably with respect to its applicable Revolving Commitment without the prior written consent of each Lender directly affected thereby; provided further , however , that no such agreement shall amend, modify or otherwise affect the rights or duties of (w) the Administrative Agent hereunder without the prior written consent of the Administrative Agent, (x) any Issuing Lender without the prior written consent of such Issuing Lender or (y) an Arranger under Section 11.04(b) without the prior written consent of such Arranger. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 11.07 and any consent by any Lender pursuant to this Section 11.07 shall bind any assignee of its rights and interests hereunder. Notwithstanding any of the foregoing, any provision of this Agreement or any other Loan Document may be amended by an agreement in writing entered into by the Borrower and the Administrative Agent to cure any ambiguity, omission, mistake, defect or inconsistency so long as, in each case, the Lenders shall have received at least five Business Days prior written notice thereof and the Administrative Agent shall not have received, within five Business Days of the date of such notice to the Lenders, a written notice from (A) the Required Lenders stating that the Required Lenders object to such amendment or (B) if affected by such amendment, any Issuing Lender stating that it objects to such amendment.

Section 11.08. Entire Agreement . This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent or the syndication of the Loans and Revolving Commitments constitute the entire contract among the parties relative to the subject matter hereof. Any previous agreement among the parties not referred to in the immediately preceding sentence with respect to the subject matter hereof is superseded by this Agreement. Nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties hereto any rights, remedies, obligations or liabilities under or by reason of this Agreement.

Section 11.09. Severability . In the event any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 11.10. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 11.03.

Section 11.11. Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

Section 11.12. Right of Setoff . If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or any of its Affiliates to or for the credit or obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after such setoff and application made by such Lender, but the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section 11.12 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have.

Section 11.13. Jurisdiction: Consent to Service of Process . (a) The Borrower irrevocably and unconditionally agrees that it will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, against the Administrative Agent, any Lender, any Issuing Lender or any Related Party of any of the foregoing in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits, for itself and its property, to the jurisdiction of such courts and agrees that all claims in respect of any action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such Federal court. Each party hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent, any Lender or any Issuing Lender may otherwise have to bring any action, litigation or proceeding relating to this Agreement or any other Loan Document against the Borrower or any of its properties in the courts of any jurisdiction.

(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (a) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 11.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

(d) The Borrower hereby agrees that service of process in any proceeding may be made by mailing or delivering a copy thereof to its address for notice set forth in Section 11.01.

Section 11.14. WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.14.

Section 11.15. [Reserved]

the benefit of the Borrower and the Subsidiaries containing provisions substantially the same as those of this Section, to any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or to any direct or indirect counterparty to a Hedge Agreement or to any credit insurance provider relating to the Borrower or its Subsidiaries and their obligations, (g) with the consent of the Borrower and the Subsidiaries, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized ratings agency, or (i) to the extent such Confidential Information (1) becomes publicly available other than as a result of a breach of this Section or (2) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower and the Subsidiaries. For the purposes of this Section, “Confidential Information” shall mean all information, including material nonpublic information within the meaning of Regulation FD promulgated by the SEC (“ Regulation FD ”), received from the Borrower and the Subsidiaries relating to such entities or their respective businesses, other than (x) any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by such entities and (y) information pertaining to this Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the lending industry; provided that, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Confidential Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person customarily accords to its own confidential information; provided , however , that with respect to disclosures pursuant to clause (b) (other than any such disclosure in connection with any routine compliance examination or examination of the financial condition of such Lender by such regulatory authority) and clause (c) of this Section, unless prohibited by law or applicable court order, each Lender and the Administrative Agent shall attempt to notify the Borrower and the Subsidiaries of any request by any governmental agency or representative thereof or other Person for disclosure of Confidential Information after receipt of such request, and if reasonable, practicable and permissible, before disclosure of such Confidential Information. It is understood and agreed that the Borrower and the Subsidiaries and their respective Affiliates may rely upon this Section 11.16 for any purpose, including without limitation to comply with Regulation FD. Notwithstanding anything herein to the contrary, any Party to this Agreement (and any employee, representative or other agent of such Party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transactions contemplated by this Agreement and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. The preceding sentence is intended to cause the transactions contemplated hereby not to be treated as having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) and 301.6111-2(a)(2)(ii) (or any successor provisions) of the Treasury Regulations promulgated under the Code, and shall be construed in a manner consistent with such purpose.

Section 11.17. USA PATRIOT Act Notice . Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies the Borrower, which information includes the names and addresses of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to

identify the Borrower in accordance with the USA PATRIOT Act, and the Borrower agrees to provide such information from time to time to such Lender and the Administrative Agent, as applicable.

Section 11.18. No Fiduciary Relationship . The Borrower, on behalf of itself and its Affiliates, agrees that in connection with all aspects of the transactions contemplated hereby and any communications in connection therewith, the Borrower and their Affiliates, on the one hand, and the Credit Parties and their Affiliates, on the other hand, will have a business relationship that does not create, by implication or otherwise, any fiduciary duty on the part of the Credit Parties or their Affiliates, and no such duty will be deemed to have arisen in connection with any such transactions or communications. The Credit Parties and their Affiliates may be engaged, for their own accounts or the accounts of customers, in a broad range of transactions that involve interests that differ from those of the Borrower and their Affiliates, and none of the Credit Parties or their Affiliates has any obligation to disclose any of such interests to the Borrower or any of their Affiliates.

Section 11.19. Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any of the parties hereto, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(b) the effects of any Bail-in Action on any such liability, including, if applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.

Section 11.20. Interest Rate Limitation . Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively the “ Charges ”), shall exceed the maximum lawful rate (the “ Maximum Rate ”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with

applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall, to the extent lawful, be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon to the date of repayment at the rate or rates applicable to such Loan, shall have been received by such Lender.

[Rest of page left intentionally blank]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

	ELANCO ANIMAL HEALTH INCORPORATED

	by	/s/ Jeffrey N. Simmons
		Name: Jeffrey N. Simmons
		Title: President and Chief Executive Officer

	JPMORGAN CHASE BANK, N.A.
	individually and as Administrative Agent,

	by	/s/ Vanessa Chiu
		Name: Vanessa Chiu
		Title: Executive Director

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: Goldman Sachs Bank USA

To execute this Agreement as a Lender:

by	/s/ Charles D. Johnston
	Name: Charles D. Johnston
	Title: Authorized Signatory

For any Lender requiring a second signature line:

by
	Name:
	Title:

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: JPMorgan Chase Bank, N.A.

To execute this Agreement as a Lender:

by	/s/ Vanessa Chiu
	Name: Vanessa Chiu
	Title: Executive Director

For any Lender requiring a second signature line:

by
	Name:
	Title:

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: Morgan Stanley Bank, N.A.

To execute this Agreement as a Lender:

by	/s/ Michael King
	Name: Michael King
	Title: Authorized Signatory

For any Lender requiring a second signature line:

by
	Name:
	Title:

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: CITIBANK, N.A.

To execute this Agreement as a Lender:

by	/s/ Stanislav Andreev
	Name: Stanislav Andreev
	Title: Vice President

For any Lender requiring a second signature line:

by
	Name:
	Title:

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: Bank of America, N.A.

To execute this Agreement as a Lender:

by	/s/ Darren Merten
	Name: Darren Merten
	Title: Vice President

For any Lender requiring a second signature line:

by
	Name:
	Title:

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: BARCLAYS BANK PLC

To execute this Agreement as a Lender:

by	/s/ Ronnie Glenn
	Name: Ronnie Glenn
	Title: Director

For any Lender requiring a second signature line:

by
	Name:
	Title:

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: BNP PARIBAS

To execute this Agreement as a Lender:

by	/s/ Michael R. Hoffman
	Name: Michael R. Hoffman
	Title: Director

For any Lender requiring a second signature line:

by	/s/ Mike Shryock
	Name: Mike Shryock
	Title: Managing Director

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH

To execute this Agreement as a Lender:

by	/s/ John Toronto
	Name: John Toronto
	Title: Authorized Signatory

For any Lender requiring a second signature line:

by	/s/ Sophie Bulliard
	Name: Sophie Bulliard
	Title: Authorized Signatory

COUNTERPART SIGNATURE PAGE TO ELANCO ANIMAL HEALTH INCORPORATED REVOLVING LOAN CREDIT AGREEMENT

Name of Lender: DEUTSCHE BANK AG NEW YORK BRANCH

To execute this Agreement as a Lender:

by	/s/ Ming K. Chu
	Name: Ming K. Chu
	Title: Director

For any Lender requiring a second signature line:

by	/s/ Virginia Cosenza
	Name: Virginia Cosenza
	Title: Vice President

ANNEX I

FACILITY FEE AND APPLICABLE MARGIN GRID

Revolving Loans

Pricing Category	Ratings (Moody’s/S&P)	Facility Fee (in Basis Points)	Applicable Margin for Eurocurrency Revolving Loans (in Basis Points)	Applicable Margin for ABR Revolving Loans (in Basis Points)
Category 1	Baa1/BBB+	9.5	90.5	0.0
Category 2	Baa2/BBB	11.0	101.5	1.5
Category 3	Baa3/BBB-	15.0	110.0	10.0
Category 4	Ba1/BB+	20.0	130.0	30.0
Category 5	Ba2/BB or lower	30.0	145.0	45.0

The ratings to be utilized for purposes of this Annex I are the senior unsecured non-credit enhanced rating of the Borrower assigned by Moody’s and Standard & Poor’s (“ Ratings ”). The Ratings in effect at any date are those in effect at the close of business on such date.

For so long as the Borrower has a Rating from only one Rating Agency, the pricing in Category 5 shall apply.

The Borrower shall, at all times, maintain a rating from at least two Rating Agencies. If the Ratings from the two Rating Agencies are the same, then the pricing in the Category for such Ratings shall apply.

In the event the Borrower has a split Rating, then the following applies:

(a) if the Ratings established by the two Rating Agencies differ by one level, the pricing shall be based upon the Category for higher Rating of the two (e.g., if it is Baa1 and BBB, the pricing in Category 1 shall apply); and

(b) if the Ratings established by the two Rating Agencies differ by more than one level, the pricing shall be based upon a Rating that would be one level below than the higher Rating (e.g., if it is Baa1 and BB+, then the pricing in Category 2 shall apply).

Capitalized terms used but not otherwise defined in this Annex I have the meanings given to them in the Revolving Loan Credit Agreement to which this Annex I is attached.

Schedule 1

Issuing Lenders

JPMorgan Chase Bank, N.A.

Goldman Sachs Bank USA

Schedule 8.02(a)

Liens

Entity

Jurisdiction

File Date

File #

File Type

Secured
Party

Collateral
Description

Elanco Animal Health

Indiana

1/17/2013

201300000656861

UCC-1

MANUFACTURERS AND TRADES TRUST COMPANY

Funds deposited into an Escrow Account per Escrow Agreement dated October 25, 2012

Schedule 8.03

Sale and Leaseback Transactions

Elanco US Inc. has sold land/facilities/equipment for $6,000,000 to Avach Iowa Holdings, LLC (the “Larchwood Transaction”). Elanco US Inc. will lease two buildings and the equipment located within the buildings involved in the Larchwood Transaction through 2019 and will pay rent of $140,000 per month.

Schedule 8.06

Transaction with Affiliates

Transitional Services Agreement by and between the Borrower and the Parent, entered into contemporaneously with the Master Separation Agreement.

Tax Matters Agreement by and between the Borrower and the Parent, entered into contemporaneously with the Master Separation Agreement.

Employee Matters Agreement by and between the Borrower and the Parent, entered into contemporaneously with the Master Separation Agreement.

Toll Manufacturing and Supply Agreement by and between Eli Lilly Export S.A. and Elanco UK AH Limited, entered into contemporaneously with the Master Separation Agreement.

Intellectual Property and Technology License Agreement by and between the Borrower and the Parent, entered into contemporaneously with the Master Separation Agreement.

Transitional Trademark License Agreement by and between the Borrower and the Parent, entered into contemporaneously with the Master Separation Agreement.

Registration Rights Agreement by and between the Borrower and the Parent, entered into contemporaneously with the Master Separation Agreement.

EXHIBIT A-1

FORM OF COMPETITIVE BID REQUEST

JPMorgan Chase Bank, N.A., as Administrative Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

JPMorgan Chase Bank, N.A., as Advance Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

[Date]

Ladies and Gentlemen:

The undersigned, Elanco Animal Health Incorporated, an Indiana Corporation (the “ Borrower ”), refers to the Revolving Loan Credit Agreement, dated as of September 5, 2018 (as amended, modified, extended or restated from time to time, the “ Agreement ”), among the Borrower, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement.

The Borrower hereby gives you notice pursuant to Section 2.05(a) of the Agreement to request a Competitive Borrowing under the Agreement, and in that connection sets forth below the terms on which such Competitive Borrowing is requested to be made:

(a)	Date of Competitive Borrowing
	(which is a Business Day)

(b)	Principal amount of Competitive Borrowing(1)

(c)	Interest rate basis(2)

(d)	Interest Period and the last day thereof

(1) Not less than $5,000,000 (and in integral multiples of $1,000,000) and not more than the total Revolving Commitments then available.

(2) Eurocurrency Loan or Fixed Rate Loan.

Upon acceptance of any or all of the Competitive Loans offered by the Lenders in response to this request by any Borrower, the Borrower shall be deemed to have represented and warranted that the conditions to lending specified in Section 6.03(c) and (d) of the Agreement have been satisfied. Any amounts borrowed shall be deposited in JPMorgan Chase Bank, N.A. account number [ ].

	Very truly yours,

	ELANCO ANIMAL HEALTH INCORPORATED

	By:
		Name:
		Title:

EXHIBIT A-2

FORM OF NOTICE OF COMPETITIVE BID REQUEST

[Name of Lender]

[Address]

[Date]

Attention: [ ]

Ladies and Gentlemen:

Reference is made to the Revolving Loan Credit Agreement, dated as of September 5, 2018 (as amended, modified, extended or restated from time to time, the “ Agreement ”), among Elanco Animal Health Incorporated, an Indiana Corporation (the “ Borrower ”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement.

The Borrower made a Competitive Bid Request on [ ], 201[ ], pursuant to Section 2.05(a) of the Agreement, and in that connection you are invited to submit a Competitive Bid by [Date]/[Time].(1) Your Competitive Bid must comply with Section 2.05 of the Agreement and the terms set forth below on which the Competitive Bid Request was made(2):

(a) Date of Competitive Borrowing

(which is a Business Day)

(b) Principal amount of Competitive Borrowing(3)

(1) The Competitive Bid must be received by the Advance Agent (i) in the case of Eurocurrency Competitive Borrowing, not later than 10:00 a.m., New York City time, four Business Days before the proposed date of such Competitive Borrowing, and (ii) in the case of a Fixed Rate Borrowing, not later than 10:00 a.m., New York City time, two Business Day before the proposed date of such Competitive Borrowing.

(2) Please note that the Borrower shall not be required to indemnify any Lender in respect of any withholding taxes that are in effect and would apply as of the date the Borrower accepts a Competitive Bid pursuant to Section 2.05(d) of the Agreement. Please note further that each Lender shall be solely responsible for obtaining and properly completing all forms or other documentation relating to current and future withholding taxes that apply at any point to payments from the Borrower to such Lender.

(3) Not less than $5,000,000 (and in integral multiples of $1,000,000) and not more than the total Revolving Commitments then available.

(4) Eurocurrency Loan or Fixed Rate Loan.

(d) Interest Period and the last day thereof(5)

(5) Which shall be subject to the definition of “Interest Period” and end not later than the Revolving Maturity Date.

	Very truly yours,

	JPMorgan Chase Bank, N.A., as
	Advance Agent


	By:
		Name:
		Title:

EXHIBIT A-3

FORM OF COMPETITIVE BID

JPMorgan Chase Bank, N.A., as Administrative Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

JPMorgan Chase Bank, N.A., as Advance Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

[Date]

Ladies and Gentlemen:

The undersigned, [Name of Lender], refers to the Revolving Loan Credit Agreement, dated as of September 5, 2018 (as amended, modified, extended or restated from time to time, the “ Agreement ”), among Elanco Animal Health Incorporated, an Indiana Corporation (the “ Borrower ”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement.

The undersigned hereby makes a Competitive Bid pursuant to Section 2.05(b) of the Agreement, in response to the Competitive Bid Request made by the Borrower on [ ], 201[ ], and in that connection sets forth below the terms on which such Competitive Bid is made:

Principal Amount(1)

Competitive Bid Rate(2)

(1) Not less than $5,000,000 (and in integral multiples of $1,000,000) and not more than the total Revolving Commitments then available. Multiple bids will be accepted by the Advance Agent.

(2) i.e., Eurocurrency Rate + or - [ ]%, in the case of Eurocurrency Competitive Loans, or [ ]%, in the case of Fixed Rate Loans.

Interest Period and last day thereof(3)

The undersigned hereby confirms that it is prepared, subject to the conditions set forth in the Agreement, to extend credit upon acceptance by the Borrower of this bid in accordance with Section 2.05(d) of the Agreement.

	Very truly yours,

	[NAME OF LENDER]


	By:
		Name:
		Title:

(3) Which shall be subject to the definition of “Interest Period” and end not later than the Revolving Maturity Date.

EXHIBIT A-4

FORM OF COMPETITIVE BID ACCEPT/REJECT LETTER

JPMorgan Chase Bank, N.A., as Administrative Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

JPMorgan Chase Bank, N.A., as Advance Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

[Date]

Ladies and Gentlemen:

In accordance with Section 2.05(c) of the Agreement, we have received a summary of bids in connection with our Competitive Bid Request dated [ ], 201[ ], and in accordance with Section 2.05(d) of the Agreement, we hereby accept the following bids for maturity on [date]:

Principal Amount	Fixed Rate/Margin	Lender
$	[%]/[+/-[ ]%]
$	[%]/[+/-[ ]%]

We hereby reject the following bids:

P r incipal Amount	Fixed Rate/Margin	Lender
$	[%]/[+/-[ ]%]
$	[%]/[+/-[ ]%]

The $[ ] should be deposited in JPMorgan Chase Bank, N.A. account number [ ] on [date].

	Very truly yours,

	ELANCO ANIMAL HEALTH INCORPORATED

	By:
		Name:
		Title:

EXHIBIT A-5

FORM OF BORROWING REQUEST

JPMorgan Chase Bank, N.A., as Administrative Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

[Date]

Ladies and Gentlemen:

The Borrower hereby [gives you] [confirms its prior oral] notice to you pursuant to Section 2.03 of the Agreement that it [requests] [has requested] a Revolver Borrowing under the Agreement, and in that connection sets forth below the terms on which such Revolving Loan [is] [has been] requested to be made:

(a) Date of Revolver Borrowing

(which is a Business Day)

(b) Principal amount of Revolver Borrowing(1)

(d) Interest Period and the last day thereof(2)

(1) In the case of (a) a Eurocurrency Borrowing denominated in Dollars, not less than $5,000,000 (and in integral multiples of $1,000,000) or greater than the total applicable Revolving Commitments then available and (b) an ABR Borrowing, not less than $3,000,000 (and in integral multiples of $1,000,000) or greater than the total applicable Revolving Commitments then available.

(2) Which shall be subject to the definition of “Interest Period”.

(e) Location and account number of the Borrower

where the funds are to be disbursed

Upon acceptance of any or all of the Revolving Loans made by the Lenders in response to this request, the Borrower shall be deemed to have represented and warranted that the conditions to lending specified in Sections 6.03(c) and (d) of the Agreement have been satisfied.

	Very truly yours,

	ELANCO ANIMAL HEALTH INCORPORATED


	By:
		Name:
		Title:

EXHIBIT B

FORM OF ASSIGMENT AND ASSUMPTION

Dated: [ ], 201[ ]

This Assignment and Assumption (the “ Assignment and Assumption ”) is dated as of the Effective Date set forth below and is entered into by and between [ Insert name of Assignor ] (the “ Assignor ”) and [ Insert name of Assignee ] (the “ Assignee ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of credit included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “ Assigned Interest ”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

This Assignment and Assumption is being delivered to JPMorgan Chase Bank, N.A. together with (a) if the Assignee is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 4.12(h) of the Credit Agreement, duly completed and executed by such Assignee, (b) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form of Exhibit D to the Credit Agreement and (c) a processing and recordation fee of $3,500; provided that such recordation fee shall not be payable for any assignment by or to Goldman Sachs Bank USA or any of its Affiliates including Goldman Sachs Lending Partners LLC. Notwithstanding anything to the contrary, no consent is required from any third party in the case of assignments between Goldman Sachs Bank USA and Goldman Sachs Lending Partners LLC.

Assignor:

2.	Assignee:
		[and is an Affiliate/Approved Fund of [ identify Lender ](13) ]

3.	Borrower:	Elanco Animal Health Incorporated

4.	Administrative Agent:	JPMorgan Chase Bank, N.A., as the administrative agent under the Credit Agreement

5.	Credit Agreement:	The $750,000,000 Revolving Credit Agreement dated as of September 5, 2018 among Elanco Animal Health Incorporated, the Lenders parties thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

6.	Assigned Interest:

Facility Assigned(14)	Aggregate Amount of Revolving Commitment/Loans for all Lenders	Amount of Revolving Commitment/Loans Assigned	Percentage Assigned of Revolving Commitment/Loans(15)
	$	$		%
	$	$		%
	$	$		%

Effective Date: , 20 [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The Assignee agrees to deliver to the Administrative Agent a completed Administrative Questionnaire in which the Assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower and its Related Parties or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.

The terms set forth in this Assignment and Assumption are hereby agreed to:

	ASSIGNOR

	[NAME OF ASSIGNOR]


	By:
		Title:

(13) Select as applicable.

(14) No less than $5,000,000 to be assigned unless it represents the entire amount of such assignor.

(15) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.

	ASSIGNEE

	[NAME OF ASSIGNEE]


	By:
		Title:

Consented to and Accepted:

JPMORGAN CHASE BANK, N.A., as
Administrative Agent


By
	Title:


[Consented to:](16)

ELANCO ANIMAL HEALTH INCORPORATED


By
	Title:

(16) Consent of Borrower not required if there exists an Event of Default, or if assignment is to another Lender, or Affiliate of a Lender or an Approved Fund.

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties .

1.1 Assignor . The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of the Credit Agreement, (iv) any requirements under applicable law for the Assignee to become a lender under the Credit Agreement or to charge interest at the rate set forth therein from time to time or (v) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under the Credit Agreement.

1.2. Assignee . The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement and under applicable law that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 7.03 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Administrative Agent, any Arranger or any other Lender and their respective Related Parties, and (v) attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, any Arranger, the Assignor or any other Lender and their respective Related Parties, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender.

2. Payments . From and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions . This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This

Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Acceptance and adoption of the terms of this Assignment and Assumption by the Assignee and the Assignor by Electronic Signature or delivery of an executed counterpart of a signature page of this Assignment and Assumption by any Approved Electronic Platform shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

EXHIBIT D

FORM OF ADMINISTRATIVE QUESTIONNAIRE

[LOGO] JPMorgan

JPMorgan Chase Bank, N.A.

500 Stanton Christian Rd.

Newark, DE 19713

Attention: Nick Fattori

Email: nicholas.fattori@chase.com

Tel: 302-552-0588

CUSTOMER’S NAME
ADMINISTRATIVE QUESTIONNAIRE

Please accurately complete the following information and return via FAX to the attention of Nick Fattori. It is very important that all of the requested information is accurately completed and returned promptly.

TELEPHONE: 302-552-0588

FAX: 302-634-1417

E-MAIL: NICHOLAS.FATTORI@CHASE.COM

LEGAL NAME OF LENDING INSTITUTION TO APPEAR IN DOCUMENTATION:

NUMBER OF SIGNATURE LINES NEEDED FOR SIGNATURE PAGE:

GENERAL INFORMATION - DOMESTIC LENDING OFFICE:

Institution Name:

Street Address:

City, State, Zip Code:

CONTACTS/NOTIFICATION METHODS:

CREDIT CONTACT:

Contact Name:

Street Address:

City, State, Zip Code:

Telephone Number:

Fax Number:

E-Mail Address:

WEB SITE ADDRESS:

TAX STATUS:

Is your institution a non-Resident Alien, foreign corporation or partnership?

Yes o No o

If yes:

What is the country of incorporation or organization?

Tax Form W-8BEN, W-8BEN-E, W-8ECI and/or W-8IMY should be enclosed as per the Tax Section of the referenced Revolving Loan Credit Agreement.

Failure to properly complete and return the applicable form will subject your institution to withholding tax.

If no:

Please submit Tax Form W-9

Lender’s Tax Identification Number:

CONTACTS/NOTIFICATION METHODS:

ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC.

Contact Name:

Street Address:

City, State, Zip Code:

Telephone Number:

Fax Number:

E-Mail Address:

FINANCIAL MAILING CONTACT (IF DIFFERENT FROM CREDIT CONTACT ABOVE):

Contact Name:

Street Address:

City, State, Zip Code:

Telephone Number:

Fax Number:

E-Mail Address:

PAYMENT INSTRUCTIONS:

Name of Bank where funds are to be transferred:

Routing Transit/ABA Number of Bank where funds are to be transferred:

Name of Account, if applicable:

Account Number:

Additional Information:

EXHIBIT E

FORM OF REVOLVING MATURITY DATE EXTENSION REQUEST

JPMorgan Chase Bank, N.A., as Administrative Agent

for the Lenders referred to below,

c/o JPMorgan Chase Bank, N.A.

383 Madison Avenue, 24th Floor

New York, NY 10179

Attention: [ ]

[Date]

Ladies and Gentlemen:

The Borrower hereby gives you notice pursuant to Section 2.04 of the Agreement that it requests an extension of Revolving Maturity Date under the Agreement, and in that connection sets forth below the terms on which such extension of Revolving Maturity Date is requested:(1)

(a) Current Revolving Maturity Date

(b) Extension of Revolving Maturity Date of additional one year

As of the date of this request, the conditions set forth in Section 6.03(c) have been satisfied and no Default shall have occurred and be continuing.

[Signature page follows]

(1) [Note: There shall be no more than two extensions of the Revolving Maturity Date and in no event shall the extended Revolving Maturity Date be more than five (5) years from the effective date of such extension.]

	Very truly yours,

	ELANCO ANIMAL HEALTH INCORPORATED


	By:
		Name:
		Title:

EXHIBIT F-1

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Not Partnerships
For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Loan Credit Agreement, dated as of September 5, 2018 as amended, modified, extended or restated from time to time, the “ Agreement ”), Elanco Animal Health Incorporated, an Indiana corporation (the “ Borrower ”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 4.12 of the Revolving Loan Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “10 percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a United States trade or business.

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W- 8BEN or W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Revolving Loan Credit Agreement and used herein shall have the meanings given to them in the Revolving Loan Credit Agreement.

[NAME OF LENDER]

By:
	Name:
	Title:

Date: , 20[ ]

EXHIBIT F-2

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Not Partnerships
For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Loan Credit Agreement, dated as of September 5, 2018 (as amended, modified, extended or restated from time to time, the “ Agreement ”), Elanco Animal Health Incorporated, an Indiana corporation (the “ Borrower ”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 4.12 of the Revolving Loan Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “10 percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv) it is not a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigned’s conduct of a United States trade or business.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E, as applicable. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Revolving Loan Credit Agreement and used herein shall have the meanings given to them in the Revolving Loan Credit Agreement.

[NAME OF PARTICIPANT]

By:
	Name:
	Title:

Date: , 20[ ]

EXHIBIT F-3

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Participants That Are Partnerships
For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Loan Credit Agreement, dated as of September 5, 2018 (as amended, modified, extended or restated from time to time, the “ Agreement ”), among Elanco Animal Health Incorporated, an Indiana corporation (the “ Borrower ”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 4.12 of the Revolving Loan Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is 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) none of its direct or indirect partners/members is a “10 percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code and (vi) the interest payments in question are not effectively connected with the undersigned’s or its direct or indirect partners’/members’ conduct of a United States trade or business.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E, as applicable or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Revolving Loan Credit Agreement and used herein shall have the meanings given to them in the Revolving Loan Credit Agreement.

[NAME OF PARTICIPANT]

By:
	Name:
	Title:

Date: , 20[ ]

EXHIBIT F-4

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Non-U.S. Lenders That Are Partnerships
For U.S. Federal Income Tax Purposes)

Reference is made to the Revolving Loan Credit Agreement, dated as of September 5, 2018 as amended, modified, extended or restated from time to time, the “ Agreement ”), among Elanco Animal Health Incorporated, an Indiana corporation (the “ Borrower ”), the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent.

Pursuant to the provisions of Section 4.12 of the Revolving Loan Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Revolving Loan Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is 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) none of its direct or indirect partners/members is a “10 percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its direct or indirect partners/members is a “controlled foreign corporation” related to the Borrower as described in Section 881(c)(3)(C) of the Code and (vi) the interest payments in question are not effectively connected with the undersigned’s or its direct or indirect partners’/members’ conduct of a United States trade or business.

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E, as applicable or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E, as applicable, from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Revolving Loan Credit Agreement and used herein shall have the meanings given to them in the Revolving Loan Credit Agreement.

[NAME OF LENDER]

By:
	Name:
	Title:

Date: , 20[ ]

Exhibit G

FORM OF SOLVENCY CERTIFICATE

This Solvency Certificate (this “ Certificate ”) is furnished to the Administrative Agent pursuant to Section 6.02(d) of the Revolving Loan Credit Agreement, dated as of September 5, 2018 (the “ Agreement ”), among the Borrower, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement.

I, [ ], [Financial Officer] of the Borrower, in that capacity only and not in my individual capacity (and without personal liability), DO HEREBY CERTIFY that as of the date hereof, after giving effect to the consummation of the Transactions, including the making of the Loans under the Agreement on the date hereof, and after giving effect to the application of the proceeds of such Loans, that:

(a) the fair value of the assets of the Borrower at a fair valuation will exceed its debts and liabilities, subordinated, contingent or otherwise;

(b) the present fair saleable value of the property of the Borrower will be greater than the amount that will be required to pay the probable liabilities on its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured;

(c) the Borrower will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured;

(d) the Borrower will not have an unreasonably small capital with which to conduct the businesses in which it is engaged as such businesses are now conducted and proposed to be conducted following the determination date;

(e) for purposes of this Certificate, the amount of contingent liabilities has been computed as the amount that, in light of all the facts and circumstances existing as of the date hereof, represents the amount that can reasonably be expected to become an actual or matured liability; and

(f) I am generally familiar with the businesses and assets of the Borrower and am duly authorized to execute this Solvency Certificate on behalf of the Borrower pursuant to the Agreement.

[ signature page follows ]

IN WITNESS WHEREOF, the undersigned has executed this Certificate in such undersigned’s capacity as [Financial Officer] of the Borrower, and not individually, as of the date first written above.

	Very truly yours,

	ELANCO ANIMAL HEALTH INCORPORATED


	By:
		Name:
		Title:

Exhibit 10.25

TERM LOAN CREDIT AGREEMENT

among

ELANCO ANIMAL HEALTH INCORPORATED,

as the “Borrower”

THE LENDERS NAMED HEREIN,

and

JPMORGAN CHASE BANK, N.A., as Administrative Agent,

Dated as of September 5, 2018

Goldman Sachs Bank USA,

JPMorgan Chase Bank, N.A.

as Joint Lead Arrangers and Joint Bookrunners

Goldman Sachs Bank USA,

as Syndication Agent

TABLE OF CONTENTS

ARTICLE I Definitions	1

Section 1.01. Defined Terms	1
Section 1.02. Classification of Term Loans and Borrowings	20
Section 1.03. Terms Generally	20
Section 1.04. Accounting Terms, GAAP	21

ARTICLE II Amount and Terms of the Term Loan Commitments	21

Section 2.01. Term Loan Commitments	21
Section 2.02. Term Loans and Borrowings	22
Section 2.03. Requests for Borrowings	22

ARTICLE III [Reserved]	23

ARTICLE IV General Provisions Applicable to Term Loans	23

Section 4.01. Funding of Borrowings	23
Section 4.02. Interest Elections	24
Section 4.03. Termination and Reduction of Term Loan Commitments	25
Section 4.04. Repayment of Term Loans; Evidence of Debt	25
Section 4.05. [Reserved]	25
Section 4.06. Prepayment of Term Loans	25
Section 4.07. Fees	26
Section 4.08. Interest	27
Section 4.09. Alternate Rate of Interest	27
Section 4.10. Increased Costs	29
Section 4.11. Break Funding Payments	30
Section 4.12. Taxes	30
Section 4.13. Payments Generally; Pro Rata Treatment; Sharing of Setoffs	34
Section 4.14. Mitigation Obligations; Replacement of Lenders	35
Section 4.15. Defaulting Lenders	36
Section 4.16. Repayment of Term Loans	37

ARTICLE V Representations and Warranties	37

Section 5.01. Organization; Powers	37
Section 5.02. Authorization	37
Section 5.03. Enforceability	37
Section 5.04. Governmental Approvals	38
Section 5.05. Financial Statements; No Material Adverse Effect	38
Section 5.06. Litigation, Compliance with Laws	38
Section 5.07. Federal Reserve Regulations	39
Section 5.08. Taxes	39

Section 5.09. Employee Benefit Plans	39
Section 5.10. Environmental and Safety Matters	39
Section 5.11. Properties	40
Section 5.12. Investment Company Status	40
Section 5.13. Solvency	40
Section 5.14. Anti-Corruption Laws and Sanctions	40
Section 5.15. Full Disclosure	41

ARTICLE VI Conditions	41

Section 6.01. Conditions Precedent to Closing Date	41
Section 6.02. Conditions Precedent to Effective Date and Extensions of Credit	42

ARTICLE VII Affirmative Covenants	43

Section 7.01. Existence	43
Section 7.02. Business and Properties	43
Section 7.03. Financial Statements, Reports, Etc.	44
Section 7.04. Insurance	45
Section 7.05. Obligations and Taxes	45
Section 7.06. Litigation and Other Notices	45
Section 7.07. Inspection of Property; Books and Records	46
Section 7.08. Use of Proceeds	46

ARTICLE VIII Negative Covenants	46

Section 8.02. Liens	47
Section 8.06. Transactions with Affiliates	49

ARTICLE IX Events of Default	50

ARTICLE X The Administrative Agent	53

Section 10.01. Administrative Agent	53
Section 10.02. ERISA Matters	55

ARTICLE XI Miscellaneous	57

Section 11.01. Notices	57
Section 11.02. Survival of Agreement	58
Section 11.03. Binding Effect	58
Section 11.04. Successors and Assigns	58
Section 11.05. Expenses, Indemnity	61
Section 11.06. Applicable Law	62
Section 11.07. Waivers, Amendment	62
Section 11.08. Entire Agreement	63
Section 11.09. Severability	63

Section 11.10. Counterparts	64
Section 11.11. Headings	64
Section 11.13. Jurisdiction: Consent to Service of Process	64
Section 11.14. WAIVER OF JURY TRIAL	65
Section 11.15. [Reserved]	65
Section 11.16. Confidentiality	65
Section 11.17. USA PATRIOT Act Notice	66
Section 11.18. No Fiduciary Relationship	66
Section 11.19. Acknowledgement and Consent to Bail-In of EEA Financial Institutions	67
Section 11.20. Interest Rate Limitation	67

SCHEDULES:

Schedule 2.01	Term Loan Commitments
Schedule 8.02(a)	Existing Liens
Schedule 8.03	Sale and Leaseback Transactions
Schedule 8.06	Transactions with Affiliates

EXHIBITS:

Exhibit A	Form of Borrowing Request
Exhibit B	Form of Assignment and Acceptance
Exhibit C	[Reserved]
Exhibit D	Form of Administrative Questionnaire
Exhibit E	[Reserved]
Exhibit F-1	Form of U.S. Tax Compliance Certificate for Foreign Lenders that are not Partnerships for U.S. Federal Income Tax Purposes
Exhibit F-2	Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are not Partnerships for U.S. Federal Income Tax Purposes
Exhibit F-3	Form of U.S. Tax Compliance Certificate for Non-U.S. Participants that are Partnerships for U.S. Federal Income Tax Purposes
Exhibit F-4	Form of U.S. Tax Compliance Certificate for Foreign Lenders that are Partnerships for U.S. Federal Income Tax Purposes
Exhibit G	Form of Solvency Certificate

TERM LOAN CREDIT AGREEMENT (as amended and in effect from time to time, the “ Agreement ”) dated as of September 5, 2018, among ELANCO ANIMAL HEALTH INCORPORATED, an Indiana corporation (the “ Borrower ”), the LENDERS (as defined herein), JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders (in such capacity, the “ Administrative Agent ”).

The Borrower has requested that the Lenders, on the terms and subject to the conditions herein set forth, extend credit to the Borrower in the form of Term Loans on the Effective Date in an aggregate principal amount of $500,000,000.

The proceeds of the Term Loans made to the Borrower shall be used for general corporate purposes and for making a distribution to the Parent as permitted herein.

Accordingly, the parties hereto agree as follows:

ARTICLE I

Definitions

Section 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ ABR ” when used in reference to any Term Loan or Borrowing, refers to whether such Term Loan, or the Term Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“ Administrative Agent ” shall have the meaning assigned to that term in the preamble.

“ Administrative Fees ” shall have the meaning assigned to such term in Section 4.07(b).

“ Administrative Questionnaire ” shall mean an administrative questionnaire delivered by a Lender pursuant to Section 11.04 in the form of Exhibit D.

“ Agreement ” shall have the meaning set forth in the preamble.

“ Applicable Margin ” shall mean, for each Term Loan, the applicable rate per annum determined pursuant to the Pricing Grid.

“ Arrangers ” shall mean Goldman Sachs Bank USA and JPMorgan Chase Bank, N.A.

“ Bail-In Action ” shall mean the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“ Bail-In Legislation ” shall mean, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council

of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

“ Basis Point ” shall mean 1/100th of 1%.

“ Beneficial Ownership Certification ” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

“ Beneficial Ownership Regulation ” means 31 C.F.R. § 1010.230

“ Borrower ” shall have the meaning assigned to that term in the preamble.

“ Borrowing ” shall mean Term Loans of the same Type, made, converted or continued on the same date and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect.

“ Borrowing Request ” shall mean a request by the Borrower for a Borrowing in accordance with Section 2.03.

“Business Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market.

“ Cash Equivalents ” shall mean (a) marketable direct obligations issued by, or unconditionally guaranteed or insured by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits, bankers’ acceptances or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized under the laws of the United States or any state thereof whose short-term commercial paper rating at the time of acquisition is at least B or the equivalent thereof by Fitch IBCA, A-3 or the equivalent thereof by S&P, or P-3 or the equivalent thereof by Moody’s; (c) commercial paper of an issuer rated at least A-2 or the equivalent thereof at the time of acquisition by S&P or at least P-2 or the equivalent thereof at the time of acquisition by Moody’s, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities or marketable direct obligations with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody’s; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition; provided , however , that, in case of any investment by a Foreign Subsidiary, “ Cash Equivalents ”

shall also include: (i) certificates of deposit, time deposits, Eurodollar time deposits, bankers’ acceptances or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any commercial bank located in the same jurisdiction as such Foreign Subsidiary whose short-term commercial paper rating at the time of acquisition would meet or exceed those ratings applicable to a Lender set forth in clause (b) hereof, (ii) direct obligations of the sovereign nation (or any agency thereof) in which such Foreign Subsidiary is organized or is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof), in each case maturing within one year from the date of acquisition, (iii) investments of the type and maturity described in clauses (c) through (f) above of obligors located in the same jurisdiction as such Foreign Subsidiary, which Investments or obligors (or the parent of any such obligor) have ratings described in clauses (c) through (f) or equivalent ratings from comparable foreign rating agencies and (iv) shares of money market mutual or similar funds which invest exclusively in assets otherwise satisfying the requirements of this proviso.

“ Change in Law ” shall mean (a) the adoption or taking effect of any law, rule, regulation or treaty after the Closing Date, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender (or, for purposes of Section 4.10, by any lending office of such Lender or by such Lender’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Closing Date; provided that, notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States of America or foreign regulatory authorities, in each case pursuant to Basel III, in each case shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, promulgated or issued.

“ Closing Date ” shall have the meaning assigned to that term in Section 6.01.

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

“ Connection Income Taxes ” shall mean Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“ Consolidated EBITDA ” shall mean, for any period, Consolidated Net Income for such period plus, without duplication and, other than in the case of clause (i) below, to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of: (a) income tax expense, (b) interest expense (including imputed interest on Capital Lease Obligations), amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Debt (including the Term Loans), and commissions, discounts and other fees and charges with respect to letters of credit, bankers’ acceptance financing and receivables financings, (c) depreciation and amortization expense (plus, to the extent GAAP then includes amounts as such expense, amounts of such expenses (calculated under the current GAAP) for any prior portion of such period if not otherwise so included), (d) amortization of intangibles (including goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring expenses or losses (including start-up costs, and whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, losses on sales of assets outside of the ordinary course of business), (f) any non-cash expenses relating to stock option exercises (if applicable accounting rules so require), (g) any other non-cash charges, (h) [reserved], (i) [reserved], (j) (x) any charges, costs, expenses, accruals or reserves incurred pursuant to any management equity plan, profits interest or stock option plan, any equity-based compensation or equity-based incentive plan, or any other management or employee benefit plan, agreement or pension plan and (y) any charges, costs, expenses, accruals or reserves in connection with the rollover, acceleration or payout of Capital Stock of the Borrower held by management of the Borrower or any of its Subsidiaries, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of: (a) interest income, (b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) any other non-cash income, all as determined on a consolidated basis. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “ Reference Period ”) pursuant to any determination of the Consolidated Leverage Ratio or Consolidated Interest Coverage Ratio, (x) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (y) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. Notwithstanding the foregoing, for purposes of determining Consolidated EBITDA for any period that includes any of the fiscal quarters ending September 30, 2017, December 31, 2017, March 31, 2018 and June 30, 2018, Consolidated EBITDA for such fiscal quarters shall be $99.0 million, $134.0 million, $158.3 million and $161.2 million respectively.

“ Consolidated Total Debt ” shall mean, at any date, the aggregate principal amount of all third-party Debt for borrowed money (including purchase money Debt), unreimbursed

drawings under letters of credit, Capital Lease Obligations and third-party Debt obligations evidenced by notes or similar instruments, in each case of the Borrower and its Subsidiaries outstanding as of such date that would be reflected on a balance sheet prepared as of such date on a consolidated basis in accordance with GAAP (except as otherwise provided in the definition of Capital Lease Obligations) plus the aggregate Value of all Sale and Leaseback Transactions minus up to $200,000,000 of cash and Cash Equivalents held in the United States by the Borrower and its Domestic Wholly Owned Subsidiaries; provided that such cash and Cash Equivalents are free of any Liens.

“ Credit Party ” shall mean the Administrative Agent and any Lender.

“ Debt ” of any Person, shall mean, without duplication, (i) all obligations of such Person represented by notes, bonds, debentures or similar evidences of indebtedness; (ii) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services other than, in the case of any such deferred purchase price, on normal trade terms, (iii) all rental obligations of such Person as lessee under leases that are Capital Lease Obligations, (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations, contingent or otherwise, of such Person as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (vi) the liquidation value of all preferred capital stock of such Person which is redeemable at the option of the holder thereof or which may become (by scheduled or mandatory redemption) due within one year of the Term Loan Maturity Date, (vii) all Guarantees of such Person in respect of obligations of the kind referred to in clauses (i) through (vi) above, (viii) all obligations of the kind referred to in clauses (i) through (vii) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by the applicable Person, whether or not such Person has assumed or become liable for the payment of such obligation and (ix) for the purposes of paragraph (f) of Article IX only, all obligations in respect of Hedge Agreements. The Debt of any Person shall include Debt of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Debt expressly provide that such Person is not liable therefor.

“ Default ” shall mean any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“ Defaulting Lender ” shall mean any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund any portion of its Term Loans or (ii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified in such writing, including, if applicable, by reference to a specific Default) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent to funding (specifically identified in such writing, including, if applicable, by reference to a specific Default) cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after a written request by the Administrative Agent, made in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund prospective Loans; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt by the Administrative Agent of such certification in form and substance reasonably satisfactory to it, or (d) has become the subject of a Bankruptcy Event or (e) has become, or has a Lender Parent that has become, the subject of a Bail-In Action.

“ Dollars ” or “ $ ” shall mean lawful money of the United States of America.

“ Domestic Subsidiary ” shall mean a Subsidiary that is incorporated or organized under the laws of the United States, any state thereof or the District of Columbia.

“ Domestic Wholly Owned Subsidiary ” shall mean a Wholly Owned Subsidiary that is a Domestic Subsidiary.

“ EEA Member Country ” shall mean any of the member states of the European Union, Iceland, Liechtenstein and Norway.

“ Effective Date ” shall have the meaning assigned to that term in Section 6.02.

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ EU Bail-In Legislation Schedule ” shall mean the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

“ Eurocurrency ” when used in reference to any Term Loan or Borrowing, refers to whether such Term Loan, or the Term Loans comprising such Borrowing, are bearing interest at a rate determined by reference to a Eurocurrency Rate.

Period (the “ Impacted Interest Period ”) shall be the Interpolated Rate; provided , that if at the time that the Administrative Agent shall seek to determine the relevant LIBOR Screen Rate for any Interest Period for a Eurocurrency Borrowing the applicable LIBOR Screen Rate shall not be available for such Interest Period with respect to such Eurocurrency Borrowing for any reason and the Administrative Agent shall determine that it is not possible to determine the Interpolated Rate (which conclusion shall be conclusive and binding absent manifest error), then the “Eurocurrency Rate” with respect to such Eurocurrency Borrowing for the Impacted Interest Period shall be the rate per annum (rounded upwards, if necessary, to the next Basis Point) equal to the arithmetic average of the rates at which deposits in Dollars and for a maturity comparable to such Interest Period are offered with respect to any Eurocurrency Borrowing, to the principal London offices of the Reference Lenders (or, if either Reference Lender does not at the time maintain a London office, the principal London office of any Affiliate of such Reference Lender) in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. It is understood and agreed that the Administrative Agent will not disclose to any party hereto the rates quoted by the individual Reference Lenders. Notwithstanding the foregoing, in the event that any “Eurocurrency Rate”, determined as provided above, would be less than zero, the Eurocurrency Rate shall be deemed to be zero for all purposes of this Agreement.

“ Event of Default ” shall have the meaning assigned to such term in Article IX.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

on its public website from time to time) and published on the next succeeding business day as the federal funds effective rate; provided that such rate shall in no event be less than zero.