TEVA PHARMACEUTICAL INDUSTRIES LTD (Form: 6-K, Received: 05/11/2017 16:10:59)

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Date: May 11, 2017

/S/ EYAL DESHEH

Eyal Desheh

Group Executive Vice President,

Chief Financial Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

under the Securities Exchange Act of 1934

For the month of May 2017

Commission File Number 001-16174

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

(Translation of registrant’s name into English)

5 Basel Street, P.O. Box 3190

Petach Tikva 4951033 Israel

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

INDEX


	Page
Financial Statements (Unaudited)
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Comprehensive Income (Loss)		5
Consolidated Statements of Cash Flows		6
Notes to Consolidated Financial Statements		7
Operating and Financial Review and Prospects		40
Risk Factors		61
Quantitative and Qualitative Disclosures About Market Risk		61
Legal Proceedings		61

Exhibits


Exhibit No.		Description

EX-2.1		Senior Unsecured Japanese Yen Term Loan Credit Agreement dated as of March 22, 2017, by and among Teva Pharmaceutical Industries Limited, Teva Holdings K.K., the lenders party thereto and Sumitomo Mitsui Banking Corporation

EX-101.INS		XBRL Taxonomy Instance Document

EX-101.SCH		XBRL Taxonomy Extension Schema Document

EX-101.CAL		XBRL Taxonomy Calculation Linkbase Document

EX-101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

EX-101.LAB		XBRL Taxonomy Label Linkbase Document

EX-101.PRE		XBRL Taxonomy Presentation Linkbase Document

USE OF CERTAIN TERMS

Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Teva” refer to Teva Pharmaceutical Industries Limited and its subsidiaries, and references to “revenues” refer to net revenues. References to “U.S. dollars,” “U.S. $” and “$” are to the lawful currency of the United States of America, and references to “NIS” are to new Israeli shekels. References to “MS” are to multiple sclerosis. Market data, including both sales and share data, are based on information provided by IMS Health Inc., a provider of market research to the pharmaceutical industry (“IMS”), unless otherwise stated. References to “ROW” are to our Rest of the World markets. References to “Actavis Generics” are to the generic pharmaceuticals business we purchased from Allergan plc on August 2, 2016. References to “P&G” are to The Procter & Gamble Company, and references to “PGT” are to PGT Healthcare, the joint venture we formed with P&G. References to “R&D” are to Research and Development, to “S&M” are to Selling and Marketing and to “G&A” are to General and Administrative.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in millions)

(Unaudited)


	March 31,			December 31,
	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	900		$	988
Trade receivables		7,264			7,523
Inventories		4,999			4,954
Prepaid expenses		960			1,362
Other current assets		669			1,293
Assets held for sale		43			841

Total current assets		14,835			16,961
Deferred income taxes		747			725
Other non-current assets		1,319			1,235
Property, plant and equipment, net		8,160			8,073
Identifiable intangible assets, net		21,189			21,487
Goodwill		45,026			44,409

Total assets	$	91,276		$	92,890

LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	1,942		$	3,276
Sales reserves and allowances		7,500			7,839
Trade payables		2,378			2,157
Employee-related obligations		660			859
Accrued expenses		2,500			3,405
Other current liabilities		923			867
Liabilities held for sale		—			116

Total current liabilities		15,903			18,519
Long-term liabilities:
Deferred income taxes		5,291			5,215
Other taxes and long-term liabilities		1,643			1,639
Senior notes and loans		32,694			32,524

Total long-term liabilities		39,628			39,378

Commitments and contingencies , see note 16
Total liabilities		55,531			57,897

Equity:
Teva shareholders’ equity:
Preferred shares of NIS 0.10 par value per mandatory convertible preferred share; March 31, 2017 and December 31, 2016: authorized 5.0 million shares; issued 3.7 million shares		3,620			3,620
Ordinary shares of NIS 0.10 par value per share; March 31, 2017 and December 31, 2016: authorized 2,500 million shares; issued 1,123 million shares		54			54
Additional paid-in capital		23,410			23,409
Retained earnings		13,809			13,607
Accumulated other comprehensive loss		(2,714	)		(3,159	)
Treasury shares as of March 31, 2017 and December 31, 2016 —107 million ordinary shares and 108 million ordinary shares, respectively		(4,156	)		(4,194	)

		34,023			33,337

Non-controlling interests		1,722			1,656

Total equity		35,745			34,993

Total liabilities and equity	$	91,276		$	92,890


/s/ DR. Y. PETERBURG				/s/ E. DESHEH
Dr. Y. Peterburg				E. Desheh
Interim President and Chief Executive Officer				Group Executive Vice President, Chief Financial Officer

The accompanying notes are an integral part of the financial statements.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF INCOME

(U.S. dollars in millions, except share and per share data)

(Unaudited)


	Three months ended
	March 31,
	2017			2016
Net revenues	$	5,630		$	4,810
Cost of sales		2,811			2,019

Gross profit		2,819			2,791
Research and development expenses		457			389
Selling and marketing expenses		971			839
General and administrative expenses		236			304
Impairments, restructuring and others		240			119
Legal settlements and loss contingencies		20			(25	)

Operating income		895			1,165
Financial expenses, net		207			298

Income before income taxes		688			867
Income taxes		54			228
Share in (profits) losses of associated companies, net		(7	)		6

Net income		641			633
Net loss attributable to non-controlling interests		(4	)		(3	)

Net income attributable to Teva		645			636

Dividends on preferred shares		65			66

Net income attributable to ordinary shareholders	$	580		$	570

Earnings per share attributable to ordinary shareholders:
Basic	$	0.57		$	0.62

Diluted	$	0.57		$	0.62

Weighted average number of shares (in millions):
Basic		1,016			913

Diluted		1,017			920

The accompanying notes are an integral part of the financial statements.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(U.S. dollars in millions)

(Unaudited)


	Three months ended
	March 31,
	2017			2016
Net income	$	641		$	633
Other comprehensive income (loss), net of tax:
Currency translation adjustment		466			255
Unrealized gain (loss) from derivative financial instruments, net		8			(336	)
Unrealized gain (loss) from available-for-sale securities, net		54			(199	)
Unrealized gain (loss) on defined benefit plans		(13	)		—

Total other comprehensive income (loss)		515			(280	)

Total comprehensive income		1,156			353
Comprehensive income (loss) attributable to the non-controlling interests		66			(2	)

Comprehensive income attributable to Teva	$	1,090		$	355

The accompanying notes are an integral part of the financial statements.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in millions)

(Unaudited)


	Three months ended
	March 31,
	2017			2016
Operating activities:
Net income	$	641		$	633
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		480			305
Net change in operating assets and liabilities		(463	)		189
Deferred income taxes – net and uncertain tax positions		(217	)		(51	)
Stock-based compensation		40			24
Net gain from sale of long-lived assets and investments		(39	)		—
Venezuela impairment of net monetary assets		14			246
Impairment of long-lived assets		11			13
Other items		3			7
Research and development in process		—			10

Net cash provided by operating activities		470			1,376

Investing activities:
Proceeds from sales of business, investments and long-lived assets		1,412			2
Purchases of property, plant and equipment		(202	)		(172	)
Other investing activities		(22	)		18
Purchases of investments and other assets		(6	)		(29	)
Acquisitions of subsidiaries, net of cash acquired		—			(2,236	)

Net cash provided by (used in) investing activities		1,182			(2,417	)

Financing activities:
Net change in short-term debt		(1,350	)		38
Dividends paid on ordinary shares		(346	)		(307	)
Dividends paid on preferred shares		(65	)		(60	)
Other financing activities		(7	)		(31	)
Proceeds from issuance of ordinary shares, net of issuance costs		—			329
Proceeds from issuance of mandatory convertible preferred shares, net of issuance costs		—			329
Repayment of long-term loans and other long-term liabilities		—			(41	)
Proceeds from exercise of options by employees		—			13
Proceeds from long-term loans and other long-term liabilities		—			(3	)

Net cash provided by (used in) financing activities		(1,768	)		267

Translation adjustment on cash and cash equivalents		28			(208	)

Net change in cash and cash equivalents		(88	)		(982	)
Balance of cash and cash equivalents at beginning of period		988			6,946

Balance of cash and cash equivalents at end of period	$	900		$	5,964

The accompanying notes are an integral part of the financial statements.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 – Basis of presentation:

The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the financial statements reflect all adjustments necessary to fairly state the financial position and results of operations of Teva. These consolidated financial statements and notes thereto are unaudited and should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 20-F for the year ended December 31, 2016, as filed with the Securities and Exchange Commission (“SEC”). Amounts at December 31, 2016 were derived from the audited balance sheet at that date, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are included. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of results that could be expected for the entire fiscal year.

NOTE 2 - Significant accounting policies:

Recently adopted accounting pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance on goodwill impairment testing. The new guidance reduces the complexity of goodwill impairment tests by no longer requiring entities to determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Teva adopted the provisions of this update in the first quarter of 2017. As of March 31, 2017 there has been no impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued guidance on the differentiation between acquisitions of assets and businesses. The new guidance dictates that, when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, it should be treated as an acquisition or disposal of an asset. The new guidance also requires that to be considered a business, a set of integrated activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs, without regard as to whether a market participant could replace missing elements. In addition, the new guidance narrows the definition of the term “output” to make it consistent with how outputs are described in the updated revenue recognition guidance. The guidance will be effective for the fiscal year beginning on January 1, 2018, including interim periods within that year (early adoption is permitted). Teva adopted the provisions of this update in the first quarter of 2017. As of March 31, 2017 there has been no impact on the Company’s consolidated financial statements.

In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance will be effective for the fiscal year beginning on January 1, 2018, including interim periods within that year (early adoption is permitted). Teva adopted the provisions of this update in the first quarter of 2017. The application of the guidance does not have a material impact on Teva’s consolidated financial statements.

In October 2016, the FASB issued guidance on accounting for consolidation of interests held through related parties that are under common control. The amended guidance designates the primary beneficiary of a variable interest entity (“VIE”) as the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. Teva adopted the provisions of this update in the first quarter of 2017. The application of the guidance does not have a material impact on Teva’s consolidated financial statements.

In October 2016, the FASB issued guidance on income taxes on intra-entity transfers. The guidance eliminates the exception to the recognition requirements under the standard for intra-entity transfers of an asset other than inventory. As a result, an entity should recognize the income tax consequences when the transfer of assets other than inventory occurs. Teva adopted the provisions of this update in the first quarter of 2017. The application of the guidance increased the deferred tax liabilities in the consolidated balance sheet by $31 million.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements

(Unaudited)

Recently issued accounting pronouncements, not yet adopted

In August 2016, the FASB issued guidance on statements of cash flows. The guidance addresses eight specific issues: debt prepayment or debt extinguishment costs; settlement of certain debt instruments; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; distributions received from equity method investees; beneficial interest in securitization transactions; and separately identifiable cash flows and application of predominance principle. The guidance will be effective for the fiscal year beginning on January 1, 2018, including interim periods within that year (early adoption is permitted). Teva is currently evaluating the potential effect of the guidance on its consolidated financial statements.

In June 2016, the FASB issued guidance on financial instruments. The guidance replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance will be effective for the fiscal year beginning on January 1, 2020, including interim periods within that year. Teva is currently evaluating the potential effect of the guidance on its consolidated financial statements.

In February 2016, the FASB issued guidance on leases. The guidance requires entities to record lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. The guidance will become effective for interim and annual periods beginning on January 1, 2019 (early adoption is permitted) and is required to be adopted at the earliest period presented using a modified retrospective approach. Teva is currently evaluating the potential effect of the guidance on its consolidated financial statements.

In January 2016, the FASB issued guidance which updates certain aspects of recognition, measurement, presentation and disclosure of equity investments. The guidance requires entities to recognize changes in fair value in net income rather than in accumulated other comprehensive income. The guidance will be effective for interim and annual periods beginning on January 1, 2018 (early adoption is permitted). Teva is currently evaluating the potential effect of the guidance on its consolidated financial statements.

In May 2014, the FASB issued guidance on revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. Under the new standard, a good or service is transferred to the customer when (or as) the customer obtains control of the good or service, which differs from the risk and rewards approach under current guidance. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of the time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. In March, April and May 2016, the FASB issued three additional updates regarding identifying performance obligations and licensing, certain principal versus agent considerations, and various narrow scope improvements based on practical questions raised by users. The guidance may be adopted through either retrospective application to all periods presented in the financial statements (full retrospective approach) or through a cumulative effect adjustment to retained earnings at the effective date (modified retrospective approach). The guidance will be effective for the fiscal periods beginning on January 1, 2018 (early adoption is permitted).

While Teva has not yet completed its final review of the impact of the new standard, Teva does not currently anticipate a material impact on its revenue recognition practices. We continue to review variable consideration and potential disclosures to complete our evaluation of the impact on our consolidated financial statements. In addition we continue to monitor additional changes, modifications, clarifications or interpretations which may impact our current conclusions. Teva expects to adopt the new standard using the modified retrospective approach.

NOTE 3 – Certain transactions:

a.	Business transactions:

Actavis Generics and Anda acquisitions:

On August 2, 2016, Teva consummated its acquisition of Allergan plc’s (“Allergan”) worldwide generic pharmaceuticals business (“Actavis Generics”). At closing, Teva transferred to Allergan consideration of approximately $33.4 billion in cash and approximately 100.3 million Teva shares. The acquisition significantly expanded Teva’s generics product portfolio and pipeline, R&D capabilities and global operational network.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

On October 3, 2016, Teva consummated the acquisition of Anda Inc. (“Anda”), the fourth largest distributor of generic pharmaceuticals in the United States, from Allergan, for cash consideration of $500 million. The purchase is a transaction related to the Actavis Generics acquisition, and as such the purchase price accounting and related disclosures were treated on a combined basis.

In July 2016, Teva completed debt issuances for an aggregate principal amount of $20.4 billion, or $20.3 billion in net proceeds, consisting of senior notes with aggregate principal amounts of $15 billion, € 4 billion and CHF 1 billion and maturities of between two to 30 years. The effective average interest rate of these notes is 2.32% per annum.

At the closing of the Actavis Generics acquisition, Teva borrowed $5 billion under its term loan facility with a syndicate of banks. The term facility is split into two tranches of $2.5 billion each, with the first tranche maturing in 2018 and the second tranche maturing in 2020 with payment installments each year (see note 11). In addition, Teva terminated its $22 billion bridge loan credit agreement.

Teva financed the cash consideration with the amounts mentioned above, in addition to approximately $8.1 billion from cash on hand, including from its December 2015 equity offerings, and borrowings under its syndicated revolving line of credit.

Debt issuance and term loan facilities related costs of approximately $0.1 billion were incurred as part of the financing arrangements, and were capitalized under senior notes and loans in the consolidated balance sheets in 2016. Total equity issuance costs of approximately $0.2 billion related to the transaction were offset against the proceeds received from the issuances.

The following table summarizes the consideration transferred to acquire Actavis Generics and Anda:

Fair value of consideration transferred:


	U.S.$ in millions
Cash ⁽¹⁾	$	33,878
Ordinary shares ⁽²⁾		5,065
Contingent consideration ⁽³⁾		302
Equity based compensation		25

Total fair value of consideration transferred	$	39,270

⁽¹⁾

As a result of a working capital true up adjustment related to the Anda acquisition, a $42 million reduction in the fair value of the consideration transferred to acquire the businesses has been reflected in the first quarter of 2017. The adjustment was not settled in the period, and therefore there is no impact in the current period on the statements of cash flows.

⁽²⁾	Represents approximately 100.3 million shares at a price per share of $50.50 at August 1, 2016, which has been adjusted for a lack of marketability discount factor of 5.8%. Beginning on August 2, 2017 Allergan will no longer be prohibited from trading its Teva shares.

⁽³⁾	The contingent consideration relates to sharing of profits of one specific product currently in development. Its fair value is based on the estimated future cash outflows, utilizing the same probability assessment that was applied on the related in-process research and development (“IPR&D”).

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

The table below summarizes the preliminary estimates of the fair value of the assets acquired and liabilities assumed and resulting goodwill. These values are not yet finalized and are subject to change, which could be significant. The amounts recognized and associated amortization periods will be finalized as the information necessary to complete the analyses is obtained, but no later than one year from the acquisition date (“the measurement period”).

Recognized amounts of identifiable assets acquired and liabilities assumed:

U.S.$ in millions


	Preliminary values at December 31, 2016		Measurement period adjustments			Preliminary values at March 31, 2017
Cash and cash equivalents	$	84	$	—		$	84
Trade receivables ⁽¹⁾		3,211		34			3,245
Inventories		1,670		1			1,671
Other current assets ⁽²⁾		2,050		(8	)		2,042
Property, plant and equipment		1,370		22			1,392
Other non-current assets		24		—			24
Identifiable intangible assets: ⁽³⁾
Product rights ⁽⁴⁾		8,640		(682	)		7,958
Trade names		417		—			417
In-process research and development		5,006		407			5,413
Goodwill		24,192		390			24,582

Total assets acquired		46,664		164			46,828

Sales reserves and allowances		1,988		49			2,037
Trade payables		441		—			441
Employee related obligations		134		13			147
Accrued expenses ⁽⁵⁾		920		37			957
Other current liabilities		376		(22	)		354
Deferred income taxes and other non-current liabilities		3,493		129			3,622

Total liabilities assumed		7,352		206			7,558

Net assets acquired ⁽⁶⁾	$	39,312	$	(42	)	$	39,270

⁽¹⁾	As of the acquisition date, the fair value of trade receivables approximated the book value acquired. The gross contractual amount receivable was $3,347 million, of which approximately $102 million was not expected to be collected.

⁽²⁾	Other current net assets related to divestitures were approximately $1,647 million.

⁽³⁾

The fair value adjustment estimate of identifiable intangible assets is preliminary and is determined using the “income approach,” which is a valuation technique that estimates the fair value of an asset based on market participants’ expectations of the cash flows an asset would generate over its remaining useful life.

⁽⁴⁾	The estimated weighted average amortization period of the acquired product rights is 12 years.

⁽⁵⁾

In the ordinary course of business, Actavis Generics incurred contingent and other liabilities. Except as specifically excluded by the relevant accounting standard, contingencies are required to be measured at fair value as of the acquisition date. A liability of $524 million for litigation matters was assumed by Teva in connection with the acquisition. Refer further to note 16 for contingencies.

⁽⁶⁾	The reduction in the estimated fair value of the net assets acquired is a result of a working capital true up adjustment related to the Anda business.

Goodwill is largely attributable to expected synergies following the acquisitions, as well as future economic benefits arising from other assets acquired that could not be separately recognized at this time. Goodwill is not deductible for tax purposes, and was allocated to the generic medicines segment and other activities, see note 7.

Purchase price allocated to intangibles primarily represents developed products already marketed and IPR&D. Approximately $8.0 billion was allocated from the purchase price to developed products and $5.4 billion to IPR&D.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

For both developed products and IPR&D, net cash flows were discounted to present values, using a range of discount rates from 6.5% to 13%. Other assumptions reflect stage of development, nature and timing of efforts for completion, and other risks and uncertainties. Identifiable intangible assets were valued using a variation of the income approach known as the “Multi-Period Excess Earnings Approach”. This uses a forecast of expected cash flows, cash outflows and contributory charges for economic returns on tangible and intangible assets employed.

IPR&D represents development in process which as of the closing date, had substance, where process to date is more than insignificant but had not yet reached completeness. As it relates to this acquisition, Teva considered all products that had at least begun processing the testing to demonstrate bioequivalence but had not yet received final approval from the Food and Drug Administration (“FDA”) to be part of IPR&D. There are approximately 200 products and/or product groups included in this allocation. A probability of success factor was used to reflect inherent technological and regulatory risks.

The measurement period adjustments related to the identifiable intangible assets acquired represent the impact of updated cash flow projections on the fair value of the assets. The updated projections incorporated additional information obtained subsequent to the closing of the transaction, which included updated product and market based assumptions. The resulting reduction of amortization of product rights from the date of the acquisition’s consummation is not material to the consolidated financial statements.

The final cash consideration for the Actavis Generics acquisition is subject to certain net working capital adjustments. Following the terms of the agreement, Teva submitted an adjustment for $1.4 billion with regards to a working capital true up. The final amount of any contractual adjustment will be determined in arbitration, as provided for in the agreement, and it could be significantly lower than the amount submitted. No amount for the working capital true up has been recorded as a purchase price adjustment to date. Any amount recovered from the working capital true up before the end of the measurement period would be a reduction to purchase price and associated goodwill. Amounts recovered after the measurement period would be recorded as a gain in net income.

In order to complete the Actavis Generics acquisition, Teva was required by the U.S. Federal Trade Commission (“FTC”) to divest certain Actavis Generics and Teva products. On October 5, 2016, Teva entered into an agreement to sell certain assets and operations of Actavis Generics in the U.K. and Ireland, and the transaction closed on January 9, 2017. Net proceeds from the sale of the assets amounted to $677 million. As a result of the devaluation of the British pound, the transactional currency, against the U.S. dollar, a capital loss of $52 million was recognized during the period in general and administrative expenses. The currency translation impact was reclassified to the statements of income out of accumulated other comprehensive income (see note 10). The table below summarizes the major classes of assets and liabilities included as held for sale as at December 31, 2016.

Carrying amounts of major classes of assets included as held for sale:


	U.S.$ in millions
Trade receivables	$	59
Inventories		63
Other current assets		1
Deferred income taxes		7
Property, plant and equipment, net		36
Identifiable intangible assets, net		633

Total assets of the disposal group classified as held for sale in the consolidated balance sheets	$	799

Trade payables and accrued expenses	$	83
Other current liabilities		10
Other taxes and long-term liabilities		23

Total liabilities of the disposal group classified as held for sale in the consolidated balance sheets	$	116

In addition, assets held for sale at December 31, 2016 include other divestitures related to the acquisition of Actavis Generics, which are not significant to Teva.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

Other 2016 transactions:

During the year ended December 31, 2016, Teva entered into other transactions for aggregate cash consideration of $2.3 billion and non-cash consideration with a fair value of $1.8 billion. Goodwill recognized for these transactions is not deductible for tax purposes.

Pro forma financial information for the following transactions was not significant, individually or collectively, when compared with Teva’s financial results.

Japanese business venture:

On April 1, 2016, Teva and Takeda Pharmaceutical Company Limited (“Takeda”) established Teva Takeda Yakuhin Ltd. (“Teva Takeda”), a new business venture in Japan. The business venture combined Teva’s Japanese generics business with Takeda’s portfolio of off-patent products, leveraging Takeda’s leading brand reputation and strong distribution presence in Japan with Teva’s expertise in supply chain, operational network, infrastructure and R&D, to meet the wide-ranging needs of patients and growing importance of generics in Japan through the provision of off-patent medicines.

Teva assigned 49% in the business venture to Takeda in consideration of the contribution of its off-patented products business in Japan. The business venture was consolidated in Teva’s financial statements commencing April 1, 2016. Takeda’s interest in the business venture is accounted for under net income (loss) attributable to non-controlling interests.

The table below summarizes the fair value of the assets acquired and liabilities assumed and resulting goodwill, as finalized in the first quarter of 2017. Teva recorded net assets acquired of $1.8 billion and non-controlling interests of $1.6 billion, with the difference recorded under Teva shareholders’ equity.

Recognized amounts of identifiable assets acquired and liabilities assumed:


	U.S.$ in millions
Inventories	$	134
Identifiable intangible assets:
Product and marketing rights ⁽¹⁾		1,491
Goodwill		698

Total assets acquired	$	2,323

Deferred income taxes		498

Total liabilities assumed		498

Net assets acquired	$	1,825

⁽¹⁾	The weighted average amortization period of the acquired product and marketing rights is approximately 15 years.

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized. Specifically, goodwill recorded as part of the Teva Takeda business venture is attributable to expected specific synergies and market benefits that could not be individually identified and separately recognized, and was allocated to the generics segment.

Rimsa

On March 3, 2016, Teva completed the acquisition of Representaciones e Investigaciones Médicas, S.A. de C.V. (“Rimsa”), a pharmaceutical manufacturing and distribution company in Mexico, for $2.3 billion, in a cash free, debt free set of transactions. Teva financed the transaction using cash on hand.

Following the closing of the acquisition, Teva identified issues concerning Rimsa’s pre-acquisition quality, manufacturing and other practices, at which point the Company began an assessment of the extent and cost of remediation required to return its products to the market. In September 2016, two lawsuits were filed: a pre-emptive suit by the Rimsa sellers against Teva, and Teva’s lawsuit alleging fraud and breach of contract against the Rimsa sellers. The Rimsa sellers subsequently dismissed their lawsuit, and the dismissal was approved by court order on December 20, 2016. Teva’s lawsuit against the Rimsa sellers remains outstanding.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

During the fourth quarter of 2016, Teva completed its assessment of the implications of the identified issues on the intended synergies and integration of the acquisition, resulting in a comprehensive remediation plan and an impairment test over the goodwill acquired.

As a result of the alleged fraud, and given the required level of senior management’s attention to execute the remediation plan, Teva concluded that the rarity of the circumstances warranted the evaluation of Rimsa as a separate reporting unit. Accordingly, in 2016 goodwill resulting from the Rimsa acquisition was tested for impairment at this level, and an impairment charge of $900 million on goodwill was recorded.

Teva continues to monitor the execution of the remediation plan and related milestones. Critical to the plan are the timing and costs to remediate the facility and its product files. As all files required revalidation efforts in order to commence sales, all were classified as IPR&D. If it is determined that remediation will not be completed within the expected timeframe, Teva may conclude that additional impairment is necessary.

The table below summarizes the fair value of the assets acquired and liabilities assumed and resulting goodwill, prior to any goodwill impairments. The amounts were finalized in the first quarter of 2017. The measurement period adjustments since December 31, 2016 were not material to Teva’s consolidated financial statements.

Recognized amounts of identifiable assets acquired and liabilities assumed:


	U.S.$ in millions
Current assets ⁽¹⁾	$	97
Other non-current assets		144
Identifiable intangible assets:
In-process research and development ⁽²⁾		338
Goodwill		1,933

Total assets acquired	$	2,512

Current liabilities		123
Deferred taxes and other non-current liabilities		68

Total liabilities assumed		191

Net assets acquired	$	2,321

⁽¹⁾	As of the acquisition date, the fair value of trade receivables approximated the book value acquired. The gross contractual amount receivable was $47 million, of which $3 million was not expected to be collected.

⁽²⁾	The value of research and development in-process was calculated using cash flow projections discounted for the inherent risk in the projects.

Goodwill attributable to the acquisition following the updated valuations represents the expected benefits from Teva’s increased presence in the Mexican market, and was allocated to the generics operating segment.

b.	Other significant agreements:

The Company has entered into alliances and other arrangements with third parties to acquire rights to products it does not have, to access markets it does not operate in and to otherwise share development costs or business risks. The Company’s most significant agreements of this nature are summarized below.

Attenukine ^TM

In December 2016, Teva entered into a license agreement for research, development, manufacture and commercializing of Attenukine ^TM with a subsidiary of Takeda. Teva received a $30 million upfront payment. The agreement stipulates additional milestone payments of up to $280 million, as well as royalties.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

Ninlaro ^®

In November 2016, Teva entered into an agreement to sell its royalties and other rights in Ninlaro ^® (ixazomib) to a subsidiary of Takeda, for a $150 million upfront payment to Teva, with additional consideration of up to $150 million dependent on future sales. Teva was entitled to these royalties pursuant to an agreement from 2014 assigning the Ninlaro ^® patents to an affiliate of Takeda in consideration of milestone payments and sales royalties. In the first quarter of 2017, Teva received a $75 million payment which was recognized in revenue for the period.

Celltrion

In October 2016, Teva and Celltrion, Inc. (“Celltrion”) entered into a collaborative agreement to commercialize two of Celltrion’s biosimilar products in development for the U.S. and Canadian markets. Teva paid Celltrion $160 million, of which up to $60 million is refundable or creditable under certain circumstances. Teva and Celltrion will share the profit from the commercialization of these products.

Regeneron

In September 2016, Teva and Regeneron Pharmaceuticals, Inc. (“Regeneron”) entered into a collaborative agreement to develop and commercialize Regeneron’s pain medication product, fasinumab. Teva and Regeneron share equally in the global commercial benefits of this product, as well as ongoing associated research and development costs of approximately $1 billion. Teva paid an upfront payment of $250 million to Regeneron as part of the agreement.

NOTE 4 – Inventories:

Inventories consisted of the following:


	March 31,		December 31,
	2017		2016
	U.S. $ in millions
Finished products	$	2,865	$	2,832
Raw and packaging materials		1,345		1,385
Products in process		568		538
Materials in transit and payments on account		221		199

	$	4,999	$	4,954

NOTE 5 - Property, plant and equipment:

Property, plant and equipment, net, consisted of the following:


	March 31,		December 31,
	2017		2016
	(U.S. $ in millions)
Machinery and equipment	$	5,845	$	5,748
Buildings		3,413		3,331
Computer equipment and other assets		1,849		1,774
Payments on account		588		634
Land ⁽¹⁾		450		439

		12,145		11,926
Less—accumulated depreciation		3,985		3,853

	$	8,160	$	8,073

⁽¹⁾	Land includes long-term leasehold rights in various locations, with useful lives of between 30 and 99 years.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

NOTE 6 - Identifiable intangible assets:

Identifiable intangible assets consisted of the following:


	Original amount net of impairment				Accumulated amortization				Amortized balance
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
	2017		2016		2017		2016		2017		2016
	(U.S. $ in millions)
Product rights	$	18,065	$	18,180	$	6,795	$	6,460	$	11,270	$	11,720
Trade names		590		625		27		41		563		584
Research and development in process		9,356		9,183		—		—		9,356		9,183

Total	$	28,011	$	27,988	$	6,822	$	6,501	$	21,189	$	21,487

Product rights and trade names are assets presented at amortized cost. These assets represent a portfolio of pharmaceutical products from various categories with a weighted average life of approximately 11 years. Amortization of intangible assets amounted to $321 million and $993 million in the three months ended March 31, 2017 and year ended December 31, 2016, respectively, and are recorded in earnings, as relevant, under cost of sales and selling and marketing expenses, depending on the nature of the asset.

Impairment of identifiable intangible assets amounted to $2 million and $589 million in the three months ended March 31, 2017 and year ended December 31, 2016, respectively, and are recorded in earnings under impairments, restructuring and others. See note 14.

NOTE 7 - Goodwill:

The changes in the carrying amount of goodwill for the period ended March 31, 2017 were as follows:


	Generics		Specialty		Other		Total
	(U.S. $ in millions)
Balance as of January 1, 2017	$	32,863	$	9,323	$	2,223	$	44,409

Changes during the period:
Goodwill adjustments ⁽¹⁾		355		—		—		355
Translation differences		235		22		5		262

Balance as of March 31, 2017	$	33,453	$	9,345	$	2,228	$	45,026

⁽¹⁾	Due to Actavis Generics and Rimsa measurement period adjustments.

As a result of the acquisition of Actavis Generics, Teva conducted an analysis of its business segments, which led to a change to Teva’s segment reporting and goodwill assignment in the fourth quarter of 2016. Teva reallocated goodwill to its adjusted reporting units using a relative fair value approach.

Notwithstanding the recent performance of Teva’s shares on the market, the February 2017 departure of its President and Chief Executive Officer and the announcement of the impending departure of its Chief Financial Officer, management has determined that Teva’s business has not changed in a manner that affects the conclusion that the fair value estimates of its reporting units are greater than their respective carrying amounts.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

NOTE 8 – Earnings per share:

Basic earnings per share is computed by dividing net income attributable to Teva’s ordinary shareholders by the weighted average number of ordinary shares outstanding (including fully vested restricted share units (“RSUs”)) during the period, net of treasury shares.

In computing diluted earnings per share for the three months ended March 31, 2017 and 2016, basic earnings per share was adjusted to take into account the potential dilution that could occur upon the exercise of options and non-vested RSUs granted under employee stock compensation plans, and convertible senior debentures, using the treasury stock method.

Additionally, for the three months ended March 31, 2017, no account was taken of the potential dilution of the mandatory convertible preferred shares amounting to 59 million weighted average shares, since they had an anti-dilutive effect on earnings per share.

NOTE 9 – Revenue recognition:

The Company recognizes revenues from product sales, including sales to distributors, when persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable and collectability is reasonably assured. This generally occurs when products are shipped and title and risk and rewards for the products are transferred to the customer.

Revenues from product sales are recorded net of provisions for estimated chargebacks, rebates, returns, prompt pay discounts and other deductions, such as shelf stock adjustments, which can be reasonably estimated. When sales provisions are not considered reasonably estimable by Teva, the revenue is deferred to a future period when more information is available to evaluate the impact.

Provisions for chargebacks, rebates including Medicaid and other governmental program discounts, as well as other promotional items, such as shelf stock adjustments, are included in sales reserves and allowances (“SR&A”) under “current liabilities.” These provisions are recognized concurrently with the sales of products. Prompt payment discounts are netted against “accounts receivable.”

Calculations for these deductions from sales are based on historical experience and the specific terms in the individual agreements. Chargebacks and rebates are the largest components of sales reserves and allowances. Provisions for chargebacks are determined using historical chargeback experience, expected chargeback levels and wholesaler sales information for new products, which are compared to externally obtained distribution channel reports for reasonableness. Rebates are recognized based on contractual obligations in place at the time of sales with consideration given to relevant factors that may affect the payment as well as historical experience for estimated market activity. Shelf-stock adjustments are granted to customers based on the existing inventory of a customer following decreases in the invoice or contract price of the related product and are estimated based on expected market performance. Teva records a reserve for estimated sales returns by applying historical experience of customer returns to the amounts invoiced and the amount of returned products to be destroyed versus products that can be placed back in inventory for resale.

Revenue resulting from the achievement of milestone events stipulated in agreements is recognized when the milestone is achieved. Milestones are based upon the occurrence of a substantive element specified in the contract or as a measure of substantive progress towards completion under the contract.

Revenues from licensees, sales of licensed products and technology are recorded in accordance with the contract terms, when third-party sales can be reliably measured and collection of the funds is reasonably assured.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

Sales reserves and allowances consisted of the following:


	March 31,		December 31,
	2017		2016
	U.S. $ in millions
Rebates	$	2,852	$	3,482
Medicaid		1,903		1,729
Chargebacks		1,717		1,584
Returns		813		844
Other		215		200

	$	7,500	$	7,839

NOTE 10 – Equity:

Accumulated other comprehensive income (loss)

The components of, and changes within, accumulated other comprehensive income attributable to Teva are presented in the table below:


	Net Unrealized Gains/(Losses)												Benefit Plans
	Foreign currency translation adjustments				Available-for- sale securities				Derivative financial instruments				Actuarial gains/(losses) and prior service (costs)/credits				Total
Balance, December 31, 2016		$	(2,769	)		$	(7	)		$	(302	)		$	(81	)		$	(3,159	)

Other comprehensive income/(loss) before reclassifications			448				90				2				(9	)			531
Amounts reclassified to the statements of income			(52	)			(35	)			6				1				(80	)

Net other comprehensive income/(loss) before tax			396				55				8				(8	)			451
Corresponding income tax			—				(1	)			—				(5	)			(6	)

Net other comprehensive income/(loss) after tax*			396				54				8				(13	)			445

Balance, March 31, 2017		$	(2,373	)		$	47			$	(294	)		$	(94	)		$	(2,714	)

*	Amounts do not include foreign currency translation adjustments attributable to noncontrolling interests of $70 million gain

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

NOTE 11—Debt obligations

a.	Short-term debt:


	Weighted average interest rate as of March 31, 2017		Maturity		March 31, 2017		December 31, 2016
					(U.S. $ in millions)
Revolving credit facility		LIBOR+1.125%		2017	$	260	$	1,240
Term loan JPY 20.7 billion		JPY LIBOR+0.25%		2018		185		—
Bank facilities		1.70%		2017		148		15
Convertible debentures		0.25%		2026		514		514
Term loan JPY 8.0 billion		JPY LIBOR+0.223%		2017		—		68
Term loan GBP 510 million		GBP LIBOR+0.7%		2017		—		629
Current maturities of long-term liabilities						835		810

Total short term debt					$	1,942	$	3,276

Short-term debt has an earliest date of repayment within 12 months.

b. Senior notes and loans:

Long-term debt includes the following:


	Weighted average interest rate as of March 31, 2017			Maturity		March 31, 2017			December 31, 2016
						(U.S. $ in millions)
Senior notes EUR 1,750 million		0.38	%		2020	$	1,863		$	1,834
Senior notes EUR 1,500 million		1.13	%		2024		1,590			1,566
Senior notes EUR 1,300 million		1.25	%		2023		1,378			1,357
Senior notes EUR 1,000 million		2.88	%		2019		1,066			1,050
Senior notes EUR 750 million		1.63	%		2028		792			780
Senior notes EUR 700 million		1.88	%		2027		744			733
Senior notes USD 3,500 million		3.15	%		2026		3,491			3,491
Senior notes USD 3,000 million		2.20	%		2021		2,996			2,995
Senior notes USD 3,000 million		2.80	%		2023		2,991			2,991
Senior notes USD 2,000 million		1.70	%		2019		2,000			2,000
Senior notes USD 2,000 million		4.10	%		2046		1,984			1,984
Senior notes USD 1,500 million		1.40	%		2018		1,499			1,498
Senior notes USD 844 million		2.95	%		2022		867			868
Senior notes USD 789 million		6.15	%		2036		781			781
Senior notes USD 700 million		2.25	%		2020		700			700
Senior notes USD 613 million		3.65	%		2021		625			626
Senior notes USD 588 million		3.65	%		2021		587			587
Senior notes CHF 450 million		1.50	%		2018		449			442
Senior notes CHF 350 million		0.50	%		2022		350			344
Senior notes CHF 350 million		1.00	%		2025		350			345
Senior notes CHF 300 million		0.13	%		2018		300			295

Fair value hedge accounting adjustments							(3	)		(2	)


Total senior notes							27,400			27,265

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)


Term loan USD 2.5 billion	LIBOR +1.125%	2018		2,500			2,500
Term loan USD 2.5 billion	LIBOR +1.25%	2017-2020		2,500			2,500
Term loan JPY 65 billion	0.99%	2017		585			560
Term loan JPY 35 billion	1.42%	2019		313			299
Term loan JPY 35 billion	LIBOR +0.3%	2018		313			299

Total loans				6,211			6,158
Debentures USD 15 million	7.20%	2018		15			15
Other	5.07%	2026		10			9

Total debentures and others				25			24

Less current maturities				(835	)		(810	)
Derivative instruments				3			2
Less debt issuance costs				(110	)		(115	)

Total long-term debt			$	32,694		$	32,524

NOTE 12 – Fair value measurement:

Teva’s financial instruments consist mainly of cash and cash equivalents, investment in securities, current and non-current receivables, short-term debt, current and non–current payables, contingent consideration, senior notes and loans, convertible senior debentures and derivatives.

The fair value of the financial instruments included in working capital and non-current receivables and payables approximates their carrying value. The fair value of term loans and bank facilities mostly approximates their carrying value, since they bear interest at rates close to the prevailing market rates.

a. Financial instruments measured at fair value

The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable inputs that are based on inputs not quoted on active markets, but corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

Financial items carried at fair value as of March 31, 2017 and December 31, 2016 are classified in the tables below in one of the three categories described above:


	March 31, 2017
	Level 1		Level 2			Level 3			Total
	U.S. $ in millions
Cash and cash equivalents:
Money markets	$	13	$	—		$	—		$	13
Cash deposits and other		887		—			—			887
Investment in securities:
Equity securities		226		—			—			226
Structured investment vehicles		—		90			—			90
Other		14		—			17			31
Derivatives:
Asset derivatives - options and forward contracts		—		12			—			12
Asset derivatives - cross currency swaps		—		90			—			90
Liabilities derivatives - options and forward contracts		—		(26	)		—			(26	)
Liabilities derivatives - interest rate swaps		—		(3	)		—			(3	)
Contingent consideration*		—		—			(839	)		(839	)

Total	$	1,140	$	163		$	(822	)	$	481


	December 31, 2016
	Level 1		Level 2			Level 3			Total
	U.S. $ in millions
Cash and cash equivalents:
Money markets	$	24	$	—		$	—		$	24
Cash deposits and other		964		—			—			964
Investment in securities:
Equity securities		842		—			—			842
Structured investment vehicles		—		89			—			89
Other		14		—			17			31
Derivatives:
Asset derivatives - options and forward contracts		—		10			—			10
Asset derivatives - cross-currency swaps		—		88			—			88
Liability derivatives - options and forward contracts		—		(17	)		—			(17	)
Liability derivatives - interest rate swaps		—		(2	)		—			(2	)
Contingent consideration*		—		—			(828	)		(828	)

Total	$	1,844	$	168		$	(811	)	$	1,201

*	Contingent consideration represents either liabilities or assets recorded at fair value in connection with acquisitions.

Teva determined the fair value of the liability for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration is based on several factors, such as: the cash flows projected from the success of unapproved product candidates; the probability of success for product candidates including risks associated with uncertainty regarding achievement and payment of milestone events; the time and resources needed to complete the development and approval of product candidates; the life of the potential commercialized products and associated risks of obtaining regulatory approvals in the U.S. and Europe and the risk adjusted discount rate for fair value measurement.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

The contingent consideration is evaluated quarterly or more frequently if circumstances dictate. Changes in the fair value of contingent consideration are recorded in earnings.

Significant changes in unobservable inputs, mainly the probability of success and cash flows projected, could result in material changes to the contingent consideration liability.

The following table summarizes the activity for those financial assets and liabilities where fair value measurements are estimated utilizing Level 3 inputs:


	Three months ended March 31, 2017			Year ended December 31, 2016
	U.S. $ in millions
Fair value at the beginning of the period	$	(811	)	$	(811	)
Investment in debt securities		—			16
Additional contingent consideration resulting from:
Actavis Generics transaction		—			(302	)
Adjustments to provisions for contingent consideration:
Actavis Generics transaction		(34	)		18
Labrys transaction		(1	)		(6	)
Eagle transaction		(5	)		(179	)
MicroDose transaction		—			(8	)
Cephalon transaction		—			(12	)
Nupathe transaction		—			122
Settlement of contingent consideration:
Labrys transaction		—			25
Eagle transaction		29			115
Cephalon transaction		—			205
Gecko transaction		—			6

Fair value at the end of the period	$	(822	)	$	(811	)

b. Financial instruments not measured at fair value

Financial instruments measured on a basis other than fair value mostly consist of senior notes and convertible senior debentures, and are presented in the below table in terms of fair value:


	Estimated fair value*
	March 31,		December 31,
	2017		2016
	U.S. $ in millions
Senior notes included under long-term liabilities	$	26,584	$	26,456
Senior notes and convertible senior debentures included under short-term debt		551		569

Total	$	27,135	$	27,025

*	The fair value was estimated based on quoted market prices, where available.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

c. Investment in securities

The fair value, amortized cost and gross unrealized holding gains and losses of such securities are presented in the below table:


	Fair value		Amortized cost		Gross unrealized holding gains		Gross unrealized holding losses
	U.S. $ in millions
March 31, 2017	$	360	$	304	$	88	$	32
December 31, 2016	$	986	$	985	$	44	$	43

NOTE 13 – Derivative instruments and hedging activities:

The following table summarizes the notional amounts for hedged items, when transactions are designated as hedge accounting:


	March 31,		December 31,
	2017		2016
	U.S. $ in millions
Cross-currency swap - cash flow hedge	$	588	$	588
Cross-currency swap - net investment hedge		500		—
Interest rate swap - fair value hedge		500		500

The following table summarizes the classification and fair values of derivative instruments:


	Fair value
	Designated as hedging instruments						Not designated as hedging instruments
	March 31, 2017			December 31, 2016			March 31, 2017			December 31, 2016
Reported under	U.S. $ in millions

Asset derivatives:
Other current assets:
Option and forward contracts	$	—		$	—		$	12		$	10
Other non-current assets:
Cross-currency swaps - cash flow hedge		87			88			—			—
Cross-currency swaps - net investment hedge		3			—			—			—
Liability derivatives:
Other current liabilities:
Option and forward contracts		—			—			(26	)		(17	)
Senior notes and loans:
Interest rate swaps - fair value hedge		(3	)		(2	)		—			—

Derivatives on foreign exchange contracts mainly hedge Teva’s balance sheet items from currency exposure but are not designated as hedging instruments for accounting purposes. With respect to such derivatives, losses of $47 million and gains of $14 million were recognized under financial expenses, net for the three months ended March 31, 2017 and 2016, respectively. Such losses or gains offset the revaluation of the balance sheet items which are also recorded under financial expenses, net.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

With respect to the interest rate and cross-currency swap agreements, gains of $1 million and $5 million were recognized under financial expenses, net for the three months ended March 31, 2017 and 2016, respectively. Such losses or gains mainly reflect the differences between the fixed interest rate and the floating interest rate.

Commencing in the third quarter of 2015, Teva entered into forward starting interest rate swap and treasury lock agreements designated as cash flow hedges of the U.S. dollar debt issuance in July 2016 (in connection with the closing of the Actavis Generics acquisition).

Certain of the forward starting interest rate swaps and treasury lock agreements matured during the first half of 2016. In July 2016, Teva terminated the remaining forward starting interest rate swaps and treasury lock agreements. The termination of these transactions resulted in a loss position of $493 million, of which $242 million were settled on October 7, 2016 and the remaining amount was settled in January 2017. The change in fair value of these instruments recorded as part of other comprehensive income will be amortized under financial expenses, net over the life of the debt.

With respect to the forward starting interest rate swaps and treasury lock agreements, losses of $7 million were recognized under financial expenses, net for the three months ended March 31, 2017. Such losses mainly reflect the differences between the hedged interest rate and the actual interest rate on the U.S. dollar debt issuance date in July 2016.

In the third quarter of 2016, Teva terminated interest rate swap agreements designated as fair value hedge relating to certain senior notes. Settlement of these transactions resulted in a gain position of $41 million. The fair value hedge accounting adjustments of these instruments recorded under senior notes and loans, will be amortized under financial expenses, net over the life of the debt. With respect to these terminated interest rate swap agreements, gains of $2 million were recognized under financial expenses, net for the three months ended March 31, 2017.

In the fourth quarter of 2016, Teva entered into an interest rate swap agreement designated as fair value hedge relating to its 2.8% senior notes due 2023 with respect to $500 million notional amount of outstanding debt.

In the first quarter of 2017, Teva entered into a cross currency swap agreement maturing in 2020 with respect to $500 million notional amount. The cross currency swap was designated as a net investment hedge of Teva’s euro denominated net assets, in order to reduce the risk of adverse exchange rate fluctuations. The effective portion of the hedge will be determined by looking into changes in spot exchange rate. The change in fair value of the cross currency swap attributable to changes other than those due to fluctuations in the spot exchange rate are excluded from the assessment of hedge effectiveness and such differences are reported directly in the statement of income. The amount recorded in the statement of income in the first quarter of 2017 was not material.

Venezuela

Our operations in Venezuela are increasingly challenging due to instability there. Teva adjusted the exchange rates that it uses for the Venezuelan bolivar twice during 2016 and in February 2017 Teva further updated the exchange rate to 380 bolivar per dollar. Teva is exposed to a potential impairment of its net monetary balance sheet items in Venezuela as it continues to adjust the exchange rate that it uses. As of March 31, 2017, Teva’s net monetary balance sheet items amounted to approximately negative $8 million, including approximately $23 million in cash. In addition, remittance of cash outside of Venezuela is limited. Teva is also exposed to a potential negative impact on its revenues and profits in Venezuela, including due to capital controls and the difficulty of maintaining inventory for sale.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

NOTE 14 – Impairments, restructuring and others:

Impairments, restructuring and others consisted of the following:


	Three months ended
	March 31,
	2017		2016

Restructuring expenses	$	130	$	19
Capital loss from currency translation		52		—
Integration expenses		23		13
Contingent consideration		21		51
Impairments of long-lived assets		11		13
Acquisition expenses		—		24
Others		3		(1	)

Total	$	240	$	119

Restructuring expenses of $130 million were incurred in the first quarter of 2017, following the integration of Actavis Generics and other efficiency measures. Further integration and other efficiency initiatives may drive additional restructuring expenses throughout the year.

Following FDA actions in 2016, Teva voluntarily discontinued all manufacturing activities at its facility in Godollo, Hungary, in order to assess and remediate quality concerns. Property, plant and equipment balances for this site as of March 31, 2017 amounted to approximately $87 million following an impairment of $80 million recorded during the fourth quarter of 2016. Any actions taken with regards to its Godollo facility may result in further impairments.

Following an FDA audit of Teva’s active pharmaceutical ingredient (“API”) production facility in China in September 2016, Teva received a warning letter from the FDA in April 2017. Teva is in the process of undertaking corrective actions to address both the specific concerns raised by investigators as well as the underlying causes of those concerns. A response has been sent to the FDA.

NOTE 15 – Legal settlements and loss contingencies:

Legal settlements and loss contingencies for the three months ended March 31, 2017 amounted to an expense of $20 million, compared to income of $25 million for the three months ended March 31, 2016. As of March 31, 2017 and December 31, 2016 an accrued amount for legal settlements and loss contingencies of $901 million and $1,525 million, respectively, is recorded in other current liabilities.

NOTE 16 – Contingencies:

General

From time to time, Teva and/or its subsidiaries are subject to claims for damages and/or equitable relief arising in the ordinary course of business. In addition, as described below, in large part as a result of the nature of its business, Teva is frequently subject to litigation. Teva generally believes that it has meritorious defenses to the actions brought against it and vigorously pursues the defense or settlement of each such action. Except as described below, Teva does not currently have a reasonable basis to estimate the loss, or range of loss, that is reasonably possible with respect to matters disclosed in this note.

Teva records a provision in its financial statements to the extent that it concludes that a contingent liability is probable and the amount thereof is estimable. Based upon the status of the cases described below, management’s assessments of the likelihood of damages, and the advice of counsel, no provisions have been made regarding the matters disclosed in this note, except as noted below. Litigation outcomes and contingencies are unpredictable, and excessive verdicts can occur. Accordingly, management’s assessments involve complex judgments about future events and often rely heavily on estimates and assumptions.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

Based on currently available information, Teva believes that none of the proceedings brought against it described below is likely to have a material adverse effect on its financial condition. However, if one or more of such proceedings were to result in final judgments against Teva, such judgments could be material to its results of operations and cash flows in a given period. In addition, Teva incurs significant legal fees and related expenses in the course of defending its positions even if the facts and circumstances of a particular litigation do not give rise to a provision in the financial statements.

In connection with third-party agreements, Teva may under certain circumstances be required to indemnify, and may be indemnified by, in unspecified amounts, the parties to such agreements against third-party claims. Among other things, Teva’s agreements with third parties may require Teva to indemnify them, or require them to indemnify Teva, for the costs and damages incurred in connection with product liability claims, in specified or unspecified amounts.

Except as otherwise noted, all of the litigation matters disclosed below involve claims arising in the United States. Except as otherwise noted, all third party sales figures given below are based on IMS data.

Intellectual Property Litigation

From time to time, Teva seeks to develop generic versions of patent-protected pharmaceuticals for sale prior to patent expiration in various markets. In the United States, to obtain approval for most generics prior to the expiration of the originator’s patents, Teva must challenge the patents under the procedures set forth in the Hatch-Waxman Act of 1984, as amended. To the extent that Teva seeks to utilize such patent challenge procedures, Teva is and expects to be involved in patent litigation regarding the validity, enforceability or infringement of the originator’s patents. Teva may also be involved in patent litigation involving the extent to which its product or manufacturing process techniques may infringe other originator or third-party patents.

Additionally, depending upon a complex analysis of a variety of legal and commercial factors, Teva may, in certain circumstances, elect to market a generic version even though litigation is still pending. This could be before any court decision is rendered or while an appeal of a lower court decision is pending. To the extent Teva elects to proceed in this manner, it could face substantial liability for patent infringement if the final court decision is adverse to Teva.

The general rule for damages in patent infringement cases in the United States is that the patentee should be compensated by no less than a reasonable royalty, and it may also be able in certain circumstances to be compensated for its lost profits. The amount of a reasonable royalty award would generally be calculated based on the sales of Teva’s generic product. The amount of lost profits would generally be based on the lost sales of the branded product. The launch of an authorized generic and other generic competition may be relevant to the damages calculation. In addition, the patentee may seek consequential damages as well as enhanced damages of up to three times the profits lost by the patent holder for willful infringement, although courts have typically awarded much lower multiples.

Teva is also involved in litigation regarding patents in other countries where it does business, particularly in Europe, where Teva has in recent years increased the number of launches of its generic versions of branded pharmaceuticals prior to the expiration of the innovator’s patents. The laws concerning generic pharmaceuticals and patents differ from country to country. Damages for patent infringement in Europe may include lost profits or a reasonable royalty, but enhanced damages for willful infringement are generally not available.

In December 2012, Endo International (“Endo”) sued Actavis Inc. and Actavis South Atlantic LLC (collectively “Actavis”), subsidiaries of Teva, in New York federal court for infringement of patents expiring in 2023. The lawsuit followed the launch by Actavis of its 7.5 mg and 15 mg oxymorphone extended-release tablets, which were the AB-rated generic versions of the original formulation of Endo’s Opana ^® ER. According to Endo’s annual report, Opana ^® ER had net sales of approximately $299 million for the twelve months ended December 31, 2012. In September 2013, Actavis launched additional strengths of its product. In August 2015, the court found two Endo patents valid and infringed, and on April 29, 2016, enjoined Actavis from selling its oxymorphone ER products. Actavis has appealed these rulings. In addition, in November 2014, Endo and Mallinckrodt sued Actavis in Delaware federal court, alleging that sales of the Actavis oxymorphone ER products infringe another patent that expires in 2029, which Endo had licensed from Mallinckrodt. Trial in that case took place in February 2017. Were Endo ultimately to be successful in its allegations of patent infringement, Actavis could be required to pay damages relating to past sales of its oxymorphone ER products and continue to be enjoined from future sales until patent expiration. The amount of damages, if any, would be determined in a separate trial that would be scheduled after resolution of the pending appeal.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

In July 2014, GlaxoSmithKline (“GSK”) sued Teva in Delaware federal court for infringement of a patent expiring in June 2015, which covers GSK’s Coreg ^® products. Teva and other generic producers began selling their carvedilol tablets (the generic version of Coreg ^® ) in September 2007. At the time of Teva’s launch, annual sales of Coreg ^® were approximately $1.6 billion. The parties served their first round expert reports in September 2016, including GSK’s confidential damages expert report. Teva vigorously disputes GSK’s claims on the merits and also disputes the amount and nature of GSK’s alleged damages. Rebuttal expert reports, including Teva’s damages report, were served in November 2016. A summary judgment hearing took place on March 24, 2017. Trial, if necessary, is scheduled to commence on June 12, 2017. Were GSK ultimately to be successful in its allegations of patent infringement, Teva could be required to pay damages relating to past sales of its carvedilol products. Teva would be permitted to continue selling its carvedilol products, given that GSK’s patent has expired.

Product Liability Litigation

Teva’s business inherently exposes it to potential product liability claims, and in recent years the number of product liability claims asserted against Teva has increased. Teva maintains a program of insurance, which may include commercial insurance, self-insurance (including direct risk retention), or a combination of both approaches, in amounts and on terms that it believes are reasonable and prudent in light of its business and related risks. However, Teva sells, and will continue to sell, pharmaceuticals that are not covered by insurance; in addition, it may be subject to claims for which insurance coverage is denied as well as claims that exceed its policy limits. Product liability coverage for pharmaceutical companies is becoming more expensive and increasingly difficult to obtain. As a result, Teva may not be able to obtain the type and amount of commercial insurance it desires, or any commercial insurance on reasonable terms, in all of its markets.

Teva and/or its subsidiaries, including Watson Laboratories, Inc. (“Watson”) and Actavis Elizabeth LLC (“Actavis Elizabeth”), have been named as defendants in approximately 4,000 product liability lawsuits brought against them and other manufacturers by approximately 4,400 plaintiffs claiming injuries (including allegations of neurological disorders, such as tardive dyskinesia) from the long-term use of metoclopramide (the generic form of Reglan ^® ). The vast majority of the lawsuits are pending in mass tort proceedings in state court in California, Pennsylvania and New Jersey. For over 20 years, the FDA-approved label for metoclopramide has contained warning language about the risk of tardive dyskinesia, and that the risk of developing the disorder increases with duration of treatment and total cumulative dose. In February 2009, the FDA announced that manufacturers of metoclopramide would be required to revise the label, including the addition of a “black box” warning about the risk of tardive dyskinesia resulting from long-term usage. Teva expects to be dismissed from at least some of the cases on the basis that some plaintiffs cannot demonstrate that they used a Teva product.

In the New Jersey proceeding, the trial court granted the defendants’ motion to dismiss, on federal preemption grounds, all claims other than those based on an alleged failure to timely update the label. The appellate court affirmed this dismissal. On August 22, 2016, following Teva’s appeal of the decision, the New Jersey Supreme Court affirmed with respect to the failure to update claims. On November 21, 2016, Teva filed a petition for a writ of certiorari with the United States Supreme Court, which was denied on April 3, 2017.

In October 2015, Actavis Elizabeth reached an agreement in principle to resolve the vast majority of the cases pending against it. In January 2017, Teva and/or its other subsidiaries involved in the litigation also reached an agreement in principle to resolve the vast majority of the cases pending against them, subject to participation by a certain percentage of plaintiffs. A provision has been included in the financial statements for these matters.

Competition Matters

As part of its generic pharmaceuticals business, Teva has challenged a number of patents covering branded pharmaceuticals, some of which are among the most widely-prescribed and well-known drugs on the market. Many of Teva’s patent challenges have resulted in litigation relating to Teva’s attempts to market generic versions of such pharmaceuticals under the federal Hatch-Waxman Act. Some of this litigation has been resolved through settlement agreements in which Teva obtained a license to market a generic version of the drug, often years before the patents expire.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

Teva and its subsidiaries have increasingly been named as defendants in cases that allege antitrust violations arising from such settlement agreements. The plaintiffs in these cases, which are usually direct and indirect purchasers of pharmaceutical products, and often assert claims on behalf of classes of all direct and indirect purchasers, typically allege that (1) Teva received something of value from the innovator in exchange for an agreement to delay generic entry, and (2) significant savings could have realized if there had been no settlement agreement and generic competition had commenced earlier. These class action cases seek various forms of injunctive and monetary relief, including damages based on the difference between the brand price and what the generic price allegedly would have been and disgorgement of profits, which are automatically trebled under the relevant statutes, plus attorneys’ fees and costs. The alleged damages generally depend on the size of the branded market and the length of the alleged delay, and can be substantial – potentially measured in multiples of the annual brand sales – particularly where the alleged delays are lengthy or branded drugs with annual sales in the billions of dollars are involved.

Teva believes that its settlement agreements are lawful and serve to increase competition, and has defended them vigorously. In Teva’s experience to date, these cases have typically settled for a fraction of the high end of the damages sought, although there can be no assurance that such outcomes will continue.

In June 2013, the United States Supreme Court held, in Federal Trade Commission v. Actavis, Inc. (the “AndroGel case”), that a rule of reason test should be applied in analyzing whether such settlements potentially violate the federal antitrust laws. The Supreme Court held that a trial court must analyze each agreement in its entirety in order to determine whether it violates the antitrust laws. This new test has resulted in increased scrutiny of Teva’s patent settlements, additional action by the FTC and state and local authorities, and an increased risk of liability in Teva’s currently pending antitrust litigations.

In April 2006, certain subsidiaries of Teva were named in a class action lawsuit filed in the U.S. District Court for the Eastern District of Pennsylvania. The case alleges that the settlement agreements entered into between Cephalon, Inc., now a Teva subsidiary (“Cephalon”), and various generic pharmaceutical companies in late 2005 and early 2006 to resolve patent litigation involving certain finished modafinil products (marketed as Provigil ^® ) were unlawful because they had the effect of excluding generic competition. The case also alleges that Cephalon improperly asserted its Provigil ^® patent against the generic pharmaceutical companies. The first lawsuit was brought by King Drug Company of Florence, Inc. on behalf of itself and as a proposed class action on behalf of any other person or entity that purchased Provigil ^® directly from Cephalon (the “Direct Purchaser Class”). Similar allegations have been made in a number of additional complaints, including those filed on behalf of a proposed class of end payors of Provigil ^® (the “End Payor Class”), by certain individual end payors, by certain retail chain pharmacies and by Apotex, Inc. (collectively, these cases are referred to as the “Philadelphia Modafinil Action”). Separately, Apotex challenged Cephalon’s Provigil ^® patent, and in October 2011, the Court found the patent to be invalid and unenforceable based on inequitable conduct. This decision was affirmed on appeal in April 2013. Teva has either settled or reached agreements in principle to settle with all of the plaintiffs in the Philadelphia Modafinil Action. However, one of the end payors, United Healthcare Services, took the position that it is not bound by the settlement that was agreed to on its behalf and brought a separate action in Minnesota federal court. On February 6, 2017, the Minnesota court granted Teva’s motion to transfer that action to the U.S. District Court for the Eastern District of Pennsylvania, where Teva has also filed suit to enforce the settlement.

In February 2008, following an investigation, the FTC sued Cephalon, alleging that Cephalon violated Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices in the marketplace, by unlawfully maintaining a monopoly in the sale of Provigil ^® and improperly excluding generic competition (the “FTC Modafinil Action”).

In addition to the Philadelphia Modafinil Action and the FTC Modafinil Action, the City of Providence (Rhode Island) and the State of Louisiana have also filed lawsuits against Cephalon and other Teva subsidiaries. Teva settled its suit with the City of Providence, and won its motion to dismiss against the State of Louisiana. Cephalon and Teva have also reached a settlement with 48 state attorneys general, which was approved by the court on November 7, 2016. Certain other claimants have given notices of potential claims related to these settlement agreements. Annual sales of Provigil ^® were approximately $500 million at the time of the settlement agreements, and approximately $1 billion when the first generic modafinil product was launched in March 2012.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

In May 2015, Cephalon entered into a consent decree with the FTC under which the FTC dismissed its claims against Cephalon in the FTC Modafinil Action in exchange for payment of $1.2 billion (less set-offs for prior settlements) by Cephalon and Teva into a settlement fund. The net amount paid into the settlement fund may be (and has been) used to settle certain other related cases, including the claims in the litigations described above, as well as other government investigations. Under the consent decree, Teva also agreed to certain injunctive relief with respect to the types of settlement agreements Teva may enter into to resolve patent litigation in the United States for a period of ten years. If, at the end of the ten years, the entire settlement fund has not been fully disbursed, any amount remaining will be paid to the Treasurer of the United States. In July 2015, Teva made a payment into the settlement fund for the difference of $1.2 billion less the amount of the agreed-upon settlements reached as of that date.

In April 2011, the European Commission opened a formal investigation against both Cephalon and Teva to assess whether the 2005 settlement agreement between the parties might have had the object or effect of hindering the entry of generic modafinil. The Commission has indicated to Teva that it intends to issue a statement that will specify the initial findings of the investigation.

In January 2009, the FTC and the State of California filed a lawsuit in California federal court alleging that a September 2006 patent lawsuit settlement between Watson and Solvay Pharmaceuticals, Inc. (“Solvay”) relating to AndroGel ^® 1% (testosterone gel) violated the antitrust laws. Additional lawsuits alleging similar claims were later filed by private plaintiffs (including plaintiffs purporting to represent classes of similarly situated claimants), and the various actions were consolidated in a multidistrict litigation in Georgia federal court. In February 2010, the court granted Watson’s motion to dismiss all claims except certain sham litigation claims brought by the private plaintiffs. Those sham litigation claims were later dismissed on summary judgment and appealed to the Eleventh Circuit. In June 2013, the United States Supreme Court reversed the dismissal of the FTC’s reverse-payment claims in the AndroGel decision referenced above, and ordered the case remanded. The Eleventh Circuit also remanded the private plaintiffs’ cases. In May 2015, Giant Eagle, Inc., an individual direct purchaser opt-out plaintiff, filed a new complaint, alleging similar claims, in Pennsylvania federal court. That action was transferred to the multidistrict litigation in Georgia, and Watson answered the complaint in August 2015. Discovery remains ongoing in both the multidistrict and FTC litigations. On May 19, 2016, the indirect purchaser plaintiffs stipulated to the voluntary dismissal of their claims with prejudice. On October 14, 2016, Actavis Holdco U.S., Inc. (successor-in-interest to Watson) moved for summary judgment on the grounds that the FTC’s case is moot in light of the above-described consent decree stemming from the FTC Modafinil Action. That motion remains pending. Annual sales of AndroGel ^® 1% at the time of the settlement were approximately $350 million, and annual sales of the AndroGel franchise (AndroGel ^® 1% and AndroGel ^® 1.62%) were approximately $140 million and $1.05 billion, respectively, at the time Actavis launched its generic version of AndroGel ^® 1% in November 2015.

Teva subsidiaries Barr Laboratories, Inc. (“Barr”) and The Rugby Group (“Rugby”) were sued in actions in California, Kansas and Florida state courts by plaintiffs alleging that a January 1997 patent litigation settlement agreement between Barr, Rugby (then a subsidiary of Sanofi Aventis) and Bayer Corporation concerning the antibiotic ciprofloxacin was anticompetitive and violated state antitrust and consumer protection laws. In addition, Rugby is also named as a defendant in a Tennessee action. In the California case, the trial court granted defendants’ summary judgment motions, and the court of appeal affirmed in October 2011. While an appeal was pending before the California Supreme Court, the trial court approved a $74 million class settlement with Bayer. In May 2015, the California Supreme Court reversed and remanded the case back to the trial court for a rule of reason inquiry as to the remaining defendants, including Barr and Rugby. In August 2016, Rugby agreed to settle with plaintiffs for $100 million, which was indemnified by Sanofi Aventis. The settlement was approved by the court on November 4, 2016. On January 18, 2017, Barr agreed to settle with plaintiffs for $225 million and a provision has been included in the financial statements. On April 21, 2017, the court granted final approval of the settlement. In the Kansas action, the court granted preliminary approval of the settlement Bayer entered into with plaintiffs in June 2015. In July 2015, Barr and the remaining co-defendants also agreed to settle with the plaintiffs; the court granted final approval of the settlement on June 6, 2016. The Florida case has been administratively closed by the court.

In December 2011, three groups of plaintiffs sued Wyeth and Teva for alleged violations of the antitrust laws in connection with their settlement of patent litigation involving extended release venlafaxine (generic Effexor ^® XR) entered into in November 2005. The cases were filed by a purported class of direct purchasers, by a purported class of indirect purchasers and by certain chain pharmacies. The plaintiffs claim that the settlement agreement between Wyeth and Teva unlawfully delayed generic entry. In October 2014, the court granted Teva’s motion to dismiss in the direct purchaser cases, after which the parties agreed that the court’s reasoning applied equally to the indirect purchaser cases. Plaintiffs filed notices of appeal, and the Third Circuit has consolidated the appeal with a separate antitrust case in which Teva is not a party, In re Lipitor Antitrust Litigation, solely for purposes of disposition by the same appellate panel. Oral argument before the Third Circuit for the merits of the appeal has been scheduled for May 19, 2017. Annual sales of Effexor ^® XR were approximately $2.6 billion at the time of settlement and at the time generic versions were launched in July 2010.

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

In February 2012, two purported classes of direct-purchaser plaintiffs sued GSK and Teva in New Jersey federal court for alleged violations of the antitrust laws in connection with their settlement of patent litigation involving lamotrigine (generic Lamictal ^® ) entered into in February 2005. In August 2012, a purported class of indirect purchaser plaintiffs filed a nearly identical complaint against GSK and Teva in the same court. The plaintiffs claim that the settlement agreement unlawfully delayed generic entry and seek unspecified damages. In December 2012, the court dismissed the cases. In January 2014, the court denied the direct purchaser plaintiffs’ motion for reconsideration and affirmed its original dismissal of the cases. In June 2015, the Third Circuit reversed and remanded for further proceedings. On February 19, 2016, Teva and GSK filed a petition for a writ of certiorari in the United States Supreme Court, which was denied on November 7, 2016. In the meantime, litigation has resumed in both the direct purchaser and indirect purchaser actions. Teva and GSK filed a motion for judgment on the pleadings in the indirect purchaser action in December 2015, which the court granted in part and denied in part in March 2016. On September 21, 2016, GSK, Teva and the indirect purchaser plaintiffs agreed to settle the litigation, and on October 27, 2016, the indirect purchaser plaintiffs stipulated to the dismissal of their claims with prejudice. A provision has been included in the financial statements for the dismissed matter. Annual sales of Lamictal ^® were approximately $950 million at the time of the settlement, and approximately $2.3 billion at the time generic competition commenced in July 2008.

In April 2013, purported classes of direct purchasers of, and end payors for, Niaspan ^® (extended release niacin) sued Teva and Abbott for violating the antitrust laws by entering into a settlement agreement in April 2005 to resolve patent litigation over the product. A multidistrict litigation has been established in the U.S. District Court for the Eastern District of Pennsylvania. Teva and Abbott’s motion to dismiss was denied in September 2014. Throughout 2015 and in January 2016, several individual direct purchaser opt-out plaintiffs filed complaints with allegations nearly identical to those of the direct purchaser class. In October 2016, the District Attorney for Orange County, California, filed a similar complaint, which has since been amended, in California state court alleging violations of state law. On February 10, 2017, Teva and Abbott filed a demurrer seeking to dismiss the Orange County claims on statute of limitations grounds, and also moved to strike all claims for restitution and civil penalties to the extent they are not limited to alleged activity in Orange County. Those filings remain pending. Annual sales of Niaspan ^® were approximately $416 million at the time of the settlement and approximately $1.1 billion at the time generic competition commenced in September 2013.

In November 2013, a putative class action was filed in Pennsylvania federal court against Actavis, Inc. and certain of its affiliates, alleging that Watson’s 2012 patent lawsuit settlement with Endo Pharmaceuticals Inc. relating to Lidoderm ^® (lidocaine transdermal patches) violated the antitrust laws. Additional lawsuits containing similar allegations followed on behalf of other classes of putative direct purchaser and end-payer plaintiffs, and the cases have been consolidated as a multidistrict litigation (“MDL”) in federal court in California. Defendants moved to dismiss, and in November 2014, the court granted the motions in part but denied them with respect to the claims under Section 1 of the Sherman Act. Plaintiffs then filed amended consolidated complaints in December 2014, and additional complaints have followed from retailers acting in their individual capacities. Discovery in these cases is ongoing, and on February 21, 2017, the court granted both the indirect purchaser plaintiffs’ and the direct purchaser plaintiffs’ motions for class certification. Defendants have petitioned the Ninth Circuit for permission to immediately appeal those rulings. In March 2016, the FTC filed a lawsuit in Pennsylvania federal court against Allergan plc, Watson, Endo and Impax Laboratories, Inc. challenging (1) Watson’s 2012 patent lawsuit settlement with Endo related to Lidoderm ^® and (2) a June 2010 patent litigation settlement between Endo and Impax related to Opana ^® ER (generic oxymorphone extended release tablets). The FTC’s allegations against Watson relate to the Lidoderm ^® settlement only (and not the Opana ^® ER settlement). On October 20, 2016, the court severed the Lidoderm ^® -related claims from the Opana ^® ER-related claims, and ordered the FTC to file new, individual complaints. The court denied the defendants’ motions to dismiss as moot, with leave to re-file once the FTC filed its new complaints. On October 25, 2016, the FTC filed a notice of voluntary dismissal. On October 26, 2016, Endo and Watson filed a complaint in Pennsylvania federal court seeking a declaratory judgment that the FTC’s claims are not authorized by statute, or, in the alternative, that the FTC does not have statutory authority to pursue a disgorgement remedy. On

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

Notes to Consolidated Financial Statements – (Continued)

December 30, 2016, the FTC moved to dismiss the declaratory judgment complaint. The court denied that motion as moot on February 1, 2017, when it consolidated Watson’s action with a later-filed declaratory judgment action brought by Allergan. Watson and Allergan filed a new, consolidated complaint for declaratory judgment on February 15, 2017. The FTC moved to dismiss that complaint on March 2, 2017, and Watson and Allergan moved for summary judgment on May 9, 2017. Both motions remain pending. Meanwhile, on January 23, 2017, the FTC re-filed its Lidoderm ^® -related claims against Allergan, Watson, and Endo, along with a stipulated order for permanent injunction, to settle its claims against Endo, in the same California federal court in which the private MDL, referenced above, is pending. This new FTC case has been assigned to the judge presiding over the MDL. On February 3, 2017, the State of California filed a complaint against Allergan and Watson, and that complaint has also been assigned to the judge presiding over the MDL. On March 28, 2017, that judge stayed the FTC’s claims against Allergan and Watson – and ordered the State of California to stipulate to a stay of its claims against Allergan and Watson – pending the outcome of the declaratory judgment action in Pennsylvania. Annual sales of Lidoderm ^® at the time of the settlement were approximately $1.2 billion, and were approximately $1.4 billion at the time Actavis launched its generic version in September 2013.

Since November 2013, numerous lawsuits have been filed in various federal courts by purported classes of end payors for, and direct purchasers of, Aggrenox ^® (dipyridamole/aspirin tablets) against Boehringer Ingelheim (“BI”), the innovator, and several Teva subsidiaries. The lawsuits allege, among other things, that the settlement agreement between BI and Barr entered into in August 2008 violated the antitrust laws. A multidistrict litigation has been established in the U.S. District Court for the District of Connecticut. Teva and BI’s motion to dismiss was denied in March 2015. On August 6, 2016, the judge issued an order preventing discovery about any products other than branded Aggrenox ^® and its AB-rated generics for purposes of defining the relevant antitrust market in this litigation. The order was certified for immediate appeal, which the Second Circuit denied. On April 11, 2017, the Orange County District Attorney filed a complaint for violations of California’s Unfair Competition Law based on the Aggrenox ^® patent litigation settlement. Annual sales of Aggrenox ^® were approximately $340 million at the time of the settlement, and were approximately $455 million at the time generic competition began in July 2015. Teva launched a generic version of Aggrenox ^® in July 2015.

Since January 2014, numerous lawsuits have been filed in the U.S. District Court for the Southern District of New York by purported classes of end payors for and direct purchasers of ACTOS ^® and ACTO plus Met ^® (pioglitazone and pioglitazone plus metformin) against Takeda, the innovator, and several generic manufacturers, including Teva, Actavis and Watson. The lawsuits allege, among other things, that the settlement agreements between Takeda and the generic manufacturers violated the antitrust laws. Teva entered into its agreement with Takeda in December 2010. Defendants’ motions to dismiss with respect to the end payor lawsuits were granted in September 2015. In October 2015, the end payors filed a notice of appeal of this ruling, and on March 22, 2016, a stipulation was filed dismissing Teva and the other generic defendants from the appeal. On February 8, 2017, the Court of Appeals for the Second Circuit affirmed the dismissal in part and vacated and remanded the dismissal in part with respect to the claims against Takeda. The direct purchasers’ case was stayed pending resolution of the appeal in the end payor matter, and they have amended their complaint again after the Second Circuit’s decision. Defendants had moved to dismiss the direct purchasers’ complaint and supplemental briefing on that motion based on the new allegations in the amended complaint will be completed by June 16, 2017. At the time of the settlement, annual sales of ACTOS ^® were approximately $3.7 billion and annual sales of ACTO plus Met ^® were approximately $500 million. At the time generic competition commenced in August 2012, annual sales of ACTOS ^® were approximately $2.8 billion and annual sales of ACTO plus Met ^® were approximately $430 million.

In June 2014, two groups of end payors sued AstraZeneca and Teva, as well as Ranbaxy and Dr. Reddy’s, in the Philadelphia Court of Common Pleas for violating the antitrust laws by entering into settlement agreements to resolve the esomeprazole (generic Nexium ^® ) patent litigation (the “Philadelphia Esomeprazole Actions”). These end payors had opted out of a class action that was filed in the Massachusetts federal court in September 2012 and resulted in a jury verdict in December 2014 in favor of AstraZeneca and Ranbaxy (the “Massachusetts Action”). Prior to the jury verdict, Teva settled with all plaintiffs in the Massachusetts Action for $24 million. The allegations in the Philadelphia Esomeprazole Actions are nearly identical to those in the Massachusetts Action. The Philadelphia Esomeprazole Actions were stayed pending resolution of the Massachusetts Action, which was on appeal to the First Circuit with respect to the claims against the non-settling defendants AstraZeneca and Ranbaxy. On November 21, 2016, the First Circuit affirmed the district court’s judgment in favor of AstraZeneca and Ranbaxy, and the plaintiffs’ petitions for rehearing and rehearing en banc were denied on January 10, 2017.

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Notes to Consolidated Financial Statements – (Continued)

In September 2014, the FTC sued AbbVie Inc. and certain of its affiliates (“AbbVie”) and Teva in the U.S. District Court for the Eastern District of Pennsylvania alleging that they violated the antitrust laws when they entered into a settlement agreement to resolve the AndroGel ^® patent litigation and a supply agreement under which AbbVie would supply authorized generic product for TriCor ^® to Teva. The FTC alleges that Teva agreed to delay the entry of its generic testosterone gel product in exchange for entering into the TriCor supply agreement. In May 2015, the court granted Teva’s motion to dismiss the FTC’s claim as to Teva. The FTC’s motions for reconsideration and for entry of partial final judgment to permit an immediate appeal were denied, so the FTC cannot appeal the dismissal until its claims against AbbVie are resolved.

Since May 2015, two lawsuits have been filed in the U.S. District Court for the Southern District of New York by a purported class of direct purchasers of, and a purported class of end payors for, Namenda IR ^® (memantine hydrochloride) against Forest Laboratories, LLC (“Forest”) and Actavis PLC, the innovator, and several generic manufacturers, including Teva. The direct purchasers withdrew their complaint and filed an amended complaint that did not name Teva as a defendant. Defendants have moved to dismiss the claims made by the end payors. The lawsuits allege, among other things, that the settlement agreements between Forest and the generic manufacturers violated the antitrust laws. Teva entered into its agreement with Forest in November 2009. On September 13, 2016, the court denied defendants’ motions to dismiss, but stayed the cases with respect to the claims brought under state law, which are the only claims asserted against Teva. Annual sales of Namenda IR ^® at the time of the settlement were approximately $1.1 billion, and are currently approximately $1.4 billion.

On March 8, 2016 and April 11, 2016, certain Actavis subsidiaries in the United Kingdom, including Auden Mckenzie Holdings Limited, received notices from the U.K. Competition and Markets Authority (“CMA”) that it had launched formal investigations under Section 25 of the Competition Act of 1998 (“Competition Act”) into suspected breaches of competition law in connection with the supply of 10mg and 20mg hydrocortisone tablets. On December 16, 2016, the CMA issued a statement of objections (a provisional finding of infringement of the Competition Act) in respect of certain allegations against Actavis UK and Allergan, which was later reissued to include certain Auden Mckenzie entities. Actavis UK submitted a response, and an oral hearing is due to take place in the next few months. On March 3, 2017, the CMA issued a second statement of objection in respect of certain additional allegations (relating to the same products and covering part of the same time period as for the first statement of objections) against Actavis UK, Allergan plc, and a number of other companies, which was later reissued to include certain Auden Mckenzie entities. On January 9, 2017, Teva completed the sale of Actavis UK to Accord Healthcare Limited, pursuant to which Teva will indemnify Accord for fines imposed by the CMA and/or damages awarded by a court on Actavis UK as a result of the investigations in respect of conduct prior to the closing date of the sale. In the event of any such fines or damages, Teva expects to assert claims, including claims for breach of warranty, against the sellers of Auden Mckenzie. The terms of the purchase agreement may preclude a full recovery by Teva. A liability for this matter has been recorded in purchase accounting related to the acquisition of Actavis Generics. See Note 3 above.

In November 2016, three putative indirect class actions were filed in federal courts in Wisconsin, Massachusetts and Florida against Shire U.S., Inc., Shire LLC (collectively, “Shire”), and Actavis, alleging that Shire’s 2013 patent litigation settlement with Actavis related to the ADHD drug Intuniv ^® (guanfacine) violated various state consumer protection and antitrust laws. On December 30, 2016 and January 11, 2017, two additional similar actions were filed, also in Massachusetts federal court, against Shire and Actavis or Teva (as successor to Actavis) by putative classes of direct purchaser plaintiffs. On January 18, 2017, the parties jointly moved to transfer the Wisconsin and Florida actions to Massachusetts. All five cases are now in Massachusetts federal court, and on March 10, 2017, both the indirect purchaser plaintiffs and the direct purchaser plaintiffs filed consolidated amended complaints. Defendants filed motions to dismiss those complaints on April 10, 2017. Annual sales of Intuniv ^® were approximately $335 million at the time of the settlement, and approximately $327 million at the time generic competition began in 2014.

Government Investigations and Litigation Relating to Pricing and Marketing

Teva is involved in government investigations and litigation arising from the marketing and promotion of its specialty pharmaceutical products in the United States. Many of these investigations originate through what are known as qui tam complaints, in which the government reviews a complaint filed under seal by a whistleblower (a “relator”) that alleges violations of the federal False Claims Act. The government considers whether to investigate the allegations and will, in many cases, issue subpoenas requesting documents and other information, including conducting witness interviews. The government must decide whether to intervene and pursue the claims as the plaintiff. Once a decision is made by the government, the complaint is unsealed. If the government decides not to intervene, then the relator may decide to pursue the lawsuit on his own without the active participation of the government.

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Notes to Consolidated Financial Statements – (Continued)

Under the federal False Claims Act, the government (or relators who pursue the claims without the participation of the government in the case) may seek to recover up to three times the amount of damages in addition to a civil penalty of $10,781 to $21,563 for each allegedly false claim submitted to the government for payment. Generally speaking, these cases take several years for the investigation to be completed and, ultimately, to be resolved (either through litigation or settlement) after the complaint is unsealed. In addition, some states have pursued investigations under state false claims statutes or consumer protection laws, either in conjunction with a government investigation or separately. There is often collateral litigation that arises from public disclosures of government investigations, including the filing of class action lawsuits by third party payors alleging fraud-based claims or by shareholders alleging violations of the securities laws.

A number of state attorneys general have filed various actions against Teva and/or certain of its subsidiaries, including certain Actavis subsidiaries, relating to reimbursements or drug price reporting under Medicaid or other programs. Such price reporting is alleged to have caused governments and others to pay inflated reimbursements for covered drugs. Teva and its subsidiaries have reached settlements in most of these cases, and remain parties to litigation in Illinois. The Actavis subsidiaries remain parties to litigation in Illinois and Mississippi, and finalized a settlement with the state of Wisconsin. A provision for the cases has been included in the financial statements. Trial in the Illinois case against Teva concluded in the fourth quarter of 2013, and post-trial briefing has been submitted. The court has notified the parties that it will issue an order regarding the case by May 19, 2017. The State of Illinois is seeking approximately $100 million in compensatory damages. Any such damages ultimately awarded by the court are subject to automatic trebling. In addition, the state is seeking unspecified statutory penalties that could range, depending on the method used for calculation, from a de minimis amount to well over $100 million. Teva denies any liability, and expects to argue that even if the court finds liability, compensatory damages and penalties should be significantly less than the amount sought by the state. In August 2013, in the Mississippi case against Watson, the court ruled in favor of the state, awarding $12.4 million in compensatory damages and civil penalties. In March 2014, the court awarded the state an additional $17.9 million in punitive damages. A provision for these amounts has been included in the financial statements. Watson is appealing both the original and the punitive damage awards.

Several qui tam complaints have been unsealed in recent years as a result of government decisions not to participate in the cases. The following is a summary of certain government investigations, qui tam actions and related matters.

In December 2009, the U.S. District Court for the District of Massachusetts unsealed a complaint alleging that numerous drug manufacturers, including certain Teva subsidiaries (including Actavis), violated the federal False Claims Act in connection with Medicaid reimbursement for certain vitamins, dietary supplements and DESI (Drug Efficacy Study Implementation) products that were allegedly ineligible for reimbursement. The U.S. Department of Justice (“DOJ”) declined to join in the matter. The defendants, including Teva, filed a motion to dismiss, which was granted in February 2013. The plaintiffs’ deadline to appeal the dismissal has not yet expired.

Cephalon has received and responded to subpoenas related to Treanda ^® , Nuvigil ^® and Fentora ^® . In March 2013, a federal False Claims Act complaint filed against Cephalon in the U.S. District Court for the Southern District of New York was unsealed. The case was transferred to the Eastern District of Pennsylvania. The complaint alleges off-label promotion of Treanda ^® and Fentora ^® . The court granted Cephalon’s motion to dismiss the Fentora ^® claims and denied Cephalon’s motion to dismiss the Treanda ^® claims. In January 2014, a separate federal False Claims Act complaint that had been filed in the U.S. District Court for the Eastern District of Pennsylvania was served on Cephalon. The complaint alleges off-label promotion of Fentora ^® , Nuvigil ^® and Provigil ^® . The court dismissed the Fentora ^® claims and denied Cephalon’s motion to dismiss the Provigil ^® and Nuvigil ^® claims. In August 2015, Cephalon submitted a motion to modify the court’s order denying its motion to dismiss the relators’ Provigil ^® claims. In February 2016, the court granted Cephalon’s motion for judgment on the pleadings as to Provigil ^® claims that allegedly occurred prior to February 28, 2008. The relators’ motion for reconsideration was denied without prejudice. The Company has reached an agreement in principle to settle both of these matters and has established a reserve in the financial statements in 2017.

In September 2013, the State of Louisiana filed a petition seeking penalties and unspecified damages against 54 pharmaceutical companies, including Teva and Actavis. The complaint alleges that the defendants defrauded the state by falsely representing that its products were FDA-approved drugs, which allegedly caused the state Medicaid program to pay millions of dollars in reimbursement

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Notes to Consolidated Financial Statements – (Continued)

claims for products that it would not otherwise have covered. The case was dismissed without prejudice in September 2015, with the court finding that the state was not a proper plaintiff. The state appealed, and on October 21, 2016 the state court of appeals affirmed the trial court’s ruling in part and reversed in part. The state and the defendants appealed to the Louisiana Supreme Court, which denied all parties’ appeals on March 13, 2017, and remanded the case to the trial court. On March 31, 2017 the trial court ordered all defendants to respond to the first amended petition on or before May 11, 2017.

In January 2014, Teva received a civil investigative demand from the U.S. Attorney for the Southern District of New York seeking documents and information from January 1, 2006 related to sales, marketing and promotion of Copaxone ^® and Azilect ^® . The demand states that the government is investigating possible civil violations of the federal False Claims Act. In March 2015, the docket in this matter and a False Claims Act civil qui tam complaint concerning this matter were unsealed by the court, which revealed that the U.S. Attorney had notified the court in November 2014 that it had declined to intervene in and proceed with the lawsuit. The qui tam relators, however, are moving forward with the lawsuit. In June 2015, Teva filed motions to dismiss the complaint. In February 2016, the court stayed its decision on the relators’ claims based on state and local laws, denied Teva’s motions to dismiss the False Claims Act claims, and instructed the relators to amend their complaint with additional information. In March 2016, the relators filed an amended complaint, which Teva answered in April 2016. In December 2016, the Court entered a civil case management plan, setting a close of all discovery (including expert discovery) in January 2018 and a deadline for dispositive motions in February 2018. No trial date has been set. The parties are currently engaged in discovery.

In May 2014, counsel for Santa Clara County and Orange County, purportedly on behalf of the People of California, filed a complaint in the Superior Court for Orange County, California against Teva and Cephalon, along with several other pharmaceutical companies, contending that defendants allegedly engaged in improper marketing of opioids, including Actiq ^® and Fentora ^® . In June 2014, the City of Chicago filed a similar complaint against Teva and Cephalon in the Circuit Court of Cook County, Illinois, which has been removed to the Northern District of Illinois. Both complaints assert claims under state law based upon alleged improper marketing of opioids, and both seek a variety of damages, including restitution, civil penalties, disgorgement of profits, treble damages, attorneys’ fees and injunctive relief. Neither complaint specifies the exact amount of damages at issue. Teva and Cephalon filed motions to dismiss in both the California and Chicago actions. In the California action, in August 2015, the court granted the defendants’ demurrer, or motion to dismiss, on primary jurisdiction grounds and the case has been stayed. In July 2016, the court provided the counties in the California action with an opportunity to revise their complaint once again and re-file the motions. The counties re-filed the motion to lift the stay and motion for leave to file a third amended complaint. On October 16, 2016, the court granted the counties’ motion to lift the stay in part for the limited purpose of filing a third amended complaint, permitting challenges to the third amended complaint, and exploring settlement possibilities. In the Chicago action, all claims against Teva and Cephalon were dismissed without prejudice. In August 2015, the City of Chicago filed a second amended complaint and defendants filed motions to dismiss the second amended complaint. On September 29, 2016, the court granted the motions to dismiss with respect to all but two claims. The City of Chicago filed an amended complaint on October 26, 2016. On December 15, 2016, the defendants filed an answer to the two previously sustained claims and motions to dismiss the remainder of the Third Amended Complaint. The motions to dismiss are pending, and the parties are currently engaged in discovery.

In December 2015, the Mississippi Attorney General filed a lawsuit against Teva Pharmaceuticals USA, Inc. (“Teva USA”) and Cephalon along with the same defendants named in the California and Chicago actions described above. The Mississippi complaint is similar to the California and Chicago complaints, asserts claims under Mississippi state law based upon alleged improper marketing of opioids, including Actiq ^® and Fentora ^® , and seeks a variety of damages including restitution, civil penalties, disgorgement of profits, treble damages, attorneys’ fees and injunctive relief. The complaint does not specify the exact amount of damages at issue. Teva USA and Cephalon, along with the co-defendants named in the action, filed joint and individual motions to dismiss and to transfer venue in March 2016. The State filed its opposition to the various motions to dismiss in June 2016, and the defendants filed their replies in support of the motions to dismiss in July 2016. On February 13, 2017, the Court denied the defendants’ motion to transfer venue. The defendants have appealed to the Mississippi Supreme Court and have also filed a motion to stay pending the appeal. The motions to dismiss remain pending.

On August 31, 2016, Suffolk County, New York filed a complaint in the Supreme Court of New York against Teva USA and Cephalon along with the most of the same defendants named in the California, Chicago and Mississippi actions described above. The Suffolk County complaint, which is similar to the complaints filed in California, Chicago and Mississippi, asserts claims under New York state law for improper marketing of opioids, including Actiq ^® and Fentora ^® , and seeks a variety of damages including compensatory damages, civil penalties, disgorgement of profits, treble damages, and attorneys’ fees. A motion to dismiss was filed on January 23, 2017. The County filed its reply on April 14, 2017. On February 1, 2017, Erie and Broome Counties in the State of New York filed a suit against Teva USA and other defendants that is substantially similar to the Suffolk County suit.

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Notes to Consolidated Financial Statements – (Continued)

On June 21, 2016, Teva USA received a subpoena from the Antitrust Division of the DOJ seeking documents and other information relating to the marketing and pricing of certain of Teva USA’s generic products and communications with competitors about such products. Actavis received a similar subpoena in June 2015. On July 12, 2016, Teva USA received a subpoena from the Connecticut Attorney General seeking documents and other information relating to potential state antitrust law violations. Actavis has also received a similar subpoena from the Connecticut Attorney General. Teva and Actavis are cooperating fully with these subpoenas.

On December 15, 2016, a civil action was brought by the attorneys general of twenty states against Teva USA and several other companies asserting claims under federal antitrust law (specifically, section 1 of the Sherman Act). An amended complaint was filed on March 1, 2017 adding twenty additional states to the named plaintiffs and adding supplemental state law claims. The plaintiffs now include all states except Alaska, Arkansas, Georgia, Missouri, New Mexico, Texas, Rhode Island, South Dakota, West Virginia and Wyoming. The states seek a finding that the defendants’ actions violated federal antitrust law, and state antitrust and consumer protection laws, as well as injunctive relief, disgorgement, damages on behalf of various state and governmental entities and consumers, civil penalties and costs. This action is subject to a contested conditional transfer order that would transfer the case from the District of Connecticut into the Eastern District of Pennsylvania MDL discussed below.

Beginning on March 2, 2016, numerous complaints have been filed in the United States on behalf of putative classes of direct and indirect purchasers of generic drug products including: doxycycline, digoxin, pravastatin, clobetasol, desonide, fluocinonide, propranolol, glyburide, lidocaine-prilocaine, ursodial and baclofen. These complaints, which allege that the defendants engaged in conspiracies to fix, increase, maintain and/or stabilize the prices of the generic drug products named, have been brought against various defendants including, among others, Teva USA, Actavis Holdco U.S., Inc., Actavis Elizabeth and Pliva, Inc. The plaintiffs generally seek injunctive relief and damages under federal antitrust law, and damages under various state laws. On April 6, 2017, the Judicial Panel on Multidistrict Litigation entered an order transferring cases brought by classes of direct or indirect purchasers and alleged claims of generic price-fixing for coordination or consolidation with the MDL currently pending in the Eastern District of Pennsylvania; the panel has subsequently transferred further cases to that court. Before the transfer order was entered in the Eastern District of Pennsylvania, the judge in certain of the propranolol cases issued an order largely denying our motions to dismiss those cases but dismissing certain state law claims. During a conference with the court overseeing the MDL on May 4, 2017, however, the court advised the parties that any decisions made before the transfer would need to be relitigated within the MDL. Teva denies having engaged in any conduct that would give rise to liability with respect to the above-mentioned subpoenas and civil suits.

On March 21, 2017, Teva received a subpoena from the U.S. Attorney’s office in Boston, Massachusetts requesting documents related to Teva’s donations to patient assistance programs. Teva is in the process of responding to the subpoena.

For several years, Teva had conducted a voluntary worldwide investigation into business practices that may have implications under the U.S. Foreign Corrupt Practices Act (“FCPA”), following the receipt, beginning in 2012, of subpoenas and informal document requests from the SEC and the DOJ with respect to compliance with the FCPA in certain countries. In December 2016, Teva reached a resolution with the SEC and DOJ to fully resolve these FCPA matters. The resolution, which relates to conduct in Russia, Mexico and Ukraine from 2007 to 2013, provides for penalties of approximately $519 million (reserved in the financial statements in the third quarter of 2016), which includes a fine, disgorgement and prejudgment interest; a three-year deferred prosecution agreement for Teva; a guilty plea by Teva’s Russian subsidiary to criminal charges of violations of the anti-bribery provisions of the FCPA; consent to entry of a final judgment against Teva settling civil claims of violations of the anti-bribery, internal controls and books and records provisions of the FCPA; and the retention of an independent compliance monitor for a period of three years. The SEC civil consent and DOJ deferred prosecution agreement have each obtained court approval. Teva is awaiting the scheduling of a plea and sentencing hearing for the guilty plea agreement by its Russian subsidiary. Teva has been informed by Israeli authorities that they have initiated an investigation into the conduct that was the subject of the FCPA investigation and which resulted in the above-mentioned resolution with the SEC and DOJ. Teva is cooperating fully with the Israeli investigation. Following the settlement, we have had requests for documents and information from various Russian government entities.

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Notes to Consolidated Financial Statements – (Continued)

Shareholder Litigation

On November 6, 2016, a putative class action securities lawsuit was filed in the U.S. District Court for the Central District of California on behalf of purchasers of Teva’s securities between February 10, 2015 and November 3, 2016. The complaint alleges that Teva and certain officers violated the federal securities laws by making false and misleading statements that failed to disclose that (1) Teva was engaging in conduct that would result in an antitrust investigation by the U.S. Department of Justice and Connecticut state attorney general and (2) that the government’s investigation of such conduct could cause criminal charges to be filed against Teva by the end of 2016 for suspected price collusion. The plaintiff is seeking certification of similarly situated investors as a class and as well as unspecified damages, legal fees, interest, and costs. Another lawsuit was filed on November 10, 2016 in the U.S. District Court for the Southern District of New York with similar allegations but a different class period and defendants. On December 27, 2016, a second putative class action was filed in the Central District of California with a longer class period but similar allegations to the original suit in California. The next day, the lawsuit in the Southern District of New York was voluntarily dismissed by plaintiffs.

A motion to approve a derivative action against Teva’s directors and certain of its senior officers was filed in the Israeli district court in September 2016 for alleged negligence and recklessness with respect to the due diligence conducted regarding the business of Rimsa. A motion to approve a class action against Teva, its directors and certain of its senior officers was filed in the Israeli district court in November 2016 asserting alleged claims and causes of action under Israeli law related to the company’s disclosure of the above-mentioned pricing investigation. Various motions were filed in Israeli courts in November and December 2016, and in January, February and March 2017, seeking (i) discovery, (ii) the approval of a class action or (iii) the approval of a derivative action, all related to alleged claims and causes of action under Israeli law arising out of Teva’s above-mentioned FCPA resolution with the SEC and DOJ or to not seeking shareholder approval for the Actavis Generics acquisition.

Environmental Matters

Teva and some of its subsidiaries are party to a number of environmental proceedings, or have received claims, including some brought pursuant to the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the Superfund law) or other national, federal, provincial or state and local laws imposing liability for alleged noncompliance with various environmental laws and regulations or for the investigation and remediation of releases of hazardous substances and for natural resource damages. Many of these proceedings and claims seek to require the generators of hazardous wastes disposed of at a third party-owned site, or the party responsible for a release of hazardous substances into the environment that impacted a site, to investigate and cleanup the site or to pay or reimburse others for such activities, including for oversight by governmental authorities, the response costs associated with such oversight and any related damages to natural resources. Teva or its subsidiaries have received claims, or has been made a party to these proceedings, along with other potentially responsible parties, as an alleged generator of wastes that were disposed of or treated at third-party waste disposal sites, or as a result of an alleged release from one of Teva’s facilities or former facilities that may have adversely impacted the environment.

In many of these cases, the government or private litigants allege that the responsible parties are jointly and severally liable for the investigation and cleanup costs. Although the liability among the responsible parties, under certain circumstances, may be joint and several, these proceedings are frequently resolved so that the allocation of cleanup and other costs among the parties reflects the relative contributions of the parties to the site conditions and takes into account other pertinent factors. Teva’s potential liability varies greatly at each of the sites in the proceedings or for which claims have been asserted; for some sites the costs of the investigation, cleanup and natural resource damages have not yet been determined, and for others Teva’s allocable share of liability has not been determined. At other sites, Teva has been paying a share of the costs, the amounts of which have not been, and are not expected to be, material. Teva has taken an active role in identifying those costs, to the extent they are identifiable and estimable, which do not include reductions for potential recoveries of cleanup costs from insurers, indemnitors, former site owners or operators or other potentially responsible parties. In addition, enforcement proceedings relating to alleged federal, state, commonwealth or local regulatory violations at some of Teva’s facilities have resulted, or may result, in the imposition of significant penalties (in amounts not expected to materially adversely affect Teva’s results of operations) and the recovery of certain state or commonwealth costs and natural resource damages, and have required, or may require, that corrective measures and enhanced compliance measures be implemented.

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Notes to Consolidated Financial Statements – (Continued)

NOTE 17 – Segments:

Teva has two reportable segments: generic and specialty medicines. The generic medicines segment develops, manufactures, sells and distributes generic or branded generic medicines. This segment includes Teva’s over-the-counter (“OTC”) business, including PGT, Teva’s consumer healthcare joint venture with P&G. Also included in this segment is Teva’s API manufacturing businesses. The specialty medicines segment engages in the development, manufacture, sale and distribution of branded specialty medicines, most significantly in the core therapeutic areas of central nervous system medicines and respiratory medicines, as well as other therapeutic areas, such as oncology, women’s health and selected other areas.

Teva’s other activities include distribution activities mainly in the United States, Israel and Hungary, sales of medical devices and contract manufacturing services related to divestment of products in connection with the Actavis Generics acquisition and other miscellaneous items.

Following the Actavis Generics and Anda acquisitions in 2016, Teva conducted an analysis of its business segments, resulting in a change to Teva’s segment reporting and goodwill assignment.

Teva’s management reassessed its organizational structure and concluded that in order to enhance its managers’ accountability and gain better control over all activities, its reporting segments will be reorganized as follows, commencing in the fourth quarter of 2016:

•

The generic medicines segment includes all Teva legacy generics activity, with the addition of:

•

All Actavis activities, excluding contract manufacturing services related to divestment of products in connection with the Actavis Generics acquisition; and

•

Teva’s OTC business.

•

The specialty medicines segment includes all Teva specialty activity without any change.

•

Other non-segment activities include other Teva business (excluding the OTC business), with the addition of:

•

Contract manufacturing services related to divestment of products in connection with the Actavis Generics acquisition; and

•

Anda’s distribution activity.

All the above changes were reflected through retroactive revision of prior period segment information.

Teva’s chief executive officer, who is the chief operating decision maker (“CODM”), reviews financial information prepared on a consolidated basis, accompanied by disaggregated information about revenues and contributed profit by the two identified reportable segments, namely generic and specialty medicines to make decisions about resources to be allocated to the segments and assess their performance.

Segment profit is comprised of gross profit for the segment, less R&D and S&M expenses related to the segment. Segment profit does not include G&A expenses, amortization, research and development in process, inventory step up and certain other items. Beginning in the fourth quarter of 2016, our OTC business is included in our generic medicines segment. The data presented have been conformed to reflect these changes for all relevant periods.

Teva manages its assets on a total company basis, not by segments, as many of its assets are shared or commingled. Teva’s CODM does not regularly review asset information by reportable segment, and therefore Teva does not report asset information by reportable segment.

Any newly appointed chief executive officer may review Teva’s strategy and organizational structure. Any changes in strategy may lead to a reevaluation of the Company’s segments and goodwill allocation to reporting units as well as fair value attributable to its reporting units.

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Notes to Consolidated Financial Statements – (Continued)

a. Segment information

The following tables present profit by segments and a reconciliation of Teva’s segment profit to Teva’s consolidated income before income taxes, for the three months ended March 31, 2017 and 2016:


	Generics				Specialty
	Three months ended March 31,				Three months ended March 31,
	2017		2016		2017		2016
	U.S.$ in millions				U.S.$ in millions
Revenues	$	3,058	$	2,458	$	2,020	$	2,152
Gross profit		1,370		1,123		1,754		1,871
R&D expenses		191		129		255		239
S&M expenses		400		345		461		457

Segment profit	$	779	$	649	$	1,038	$	1,175


	Three months ended March 31,
	2017		2016
	U.S.$ in millions
Generic medicines profit	$	779	$	649
Specialty medicines profit		1,038		1,175

Total segment profit		1,817		1,824
Profit (loss) of other activities		26		(4	)

		1,843		1,820
Amounts not allocated to segments:
Amortization		320		189
General and administrative expenses		236		304
Impairments, restructuring and others		240		119
Inventory step-up		64		6
Costs related to regulatory actions taken in facilities		34		38
Legal settlements and loss contingencies		20		(25	)
Other unallocated amounts		34		24

Consolidated operating income		895		1,165

Financial expenses - net		207		298

Consolidated income before income taxes	$	688	$	867

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Notes to Consolidated Financial Statements – (Continued)

b. Segment revenues by geographic area:


	Three months ended March 31,
	2017		2016
	U.S.$ in millions
Generic Medicines
United States	$	1,381	$	976
Europe*		988		790
Rest of the World		689		692

Total Generic Medicines		3,058		2,458
Specialty Medicines
United States		1,492		1,677
Europe*		438		394
Rest of the World		90		81

Total Specialty Medicines		2,020		2,152
Other Revenues
United States		320		4
Europe*		78		51
Rest of the World		154		145

Total Other Revenues		552		200

Total Revenues	$	5,630	$	4,810

*	We define our European region as the European Union and certain other European countries.

c. Net revenues from specialty medicines:


	Three months ended March 31,
	2017		2016
	U.S. $ in millions
CNS	$	1,138	$	1,323
Copaxone ^®		970		1,006
Azilect ^®		60		113
Nuvigil ^®		17		103
Respiratory		304		366
ProAir ^®		121		173
QVAR ^®		98		134
Oncology		270		268
Treanda® and Bendeka ^™		157		155
Women’s health		124		110
Other Specialty*		184		85

Total Specialty Medicines	$	2,020	$	2,152

*	Includes a $75 million payment related to the Ninlaro ^® transaction in the first quarter of 2017.

It is impractical to present revenues by product for our generic medicines segment.

A significant portion of Teva’s revenues, and a higher proportion of the profits, come from the manufacture and sale of patent-protected pharmaceuticals. Many of Teva’s specialty medicines are covered by several patents that expire at different times. Nevertheless, once patent protection has expired, or has been lost prior to the expiration date as a result of a legal challenge, Teva no longer has patent exclusivity on these products, and subject to regulatory approval, generic pharmaceutical manufacturers are able to produce similar (or purportedly similar) products and sell them for a lower price. The commencement of generic competition, even in the form of non-equivalent products, can result in a substantial decrease in revenues for a particular specialty medicine in a very short time. Any such expiration or loss of intellectual property rights could therefore significantly adversely affect Teva’s results of operations and financial condition.

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Notes to Consolidated Financial Statements – (Continued)

In particular, Teva relies heavily on sales of Copaxone ^® , its leading specialty medicine. A key element of Teva’s business strategy for Copaxone ^® is maintaining patients on the three-times-a-week 40 mg/mL version introduced in 2014, and protecting its patents for the 40 mg/mL version. Any substantial reduction in the number of patients taking Copaxone ^® , whether due to increased use of oral medicines or other competing products, including competing 20 mg/mL generic products (with one generic version introduced in the U.S. in 2015 and follow-on products in some European countries) and potential competing 40 mg/mL generic products, would likely have a material adverse effect on Teva’s financial results and cash flow.

Copaxone ^® 40 mg/mL was protected by five U.S. Orange Book patents that expire in 2030. All of the claims of three of those patents were declared to be unpatentable by the U.S. Patent Office in inter partes review (“IPR”) proceedings, and Teva has appealed those decisions. A petition filed for an IPR against a fourth Orange Book patent was withdrawn on May 2, 2017. These four patents have also been challenged in paragraph IV litigation in the United States. A trial was held in the United States District Court for the District of Delaware, and in January 2017 the court held that the asserted claims of these four patents were invalid. Teva has appealed this decision; however, it is possible that certain competitors may receive FDA approval and launch before either appeal is decided. A separate paragraph IV litigation in the United States regarding the fifth Orange Book patent, which was issued in August 2016, has been dismissed with prejudice, but may nonetheless be revived pending the outcomes of appeals. Teva has also filed suit against multiple abbreviated new drug applications (“ANDA”) filers to assert a non-Orange Book process patent in various jurisdictions. Copaxone ^® 40 mg/mL is also protected by one European patent expiring in 2030.

Teva’s multiple sclerosis franchise includes Copaxone ^® products and laquinimod (a developmental compound for the treatment of multiple sclerosis). The profitability of the multiple sclerosis franchise is comprised of Copaxone ^® revenues and cost of goods sold as well as S&M and R&D expenses related to the MS franchise. It does not include G&A expenses, amortization, research and development in process, inventory step up and certain other items. The profit of the multiple sclerosis franchise as a percentage of Copaxone ^® revenues was 76.5% for the three months ended March 31, 2017, compared to 80.0% for the three months ended March 31, 2016.

Teva is pursuing opportunities to sell its global women’s health business and its oncology and pain business in Europe. Teva has engaged financial advisors and expects the sale process for these businesses to commence in the coming weeks. These transactions are subject to board approval and applicable regulatory approvals.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Cautionary Note Regarding Forward-Looking Statements

The following discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management’s current beliefs and expectations and are subject to substantial risks and uncertainties, both known and unknown, that could cause our future results, performance or achievements to differ significantly from that expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to:

•

our generics medicines business, including: that we are substantially more dependent on this business, with its significant attendant risks, following our acquisition of Actavis Generics; our ability to realize the anticipated benefits of the acquisition (and any delay in realizing those benefits) or difficulties in integrating Actavis Generics; the increase in the number of competitors targeting generic opportunities and seeking U.S. market exclusivity for generic versions of significant products; price erosion relating to our generic products, both from competing products and as a result of increased governmental pricing pressures; and our ability to take advantage of high-value biosimilar opportunities;

•

our specialty medicines business, including: competition for our specialty products, especially Copaxone ^® , our leading medicine, which faces competition from existing and potential additional generic versions and orally-administered alternatives; our ability to achieve expected results from investments in our product pipeline; competition from companies with greater resources and capabilities; and the effectiveness of our patents and other measures to protect our intellectual property rights;

•

our substantially increased indebtedness and significantly decreased cash on hand, which may limit our ability to incur additional indebtedness, engage in additional transactions or make new investments, and may result in a downgrade of our credit ratings;

•

our business and operations in general, including: uncertainties relating to our recent senior management changes; our ability to develop and commercialize additional pharmaceutical products; manufacturing or quality control problems, which may damage our reputation for quality production and require costly remediation; interruptions in our supply chain; disruptions of our or third party information technology systems or breaches of our data security; the failure to recruit or retain key personnel, including those who joined us as part of the Actavis Generics acquisition; the restructuring of our manufacturing network, including potential related labor unrest; the impact of continuing consolidation of our distributors and customers; variations in patent laws that may adversely affect our ability to manufacture our products; adverse effects of political or economic instability, major hostilities or terrorism on our significant worldwide operations; and our ability to successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions;

•

compliance, regulatory and litigation matters, including: costs and delays resulting from the extensive governmental regulation to which we are subject; the effects of reforms in healthcare regulation and reductions in pharmaceutical pricing, reimbursement and coverage; potential additional adverse consequences following our resolution with the U.S. government of our FCPA investigation; governmental investigations into sales and marketing practices; potential liability for sales of generic products prior to a final resolution of outstanding patent litigation; product liability claims; increased government scrutiny of our patent settlement agreements; failure to comply with complex Medicare and Medicaid reporting and payment obligations; and environmental risks;

•

other financial and economic risks, including: our exposure to currency fluctuations and restrictions as well as credit risks; the significant increase in our intangible assets, which may result in additional substantial impairment charges; potentially significant increases in tax liabilities; and the effect on our overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or of a change in our business;

and other factors discussed in our Annual Report on Form 20-F for the year ended December 31, 2016 (“Annual Report”), including in the section captioned “Risk Factors,” and in our other filings with the U.S. Securities and Exchange Commission, which are available at www.sec.gov and www.tevapharm.com. Forward-looking statements speak only as of the date on which they are made, and we assume no obligation to update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise. You are cautioned not to put undue reliance on these forward-looking statements.

Introduction

Overview

We are a global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic medicines and a focused portfolio of specialty medicines. We operate worldwide, with a significant presence in the United States, Europe and many other markets around the world. Our key strengths include our world-leading generics expertise and portfolio, focused specialty portfolio, robust R&D capabilities, global infrastructure and scale and dedicated leadership and employees.

We believe we are strategically positioned to benefit from market, economic and regulatory trends in global healthcare. These trends include aging populations, the increasing prevalence of chronic diseases, economic pressure on governments and private payors to provide affordable healthcare solutions, legislative and regulatory reforms, scientific and technological advances, increased patient awareness and involvement, the impact of the digital revolution on consumer healthcare, increased spending on pharmaceuticals in emerging markets and the growing importance of over-the-counter (“OTC”) medicines.

Segments

We operate our business in two segments:

•

Generic medicines , which includes chemical and therapeutic equivalents of originator medicines in a variety of dosage forms, such as tablets, capsules, injectables, inhalants, liquids, ointments and creams. We are the leading generic drug company in the United States and Europe, and we have a significant presence in certain ROW markets. This segment also includes our OTC business, conducted primarily through PGT, our consumer healthcare joint venture with P&G, and our API manufacturing business.

•

Specialty medicines , which includes our core therapeutic areas of central nervous system (“CNS”) medicines such as Copaxone ^® and Azilect ^® and respiratory medicines such as ProAir ^® and QVAR ^® . Our specialty medicines segment also includes products in other therapeutic areas, such as Bendeka ^® /Treanda ^® in oncology and ParaGard ^® in women’s health.

In addition to these two segments, we have other activities, primarily distribution activities in the United States, Israel and Hungary.

Highlights

Significant highlights of the first quarter of 2017 included:

•

Our revenues were $5.6 billion, up 17%, or 22% in local currency terms, compared to the first quarter of 2016.

•

Our generic medicines segment generated revenues of $3.1 billion and profit of $779 million. Revenues increased 24%, or 34% in local currency terms. Profit increased 20% compared to the first quarter of 2016. The increase in revenues and profit in the first quarter of 2017 was mainly due to the inclusion of Actavis Generics revenues.

•

Our specialty medicines segment generated revenues of $2.0 billion and profit of $1.0 billion. Revenues decreased 6%, or 5% in local currency terms. Profit was down 12%, compared to the first quarter of 2016, mainly due to generic competition to certain of our specialty products.

•

Impairments, restructuring and others were $240 million, primarily consisting of restructuring expenses of $130 million, compared to $119 million in the first quarter of 2016.

•

Operating income was $895 million, compared to $1.2 billion in the first quarter of 2016. The decrease was mainly due to lower profit of our specialty medicines segment.

•

Net income attributable to Teva was $645 million, compared to $636 million in the first quarter of 2016.

•

Net income attributable to ordinary shareholders was $580 million, compared to $570 million in the first quarter of 2016.

•

Exchange rate differences between the first quarter of 2017 and the first quarter of 2016 had a negative impact of $254 million on revenues, including a $217 million decrease attributable to Venezuela, and a net negative impact of $78 million on operating income, including a $71 million decrease attributable to Venezuela.

•

Cash flow generated from operating activities during the first quarter of 2017 was $470 million, compared to $1.4 billion in the first quarter of 2016. The decrease was mainly due to higher payments for legal settlements, primarily the FCPA settlement with the SEC and DOJ, as well as settlement of certain hedging activities.

Changes in Senior Management

In April 2017, we announced the planned departure of Mr. Eyal Desheh, Group Executive Vice President and Chief Financial Officer since 2008. Mr. Michael McClellan will serve as the Interim Chief Financial Officer effective July 1, 2017. Mr. McClellan has served as chief financial officer of our global specialty medicines division for the past two years. We are also continuing our search to identify and appoint our next Chief Executive Officer, who will have a significant role in identifying a permanent successor to the chief financial officer role.

Results of Operations

Comparison of Three Months Ended March 31, 2017 to Three Months Ended March 31, 2016

The following table sets forth, for the periods indicated, certain financial data derived from our U.S. GAAP financial statements, presented as percentages of net revenues, and the percentage change for each item as compared to the previous period.


	Percentage of Net Revenues Three Months Ended March 31,						Percentage Change 2017-2016
	2017			2016
	%			%			%
Net revenues		100.0			100.0			17
Gross profit		50.1			58.0			1
Research and development expenses		8.1			8.1			17
Selling and marketing expenses		17.2			17.4			16
General and administrative expenses		4.2			6.3			(22	)
Impairments, restructuring and others		4.3			2.5			102
Legal settlements and loss contingencies		0.4			(0.5	)		n/a
Operating income		15.9			24.2			(23	)
Financial expenses, net		3.7			6.2			(31	)
Income before income taxes		12.2			18.0			(21	)
Income taxes		1.0			4.7			(76	)
Share in losses of associated companies, net		(0.1	)		0.1			n/a
Net loss attributable to non-controlling interests		(0.1	)		§			n/a
Net income attributable to Teva		11.5			13.2			1
Dividends on preferred shares		1.2			1.4			(2	)
Net income attributable to ordinary shareholders		10.3			11.8			2

§	Less than 0.05%

Segment Information

Generic Medicines Segment

The following table presents revenues, expenses and profit for our generic medicines segment for the three months ended March 31, 2017 and 2016. The Actavis Generics acquisition had a significant impact on our generic medicines segment, expanding our sales, product portfolio, R&D capabilities, product pipeline and global operational network.


	Three Months Ended March 31,
	2017				2016
	U.S.$ in millions / % of Segment Revenues

Revenues	$	3,058	100.0	%	$	2,458	100.0	%
Gross profit		1,370	44.8	%		1,123	45.7	%
R&D expenses		191	6.2	%		129	5.3	%
S&M expenses		400	13.1	%		345	14.0	%

Segment profit*	$	779	25.5	%	$	649	26.4	%

Segment profit consists of gross profit for the segment, less R&D and S&M expenses related to the segment. Segment profit does not include G&A expenses, amortization and certain other items. Beginning in the fourth quarter of 2016, our OTC business is included in our generic medicines segment. The data presented have been conformed to reflect these changes for all relevant periods. See note 17 to our consolidated financial statements and “Operating Income” below for additional information.

Generic Medicines Revenues

Our generic medicines segment includes generic medicines and our OTC business as well as API products sold to third parties. Revenues from our generic medicines segment in the first quarter of 2017 were $3.1 billion, an increase of $600 million, or 24%, compared to the first quarter of 2016. In local currency terms, revenues increased 34%.

We adjusted the exchange rates we use for the Venezuelan bolivar twice during 2016 and again in February 2017, which resulted in a decrease of $217 million in revenues in the first quarter of 2017, including $102 million in OTC revenues, compared to the first quarter of 2016. In light of the economic conditions in Venezuela, we have excluded the quarterly changes in revenues and operating profit in any discussion of currency effects.

Revenues from generic medicines in the United States, our largest generic market, were $1.4 billion in the first quarter of 2017, an increase of 41% compared to the first quarter of 2016. Revenues from generic medicines in Europe were $988 million, an increase of 25% compared to the first quarter of 2016. In local currency terms, our European revenues increased 31% compared to the first quarter of 2016. Revenues of generic medicines in our ROW markets were $689 million, flat compared to the first quarter of 2016. In local currency terms, our ROW revenues increased 27% compared to the first quarter of 2016.

Our revenues from OTC products in the first quarter of 2017 were $264 million, a decrease of 10% compared to $292 million in the first quarter of 2016. In local currency terms, revenues increased 25%.

API sales to third parties in the first quarter of 2017 were $197 million, flat in both U.S. dollar and local currency terms, compared to the first quarter of 2016.

The following table presents generic segment revenues by geographic area for the three months ended March 31, 2017 and 2016:


	Three Months Ended March 31,				Percentage Change
	2017		2016		2017 - 2016
	U.S. $ in millions
United States	$	1,381	$	976		41	%
Europe		988		790		25	%
Rest of the World		689		692		§

Total Generic Medicines	$	3,058	$	2,458		24	%

§	Less than 0.5%

United States Generic Medicines Revenues

In the first quarter of 2017, we led the U.S. generic market in total prescriptions and new prescriptions, with approximately 597 million total prescriptions, representing 15.5% of total U.S. generic prescriptions according to IMS data. We seek to continue our U.S. market leadership based on our ability to introduce new generic equivalents for brand-name products on a timely basis, with a focus on complex generics and other high-barrier products that we believe will create more value for patients and customers, our strong emphasis on customer service, the breadth of our product line, our commitment to quality and regulatory compliance and our cost-effective production.

Revenues from generic medicines in the United States during the first quarter of 2017 were $1.4 billion, an increase of 41%, compared to the first quarter of 2016. The increase resulted mainly from the inclusion of Actavis Generics revenues and products sold in the first quarter of 2017 that were not sold in the first quarter of 2016, partially offset by a decline in sales due to increased competition, mainly to aripiprazole (the generic equivalent of Abilify ^® ) and budesonide (the generic equivalent of Pulmicort ^® ) and loss of revenues following our divestment of certain products in connection with the acquisition.

Among the most significant generic products we sold in the United States in the first quarter of 2017 were Concerta ^® authorized generic (methylphenidate extended-release tablets), as well as generic versions of Cubicin ^® (daptomycin injection), Pulmicort ^® (budesonide inhalation), Adderall XR ^® (mixed amphetamine salts ER) and Lidoderm ^® Patch (lidocaine patch).

Launches . In the first quarter of 2017, we launched generic versions of the following branded products in the United States (listed by month of launch):


Generic Name	Brand Name	Month of Launch	Total Annual U.S. Market at Time of Launch U.S. $ millions (IMS)*
Dexmedetomidine hydrochloride injection 100 mcg/mL, 200 mcg	Precedex ^®	January		56
Rasagiline mesylate tablets 0.5 & 1 mg **	Azilect ^®	January		360
Norepinephrine bitartrate injection, USP 1 mg/mL, 4 mg ***	Levophed ^®	January		91
Lamotrigine extended-release tablets, USP 250 mg	Lamictal ^® XR ^™	January		39
Melphalan hydrochloride for injection 50 mg/vial	Alkeran ^®	January		127
Amantadine hydrochloride capsules, USP 100 mg	Symmetrel ^®	January		37
Levoleucovorin for injection 50 mg/vial	Fusilev ^®	February		1
Levoleucovorin for injection 175 mg/vial ****	Fusilev ^®	February		—
Desvenlafaxine extended-release tablets 25, 50, & 100 mg	Pristiq ^®	March		883
Fludarabine phosphate injection, USP 25 mg/mL, 50 mg	—	March		4
Norethindrone acetate and ethinyl estradiol tablets and ferrous fumarate tablets 1 mg/20 mcg **	Minastrin ^® 24 Fe	March		361

*	The figures given are for the twelve months ended in the calendar quarter closest to our launch.

**	Authorized generic of a Teva specialty product.

***	Product was re-launched.

****	Approved via 505(b)(2) regulatory pathway; not equivalent to a brand product.

We expect that our generic medicines revenues in the United States will continue to benefit from our world-leading generic pipeline, which includes, as of March 31, 2017, 325 product applications awaiting FDA approval, including 77 tentative approvals. This reflects all pending ANDAs, supplements for product line extensions and tentatively approved applications and includes some instances where more than one application was submitted for the same reference product. Excluding overlaps, the branded products to which these pending applications relate had U.S. sales for the quarter ended March 31, 2017 exceeding $120 billion, according to IMS. Approximately 70% of pending applications include a paragraph IV patent challenge, and we believe we are first to file with respect to 99 of these products, or 123 products including final approvals where launch is pending a settlement agreement or court decision. Collectively, these first to file opportunities represent over $60 billion in U.S. brand sales for the twelve months ended March 31, 2017 according to IMS. IMS reported brand sales are one of the many indicators of future potential value of a launch, but equally important are the mix and timing of competition, as well as cost effectiveness. The potential advantages of being the first filer with respect to some of these products may be subject to forfeiture, shared exclusivity or competition from so-called “authorized generics,” which may ultimately affect the value derived.

The FDA requires companies to submit ANDAs for approval to manufacture and market generic forms of brand-name drugs. In most instances, FDA approval is granted upon the expiration of the underlying patents. However, companies may be rewarded with a 180-day period of marketing exclusivity, as provided by law, for being the first generic applicant to successfully challenge these patents. As part of our strategy, we actively review pharmaceutical patents and seek opportunities to challenge patents that we believe are either invalid or not infringed by our generic version. In addition to the commercial benefit of obtaining marketing exclusivity, we believe that our patent challenges ultimately improve healthcare by allowing consumers earlier access to more affordable, high-quality medications.

In the first quarter of 2017, we received tentative approvals for generic equivalents of the products listed below, excluding overlapping applications. A “tentative approval” indicates that the FDA has substantially completed its review of an application and final approval is expected once the relevant patent expires, a court decision is reached, a 30-month regulatory stay lapses or a 180-day exclusivity period awarded to another manufacturer either expires or is forfeited.


Generic Name	Brand Name	Total U.S. Annual Branded Market U.S. $ millions (IMS)*
Minoxidil topical aerosol, 5%	Rogaine ^®		62
Ranolazine extended-release tablets, 500 & 1000 mg	Ranexa ^®		862
Lacosamide tablets 50, 100, 150 & 200 mg	Vimpat ^®		931
Tadalafil tablets, 2.5, 5, 10 & 20 mg	Cialis ^®		1,931
Fingolimod capsules, 0.5 mg	Gilenya ^®		2,045
Methylphenidate hydrochloride extended-release capsules, 10, 15, 20, 30, 40, 50 & 60 mg	Aptensio XR ^®		13
Darunavir tablets, 800 mg	Prezista ^®		748

*	For the twelve months ended in the calendar quarter closest to the receipt of tentative approval.

Europe Generic Medicines Revenues

We define our European region as the European Union and certain other European countries.

Revenues from generic medicines in Europe in the first quarter of 2017 were $988 million, an increase of 25%, or 31% in local currency terms, compared to the first quarter of 2016, mainly as a result of the inclusion of Actavis Generics revenues.

As in previous years, European regulatory measures aimed at reducing healthcare and drug expenditures have led to slower growth in the generic medicines market and have adversely affected our revenues in some markets. In Germany, Italy, France, Spain and Poland, governmental measures (such as tenders and price-referencing) have reduced prices. Our strategy to address these changes is designed to ensure profitable and sustainable growth by focusing on successful new product launches, gaining market share in selective markets, strong portfolio management and pricing strategy, as well as a focus on cost reduction.

During the first quarter of 2017, we received 320 generic approvals in Europe relating to 69 compounds in 140 formulations. We currently hold approximately 2,195 marketing authorization applications pending approval in 37 European countries, relating to 243 compounds in 495 formulations, including one application pending with the EMA for four strengths in 30 countries.

Listed below are generic revenues highlights for the first quarter of 2017 in our most significant European markets:

•

Germany : Generic revenues in the first quarter of 2017 increased 1%, or 4% in local currency terms, compared to the first quarter of 2016. The increase in local currency terms was mainly as a result of the inclusion of Actavis Generics revenues. We maintained our position as one of Germany’s leading suppliers of medicines.

•

United Kingdom : Generic revenues in the first quarter of 2017 increased 36%, or 56% in local currency terms, compared to the first quarter of 2016. The increase in local currency terms was mainly due to the inclusion of Actavis Generics revenues. In January 2017, we completed the divestiture of certain assets and operations of Actavis Generics in the U.K. and Ireland, as part of our undertaking to the European Commission in connection with the Actavis Generics acquisition, which resulted in lower sales in the first quarter of 2017 and will continue to impact our U.K. revenues in the future. We maintained our position as one of the largest generic pharmaceutical companies in the U.K.

•

Italy : Generic revenues in the first quarter of 2017 increased 19%, or 23% in local currency terms, compared to the first quarter of 2016. The increase was primarily due to higher volumes of existing products, new product launches and the inclusion of Actavis Generics revenues. We continue to be a generic market leader in Italy.

•

Poland : Generic revenues in the first quarter of 2017 increased 23%, or 26% in local currency terms, compared to the first quarter of 2016. The increase was mainly due to the inclusion of Actavis Generics revenues. We are the second largest supplier in the Polish generics market.

•

France : Generic revenues in the first quarter of 2017 increased 29%, or 33% in local currency terms, compared to the first quarter of 2016. The increase was mainly due to the inclusion of Actavis Generics revenues.

•

Switzerland : Generic revenues in the first quarter of 2017 increased 17%, or 19% in local currency terms, compared to the first quarter of 2016. The increase was mainly due to the inclusion of Actavis Generics revenues, higher volumes of existing products and new product launches. We are the largest supplier in the Swiss generics market.

•

Spain : Generic revenues in the first quarter of 2017 increased 15%, or 18% in local currency terms, compared to the first quarter of 2016. The increase was mainly due to the inclusion of Actavis Generics revenues, higher volumes of existing products and new product launches.

ROW Generic Medicines Revenues

Our ROW markets include all countries other than the United States and those in our European region. Our key ROW markets are Japan, Canada and Russia. The countries in this category range from highly regulated, pure generic markets such as Canada and Israel, to hybrid markets such as Japan and Brazil, to branded generics oriented markets such as Russia and certain Commonwealth of Independent States (CIS), Latin American markets and Asia Pacific markets.

In our ROW markets, generics revenues in the first quarter of 2017 were $689 million, flat compared to the first quarter of 2016. In local currency terms, revenues increased 27%. This increase was mainly due to higher revenues from our business venture in Japan, higher revenues in Canada and Russia, as well as the inclusion of Actavis Generics revenues.

We adjusted the exchange rates we use for the Venezuelan bolivar twice during 2016 and again in February 2017, which resulted in a decrease of $217 million in revenues in the first quarter of 2017, compared to the first quarter of 2016. In light of the economic conditions in Venezuela, we have excluded the quarterly changes in revenues and operating profit in any discussion of currency effects.

Listed below are generic revenues highlights for the first quarter of 2017 in our main ROW markets:

•

Japan : Generic revenues in the first quarter of 2017 increased 65%, or 63% in local currency terms, compared to the first quarter of 2016. The increase was mainly due to our business venture with Takeda, which commenced operations in April 2016. We are one of the top three generics companies in Japan.

•

Canada : Generic revenues in the first quarter of 2017 increased 46%, or 41% in local currency terms, compared to the first quarter of 2016. The increase was mainly due to the inclusion of Actavis Generics revenues and a distribution arrangement that commenced in the second quarter of 2016. We are the leading generic pharmaceutical company in Canada.

•

Russia : Generic revenues in the first quarter of 2017 increased 36%, or 9% in local currency terms, compared to the first quarter of 2016. The increase in local currency terms was mainly due to the inclusion of Actavis Generics revenues. We maintained our position as one of the leading generic pharmaceutical companies in the Russian market.

•

Venezuela : Revenues of generic medicines in Venezuela in the first quarter of 2017 were $21 million, including $10 million of OTC revenues, compared to $238 million and $112 million in the first quarter of 2016, respectively. For further information, see below under “—Impact of Currency Fluctuations on Results of Operations.”

Generic Medicines Gross Profit

In the first quarter of 2017, gross profit from our generic medicines segment was $1.4 billion, an increase of $247 million, or 22%, compared to the first quarter of 2016. The higher gross profit was mainly due to the inclusion of Actavis Generics and our business venture with Takeda in Japan.

Gross profit margin for our generic medicines segment in the first quarter of 2017 was 44.8% compared to 45.7% in the first quarter of 2016.

The decrease of 0.9 points in gross profit margin was mainly a result of lower profitability in our U.S. market (2.0 points) and in our ROW markets (0.9 points), partially offset by lower production expenses (1.1 points) and higher profitability of our European markets (0.8 points).

Generic Medicines R&D Expenses

R&D expenses relating to our generic medicines segment for the first quarter of 2017 were $191 million, an increase of 48% compared to $129 million in the first quarter of 2016. The increase is mainly due to the inclusion of Actavis Generics. As a percentage of segment revenues, generic R&D expenses were 6.2% in the first quarter of 2017, compared to 5.3% in the first quarter of 2016.

Our R&D activities for the generic medicines segment include both (a) direct expenses relating to product formulation, analytical method development, stability testing, management of bioequivalence and other clinical studies, regulatory filings and other expenses relating to patent review and challenges prior to obtaining tentative approval, and (b) indirect expenses such as costs of internal administration, infrastructure and personnel involved in generic R&D.

Generic Medicines S&M Expenses

Selling and marketing expenses related to our generic medicines segment in the first quarter of 2017 were $400 million, an increase of 16% compared to $345 million in the first quarter of 2016. The increase was mainly due to the inclusion of Actavis Generics and our business venture with Takeda in Japan, partially offset by a decrease in Venezuela due to exchange rate adjustments.

As a percentage of segment revenues, selling and marketing expenses decreased to 13.1% in the first quarter of 2017 compared to 14.0% in the first quarter of 2016.

Generic Medicines Profit

The profit of our generic medicines segment consists of the gross profit for the segment less S&M expenses and R&D expenses related to this segment. Segment profit does not include G&A expenses, amortization, research and development in process, inventory step up and certain other items. Beginning in the fourth quarter of 2016, our OTC business is included in our generic medicines segment. See note 17 of our consolidated financial statements and “Operating Income” below for additional information.

Profit of our generic medicines segment was $779 million in the first quarter of 2017, compared to $649 million in the first quarter of 2016. The increase was mainly due to factors previously discussed, primarily higher gross profit, partially offset by higher R&D expenses and higher S&M expenses.

Generic medicines profit as a percentage of generic medicines revenues was 25.5% in the first quarter of 2017, down from 26.4% in the first quarter of 2016. This decrease of 0.9 points was due to lower gross margin (0.9 points), higher R&D expenses as a percentage of revenues (1.0 points), partially offset by lower S&M expenses as a percentage of revenues (0.9 points).

Specialty Medicines Segment

Our specialty medicines business, which is focused on delivering innovative solutions to patients and providers via medicines, devices and services in key regions and markets around the world, includes our core therapeutic areas of CNS (with a strong emphasis on MS, neurodegenerative disorders, movement disorders and pain care) and respiratory medicines (with a focus on asthma and chronic obstructive pulmonary disease). We also have specialty products in oncology, women’s health and selected other areas.

We are pursuing opportunities to sell our global women’s health business and our oncology and pain business in Europe. We have engaged financial advisors and expect the sale process for these businesses to commence in the coming weeks. These transactions are subject to board approval and applicable regulatory approvals.

The following table presents revenues, expenses and profit for our specialty medicines segment for the three months ended March 31, 2017 and 2016:


	Three Months Ended March 31,
	2017				2016
	U.S.$ in millions / % of Segment Revenues

Revenues	$	2,020	100.0	%	$	2,152	100.0	%
Gross profit		1,754	86.8	%		1,871	86.9	%
R&D expenses		255	12.6	%		239	11.1	%
S&M expenses		461	22.8	%		457	21.2	%

Segment profit*	$	1,038	51.4	%	$	1,175	54.6	%

Specialty Medicines Revenues

Specialty medicines revenues in the first quarter of 2017 were $2.0 billion, a decrease of 6%, or 5% in local currency terms, compared to the first quarter of 2016. In the United States, our specialty medicines revenues were $1.5 billion, a decrease of 11% compared to the first quarter of 2016. Specialty medicines revenues in Europe were $438 million, an increase of 11%, or 17% in local currency terms, compared to the first quarter of 2016. Specialty medicines revenues in our ROW markets were $90 million, an increase of 11%, or 9% in local currency terms, compared to the first quarter of 2016.

In the first quarter of 2017, our specialty medicines revenues included a $75 million payment from the Ninlaro ^® transaction.

Specialty Medicines Revenues Breakdown

The following table presents revenues by therapeutic area and key products for our specialty medicines segment for the three months ended March 31, 2017 and 2016:


	Three Months Ended March 31,				Percentage Change
	2017		2016		2017 - 2016
	U.S. $ in millions
CNS	$	1,138	$	1,323		(14	%)
Copaxone ^®		970		1,006		(4	%)
Azilect ^®		60		113		(47	%)
Nuvigil ^®		17		103		(83	%)
Respiratory		304		366		(17	%)
ProAir ^®		121		173		(30	%)
QVAR ^®		98		134		(27	%)
Oncology		270		268		1	%
Treanda ^® and Bendeka ^®		157		155		1	%
Women’s Health		124		110		13	%
Other Specialty*		184		85		116	%

Total Specialty Medicines	$	2,020	$	2,152		(6	%)

*	Includes a $75 million payment related to the Ninlaro ^® transaction in the first quarter of 2017.

Central Nervous System

Our CNS portfolio includes Copaxone ^® and Azilect ^® as well as several other medicines. In the first quarter of 2017, our CNS sales were $1.1 billion, a decrease of 14% compared to the first quarter of 2016, primarily due to generic competition for Nuvigil ^® and Azilect ^® .

Copaxone ^® (glatiramer acetate injection) continued to be the leading multiple sclerosis therapy in the United States and worldwide in the first quarter of 2017. Global sales of Copaxone ^® were $970 million in the first quarter of 2017, a decrease of 4% compared to the first quarter of 2016.

Copaxone ^® revenues in the United States in the first quarter of 2017 were $782 million, a decrease of 5% compared to the first quarter of 2016, mainly due to lower volumes of Copaxone ^® 20 mg/mL, partially offset by a price increase of 7.9% in January 2017 for both the 20 mg/mL and 40 mg/mL versions. Over 85% of total U.S. Copaxone ^® prescriptions are now filled with the 40 mg/mL version, driven by patient and physician choice of the 40 mg/mL version supported by payer access and patient support activities. Our U.S. market shares in terms of new and total prescriptions were 25.4% and 28.4%, respectively, according to March 2017 IMS data.

Revenues in the United States were 81% of global Copaxone ^® revenues in the first quarter of 2017, compared to 82% in the first quarter of 2016.

Our Copaxone ^® revenues outside the United States were $188 million in the first quarter of 2017, an increase of 2%, or 5% in local currency terms, compared to the first quarter of 2016. The increase in local currency terms was mainly due to higher volumes. Over 70% of the total European Copaxone ^® prescriptions are now filled with the 40 mg/mL version.

Copaxone ^® accounted for approximately 17% of our revenues in the first quarter of 2017, and a significantly higher percentage contribution to our profits and cash flow from operations during this period.

Our U.S. Orange Book patents covering Copaxone ^® 20 mg/mL expired in May 2014. Our patents on Copaxone ^® 20 mg/mL expired in May 2015 in most of the rest of the world. Accordingly, a key part of our strategy has been the introduction of Copaxone ^® 40 mg/mL, a higher dose of Copaxone ^® with a three times a week dosing regimen for patients with relapsing-remitting multiple sclerosis. This formulation allows for a less frequent dosing regimen administered subcutaneously for patients with relapsing forms of MS.

Copaxone ^® 40 mg/mL was protected by five U.S. Orange Book patents that expire in 2030. All of the claims of three of those patents were declared to be unpatentable by the U.S. Patent Office in inter partes review (“IPR”) proceedings, and we have appealed those decisions. A petition filed for an IPR against a fourth Orange Book patent was withdrawn on May 2, 2017. These four patents have also been challenged in paragraph IV litigation in the United States. A trial was held in the United States District Court for the District of Delaware, and in January 2017 the court held that the asserted claims of these four patents were invalid. We have appealed this decision; however, it is possible that certain competitors may receive FDA approval and launch before either appeal is decided. A separate paragraph IV litigation in the United States regarding the fifth Orange Book patent, which was issued in August 2016, has been dismissed with prejudice, but may nonetheless be revived pending the outcomes of appeals. We have also filed suit against multiple ANDA filers to assert a non-Orange Book process patent in various jurisdictions. Copaxone ^® 40 mg/mL is also protected by one European patent expiring in 2030.

The market for MS treatments continues to change as a result of new and emerging therapies as well as a generic version of Copaxone ^® 20 mg/mL in the U.S., follow-on products in some European countries and potential competing purported generic versions of Copaxone ^® 40 mg/mL following the court ruling invalidating four Copaxone ^® 40 mg/mL patents in January 2017. In particular, the increasing number of oral treatments, such as Tecfidera ^® by Biogen, Gilenya ^® by Novartis, and Aubagio ^® by Genzyme, continue to present significant and increasing competition. Copaxone ^® also continues to face competition from existing injectable products, such as five beta-interferons Avonex ^® , Plegridy ^® , Betaseron ^® , Extavia ^® and Rebif ^® , as well as from monoclonal antibodies such as Tysabri ^® , Lemtrada ^® and Zinbryta ^® .

Azilect ^® (rasagiline tablets) is indicated as initial monotherapy and as an adjunct to levodopa for the treatment of the signs and symptoms of Parkinson’s disease, the second most common neurodegenerative disorder. Generic competition for Azilect ^® in the United States commenced in 2017. Data exclusivity protection for Azilect ^® in the EU expired in 2015. We continue to share marketing rights with Lundbeck in certain of our ROW markets.

Our sales of Azilect ^® in the first quarter of 2017 were $60 million, a decrease of 47%, compared to the first quarter of 2016, mainly due to lower volumes following the introduction of generic competition in the United States and Europe.

Nuvigil ^® (armodafinil), the R-isomer of modafinil, is indicated for the treatment of excessive sleepiness associated with narcolepsy and certain other disorders. Global sales of Nuvigil ^® in the first quarter of 2017 were $17 million, compared to $103 million in the first quarter of 2016, due to generic competition that began in June 2016.

In April 2017, we launched Austedo ^™ (deutetrabenazine) in the United States, for the treatment of chorea associated with Huntington disease (“HD”). Austedo ^™ , previously referred to by the developmental name SD-809, is the first deuterated product approved by the FDA and the second product approved in HD. The product was previously granted Orphan Drug Designation by the FDA.

Respiratory

Our respiratory portfolio includes ProAir ^® , QVAR ^® , DuoResp Spiromax ^® , Qnasl ^® , Braltus ^® and Cinqair ^® /Cinqaero ^® . Revenues from our specialty respiratory products in the first quarter of 2017 were $304 million, a decrease of 17% compared to the first quarter of 2016.

ProAir ^® (albuterol sulfate, a short-acting beta-agonist) includes ProAir ^® hydrofluoroalkane (“HFA”) and ProAir ^® RespiClick ^® , both sold only in the United States. ProAir ^® HFA is an inhalation aerosol with dose counter. ProAir ^® RespiClick ^® is a breath-actuated, multi-dose, dry-powder inhaler. Both are indicated for patients four years of age and older for the treatment or prevention of bronchospasm with reversible obstructive airway disease and for the prevention of exercise-induced bronchospasm.

ProAir ^® revenues in the first quarter of 2017 were $121 million, a decrease of 30% compared to the first quarter of 2016, due to lower volumes mainly from wholesaler and retailer inventory reductions and net pricing effects. ProAir ^® maintained its leadership in the short-acting beta-agonist market, with an exit market share of 47.7% in terms of total number of prescriptions during the first quarter of 2017, a decrease of 4.4 points compared to the first quarter of 2016.

QVAR ^® (beclomethasone dipropionate HFA) is indicated as a maintenance treatment for asthma as a prophylactic therapy in patients five years of age and older. QVAR ^® is also indicated for asthma patients who require systemic corticosteroid administration, where adding QVAR ^® may reduce or eliminate the need for systemic corticosteroids. QVAR ^® revenues in the first quarter of 2017 were $98 million, a decrease of 27% compared to the first quarter of 2016, primarily due to net pricing effects and wholesaler and retailer inventory reductions in the U.S. QVAR ^® maintained its second-place position in the inhaled corticosteroids category in the United States, with an exit market share of 38.1% in terms of total number of prescriptions during the first quarter of 2017, a decrease of 0.5 points compared to the first quarter of 2016.

In April 2017 we launched AirDuo ^™ RespiClick ^® (fluticasone propionate and salmeterol) inhalation powder for the treatment of asthma in patients aged 12 years and older who are uncontrolled on an inhaled corticosteroid (ICS) or whose disease severity clearly warrants the use of an ICS/long-acting beta2-adrenergic agonist (LABA) combination. AirDuo ^™ RespiClick ^® is a fixed-dose combination asthma therapy containing an ICS and a LABA, the same active ingredients as GSK’s Advair ^® .

We launched AirDuo ^™ RespiClick ^® and its authorized generic simultaneously. The authorized generic is known as fluticasone propionate and salmeterol inhalation powder (multidose dry powder inhaler).

Oncology

Our oncology portfolio includes Treanda ^® / Bendeka ^® , Granix ^® and Trisenox ^® in the United States and Lonquex ^® , Tevagrastim ^® /Ratiograstim ^® and Trisenox ^® outside the United States. Sales of these products were $270 million in the first quarter of 2017, compared to $268 million in the first quarter of 2016.

Treanda ^® / Bendeka ^® (bendamustine hydrochloride injection) are approved in the United States for the treatment of patients with chronic lymphocytic leukemia and patients with indolent B-cell non-Hodgkin’s lymphoma that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. Bendeka ^® , which was launched in the United States in January 2016, is a liquid, low-volume (50 mL) and short-time 10-minute infusion formulation of bendamustine hydrochloride that we licensed from Eagle to complement our Treanda ^® franchise. Bendeka ^® is now the most-used bendamustine product on the U.S. market. The lyophilized formulation of Treanda ^® continues to be available, but its use has substantially declined in favor of Bendeka ^® .

Treanda ^® and Bendeka ^® combined revenues in the first quarter of 2017 were $157 million, compared to $155 million in the first quarter of 2016, an increase of 1%.

Women’s Health

Our women’s health portfolio includes ParaGard ^® and Plan B One-Step ^® OTC/Rx (levonorgestrel), along with other products that are marketed in various countries. Revenues from our global women’s health products were $124 million in the first quarter of 2017, an increase of 13% compared to the first quarter of 2016, mainly due to higher sales of ParaGard ^® and Plan B One-Step ^® in the United States, as well as higher women’s health sales in Europe and ROW markets.

Specialty Medicines Gross Profit

In the first quarter of 2017, gross profit from our specialty medicines segment was $1.8 billion, a decrease of $117 million compared to the first quarter of 2016. The lower gross profit was mainly a result of lower revenues.

Gross profit margin for our specialty medicines segment in the first quarter of 2017 was 86.8%, compared to 86.9% in the first quarter of 2016.

Specialty Medicines R&D Expenses

Our specialty R&D activities focus primarily on product candidates in the CNS and respiratory therapeutic areas, with additional activities in selected areas. R&D expenses relating to our specialty medicines segment in the first quarter of 2017 were $255 million, an increase of 7% compared to $239 million in the first quarter of 2016, mainly due to increased expenses for development of late stage migraine and pain products fremanezumab and fasinumab. As a percentage of segment revenues, R&D spending was 12.6% in the first quarter of 2017, compared to 11.1% in the first quarter of 2016.

Specialty R&D expenditures include certain upfront and milestone payments for products in the development phase, the costs of discovery research, preclinical development, early- and late-clinical development and drug formulation, clinical trials and product registration costs and are reported net of contributions received from collaboration partners. Our specialty R&D spending takes place throughout the development process, including (a) early-stage projects in both discovery and preclinical phases; (b) middle-stage projects in clinical programs up to phase 3; (c) late-stage projects in phase 3 programs, including where a new drug application (NDA) is currently pending approval; (d) life cycle management and post-approval studies for marketed products; and (e) indirect expenses that support our overall specialty R&D efforts but are not allocated by product or to specific R&D projects, such as the costs of internal administration, infrastructure and personnel. Furthermore, our R&D activities relating to innovation using existing molecules are managed and reported as part of our specialty R&D expenses.

Specialty Medicines S&M Expenses

S&M expenses related to our specialty medicines segment in the first quarter of 2017 were $461 million, an increase of 1%, compared to $457 million in the first quarter of 2016. As a percentage of segment revenues, S&M expenses increased to 22.8% in the first quarter of 2017 from 21.2% in the first quarter of 2016.

Specialty Medicines Profit

The profit of our specialty medicines segment consists of the gross profit for the segment, less S&M expenses and R&D expenses related to this segment. Segment profit does not include G&A expenses, amortization, research and development in process, inventory step up and certain other items. See note 17 of our consolidated financial statements and “Operating Income” below for additional information.

Profit of our specialty medicines segment was $1.0 billion in the first quarter of 2017, a decrease of 12% compared to the first quarter of 2016. This is a result of the factors discussed above, mainly lower gross profit as well as increases in R&D and S&M expenses.

Specialty medicines profit as a percentage of segment revenues was 51.4% in the first quarter of 2017, down 3.2 points from 54.6% in the first quarter of 2016. The decrease was mainly attributed to higher R&D expenses as a percentage of specialty medicines revenues (1.5 points), higher S&M expenses as a percentage of specialty medicines revenues (1.6 points) and lower gross profit as a percentage of specialty medicines revenues (0.1 points).

Our MS franchise includes our Copaxone ^® products and laquinimod (a developmental compound for the treatment of MS). The profit of our MS franchise consists of Copaxone ^® revenues and cost of goods sold as well as S&M and R&D expenses related to our MS franchise. It does not include G&A expenses, amortization, research and development in process, inventory step up and certain other items. Our MS franchise profit in the first quarter of 2017 was $742 million, compared to $805 million in the first quarter of 2016. Profit of our MS franchise as a percentage of Copaxone ^® revenues was 76.5% in the first quarter of 2017, compared to 80.0% in the first quarter of 2016.

In May 2017, we announced that the primary endpoint of the CONCERTO trial, evaluating laquinimod in patients with relapsing-remitting multiple sclerosis (RRMS), was not met. We did see positive results on a number of secondary and exploratory endpoints and we continue to study laquinimod as a possible treatment for primary-progressive multiple sclerosis (PPMS) and for Huntington disease.

Other Activities

In addition to our generic and specialty medicines segments, we have other sources of revenues, primarily distribution activities, mostly in the United States via Anda, as well as in Israel and Hungary, sales of medical devices, contract manufacturing services related to products divested in connection with the Actavis Generics acquisition and other miscellaneous items.

Our revenues from other activities in the first quarter of 2017 were $552 million, compared to $200 million in the first quarter of 2016, mainly due to the inclusion of Anda’s revenues commencing in the fourth quarter of 2016.

Teva Consolidated Results

Revenues

Revenues in the first quarter of 2017 were $5.6 billion, an increase of 17% compared to the first quarter of 2016, primarily due to higher revenues of our generic medicines and other activities, which were mainly related to the acquisitions of Actavis Generics and Anda as well as the business venture with Takeda in Japan, partially offset by lower revenues of our specialty medicines. See “Generic Medicines Revenues,” “Specialty Medicines Revenues,” and “Other Activities” above. In light of the economic conditions in Venezuela, we exclude the quarterly changes in revenues and operating profit in any discussion of currency effects. Exchange rate movements during the first quarter of 2017 negatively impacted overall revenues by $254 million, compared to the first quarter of 2016. In local currency terms, revenues increased 22%.

Gross Profit

In the first quarter of 2017, gross profit was $2.8 billion, an increase of 1% compared to the first quarter of 2016.

Gross profit was mainly the result of factors previously discussed under “Generic Medicines Gross Profit” and “Specialty Medicines Gross Profit” above, as well as higher amortization of intangible assets and higher inventory step-up expenses.

Gross profit as a percentage of revenues was 50.1% in the first quarter of 2017, compared to 58.0% in the first quarter of 2016.

The decrease in gross profit as a percentage of revenues was primarily due to the addition of the Anda distribution business in the U.S. (2.3 points), higher amortization (1.8 points), higher inventory step-up (1.2 points), lower profitability of our generic medicines segment (1.1 points), our specialty medicines segment (1.0 point) and other activities (0.5 points).

Research and Development (R&D) Expenses

Net R&D expenses for the first quarter of 2017 amounted to $457 million, an increase of 17% compared to the first quarter of 2016.

As a percentage of revenues, R&D spending was 8.1% in the first quarter of 2017, flat compared to the first quarter of 2016.

Our R&D expenses were primarily the result of the factors previously discussed under “Generic Medicines—R&D Expenses” and “Specialty Medicines—R&D Expenses” above, as well as R&D related restructuring costs.

Selling and Marketing (S&M) Expenses

S&M expenses in the first quarter of 2017 were $971 million, an increase of 16% compared to the first quarter of 2016. The increase was mainly due to higher S&M expenses related to our generic medicines segment and to our other activities. See “Generic Medicines S&M Expenses” and “Specialty Medicines S&M Expenses” above.

As a percentage of revenues, S&M expenses were 17.2% in the first quarter of 2017, compared to 17.4% in the first quarter of 2016.

General and Administrative (G&A) Expenses

G&A expenses in the first quarter of 2017 were $236 million, compared to $304 million in the first quarter of 2016. As a percentage of revenues, G&A expenses were 4.2% in the first quarter of 2017, compared to 6.3% in the first quarter of 2016. The lower G&A expenses in the first quarter of 2017 mainly reflect income related to a legal recovery in Canada and income from milestone payments from the Attenukine ^™ out-license, partially offset by the increased expenses related to the Actavis Generics acquisition.

Impairments, Restructuring and Others

In the first quarter of 2017, we recorded expenses of $240 million for impairments, restructuring and others, compared to expenses of $119 million in the first quarter of 2016. The expenses in the first quarter of 2017 were mainly due to:

•

Restructuring expenses of $130 million, following the integration of Actavis Generics and other efficiency measures;

•

An expense of $52 million, as a result of the reclassification of currency translation adjustments from accumulated other comprehensive income to the statements of income, related to the divestiture of certain assets and operations of Actavis Generics in the U.K. and Ireland;

•

Integration and acquisition expenses of $23 million;

•

Contingent consideration expenses of $21 million; and

•

Impairment of long-lived assets of $11 million.

Further integration and other efficiency initiatives may drive additional restructuring expenses throughout the year.

Following FDA actions in 2016, we voluntarily discontinued all manufacturing activities at our facility in Godollo, Hungary, in order to assess and remediate quality concerns. Property, plant and equipment balances for this site as of March 31, 2017 amounted to approximately $87 million following an impairment of $80 million recorded during the fourth quarter of 2016. Any actions taken with regards to our Godollo facility may result in further impairments.

Following an FDA audit of our API facility in China in September 2016, we received a warning letter from the FDA in April 2017. We are in the process of undertaking corrective actions to address both the specific concerns raised by investigators as well as the underlying causes of those concerns. A response has been sent to the FDA.

Legal Settlements and Loss Contingencies

In the first quarter of 2017, we recorded expenses of $20 million for legal settlements and loss contingencies, compared to income of $25 million in the first quarter of 2016.

Operating Income

Operating income was $895 million in the first quarter of 2017, compared to $1.2 billion in the first quarter of 2016. As a percentage of revenues, operating income was 15.9% in the first quarter of 2017 compared to 24.2% in the first quarter of 2016.

The decrease in operating income was mainly due to lower profit of our specialty medicines segment, higher amortization, higher impairments, restructuring and others, higher inventory step-up and higher legal settlements and loss contingencies, partially offset by higher profit of our generic medicines segment, lower G&A expenses and higher profit from other activities.

The decrease in operating income as a percentage of revenues was 8.3 points, mainly due to lower profit of our specialty medicines segment (6.0 points), higher amortization (1.8 points), higher impairments, restructuring and others (1.8 points), higher inventory step-up (1.0 points) and higher legal settlements and loss contingencies (0.9 points), partially offset by lower G&A expenses (2.1 points), higher profit of other activities (0.5 points) and higher profit of our generic medicines segment (0.3 points).

The following table presents a reconciliation of our segment profit to our consolidated operating income for the three months ended March 31, 2017 and 2016:


	Three months ended
	March 31,
	2017		2016
	U.S.$ in millions
Generic medicines profit	$	779	$	649
Specialty medicines profit		1,038		1,175

Total segment profit		1,817		1,824
Profit (loss) of other activities		26		(4	)

		1,843		1,820
Amounts not allocated to segments:
Amortization		320		189
General and administrative expenses		236		304
Impairments, restructuring and others		240		119
Inventory step-up		64		6
Costs related to regulatory actions taken in facilities		34		38
Legal settlements and loss contingencies		20		(25	)
Other unallocated amounts		34		24

Consolidated operating income		895		1,165

Financial expenses, net		207		298

Consolidated income before income taxes	$	688	$	867

Financial Expenses, Net

In the first quarter of 2017, financial expenses amounted to $207 million, compared to $298 million in the first quarter of 2016. The decrease was mainly due to a $246 million impairment of our monetary balance sheet items related to Venezuela in the first quarter of 2016, partially offset by an increase of $151 million of interest expenses resulting from our $20.4 billion bond issuances and the $5 billion term loans borrowed in connection with the Actavis Generics acquisition as well as $24 million of increased expenses derived from net foreign exchange losses and financial derivatives.

Tax Rate

In the first quarter of 2017, income taxes amounted to $54 million, or 8%, on pre-tax income of $688 million. In the first quarter of 2016, income taxes amounted to $228 million, or 26%, on pre-tax income of $867 million.

Our tax rate for the first quarter of 2016 was mainly affected by an impairment of our monetary assets in Venezuela that did not have a corresponding tax effect. Our tax rate for the first quarter of 2017 benefitted mainly from the synergies associated with the Actavis Generics acquisition and higher level of expenses in high-tax jurisdictions. The statutory Israeli corporate tax rate is 24% in 2017. Our tax rate differs from the Israeli statutory tax rate mainly due to tax incentives in Israel and other countries, the mix of profits generated in various jurisdictions where we benefit from tax rates different than the Israeli rate, as well as infrequent or nonrecurring items.

Net Income

Net income attributable to Teva in the first quarter of 2017 was $645 million, compared to $636 million in the first quarter of 2016. This increase was due to the factors previously discussed, primarily due to lower income taxes and finance expenses, partially offset by lower operating income.

Net income attributable to ordinary shareholders in the first quarter of 2017 amounted to $580 million, compared to $570 million in the first quarter of 2016. The difference from net income attributable to Teva is due to the $65 million dividend declared for holders of our mandatory convertible preferred shares in the first quarter of 2017.

Diluted Shares Outstanding and Earnings Per Share

The weighted average diluted shares outstanding used for the fully diluted share calculation for the first quarters of 2017 and 2016 were 1,017 million and 920 million shares, respectively.

Diluted earnings per share for the three months ended March 31, 2017 and 2016 take into account the potential dilution that could occur upon the exercise of options and non-vested RSUs granted under employee stock compensation plans and one series of convertible senior debentures, using the treasury stock method.

For the three months ended March 31, 2017, no account was taken of the potential dilution resulting from the conversion of the mandatory convertible preferred shares amounting to 59 million weighted average shares, since they had an anti-dilutive effect on earnings per share.

The increase in the number of shares outstanding compared to the first quarter of 2016 was mainly due to our issuance of approximately 100.3 million shares to Allergan in connection with the closing of the Actavis Generics acquisition on August 2, 2016 and the issuance of shares for employee options exercised and vested RSUs. The shares issued to Allergan are subject to a prohibition on transfer until August 2, 2017.

Diluted earnings per share amounted to $0.57 in the first quarter of 2017, compared to $0.62 in the first quarter of 2016.

Share Count for Market Capitalization

We calculate share amounts, using the outstanding number of shares (i.e., excluding treasury shares) plus shares that would be outstanding upon the exercise of options and vesting of RSUs and performance share units (PSUs), as well as the conversion of our convertible senior debentures and mandatory convertible preferred shares, in each case, at period end.

As of March 31, 2017 and 2016, the fully diluted share count for purposes of calculating our market capitalization was approximately 1,082 million and 1,003 million, respectively.

Impact of Currency Fluctuations on Results of Operations

In the first quarter of 2017, approximately 43% of our revenues came from sales outside of the United States. Because our results are reported in U.S. dollars, we are subject to significant foreign currency risks and accordingly, changes in the rate of exchange between the U.S. dollar and the local currencies in the markets in which we operate (primarily the euro, Japanese yen, British pound, new Israeli shekel, Canadian dollar, Russian ruble and Hungarian forint) impact our results. In the first quarter of 2017, compared to the first quarter of 2016, the following currencies decreased in value against the U.S. dollar: the British pound by 14%, the Mexican peso by 11%, the Argentinean peso by 8% and the euro by 3.4%, while the following currencies increased in value against the U.S. dollar: the Russian ruble by 27%, the new Israeli shekel by 4.6% and the Japanese yen by 1% (all compared on a quarterly-average basis).

As a result, exchange rate movements during the first quarter of 2017 in comparison with the first quarter of 2016 negatively impacted overall revenues by $254 million and negatively impacted our operating income by $78 million.

In addition, we adjusted the exchange rates that we use for the Venezuelan bolivar twice during 2016 and again in February 2017, which resulted in a decrease of $217 million in revenues and $71 million in operating income, compared to the first quarter of 2016. In light of the economic conditions in Venezuela, we have excluded these changes in revenues and operating profit in any discussion of currency effects.

We are exposed to a potential impairment of our net monetary balance sheet items in Venezuela as we continue to adjust the exchange rate that we use. As of March 31, 2017, our net monetary balance sheet items amounted to approximately negative $8 million, including approximately $23 million in cash. In addition, remittance of cash outside of Venezuela is limited. We are also exposed to a potential negative impact on our revenues and profits in Venezuela.

Liquidity and Capital Resources

Total balance sheet assets amounted to $91.3 billion as of March 31, 2017, compared to $92.9 billion as of December 31, 2016.

Inventory balances as of March 31, 2017 amounted to $5.0 billion, flat compared to December 31, 2016.

Trade receivables as of March 31, 2017, net of sales reserves and allowances (“SR&A”), amounted to negative $0.2 billion, compared to negative $0.3 billion as of December 31, 2016.

Prepaid expenses as of March 31, 2017 were $1.0 billion compared to $1.4 billion as of December 31, 2016, mainly due to a decrease of $0.4 billion in prepaid income tax.

Other current assets as of March 31, 2017 were $0.7 billion compared to $1.3 billion as of December 31, 2016, mainly due to the sale of our Mylan shares.

Assets held for sale as of March 31, 2017 were $43 million compared to $0.8 billion as of December 31, 2016, mainly due to the divestiture of certain assets and operations of Actavis Generics in the U.K. and Ireland in January 2017.

Trade payables amounted to $2.4 billion as of March 31, 2017, compared to $2.2 billion as of December 31, 2016.

Employee-related obligations as of March 31, 2017, were $0.7 billion, compared to $0.9 billion as of December 31, 2016.

Accrued expenses as of March 31, 2017, were $2.5 billion, compared to $3.4 billion as of December 31, 2016. The decrease is mainly due to payments made in connection with the FCPA settlement with the DOJ and SEC as well as the ciprofloxacin settlement.

Other current liabilities as of March 31, 2017 were $0.9 billion, flat compared to December 31, 2016.

We had no liabilities held for sale as of March 31, 2017 compared to $0.1 billion as of December 31, 2016, mainly due to the divestiture of certain operations of Actavis Generics in the U.K. and Ireland In January 2017.

We monitor macro-economic risks in certain emerging markets that are experiencing economic stress, focusing on Eastern Europe and Latin America, and have taken action to limit our exposure in these regions.

Our working capital balance, which includes trade receivable net of SR&A, inventories, prepaid expenses and other current assets, trade payable, employee-related obligation, accrued expenses and other current liabilities, was negative $69 million as of March 31, 2017, compared to positive $5 million as of December 31, 2016.

Investment in property, plant and equipment in the first quarter of 2017 was approximately $0.2 billion, flat compared to the first quarter of 2016. Depreciation amounted to $0.2 billion in the first quarter of 2017, compared to $0.1 billion in the first quarter of 2016.

Cash and cash equivalents and short-term and long-term investments as of March 31, 2017 amounted to $1.2 billion, compared to $1.9 billion as of December 31, 2016. The decrease was mainly due to repayments of certain short-term debt, using proceeds from the sale of our Mylan shares as well as negative net cash flow generated during the quarter.

Our principal sources of short-term liquidity are our existing cash investments, liquid securities and available credit facilities, primarily our $4.5 billion syndicated revolving line of credit, of which we utilized $260 million as of March 31, 2017, as well as internally generated funds, which we believe are sufficient to meet our on-going operating needs.

2017 Debt Balance and Movements

As of March 31, 2017, our debt was $34.6 billion, a decrease of $1.2 billion compared to $35.8 billion as of December 31, 2016.

In January 2017 we repaid our GBP 510 million short-term loan.

In March 2017 we entered into a JPY 86.8 billion term loan agreement, consisting of two tranches, JPY 58.5 billion with five years maturity and JPY 28.3 billion with one year maturity with an optional six month extension. As of March 31, 2017 we have drawn JPY 20.7 billion on the JPY 28.3 billion loan.

In March 2017 we repaid at maturity a JPY 8.0 billion term loan.

During the first quarter of 2017 we repaid a net amount of $847 million on our revolving credit facility and bank facilities.

Our debt as of March 31, 2017 was effectively denominated in the following currencies: 69% in U.S. dollars, 23% in euros, 4% in Japanese yen and 4% in Swiss francs.

The portion of total debt classified as short-term as of March 31, 2017 was 6%, compared to 9% as of December 31, 2016, mainly due to a decrease in our short term borrowing as mentioned above.

Our financial leverage was 49% as of March 31, 2017, a decrease from 51% as of December 31, 2016.

Our average debt maturity was approximately 6.6 years as of March 31, 2017, compared to 6.9 years at December 31, 2016.

Shareholders’ Equity

Total shareholders’ equity was $35.7 billion as of March 31, 2017, compared to $35.0 billion as of December 31, 2016. The increase was mainly due to $0.6 billion of net income during the quarter, $0.5 billion positive impact of currency fluctuations and $0.1 billion of unrealized gain from available-for-sale securities and derivatives financial instruments, partially offset by $0.4 billion in dividend payments.

Exchange rate fluctuations affected our balance sheet, as approximately 25% of our net assets in the first quarter of 2017 (including both non-monetary and monetary assets) were in currencies other than the U.S. dollar. When compared to December 31, 2016, changes in currency rates had a positive impact of $0.5 billion on our equity as of March 31, 2017, mainly due to the change in value against the U.S. dollar of: the Mexican peso by (10%), the euro by (2%), the Japanese yen by (4%), the British pound by (1%), the Polish zloty by (6%) and the Russian ruble by (8%). All comparisons are on a quarter-end to quarter-end basis.

Cash Flow

Cash flow generated from operating activities during the first quarter of 2017 was $0.5 billion, compared to $1.4 billion in the first quarter of 2016. The decrease was mainly due to higher payments for legal settlements of $0.6 billion, primarily the FCPA settlement with the SEC and DOJ and payments related to the ciprofloxacin settlement, as well as $0.3 billion related to the final settlement of our forward starting interest rate swaps and treasury lock agreements that matured during the first half of 2016.

Cash flow generated from operating activities in the first quarter of 2017, net of cash used for capital investments, was $0.3 billion, compared to $1.2 billion in the first quarter of 2016. The decrease resulted mainly from lower cash flow generated from operating activities.

Our cash on hand is generally invested in bank deposits as well as liquid securities that bear fixed and floating rates.

Dividends

We announced a dividend for the first quarter of 2017 of $0.34 per ordinary share. The dividend payment is expected to take place on June 22, 2017 to holders of record as of June 5, 2017.

We further announced a quarterly dividend of $17.50 per mandatory convertible preferred share. The dividend payment is expected to take place on June 15, 2017 to holders of record as of June 1, 2017.

Commitments

In addition to financing obligations under short-term debt and long-term senior notes and loans, debentures and convertible debentures, our major contractual obligations and commercial commitments include leases, royalty payments, contingent payments pursuant to acquisition agreements and participation in joint ventures associated with R&D activities.

In September 2016, we entered into an agreement to develop and commercialize Regeneron’s pain medication product, fasinumab. We paid Regeneron $250 million upfront and will share equally with Regeneron in the global commercial benefits of this product, as well as ongoing associated research and development costs of approximately $1 billion.

In October 2016, we entered into an exclusive partnership with Celltrion to commercialize two of Celltrion’s biosimilar products in development for the U.S. and Canadian markets. We paid Celltrion $160 million, of which up to $60 million is refundable or creditable under certain circumstances. We will share the profit from the commercialization of these products with Celltrion.

Dividends on our mandatory convertible preferred shares (aggregate liquidation preference of approximately $3.7 billion) are payable on a cumulative basis when, as and if declared by our board of directors at an annual rate of 7% on the liquidation preference of $1,000 per mandatory convertible preferred share. Declared dividends are paid in cash on March 15, June 15, September 15 and December 15 of each year to and including December 15, 2018.

We are committed to pay royalties to owners of know-how, partners in alliances and certain other arrangements and to parties that financed R&D, at a wide range of rates as a percentage of sales of certain products, as defined in such agreements. In some cases, the royalty period is not defined; in other cases, royalties will be paid over various periods not exceeding 20 years.

In connection with certain development, supply and marketing, and research and collaboration or services agreements, we are required to indemnify, in unspecified amounts, the parties to such agreements against third-party claims relating to (1) infringement or violation of intellectual property or other rights of such third party; or (2) damages to users of the related products. Except as described in our financial statements, we are not aware of any material pending action that may result in the counterparties to these agreements claiming such indemnification.

Certain of our loan agreements and debentures contain restrictive covenants, mainly the requirement to maintain certain financial ratios. We are currently in compliance with all applicable financial ratios.

Supplemental Non-GAAP Income Data

We utilize certain non-GAAP financial measures to evaluate performance, in conjunction with other performance metrics. The following are examples of how we utilize the non-GAAP measures:

•

our management and board of directors use the non-GAAP measures to evaluate our operational performance, to compare against work plans and budgets, and ultimately to evaluate the performance of management;

•

our annual budgets are prepared on a non-GAAP basis; and

•

senior management’s annual compensation is derived, in part, using these non-GAAP measures. While qualitative factors and judgment also affect annual bonuses, the principal quantitative element in the determination of such bonuses is performance targets tied to the work plan, and thus is based on the non-GAAP presentation set forth below.

Non-GAAP financial measures have no standardized meaning and accordingly have limitations in their usefulness to investors. We provide such non-GAAP data because management believes that such data provide useful information to investors. However, investors are cautioned that, unlike financial measures prepared in accordance with U.S. GAAP, non-GAAP measures may not be comparable with the calculation of similar measures for other companies. These non-GAAP financial measures are presented solely to permit investors to more fully understand how management assesses our performance. The limitations of using these non-GAAP financial measures as performance measures are that they provide a view of our results of operations without including all events during a period and may not provide a comparable view of our performance to other companies in the pharmaceutical industry.

Investors should consider non-GAAP financial measures in addition to, and not as replacements for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP.

In arriving at our non-GAAP presentation, we exclude items that either have a non-recurring impact on the income statement or which, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not singled out, potentially cause investors to extrapolate future performance from an improper base. In addition, we also exclude equity compensation expenses to facilitate a better understanding of our financial results, since we believe that this exclusion is important for understanding the trends in our financial results and that these expenses do not affect our business operations. While not all inclusive, examples of these items include:

•

amortization of purchased intangible assets;

•

legal settlements and/or loss contingencies, due to the difficulty in predicting their timing and size;

•

impairments of long-lived assets, including intangibles, property, plant and equipment and goodwill;

•

restructuring expenses, including severance, retention costs, contract cancellation costs and certain accelerated depreciation expenses primarily related to the rationalization of our plants, or to certain other strategic activities such as the realignment of R&D focus or other similar activities;

•

acquisition or divestment related items, including changes in contingent consideration, integration costs, banker and other professional fees, inventory step-up and in-process R&D acquired in development deals;

•

expenses related to our equity compensation;

•

significant one-time financing costs and devaluation losses;

•

material tax and other awards or settlements, both amounts paid and received;

•

other exceptional items that we believe are sufficiently large that their exclusion is important to understanding trends in our financial results, such as impacts due to changes in accounting, significant costs for remediation of plants such as inventory write-offs or related consulting costs or other unusual events; and

•

tax effects of the foregoing items.

The following tables present supplemental non-GAAP data, in U.S. dollar terms, which we believe facilitates an understanding of the factors affecting our business. In these tables, we exclude the following amounts:


	Three Months Ended March 31,
	2017			2016
	U.S. $ in millions
Amortization of purchased intangible assets		320			189
Restructuring expenses		130			19
Inventory step-up		64			6
Capital loss from currency translation		52			—
Equity compensation expenses		36			24
Costs related to regulatory actions taken in facilities		34			38
Acquisition, integration and related expenses		23			47
Contingent consideration		21			51
Legal settlements and loss contingencies		20			(25	)
Impairment of long-lived assets		11			13
Other non-GAAP items		15			2
Financial expense (income)		(28	)		246
Minority interest		(13	)		—
Corresponding tax benefit		(186	)		(74	)


	Three Months Ended March 31, 2017											Three Months Ended March 31, 2016
	U.S. dollars and shares in millions (except per share amounts)
	GAAP		Non-GAAP Adjustments			Dividends on Preferred Shares	Non- GAAP		% of Net Revenues			GAAP		Non-GAAP Adjustments			Dividends on Preferred Shares		Non- GAAP		% of Net Revenues
Gross profit (1)		2,819		377				3,196		57	%		2,791		225					3,016		63	%
Operating income (1)(2)		895		726				1,621		29	%		1,165		361					1,526		32	%
Net income attributable to ordinary shareholders (1)(2)(3)(4)		580		499				1,079		19	%		570		536			66		1,172		24	%
Earnings per share attributable to ordinary shareholders - diluted (5)		0.57		0.49				1.06					0.62		0.58					1.20

(1) Amortization of purchased intangible assets				267											178
Inventory step up				64											6
Costs related to regulatory actions taken in facilities				34											38
Equity compensation expenses				5											3
Other COGS related adjustments				7											—

Gross profit adjustments				377											225
(2) Restructuring expenses				130											19
Amortization of purchased intangible assets				53											11
Capital loss on currency translation				52											—
Equity compensation expenses				31											21
Acquisition, Integration and related expenses				23											47
Contingent consideration				21											51
Legal settlements and loss contingencies				20											(25	)
Impairment of long-lived assets				11											13
Other operating related adjustments				8											(1	)

				349											136

Operating income adjustments				726											361

(3) Financial expense (income)				(28	)										246
Tax effect				(186	)										(74	)
Impairment of equity investment—net				—											3
Minority interest				(13	)										—

Net income adjustments				499											536

(4)	Dividends on the mandatory convertible preferred shares of $66 million for the three months ended March 31, 2016 are added back to non-GAAP net income attributable to ordinary shareholders, since such preferred shares had a dilutive effect on non-GAAP earnings per share.

(5)

The non-GAAP weighted average number of shares was 1,017 and 979 million for the three months ended March 31, 2017 and 2016, respectively. The non-GAAP weighted average number of shares for the three months ended March 31, 2017 does not take into account the potential dilution of the mandatory convertible preferred shares (amounting to 59 million weighted average shares), which have anti dilutive effect on non-GAAP earnings per share. Non-GAAP earnings per share can be reconciled with GAAP earnings per share by dividing each of the amounts included in footnotes 1-4 above by the applicable weighted average share number.

Non-GAAP Tax Rate

Non-GAAP income taxes for the first quarter of 2017 amounted to $240 million, or 17%, on pre-tax non-GAAP income of $1.4 billion. Non-GAAP income taxes in the comparable quarter of 2016 were $302 million, or 21%, on pre-tax non-GAAP income of $1.5 billion.

Our tax rate for the first quarter of 2017 was lower than the tax rate in the comparable period of 2016, mainly due to the synergies associated with the Actavis acquisition.

We expect our annual non-GAAP tax rate for 2017 to be 17%, similar to our annual non-GAAP tax rate for 2016.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the accompanying consolidated financial statements and related footnotes. Actual results may differ from these estimates. We base our judgments on our experience and on various assumptions that we believe to be reasonable under the circumstances.

As applicable to our consolidated financial statements, the most significant estimates and assumptions relate to purchase price allocation on acquisitions including determination of useful lives and contingent consideration; determining the valuation and recoverability of intangible assets and goodwill; and assessing sales reserves and allowances, uncertain tax positions, valuation allowances, contingencies, and inventory valuation. We have applied our policies and critical accounting estimates consistently to all of our businesses, including the recently acquired Actavis Generics, Anda and Rimsa businesses and our Teva Takeda business venture.

Please refer to note 1 in the Consolidated Financial Statements and Critical Accounting Policies included in our Annual Report on Form 20-F for the year ended December 31, 2016 for a summary of our significant accounting policies.

We continuously monitor for events or changes in circumstances that may impact the valuation of our goodwill. Notwithstanding the recent performance of our shares on the market, the February 2017 departure of our President and Chief Executive Officer and the announcement of the impending departure of our Chief Financial Officer, we have determined that our business has not changed in a manner that affects our conclusion that the fair value estimates of our reporting units are greater than their respective carrying amounts.

Any newly appointed chief executive officer may review our strategy and organizational structure. Any changes in strategy may lead to a reevaluation of our segments and goodwill allocation to reporting units as well as fair value attributable to our reporting units.

Recently Adopted and Issued Accounting Pronouncements

See the notes to the consolidated financial statements included in this report.

RISK FACTORS

There are no material changes to the risk factors previously disclosed in our Annual Report on Form 20-F for the year ended December 31, 2016.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There are no material changes to the Quantitative and Qualitative Disclosures About Market Risk previously disclosed in our Annual Report on Form 20-F for the year ended December 31, 2016.

LEGAL PROCEEDINGS

We are subject to various litigation and other legal proceedings. For a discussion of these matters, see “Contingencies” included in note 16 to the consolidated financial statements included in this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Exhibit 2.1

Execution Version

LOGO

SENIOR UNSECURED

JAPANESE YEN TERM LOAN

CREDIT AGREEMENT

dated as of

March 22, 2017

among

TEVA PHARMACEUTICAL INDUSTRIES LIMITED ,

as Guarantor,

TEVA HOLDINGS K.K.,

as Borrower ,

THE LENDERS PARTY HERETO FROM TIME TO TIME

and

SUMITOMO MITSUI BANKING CORPORATION,

as Administrative Agent

MIZUHO BANK, LTD.

and

SUMITOMO MITSUI BANKING CORPORATION, BRUSSELS BRANCH,

as Mandated Lead Arrangers and as Bookrunners

White & Case LLP

5 Old Broad Street

London EC2N 1DW

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS			1
Section 1.01	Defined Terms		1
Section 1.02	Terms Generally		21
Section 1.03	Accounting Terms; GAAP		22
Section 1.04	Resolution of Drafting Ambiguities		22
Section 1.05	Agreement on Bank Transactions		22

ARTICLE II THE CREDITS			22
Section 2.01	Commitments		22
Section 2.02	Loans		22
Section 2.03	Requests for Loans		23
Section 2.04	Funding of Loans		23
Section 2.05	Interest Periods		24
Section 2.06	Termination and Reduction of Commitments; Term Loans		25
Section 2.07	Repayment of Loans; Evidence of Debt		25
Section 2.08	Prepayment of Loans		26
Section 2.09	Fees		27
Section 2.10	Interest		27
Section 2.11	Alternate Rate of Interest		28
Section 2.12	Increased Costs		29
Section 2.13	Illegality		31
Section 2.14	Break Funding Payments		31
Section 2.15	Taxes		32
Section 2.16	Payments Generally; Pro Rata Treatment; Sharing of Set-offs		34
Section 2.17	Mitigation Obligations; Replacement of Lenders		35
Section 2.18	Defaulting Lenders		36

ARTICLE III REPRESENTATIONS AND WARRANTIES			37
Section 3.01	Organization; Powers		37
Section 3.02	Authorization; Enforceability		37
Section 3.03	Approvals; No Conflicts		38
Section 3.04	Financial Condition; No Material Adverse Change		38
Section 3.05	Litigation		39
Section 3.06	Environmental Matters		39
Section 3.07	Disclosure		39
Section 3.08	Solvency		39
Section 3.09	ERISA		40
Section 3.10	Investment Company Status		40
Section 3.11	Margin Securities		40
Section 3.12	Properties		40
Section 3.13	Compliance with Laws and Agreements		40
Section 3.14	Taxes		41
Section 3.15	Pari Passu Ranking		41
Section 3.16	Permits, Etc		41
Section 3.17	Insurance		41
Section 3.18	No Filing or Stamp Tax		41
Section 3.19	No Anti-Social Forces		41


ARTICLE IV CONDITIONS		43
Section 4.01	Effective Date	43
Section 4.02	Each Credit Event	44

ARTICLE V AFFIRMATIVE COVENANTS		44
Section 5.01	Financial Statements and Other Information	44
Section 5.02	Notices of Material Events	46
Section 5.03	Existence; Conduct of Business	46
Section 5.04	Payment of Taxes	47
Section 5.05	Maintenance of Properties; Insurance	47
Section 5.06	Books and Records; Inspection Rights	47
Section 5.07	Compliance with Laws	47
Section 5.08	Use of Proceeds	47
Section 5.09	Environmental Laws, Etc.	47

ARTICLE VI NEGATIVE COVENANTS		48
Section 6.01	Fundamental Changes and Asset Sales	48
Section 6.02	Fiscal Year and Accounting	49
Section 6.03	Negative Pledge	50
Section 6.04	Financial Covenants	52
Section 6.05	No Anti-Social Forces	52

ARTICLE VII EVENTS OF DEFAULT		53
Section 7.01	Events of Default	53

ARTICLE VIII THE ADMINISTRATIVE AGENT		56
Section 8.01	Appointment and Authority	56
Section 8.02	Administrative Agent Individually	56
Section 8.03	Duties of Administrative Agent; Exculpatory Provisions	57
Section 8.04	Reliance by Administrative Agent	58
Section 8.05	Delegation of Duties	59
Section 8.06	Resignation of Administrative Agent	59
Section 8.07	Non-Reliance on Administrative Agent and Other Lender Parties	60
Section 8.08	[Reserved]	61
Section 8.09	Certain Titles	61

ARTICLE IX GUARANTY		61
Section 9.01	Guaranty	61
Section 9.02	Guaranty Absolute	62
Section 9.03	Waivers and Acknowledgments	63
Section 9.04	Subrogation	63
Section 9.05	Subordination	64
Section 9.06	Continuing Guaranty	65

ARTICLE X [RESERVED]		65

ARTICLE XI MISCELLANEOUS		65
Section 11.01	Notices	65
Section 11.02	[Reserved]	66
Section 11.03	Waivers; Amendments	66
Section 11.04	Expenses; Indemnity; Damage Waiver	67
Section 11.05	Successors and Assigns	69
Section 11.06	Survival	71
Section 11.07	Counterparts; Integration; Effectiveness	72


Section 11.08	Severability	72
Section 11.09	Right of Setoff	72
Section 11.10	Governing Law; Jurisdiction; Consent to Service of Process	73
Section 11.11	Waiver of Jury Trial	74
Section 11.12	Headings	74
Section 11.13	Confidentiality	74
Section 11.14	Treatment of Information	75
Section 11.15	Interest Rate Limitation	77
Section 11.16	No Waiver; Remedies	77
Section 11.17	USA Patriot Act Notice; “Know Your Customer”; OFAC, Sanctions, Anti-Corruption and Anti-Money Laundering Provisions	78
Section 11.18	Preparation of Notarized Deed ( kousei shosho )	80
Section 11.19	Judgment Currency	80
Section 11.20	Language	80
Section 11.21	No Fiduciary Duty	81
Section 11.22	Money Lending Business Act of Japan	81


SCHEDULES :

Schedule 1A	-	Parent Disclosure Schedule
Schedule 1B	-	Segment Disclosure Schedule
Schedule 2.01	-	Commitments
Schedule 3.18	-	Stamp Taxes
Schedule 6.03	-	Existing Liens

EXHIBITS :

Exhibit A	-	Form of Assignment and Assumption
Exhibit B	-	Form of Borrowing Request
Exhibit C	-	Form of Prepayment Notice
Exhibit D	-	Form of Compliance Certificate
Exhibit E	-	Form of Termination or Reduction of Commitment Notice
Exhibit F	-	Form of Net Funding Notice
Annex A	-	Confidentiality of Reference Bank Quotations

iii

CREDIT AGREEMENT

This Credit Agreement (this “ Agreement ”), dated as of March 22, 2017, is among TEVA PHARMACEUTICAL INDUSTRIES LIMITED , an Israeli company registered under no 52-0013-954, the registered address of which is at 5 Basel Street, Petach Tikva, ISRAEL (the “ Company ”, “ Guarantor ” or the “ Parent ”), TEVA HOLDINGS K.K . , a Kabushiki Kaisha organized under the laws of Japan registered under no 0104-03-008857, the registered address of which is at 1-5, Toranomon 5-chome, Minato-ku, Tokyo, Japan, and a Subsidiary of the Company (“ Teva Japan ” or the “ Borrower ”), the Lenders party hereto from time to time and SUMITOMO MITSUI BANKING CORPORATION (the “ Administrative Agent ”).

The parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ 2012 JPY Tranche A ” means the Tranche A under that certain Senior Unsecured Fixed Rate Japanese Yen Term Loan Credit Agreement dated as of March 28, 2012 among the Parent, the Borrower, the lenders party thereto and Sumitomo Mitsui Banking Corporation, as administrative agent (as amended, from time to time).

“ 2016 JPY Tranche A ” means the Tranche A under that certain Senior Unsecured Fixed Rate Japanese Yen Term Loan Credit Agreement dated as of March 28, 2016 among the Parent, the Borrower, the lenders identified therein and Sumitomo Mitsui Banking Corporation, as administrative agent (as amended, from time to time).

“ Administrative Agent ” has the meaning specified in the preamble hereto.

“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“ Agent’s Group ” has the meaning specified in Section 8.02(b) .

“ Aggregate Commitments ” means, with respect to any Tranche, the aggregate amount of all of the Lenders’ Commitments under such Tranche.

“ Agreement ” has the meaning specified in the preamble hereto.

“ Anti-Corruption Laws ” means each of the United States Foreign Corrupt Practices Act of 1977 and the U.K. Bribery Act 2010, each as amended and including all regulations thereunder, and all other similar anti-corruption regulations or legislation in other jurisdictions applicable to the Parent or its Subsidiaries.

“ Anti-Money Laundering Laws ” means all applicable financial recordkeeping and reporting requirements and the money laundering statutes and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, which in each case are issued, administered or enforced by any Governmental Authority in any jurisdiction applicable to the Parent or its Subsidiaries, including, without limitation, the Act (as defined in Section 11.17).

“ Anti-Social Force ” means any of the Persons, groups or individuals described in Sections 3.19(a) through (n) .

“ Applicable Margin ” means, with respect to each Tranche, for any day with respect to any Loan of such applicable Tranche:

(a) with respect to Tranche A, (x) for any period prior to the Tranche A Maturity Extension Date, 0.25% per annum; and (y) for any period from and after the Tranche A Maturity Extension Date, 0.30% per annum; and

(b) with respect to Tranche B, 0.55% per annum.

“ Applicable Percentage ” means, (a) with respect to any Tranche A Lender, the percentage of the total Tranche A Aggregate Commitments of all Tranche A Lenders represented by such Tranche A Lender’s Tranche A Commitments and (b) with respect to any Tranche B Lender, the percentage of the total Tranche B Aggregate Commitments of all Tranche B Lenders represented by such Tranche B Lender’s Tranche B Commitments. If the Aggregate Commitments of any Tranche have terminated or expired, the Applicable Percentages shall be determined based upon the applicable Commitments most recently in effect, giving effect to any assignments.

“ Approved Fund ” means 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 (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.05 ), and accepted by the Administrative Agent, substantially in the form attached hereto as Exhibit A or any other form approved by the Administrative Agent and the Parent.

“ Availability Period ” means the period from and including the Effective Date and ending on April 27, 2017.

“ Bankruptcy Event ” has the meaning set forth in Section 7.01(g).

“ Bankruptcy Law ” has the meaning set forth in Section 7.01(g) .

“ Basel III ” means “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems”, “Basel III: International Framework for Liquidity Risk Measurement, Standards and Monitoring” and “Guidance for National Authorities Operating the Countercyclical Capital Buffer” published by the Basel Committee on 16 December 2010, each as amended, supplemental or restated, the “Global systemically important banks:

assessment methodology and the additional loss absorbency requirement – Rules text” published by the Basel Committee in November 2011, as amended, supplemented or restated, and any other finalized form of further guidance, directives or standards published by the Basel Committee or other relevant committee, agency, authority or central bank that addresses such proposals.

“ Basel Committee ” means the Basel Committee on Banking Supervision.

“ Bookrunners ” has the meaning set forth on the cover hereof.

“ Bookrunners Fee Letter ” means that certain bookrunners fee letter dated as of the Signing Date among the Parent and the Bookrunners.

“ Borrowing Request ” means a request by a Borrower for a Loan in accordance with Section 2.03, and being in the form of attached Exhibit B or any other form approved by the Administrative Agent.

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in London or Tokyo are authorized or required by law to remain closed.

“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, adoption or application thereof by any Governmental Authority or (c) the making or issuance of, and compliance by the relevant Lender with, any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority. Notwithstanding anything herein to the contrary, (x) the Dodd Frank Wall Street Reform and Consumer Protection Act, and all requests, rules, guidelines, requirements and directives promulgated thereunder or issued in connection therewith, and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee (or any successor or similar authority) or the United States, Japan or any other foreign regulatory authorities, in each case pursuant to Basel III, are deemed to have been introduced or adopted after the date hereof, regardless of the date enacted, adopted, issued or implemented.

“ Change of Control ” shall be deemed to occur upon the occurrence of any one or more of the following:

(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 35% or more of the voting power or economic interests of the Parent,

(b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Parent ceases to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body, or

(c) the Parent shall cease to directly or indirectly beneficially own and control 100% of the equity interests in the Borrower.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Commitment ” means, with respect to each Lender, such Lender’s Tranche A Commitment or Tranche B Commitment, as the context requires, as applicable.

“ Communications ” means each notice, demand, communication, information, document and other material provided for hereunder or under any other Loan Document or otherwise transmitted between the parties hereto relating to this Agreement, the other Loan Documents, or the transactions contemplated by this Agreement or the other Loan Documents.

“ Company ” has the meaning specified in the preamble hereto.

“ Consolidated Cash and Cash Equivalents ” means, with respect to any Person, the:

(a) cash on hand or on deposit with any bank of such Person; plus

(b) all other assets held by such Person that should be classified as “cash equivalents” in accordance with GAAP,

included in the cash and cash equivalents accounts listed on the consolidated balance sheet of the Parent and its Subsidiaries, determined on a consolidated basis in accordance with GAAP (excluding any such cash or cash equivalents subject to an Encumbrance, other than non-consensual Permitted Encumbrances).

“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Credit Exposure ” means, with respect to any Lender under any Tranche at any time, the sum of the outstanding principal amount of such Lender’s Tranche A Loans (in the case of Tranche A Lenders) and Tranche B Loans (in the case of Tranche B Lenders), as applicable, at such time.

“ Credit Extension ” means the making of a Loan by a Lender.

“ Default ” means any event or condition which constitutes an Event of Default or which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Loan Documents or any combination of the foregoing ), unless cured or waived, become an Event of Default.

“ Defaulting Lender ” means any Lender with respect to which a Lender Default then exists.

“ Disruption Event ” means either or both of:

(a) a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with this Agreement (or otherwise in order for the transactions contemplated by the Loan Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the parties hereto; or

(b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a party hereto preventing that, or any other party hereto:

(i) from performing its payment obligations under the Loan Documents; or

(ii) from communicating with other Loan Parties in accordance with the terms of the Loan Documents,

and which (in either such case of clause (i) or (ii) above) is not caused by, and is beyond the control of, the party whose operations are disrupted.

“ Dollars ,” “ dollars ,” “ $ ” or “ US$ ” refers to lawful money of the United States of America.

“ Drawdown Date ” means a date on which a Loan is made.

“ EBITDA ” means, for any Test Period, the consolidated income before income taxes of the Parent and its Subsidiaries for such Test Period, determined on a consolidated basis in accordance with GAAP:

(a) adding thereto (without duplication) the income before income taxes of any Subsidiary or business or assets acquired during that Test Period for the part of that Test Period when it is not a Subsidiary and/or the business or assets were not owned by the Parent or its Subsidiaries, but

(b) excluding the income before income taxes attributable to any Subsidiary or to any business or assets sold during the Test Period,

(i) adding back Net Interest Payable;

(ii) excluding from such income before taxes any extraordinary, unusual or non-recurring expense or loss (including any extraordinary litigation or claim settlement charges or expenses) or gain (together with the tax consequences of such expense or loss or gain, as the case may be), recorded or recognized by the Parent or any Subsidiary during such Test Period;

(iii) excluding any amount attributed to minority interests to the extent reflected in income before income taxes;

(iv) adding back depreciation and amortization expenses;

(v) adding back any non-cash restructuring and non-cash integration costs incurred in respect of restructurings, plant closings, headcount reductions, cost reductions or any other similar action (including, without limitation, with respect to any acquisition) and any other non-cash charges and expenses of the Parent or its Subsidiaries reducing such consolidated income (including, without limitation, compensation expenses realized for the grants of performance shares, stock options, stock purchase rights or other rights to officers, directors and employees of the Parent or any Subsidiary) (but excluding any non-cash charge, expense or loss that results in an accrual of a reserve for cash charges in any future period and any non-cash charge, expense or loss relating to write-offs, write-downs or reserves with respect to accounts or inventory);

(vi) adding back any write-off of deferred financing costs in connection with the prepayment or repurchase of Indebtedness prior to the maturity thereof);

(vii) adding back any fees, costs and expenses incurred by the Parent or any Subsidiary in connection with the making of any acquisition (including, without limitation, any severance or restructuring costs or expenses, whether or not payable in cash, related to such acquisition), the incurrence of Indebtedness or the issuance of capital stock, whether or not the applicable transaction is consummated;

(viii) adding back any fees, costs and expenses in connection with the negotiation, execution and/or original syndication of this Agreement;

(ix) adding back any acquisition related costs, restructuring reserves, adjustments to acquired contingent liabilities and assets, adjustments made for earn-outs and other forms of contingent consideration and adjustments made to acquisition related deferred tax asset and income tax reserves incurred by the Parent or its Subsidiaries in connection with the acquisition of, merger, amalgamation or consolidation with, any Person expensed in computing such consolidated net income to the extent the same would have been capitalized prior to the adoption of Statement of Financial Accounting Standards No. 141R, Business Combinations; and

(x) taking no account of any revaluation of an asset or any loss or gain over book value arising on the disposal of an asset (otherwise than in the ordinary course of trading) by the Parent or a Subsidiary during the Test Period, and

(d) subtracting from such consolidated income before income taxes the aggregate amount of all non-cash items increasing such consolidated income before income taxes (other than accrual of revenue or recording of receivables in the ordinary course of business) for such Test Period.

For purposes of this definition, a gain, expense or loss shall only be deemed as being “ extraordinary ,” “ unusual ” or “ non -recurring ” if either (x) it is classified (in accordance with GAAP) as “extraordinary” or “unusual” on the face of the annual or quarterly consolidated financial statements of the Parent or (y) (i) it is a gain, expense or loss realized during the Test Period that in the good faith judgment of senior management of the Parent is not reasonably likely to recur within the two years following such period and (ii) there has not been another gain, expense or loss identical or similar to such gain, expense or loss realized within the preceding two years.

With respect to any period during which an acquisition or asset sale has occurred (each, a “ Subject Transaction ”), for purposes of determining the Interest Cover Ratio and the Total Consolidated Net Debt to EBITDA ratio, without duplication of clauses (a) and (b) above, EBITDA shall be calculated with respect to such period on a pro forma basis using the historical audited financial statements of any business so acquired (as if such acquisition had been effected on the first day of such Test Period) or sold (as if such sale had been effected immediately prior to the beginning of such Test Period).

“ Effective Date ” means the first Business Day on which the conditions precedent of Section 4.01 are each satisfied in full or waived.

“ Eligible Assignee ” means any Person to whom a Loan, Commitment and other rights and obligations under this Agreement may be assigned in accordance with Section 11.05(b) .

“ Embargoed Person ” means any party that (i) is publicly identified on the most current list of “Specially Designated Nationals and Blocked Persons” or the “Sectoral Sanctions Identifications List” and the “List of Foreign Sanctions Evaders” issued by OFAC or a similar list issued by the United Nations Security Council, the European Union, Her Majesty’s Treasury or the Foreign and Commonwealth Office of the United Kingdom or any other relevant sanctions authority, or is owned or controlled by or acting on behalf of such a party, or resides or is located in, is organized or chartered, or has a place of business in a country or territory subject to sanctions or embargo programs of such sanctions authorities (currently the Crimea region, Cuba, Iran, North Korea, Sudan and Syria) or is owned or controlled by or acting on behalf of such a party or (ii) is publicly identified as prohibited from doing business with the United States under any Sanctions, the International Emergency Economic Powers Act, the Trading With the Enemy Act, or any other requirement of law.

“ Encumbrance ” means mortgage, charge, pledge, lien, assignment by way of security, hypothecation, security interest, title retention, preferential right or trust arrangement or any other security agreement or arrangement having a similar effect.

“ Environmental Law ” means any statutory or common law, treaty, convention, directive or regulation having legal or judicial effect whether of a criminal or civil nature, concerning the environment, the preservation or reclamation of natural resources, or the management, release or threatened release of any Hazardous Materials or to health and safety matters.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

“ ERISA Affiliate ” means, with respect to any Person, any trade or business (whether or not incorporated) that, together with such Person, is treated as a single employer under Section 414 of the Code.

“ ERISA Event ” means (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation); (b) with respect to a Plan, the failure

to satisfy the minimum funding standard of Section 412 of the Code and Section 302 of ERISA, whether or not waived; (c) the failure to make by its due date a required installment under Section 430(j) of the Code, as amended by the Pension Protection Act of 2006, with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (d) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence by the Parent or any Subsidiary or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (f) the receipt by the Parent, any Subsidiary or any of their ERISA Affiliates from the Pension Benefit Guaranty Corporation (or any successor entity performing similar functions) or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the occurrence of any event or condition which could reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (g) the incurrence by any of the Parent, any of its Subsidiaries or any of their ERISA Affiliates of any liability with respect to the withdrawal from any Plan or Multiemployer Plan; (h) the receipt by any of the Parent, any of its Subsidiaries or their ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (i) the “substantial cessation of operations” within the meaning of Section 4062(e) of ERISA with respect to a Plan; (j) the making of any amendment to any Plan which could result in the imposition of a lien or the posting of a bond or other security or the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (k) the occurrence of a non-exempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which could reasonably be expected to result in liability to any of the Parent or any of its Subsidiaries; and (l) any event similar to any event described in (a) through (k) above but with respect to a Non-US Plan.

“ Event of Default ” has the meaning assigned to such term in Article VII .

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Excluded Financing ” means any loan financing raised in the private market (whether syndicated or bilateral, and whether from banks, private lenders or other financing sources, but excluding any debt private placement to institutional investors or any other capital markets financing), any lease financing or any substantially similar financing not raised in the public or private debt capital markets.

“ Excluded Taxes ” means, with respect to the Administrative Agent, any Lender or other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, by Japan, by any state or prefecture of any of the foregoing (including any locality or subdivision thereof) or the District of Columbia or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America, Japan or any state or prefecture of any of the foregoing or the District of Columbia or any similar tax imposed by any other jurisdiction in which the Administrative Agent, such Lender or such other recipient is located, (c) in the case of a Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b) ), any withholding tax that is attributable to such Lender’s failure to comply with Section 2.15(e) , except to the extent that such Lender

(or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 2.15(a) , (d) any tax that is attributable solely to the Administrative Agent, such Lender, or such other recipient’s (as the case may be) failure to comply with sections 1471 or 1472 of the Code and/or any U.S. Treasury Department regulations promulgated thereunder or other official interpretations thereof and (e) in the case of a Non-Qualifying Lender, any Japanese withholding tax that is imposed on amounts payable hereunder to such Non-Qualifying Lender at the time such Non-Qualifying Lender becomes a party hereto (or designates a new lending office), it being understood and agreed with respect to this subclause (e) that (x) if a Lender was a Qualifying Lender at the time such Lender became party to this Agreement and as a result of a Change in Law or a treaty change which went into effect after such Lender became a party hereto such Lender would no longer have otherwise been a Qualifying Lender, then such Lender shall none-the-less be deemed to be a Qualifying Lender and if such Lender transfers or assigns or participates out its Loan or interest therein to a different Lender (which assignee is in the same tax jurisdiction (for purposes of Japanese withholding tax) as the assigning Lender or is a branch of a financial institution based in the same tax jurisdiction as the assigning Lender (even if the branch is in another jurisdiction)) or re-books such Loan in a different booking office, such Loan shall at all times be deemed to be lent by a Qualifying Lender (even if the assignee, transferee or participant would not have otherwise been deemed a Qualifying Lender) and such Loan or interest therein shall be subject to the gross-up provisions of this Agreement, (y) if a Lender is assigned a Loan or portion thereof at the pursuant to a request by the Borrower under Section 2.17 that Loan or portion thereof so assigned shall at all times be deemed lent by a Qualifying Lender and shall be subject to the gross-up provisions of this Agreement and (z) this subclause (e) shall not apply to any Taxes imposed on a Lender in connection with an interest or participation in any Loan or other obligation that such Lender was required to acquire pursuant to Section 2.16(c) .

“ Executive Order ” means the United States Executive Order No. 13224 of September 23, 2001, entitled Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism.

“ Fee Letter ” means each of (x) the Bookrunners Fee Letter and (y) the Agency Fee Letter, dated as of the Signing Date among the Parent and the Administrative Agent, in each case, as the same may be amended from time to time.

“ Finance Parties ” means any of the Administrative Agent and/or any Lender.

“ Financial Officer ” means with respect to any Loan Party, the chief financial officer, principal accounting officer, treasurer or controller of such Loan Party.

“ Financing Arrangement ” means with respect to the Parent and its Subsidiaries the (i) sale, transfer or other disposition of any of the assets or property owned by the Parent or its Subsidiaries on terms whereby they are leased or re-acquired by the Parent or its Subsidiaries, (ii) sale, transfer or other disposition of any of its receivables on recourse terms, (iii) entering into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts, or (iv) entering into any other preferential arrangement having a similar effect, in each case in circumstances where the arrangement or transaction is entered into primarily as a method of raising Indebtedness or of financing or refinancing all or part of the acquisition of assets or property or the cost of installation, construction or improvement thereof, in each case which results in an Encumbrance on such assets or property.

“ GAAP ” means generally accepted accounting principles in the United States of America. Subject to the provisions of Section 6.02(b) , the Parent may elect to apply IFRS accounting principles in lieu of GAAP and, upon any such election, references herein to GAAP shall thereafter be construed to mean IFRS (except as otherwise provided in this Agreement); provided that any calculation or determination in this Agreement that requires the application of GAAP for periods that include fiscal quarters ended prior to the Borrower’s election to apply IFRS shall remain as previously calculated or determined in accordance with GAAP (subject to Section 6.02(b) ). The Parent shall give prompt notice of any such election made in accordance with this definition to the Administrative Agent and the Lenders.

“ Governmental Authority ” means the government of the United States of America, Japan or Israel or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body (including self-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).

“ Guarantor ” means the Parent.

“ Guaranty ” means the Guaranty issued by the Parent pursuant to Article IX hereof.

“ Hazardous Materials ” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature, in each case regulated pursuant to any Environmental Law.

“ IFRS ” means International Financial Reporting Standards as issued by the International Accounting Standards Board.

“ Indebtedness ” of a Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed ( provided that the amount of such Indebtedness shall be the lesser of (x) the fair market value of such property at such date of determination (as determined in good faith by the Borrower) and (y) the aggregate principal amount of such Indebtedness of such other Person), (g) all guarantees by such Person of Indebtedness of others, (h) all capital lease obligations of such Person (to the extent it is of the type of obligation that would have been reflected as a “capital lease” or other similar liability or obligation in accordance with GAAP as in effect as of the Signing Date (as applied in the Parent’s audited financial statements for the fiscal year ended December 31, 2016)), (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.

The indebtedness of any Person shall include the indebtedness 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 (other than in the case of general partner liability) to the extent that terms of such indebtedness expressly provide that such Person is not liable therefor, provided however , that Indebtedness of any Person shall not include (A) trade payables; (B) any contingent obligations incurred in connection with letters of credit, letters of guaranty or similar instruments obtained or created in the ordinary course of business to support obligations of such Person that do not constitute Indebtedness; or (C) endorsements of checks, bills of exchange and other instruments for deposit or collection in the ordinary course of business.

“ Indemnified Taxes ” means Taxes (other than Excluded Taxes) imposed on or with respect to any payment made by or on account of any obligation of any Loan Party hereunder or under any other Loan Document.

“ Interest Cover Ratio ” means, with respect to any Test Period, the ratio of (i) EBITDA for such Test Period to (ii) Net Interest Payable during such Test Period.

“ Interest Payable ” means all interest, acceptance commission and any other continuing, regular or periodic costs and expenses in the nature of interest and amortization of debt discount (whether paid, payable or capitalized), incurred by the Parent and its consolidated Subsidiaries in effecting, servicing or maintaining Total Consolidated Debt during a Test Period but excluding exchange differentials; provided , that , with respect to any period during which a Subject Transaction has occurred, for purposes of determining the Interest Cover Ratio, Interest Payable shall be calculated with respect to such period on a pro forma basis using the consolidated financial statements of the Parent and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period.

“ Interest Payment Date ” means each March 31, June 30, September 30 and December 31 of each year; provided that the first Interest Payment Date shall be June 30, 2017, and provided further , that in each case, whenever an Interest Payment Date would otherwise occur on a day other than a Business Day, such Interest Payment Date shall be extended to occur on the next succeeding Business Day; provided , that if such extension would cause such Interest Payment Date to occur in the next succeeding calendar month, such Interest Payment Date shall occur on the immediately preceding Business Day.

“ Interest Period ” means, for each Loan, the period from the Drawdown Date in respect of such Loan to the next succeeding Interest Payment Date and thereafter, each subsequent period from the most recent Interest Payment Date to the next succeeding Interest Payment Date; provided that in no event shall an Interest Period extend beyond any Maturity Date. For purposes of this definition, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent continuation of such Loan. For any Interest Period for which there is no Yen LIBO Rate Screen Rate that corresponds exactly to such Interest Period, then the Administrative Agent shall determine

the applicable Yen LIBO Rate Screen Rate using the weighted average of the offered Yen LIBO Rate Screen Rates for the two terms most nearly corresponding (ending before and after the applicable Interest Period) to such Interest Period; provided that for any Interest Period of one week or less, the Yen Rate LIBO Screen Rate for one week shall be used.

“ Interest Receivable ” means, in respect of any Test Period, interest and amounts in the nature of interest received during that period by the Parent and its consolidated Subsidiaries, calculated on a pro forma basis (as set forth in the proviso of the definition of Interest Payable) to the extent a Subject Transaction occurred during such Test Period.

“ IRRA ” shall have the meaning assigned to such term in Section 11.15 .

“ Japanese Borrower ” means the Borrower incorporated or organized under the laws of Japan.

“ Japanese GAAP ” means generally accepted accounting principles in Japan.

“ Japanese Material Subsidiary ” means any Material Subsidiary incorporated or organized under the laws of Japan.

“ JPY ”, “ Yen ” or “ ¥ ” means the lawful currency of Japan.

“ JPY Tranche A Facility ” means the 2012 JPY Tranche A and the 2016 JPY Tranche A.

“ Judgment Currency ” shall have the meaning assigned to such term in Section 11.19 .

“ Judgment Currency Conversion Date ” shall have the meaning assigned to such term in Section 11.19 .

“ Lender Default ” means, as to any Lender, (i) the refusal (which has not been retracted) of such Lender or the failure of such Lender to make available its portion of any Loan (unless (x) such refusal or failure is a result of an administrative or technical error or a Disruption Event and payment is made within two Business Days of its due date or (y) such Lender is reasonably disputing in good faith as to whether it is required to make the payment in question, which it shall do in writing to the Administrative Agent in reasonable detail), (ii) such Lender has (or has a direct or indirect parent company that has) been deemed insolvent or having become the subject of a bankruptcy or insolvency proceeding or a takeover by a regulatory authority (provided that as to any Lender, a Lender Default shall not be deemed to have occurred solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or any other jurisdiction of such Governmental Authority, or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender), or (iii) such Lender having notified the Administrative Agent and/or any Loan Party (x) that it does not intend to comply with its obligations under Sections 2.01 or 2.04 in circumstances where such non-compliance would constitute a breach of such Lender’s obligations under the respective Section, or having made a public statement to that effect (unless such Lender is reasonably disputing in good faith as to whether it is required to comply with its obligations in question, which it shall do in writing to the Administrative Agent in reasonable detail) or (y) of the events described in preceding clause (ii).

“ Lender Party ” means any Lender.

“ Lender Party Appointment Period ” has the meaning assigned in Section 8.06 .

“ Lenders ” means each Tranche A Lender and Tranche B Lender, as applicable.

“ Loan Documents ” means this Agreement, each Fee Letter and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith (exclusive of term sheets and commitment letters).

“ Loan Parties ” means the Borrower and Guarantor.

“ Loans ” means the loans made by the Lenders to the Borrower pursuant to this Agreement.

“ London Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in London are authorized or required by law to remain closed.

“ Mandated Lead Arrangers ” has the meaning set forth on the cover hereof.

“ Material Adverse Effect ” means any event or circumstance which:

(a) is materially adverse to:

(i) the business, operations or financial condition of the Loan Parties and their Subsidiaries, taken as a whole; or

(ii) the ability of the Loan Parties to perform their financial obligations (including both payment obligations and compliance with financial covenants) under any Loan Document; or

(b) affects the validity or the enforceability against any Loan Party of any Loan Document.

“ Material Indebtedness ” means Indebtedness (other than the Loans) of any one or more of the Parent and its Subsidiaries in an aggregate principal amount exceeding US$200,000,000 (or its equivalent in another currency or currencies).

“ Material Subsidiary ” means at any date, (a) the Borrower, (b) any Subsidiary of the Parent that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X (as in effect on the Effective Date) promulgated by the United States Securities and Exchange Commission ( provided that references therein to 10% shall for purposes hereof be 5%) as of the last day of the then most recently ended fiscal year, and (c) for the purpose of ascertaining whether an Event of Default has occurred only, any Subsidiary which, when aggregated with all other Subsidiaries that are not otherwise Material Subsidiaries and as to which any event described in the Events of Default clause has occurred and is continuing, would constitute a Material Subsidiary in accordance with the criteria in clause (b) above.

“ Maturity Date ” means the Tranche A Maturity Date or the Tranche B Maturity Date, as applicable.

“ Multiemployer Plan ” means a multiemployer plan within the meaning of Section 4001(a)(3) or Section 3(37) of ERISA (a) to which any of the Parent, its Subsidiaries or any of their ERISA Affiliates is then making or accruing an obligation to make contributions; (b) to which any of the Parent, its Subsidiaries or their ERISA Affiliates has within the preceding five plan years made contributions; or (c) with respect to which any of the Parent or its Subsidiaries could incur liability.

“ Net Cash Proceeds ” means for any event requiring a reduction of the Commitments and/or repayment of Loans pursuant to this Agreement, as the case may be, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from such event, net of reasonable transaction costs (including, as applicable, any underwriting, brokerage or other customary commissions and reasonable legal, advisory and other fees and expenses associated therewith (but not including any principal, interest, fees, costs (including payments required by Section 2.14 ) and expenses under this Agreement in relation to the reduction of the Commitments and/or repayment of Loans) received from any such event.

“ Net Interest Payable ” means Interest Payable less Interest Receivable.

“ Non-Bank Lender ” means any Lender who comes under the definition of “money lender” under Item 2 of Article 2 of the Money Lending Business Act of Japan (Act No. 32 of 1983, as amended); provided that if any Person has become a Lender hereunder and if some or all the provisions of the Money Lending Business Act of Japan will be applicable to such Person in relation thereto, such Lender shall be deemed to be a Non-Bank Lender even if such Lender is not a “money lender” under Item 2 of Article 2 of the Money Lending Business Act of Japan.

“ Non -Defaulting Lender ” means and includes each Lender other than a Defaulting Lender.

“ Non-Qualifying Lender ” means any Lender other than a Qualifying Lender.

“ Non -US Plan ” means any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by any of the Parent or its Subsidiaries with respect to employees employed outside the United States.

“ Obligation Currency ” shall have the meaning assigned to such term in Section 11.19 .

“ OFAC ” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“ Organized Crime Group ” means a group that would likely encourage its members (including members of its sub-group) to collectively or frequently engage in violent illegal acts.

“ Organized Crime Group Member ” means a member or associate of an Organized Crime Group.

“ Organized Crime Group Quasi-Member ” means a non-member of an Organized Crime Group who is related to such group and is likely to engage in violent illegal acts or financially supports an Organized Crime Group or its members, supplies weapons to such group, participates or is involved in the management of such group.

“ Other Taxes ” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“ Parent ” has the meaning specified in the preamble hereto.

“ Parent Disclosure Schedule ” means Schedule 1A.

“ Parent SEC Documents ” means the documents publicly filed with or publicly furnished to the United States Securities and Exchange Commission by the Parent prior to the Signing Date.

“ Participant ” has the meaning set forth in Section 11.05(d).

“ Participant Register ” has the meaning set forth in Section 11.05(d).

“ Payment Material Adverse Effect ” means any event or circumstance which:

(a) is materially adverse to the ability of the Loan Parties to perform their payment obligations under any Loan Document; or

(b) affects the validity or the enforceability against any Loan Party of any Loan Document.

“ Permitted Encumbrances ” has the meaning set forth in Section 6.03 .

“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA which is maintained or contributed to by any of the Parent, its Subsidiaries or any of their ERISA Affiliates or with respect to which any of the Parent or its Subsidiaries could incur liability (including under Section 4069 of ERISA).

“ Prepayment Notice ” has the meaning set forth in Section 2.08(b) , and being in the form of attached Exhibit C or any other form approved by the Administrative Agent.

“ Qualified Securitization Transaction ” means any transaction or series of transactions entered into by the Parent or any of its Subsidiaries pursuant to which the Parent or such Subsidiary sells, conveys or otherwise transfers to a Securitization Entity, or grants a security interest in for the benefit of a Securitization Entity, any Receivable Assets (whether now existing or arising or acquired in the future), or otherwise contributes to the capital of such Securitization Entity, in a transaction in which such Securitization Entity finances its acquisition of or interest in such Receivable Assets by selling or borrowing against such Receivable Assets; provided that such transaction is non-recourse to the Parent and its Subsidiaries (except for Standard Securitization Undertakings).

“ Quotation Day ” means, in relation to any period for which an interest rate is to be determined, two London Business Days before the first day of that period, unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be reasonably determined by the Lender in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“ Qualifying Lender ” means:

(a)

a Lender that exists, is created or is organized under the laws of Japan and is either lending from an office in Japan or a branch office outside of Japan;

(b)

a Lender that is not created or organized under the laws of Japan but is acting through a branch or other permanent establishment located in Japan and holds a valid Certificate of Exemption for Withholding Tax for Foreign Corporations issued by the relevant Tax authorities in Japan; or

(c)

a Treaty Lender.

“ Receivable Assets ” means ordinary course of business accounts receivable of the Parent or any of its Subsidiaries, and any assets related thereto, including, without limitation, all collateral securing such accounts receivable, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and/or receivables-discount-without-recourse schemes.

“ Reference Bank ” has the meaning set forth in Section 2.11.

“ Reference Bank Rate ” has the meaning set forth in Section 2.11.

“ Register ” has the meaning set forth in Section 11.05(c) .

“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“ Relevant Interbank Market ” means the London interbank market.

“ Required Lenders ” means, at any time, Non-Defaulting Lenders having Credit Exposures and unused Commitments representing at least 67% of the sum of the total Credit Exposures and unused Commitments of all Non Defaulting Lenders at such time.

“ Responsible Officer ” means a chief financial officer, treasurer or assistant treasurer of the Parent.

“Sanctions” means any sanctions administered, enacted or enforced by the United States (including OFAC and the U.S. Department of State), the United Nations Security Council, the European Union, Japan, Her Majesty’s Treasury or the Foreign and Commonwealth Office of the United Kingdom or any other relevant sanctions authority.

“ SEC ” means the U.S. Securities and Exchange Commission.

“ Securitization Entity ” means a Person (which may include a special purpose vehicle and/or a financial institution) to which the Parent or any Subsidiary transfers Receivable Assets for purposes of a securitization financing, and with respect to which:

(1) no portion of the Indebtedness or any other obligations (contingent or otherwise) of such entity (a) is guaranteed by the Parent or any Subsidiary of the Parent (other than the Securitization Entity) (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (b) is recourse to or obligates the Parent or any Subsidiary of the Parent (other than the Securitization Entity) in any way other than pursuant to Standard Securitization Undertakings or (c) subjects any asset of the Parent or any Subsidiary of the Parent (other than the Securitization Entity), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings and other than any interest in the Receivable Assets (whether in the form of an equity interest in such assets or subordinated indebtedness payable primarily from such financed assets) retained or acquired by the Parent or any Subsidiary of the Parent,

(2) neither the Parent nor any Subsidiary of the Parent has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Parent or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Parent, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity, and

(3) neither the Parent nor any Subsidiary of the Parent has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results (it being understood that (i) obligations of the Parent or other Subsidiaries to transfer Receivable Assets to the Securitization Entity, (ii) obligations of the Parent or any other Subsidiary to procure such transfers of Receivable Assets to the Securitization Entity, and (iii) Receivable Asset performance measures or credit enhancement measures shall not constitute an obligation to preserve the Securitization Entity’s financial condition or to cause it to achieve certain levels of operating results).

“ Segment Disclosure Schedule ” means Schedule 1B.

“ Signing Date ” means March 22, 2017.

“ Solvent ” and “ Solvency ” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature and (d) such Person is

not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ Standard Securitization Undertakings ” means representations, warranties, covenants and indemnities reasonably customary (as determined by the Parent acting in good faith) in accounts receivable securitization transactions and/or receivables-discount-without-recourse schemes in the applicable jurisdictions, including, to the extent applicable, in a manner consistent with the delivery of a “true sale”/“absolute transfer” opinion with respect to any transfer by the Parent or any Subsidiary.

“ Subject Transaction ” has the meaning specified in the definition of “ EBITDA .”

“ Subsidiary ” means, with respect to any Person (the “ parent ”) at any date, (i) any Person 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, (ii) any other corporation, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the voting power of all such ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the board of directors thereof are, as of such date, owned, controlled or held by the parent and/or one or more subsidiaries of the parent, (iii) any partnership (a) the sole general partner or the managing general partner of which is the parent and/or one or more subsidiaries of the parent or (b) the only general partners of which are the parent and/or one or more subsidiaries of the parent and (iv) any other Person that is otherwise Controlled by the parent and/or one or more subsidiaries of the parent. Unless the context requires otherwise, “ Subsidiary ” refers to a Subsidiary of the Parent.

“ Subsidiary Borrower ” means Teva Japan.

“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ Term Loan Commitment ” means each of the Tranche A Commitments and the Tranche B Commitments.

“ Termination or Reduction of Commitment Notice ” has the meaning set forth in Section 2.06(c) , and being in the form of attached Exhibit E or any other form approved by the Administrative Agent.

“ Test Period ” in effect at any time means the period of four consecutive financial quarters of the Parent ended on or prior to such time (taken as one accounting period) in respect of which quarterly or annual financial statements are required to be delivered pursuant to Section 5.01 (without giving effect to any grace periods applicable thereto).

“ Teva Japan ” has the meaning specified in the preamble hereto.

“ Total Consolidated Debt ” means, as of any date of determination, the aggregate amount of all outstanding Indebtedness of the Parent and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP.

“ Total Consolidated Net Debt ” means, at any date of determination, the Total Consolidated Debt less Consolidated Cash and Cash Equivalents of the Parent and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP.

“ Tranche ” when used in reference to any Loan, refers to whether such Loan is a Tranche A Loan or a Tranche B Loan, or when used in reference to any Commitment, refers to whether such Commitment is a Tranche A Commitment or a Tranche B Commitment, in each case, under this Agreement of which such Loan or Commitment shall be a part.

“ Tranche A Aggregate Commitments ” means the aggregate amount of all of the Tranche A Lenders’ Tranche A Commitments.

“ Tranche A Commitment ” means, with respect to any Tranche A Lender, the commitment of such Tranche A Lender to make Tranche A Loans expressed as an amount representing the maximum aggregate amount of such Tranche A Lender’s potential Credit Exposure hereunder in respect of Tranche A Loans, as such commitment may (x) be reduced from time to time pursuant to Section 2.06, and (y) be increased or reduced from time to time pursuant to assignments by or to such Tranche A Lender pursuant to Section 10.05. The initial amount of each Tranche A Lender’s Tranche A Commitment is set forth on Schedule 2.01 Part (a), or in the Assignment and Assumption pursuant to which such Tranche A Lender shall have assumed its Tranche A Commitment, as applicable. The initial aggregate amount of the Tranche A Lenders’ Tranche A Commitments is JPY 28,265,000,000.

“ Tranche A Drawdown Date ” means a date on which a Tranche A Loan is initially borrowed.

“ Tranche A Extension Option ” means the Tranche A Maturity Date extension described in and in accordance with Section 2.07(a)(y).

“ Tranche A Final Maturity Date ” means the date that is 18 months after the Tranche A First Drawdown Date.

“ Tranche A First Drawdown Date ” means the first Tranche A Drawdown Date to occur under this Agreement.

“ Tranche A Initial Maturity Date ” means the date that is 12 months after the Tranche A First Drawdown Date.

“ Tranche A Lenders ” means the Persons listed on Schedule 2.01 Part (a) and any other Person that shall have become a party hereto as a Tranche A Lender pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party as a Tranche A Lender hereto pursuant to an Assignment and Assumption.

“ Tranche A Maturity Date ” means the Tranche A Initial Maturity Date, unless the Tranche A Extension Option has been exercised in accordance with Section 2.07(a)(y) in which case “Tranche A Maturity Date” means the Tranche A Final Maturity Date.

“ Tranche A Maturity Extension Date ” is the date corresponding to the Tranche A Initial Maturity Date provided the Tranche A Extension Option has been exercised in accordance with Section 2.07(a)(y).

“ Tranche A Loan ” means a Loan made pursuant to Section 2.01(a).

“ Tranche B Aggregate Commitments ” means the aggregate amount of all of the Tranche B Lenders’ Tranche B Commitments.

“ Tranche B Commitment ” means, with respect to any Tranche B Lender, the commitment of such Tranche B Lender to make Tranche B Loans, expressed as an amount representing the maximum aggregate amount of such Tranche B Lender’s potential Credit Exposure hereunder, as such commitment may (x) be reduced from time to time pursuant to Section 2.06, and (y) be increased or reduced from time to time pursuant to assignments by or to such Tranche B Lender pursuant to Section 11.05. The initial amount of each Tranche B Lender’s Tranche B Commitment is set forth on Schedule 2.01 Part (b), or in the Assignment and Assumption pursuant to which such Tranche B Lender shall have assumed its Tranche B Commitment, as applicable. The initial aggregate amount of the Tranche B Lenders’ Tranche B Commitments is JPY 58,500,000,000.

“ Tranche B Drawdown Date ” means a date on which a Tranche B Loan is initially borrowed.

“ Tranche B Lenders ” means the Persons listed on Schedule 2.01 Part (b), and any other Person that shall have become a party hereto as a Tranche B Lender pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto as a Tranche B Lender pursuant to an Assignment and Assumption.

“ Tranche B Loan ” means a Loan made pursuant to Section 2.01(b).

“ Tranche B Maturity Date ” means the date that is 5 years from the Tranche B Drawdown Date.

“ Transactions ” means the execution, delivery and performance by the Borrower of this Agreement and the borrowing of Loans.

“ Treaty Lender ” means a Lender which is treated as an eligible resident of a jurisdiction having entered into a double taxation treaty with Japan which double taxation treaty is in effect as of the date such Lender becomes a Lender hereunder and which provides for exemption from Japanese withholding tax imposed on all interest and other payments hereunder.

“ VAT ” means value added tax, consumption tax and/or sales tax as provided for by Israel or Japan and any other tax of a similar nature in any jurisdiction.

“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“ Yen LIBO Rate ” means, with respect to any Interest Period, the rate per annum at approximately 11:00 a.m., London time, on the Quotation Day for such Interest Period quoted as the applicable Yen LIBO Rate Screen Rate for a period equal to such Interest Period. Notwithstanding the foregoing, if the Yen LIBO Rate, determined as provided above, would otherwise be less than zero, then the Yen LIBO Rate shall be deemed to be zero for all purposes.

“ Yen LIBO Rate Screen Rate ” means the London interbank offered rate administered by ICE Benchmark Administration Limited (or any other person which has taken over the administration of that rate) for Yen for the relevant period displayed on the appropriate page of the Reuters Screen (or on any successor or substitute therefor provided by another page or service providing rate quotations comparable to those currently provided on such page, as reasonably determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Yen deposits in the Relevant Interbank Market); provided that for any Interest Period of one week or less, the Yen LIBO Rate Screen Rate for one week shall be used.

Section 1.02 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 reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) 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, (d) 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, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and, unless the context requires otherwise, shall include without limitation (x) any applicable Israeli or foreign statute, law (including any rules or regulations promulgated under any such statute or law), regulation, treaty, rule, official directive, request or guideline of any of the Israeli or foreign national, state, local, municipal, or other governmental, fiscal, monetary or regulatory body, agency, department or regulatory, self-regulatory or other authority or organization, whether or not having the force of law (but if not having the force of law, one which applies generally to the class or category of financial institutions of which any Lender or the Administrative Agent forms a part and compliance with which is in accordance with the general practice of those financial institutions), including the instructions of Israeli Supervisor of Banks with respect to proper conduct of banking affairs (“ Hora’ot Nihul Bankai Takin ”) if applicable to any such Person and (y) any applicable decision of any competent court or other judicial body, (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, (g) as used herein, the obligation of any Loan Party under this Agreement or any other Loan Document in respect of interest accruing under this Agreement or the other Loan Documents shall be deemed to include without limitation any interest accruing during the pendency of, or after the filing of any petition in respect of, any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowable or allowed in such proceeding, and (h) in this Agreement, when it relates to a Japanese Borrower or a Japanese

Material Subsidiary, a Bankruptcy Event shall include, without limitation, appointment of a conservator ( hozen kanrinin ), trustee ( kanzai nin ), supervisor ( kantoku i’in ), inspector ( chosa i’in ) or receiver, or similar debtor relief affecting such Japanese Borrower or Japanese Material Subsidiary, including hasan, minji saisei, kaisha kosei, tokubetsu seisan and tokutei chotei .

Section 1.03 Accounting Terms; GAAP . All accounting terms not specifically defined shall be construed in accordance with GAAP. Except as otherwise expressly provided herein, all financial statements to be delivered pursuant to this Agreement shall be prepared in accordance with GAAP as in effect from time to time and all terms of an accounting or financial nature shall be construed and interpreted in accordance with GAAP, as in effect on the date hereof, subject to Section 6.02 .

Section 1.04 Resolution of Drafting Ambiguities . Each Loan Party acknowledges and agrees that it was represented by counsel in connection with the execution and delivery of the Loan Documents to which it is a party, that it and its counsel reviewed and participated in the preparation and negotiation hereof and thereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation hereof or thereof.

Section 1.05 Agreement on Bank Transactions . Any Agreement on Bank Transactions ( Ginko-Torihiki-Yakujosho ) entered into between any Loan Party and any Finance Party at any time shall not be applicable to any of the transactions contemplated and effected under and by this Agreement or the other Loan Documents.

ARTICLE II

THE CREDITS

Section 2.01 Commitments . Subject to the terms and conditions set forth herein, (a) each Tranche A Lender severally agrees to make Tranche A Loans (denominated in Yen) to the Borrower on a Business Day during the Availability Period for such Tranche in an aggregate principal amount that will not result in (i) such Tranche A Lender’s applicable Credit Exposure exceeding such Tranche A Lender’s Tranche A Commitment or (ii) the sum of the total applicable Credit Exposures exceeding the total Tranche A Commitments and (b) each Tranche B Lender severally agrees to make Tranche B Loans (denominated in Yen) to the Borrower on a Business Day during the Availability Period for such Tranche in an aggregate principal amount that will not result in (i) such Tranche B Lender’s applicable Credit Exposure exceeding such Tranche B Lender’s Tranche B Commitment or (ii) the sum of the total applicable Credit Exposures exceeding the total Tranche B Commitments. Amounts paid or prepaid in respect of Loans may not be reborrowed.

Section 2.02 Loans .

(a) Each Loan shall be made by the applicable Lenders under the applicable Tranche ratably in accordance with their respective Commitments for Loans in respect of such Tranche. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b) 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 options shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) The borrowing of Loans in respect of any Tranche hereunder shall be in an aggregate amount that is (i) in an integral multiple of JPY 1,000,000 and not less than JPY 1,000,000,000 or (ii) equal to the remaining available balance of the applicable Commitments. There shall be not more than two Tranche A Drawdown Dates and one Tranche B Drawdown Date under this Agreement (other than in respect of Commitments held by a Defaulting Lender). Amounts paid or prepaid in respect of Loans may not be reborrowed.

Section 2.03 Requests for Loans . To request a Loan in respect of any Tranche, the Borrower shall notify the Administrative Agent of such request in writing, not later than 10 a.m., Tokyo time, four Business Days before the date of the proposed Loan. The Borrowing Request shall be delivered by hand delivery or fax of the Borrowing Request, signed by the Borrower. Following such confirmation, the Borrowing Request shall be irrevocable and binding on the Borrower. Each such written Borrowing Request shall specify the following information in compliance with Section 2.02 :

(i) the identity of the applicable Tranche for such Loan;

(ii) the aggregate principal amount of the requested Loan under such Tranche (which, in all cases, shall be in accordance with Section 2.02(c) above);

(iii) the date of such Loan, which shall be a Business Day (which must be followed by a consecutive calendar day which is a Business Day); and

(iv) that the conditions set forth in Section 4.01 have been satisfied in full as of the date of the notice.

The Borrower hereby requests that the funds from the Loans (subject to the net settlement provisions of Section 2.04 ) be disbursed to the following bank account:

Account Holder : Teva Holdings K.K.

Bank : Mizuho Bank Limited

Branch : Nagoya-chuo branch

SWIFT : MHCBJPJT

Account # : 1370976

Account type : Ordinary

Section 2.04 Funding of Loans .

(a) Each Lender shall make each Loan (which shall be funded net of the Up-Front Fees (as defined in the Bookrunners Fee Letter) owed to such Lender under the Bookrunners Fee Letter) to be made by it hereunder on the applicable Drawdown Date thereof by wire transfer of immediately available funds by 11:00 a.m., Tokyo time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that any Lender that is, immediately preceding a Drawdown Date, also a lender under an applicable JPY Tranche A Facility being repaid with the net proceeds of such

drawdown, may in its sole discretion notify the Agent in writing in the form attached as Exhibit F four Business Days before the Drawdown Date that it will net fund its Commitments in respect of such drawdown such that the amount of JPY required to be funded by such Lender in respect of such drawdown shall be reduced by the amount then due under the applicable JPY Tranche A Facility and at the time of funding it shall be deemed repaid such amount under the applicable JPY Tranche A Facility. Furthermore, the Administrative Agent will be entitled to apply amounts funded by any Lender under this Agreement towards the repayment of amounts then due under a JPY Tranche A Facility (and net settle such amounts vis a vis the Borrower) regardless of whether the Lender funding such amounts is also a lender being concurrently repaid under such JPY Tranche A Facility. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, after reducing the amount of the Administration Fee (as defined in the Agency Fee Letter) which the Borrower owes to the Administrative Agent on such Drawdown Date, in like funds, to the account designated in Section 2.03 . The Lenders shall make such Loan to an account to be notified by the Administrative Agent to the Lenders prior to the applicable Drawdown Date.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Loan that such Lender will not make available to the Administrative Agent such Lender’s share of such Loan, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with this Section 2.04 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 Loan 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 a payment to be made by such Lender, a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to Loans. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to such Borrower the amount of such interest paid by such Borrower for such period. If such Lender pays its share of the applicable Loan to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Loan. Any payment by such Borrower shall be without prejudice to any claim such Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

Section 2.05 Interest Periods . Each Loan hereunder shall have an applicable Interest Period (as set out in, and subject to, the provisions of the definition of Interest Period). In respect of each Tranche, upon the conclusion of each Interest Period in relation to such Tranche (other than the final Interest Period prior to the applicable Maturity Date) each Loan under such Tranche hereunder shall be deemed continued into a new Interest Period (subject to the provisions of the definition of Interest Period). In respect of each Tranche, all Loans shall automatically continue at the end of each Interest Period for another successive Interest Period until the applicable Maturity Date unless the Borrower has terminated or repaid the amounts under such Tranche prior thereto or the Administrative Agent or the Lenders have terminated this facility, in each case in accordance with the terms of this Agreement.

Section 2.06 Termination and Reduction of Commitments; Term Loans .

(a) Unless previously terminated, all unutilized Commitments shall automatically terminate at the end of the Availability Period.

(b) The Parent may at any time terminate in whole, or from time to time reduce in part, the Commitment under any Tranche; provided that each reduction of the Commitment under any Tranche shall be in an amount that is an integral multiple of JPY 100,000,000 and not less than JPY 1,000,000,000 (or the remaining Commitment under such Tranche; provided that in each case all such Commitment reductions shall first be applied to undrawn Tranche A Commitments and once reduced to zero shall be applied to undrawn Tranche B Commitments).

(c) The Parent shall notify the Administrative Agent of any election to terminate or partially reduce the Commitment 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 such notice (the “ Termination or Reduction of Commitment Notice ”), the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Parent pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitment delivered by the Parent may state that such notice is conditioned upon the effectiveness of other credit facilities or another event, in which case such notice may be revoked by the Parent (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 Commitment shall be permanent. Each reduction of Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.

(d) Commitments under Tranche A will also be mandatorily reduced in accordance with Section 2.08(d) .

(e) Amounts repaid or prepaid in respect of a Loan may not be reborrowed.

Section 2.07 Repayment of Loans; Evidence of Debt .

(a) (x) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the ratable account of each applicable Lender under the applicable Tranche, the then unpaid principal amount of (i) the Tranche A Loans made to it (and all accrued and unpaid interest thereon) on the Tranche A Maturity Date and (ii) the Tranche B Loans made to it (and all accrued and unpaid interest thereon) on the Tranche B Maturity Date (in each case, if not a Business Day, on the immediately preceding Business Day). All payments or repayments of Loans made pursuant to this Section 2.07(a) shall be made in JPY.

(y) The Borrower shall have the right (but not obligation) to extend the Tranche A Maturity Date from the Tranche A Initial Maturity Date to the Tranche A Final Maturity Date provided that:

(i)

the Borrower has delivered to the Administrative Agent written notice at least 15 Business Days before the Tranche A Initial Maturity Date that it is exercising such extension option;

(ii)

as of the date of such notice and as of the Tranche A Maturity Extension Date no Default or Event of Default has occurred and is then continuing or would result therefrom; and

(iii)

the Borrower has delivered to the Administrative Agent for the accounts of each Lender (pro rata) a fee (the “ Extension Fee ”) of an amount equal to 0.075% of the principal amount of Tranche A Loans outstanding as of the Tranche A Maturity Extension Date and the maturity of which is being extended.

(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 accounts in which it shall record (i) the amount of each Loan made hereunder, the Tranche 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 accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence 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 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.

Section 2.08 Prepayment of Loans .

(a) The Borrower shall have the right at any time and from time to time to prepay any Loan in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section 2.08 . All voluntary prepayments shall be applied first toward outstanding principal amounts under Tranche A and, after all Tranche A principal amounts have been repaid, toward outstanding amounts under Tranche B.

(b) The Borrower shall notify the Administrative Agent in writing of the proposed date and the principal amount of any prepayment hereunder, by not later than 10:00 a.m., Tokyo time, at least five Business Days prior to the date of prepayment. Each such notice (the “ Prepayment Notice ”) shall be irrevocable and shall specify the prepayment date (which shall be a Business Day), the applicable Tranche (or portion thereof) being prepaid, the principal amount of each Loan or portion thereof to be prepaid; provided that any such notice of prepayment may be conditioned upon the effectiveness of other credit facilities or another event. Promptly following receipt of any such notice relating to a Loan, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial voluntary prepayment of any Loan shall be in an amount that is an integral multiple of JPY 100,000,000 and not less than JPY 1,000,000,000 (or the then remaining outstanding amount under such Tranche). Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10 .

(i) the Parent shall promptly notify the Administrative Agent upon becoming aware of that event;

(ii) no Lender shall be obliged to fund any Loans; and

(iii) if a Lender so requires and notifies the Administrative Agent and the Parent within 30 days of the Parent notifying the Administrative Agent of the event, the Administrative Agent shall, by not less than thirty days’ notice to the Parent, cancel the Commitment of that Lender and declare the participation of that Lender in all outstanding Loans, together with accrued interest, and all other amounts accrued under the Loan Documents immediately due and payable.

(d) In addition to any other mandatory prepayments or Commitment reductions pursuant to this Agreement, 100% of the Net Cash Proceeds of (without duplication) any debt capital markets transaction raised primarily in Japan or denominated in Japanese Yen issued or borrowed by the Parent or any of its Subsidiaries (and for the avoidance of doubt, excluding any Excluded Financing), shall, in each case, be applied promptly following receipt of such Net Cash Proceeds as a mandatory prepayment of the principal amount of any outstanding Loans under Tranche A (in the event the Drawdown Date under Tranche A has occurred) or toward reduction of Commitment under Tranche A (in the event Tranche A is not yet fully borrowed).

(e) All payments or prepayments of Loans made pursuant to this Section 2.08 shall be made in JPY.

Section 2.09 Fees .

(a) The Parent agrees to pay to the Administrative Agent and each Bookrunner, the fees set forth in each Fee Letter, in accordance with the terms thereof.

(b) All fees payable hereunder shall be paid on the dates due, in immediately available funds in JPY (unless expressly specified otherwise in any Loan Document), to the Administrative Agent and, in the case of the fees under the Bookrunners Fee Letter, for distribution, if and as appropriate, among the Lenders or the applicable Lenders. Once paid, none of the fees shall be refundable under any circumstances.

Section 2.10 Interest .

(a) The Borrower shall pay interest on the unpaid principal amount of each Loan owing by the Borrower to the Lenders from the date of such Loan until such principal amount shall be paid in full at a rate per annum equal at all times during each Interest Period for such Loan to the sum of (x) the Yen LIBO Rate for such Interest Period for such Loan plus (y) the Applicable Margin.

(b) Notwithstanding the foregoing, upon the occurrence and during the continuance of any Event of Default, 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 2% plus the rate otherwise applicable to Loans during the relevant Interest Period as provided in paragraph (a) of this Section (provided that if any Loan is not repaid at the relevant Maturity Date, the rate that was applicable in the Interest Period ending on such Maturity Date shall be the applicable rate for the foregoing).

(c) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitment; provided that (i) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand and (ii) in the event of any repayment or prepayment of any Loan accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment. For the avoidance of doubt, it is understood and agreed that interest will not be double counted in respect of any additional days included at the end of an Interest Period as a result of an extension thereof due to the operation of the proviso contained in the definition of “Interest Payment Date” contained in Section 1.01, such that interest for such extended days will accrue only in the Interest Period to which such extended days have been added and not any subsequent Interest Period.

(d) All interest hereunder shall be computed on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. The applicable Yen LIBO Rate shall be reasonably determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. In calculating interest owed hereunder, the Administrative Agent shall calculate the interest owed to each Lender individually (based on the then current outstanding principal amount of Loan owed to such Lender), rounded down to the nearest whole Yen (on a Lender by Lender basis), which will then be aggregated and provided to the Borrower.

(e) All interest paid or payable pursuant to this Section shall be paid in JPY.

Section 2.11 Alternate Rate of Interest . If prior to the commencement of any Interest Period:

(a) the Administrative Agent reasonably determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the applicable Yen LIBO Rate, for such Interest Period (including the applicable screen rate referred to in the definition of Yen LIBO Rate not being available or ascertainable for the relevant currency on the applicable Quotation Day); or

(b) the Administrative Agent is advised by the Required Lenders that the applicable Yen LIBO 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 Parent and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Parent and the Lenders that the circumstances giving rise to such notice no longer exist, the applicable Yen LIBO Rate shall be the Reference Bank Rate or, if not available, the rate notified to the Parent by the Administrative Agent, in the case of clause (a) above, or by such Lenders (or Lender), in the case of clause (b) above, as soon as practicable and in any event before interest is due to be paid in respect of the applicable Interest Period, to be that which expresses as a percentage rate per annum the all in cost of funds to the applicable Lenders (or Lender) of funding such outstanding Loans from whatever source such Lenders (or Lender) may reasonably select.

The “ Reference Bank Rate ” shall be determined as follows: the Administrative Agent shall, as soon as practicable after the occurrence of any event described in clauses (a) or (b) of the preceding paragraph , request each of the Reference Banks to supply to the Administrative Agent the rate (the “ Reference Bank Quotation ”) at which that Reference Bank could have borrowed funds in Yen and for the relevant period in the Relevant Interbank Market at or about 11:00 a.m. London time on the Quotation Day for the Interest Period of that Loan, were it to have done so by asking for and then accepting interbank offers for deposits in reasonable market size in Yen and for a period comparable to the Interest Period of that Loan. As soon as is practicable after receipt of the rates supplied by at least two of the Reference Banks, the Administrative Agent shall notify the Parent of the arithmetic mean of the rates supplied by such Reference Banks to it in accordance with this paragraph (rounded upwards to four decimal places), and such arithmetic mean as so rounded shall at such point be the “Reference Bank Rate”.

No Reference Bank is under any obligation to provide a Reference Bank Quotation or any other information to the Administrative Agent. No Reference Bank, in its capacity as a “Reference Bank”, will be liable for any action taken by it under or in connection with this Agreement, or for any Reference Bank Quotation, unless directly caused by its gross negligence or wilful misconduct. No party (other than the relevant Reference Bank) may take any proceedings against any officer, employee or agent of any Reference Bank in respect of any claim it might have against that Reference Bank or in respect of any act or omission of any kind by that officer, employee or agent in relation to this Agreement, and any officer, employee or agent of each Reference Bank may rely on this Section 2.11 .

As used in this Agreement, the term “ Reference Bank ” means the respective primary London lending office of each of the following (or London Affiliates thereof): (i) Mizuho Bank, Ltd. and (ii) Sumitomo Mitsui Banking Corporation Europe Limited (and any other bank or banks agreed between the Parent and the Administrative Agent).

Annex A hereto applies to all Reference Bank Rates and Reference Bank Quotations.

Section 2.12 Increased Costs .

(a) Increased Costs Generally . 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 or participated in by, any Lender;

(ii) subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Loan made by it, or its commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, or change the basis of taxation of payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 2.15 ) and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender);

(iii) impose on any Lender or the Relevant Interbank Market any other condition, cost or expense affecting this Agreement or Loans made by such Lender or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan, or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Parent will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. A certificate of such Lender setting forth the amount or amounts necessary to compensate such Lender shall be delivered to the Parent and shall be conclusive absent manifest error. Such Lender shall use commercially reasonable efforts to deliver such certificate promptly after such additional costs are incurred or reduction suffered. The Parent shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof.

(b) The Parent shall pay (or cause the Borrower to pay) to any Lender, as long as such Lender or its holding company shall be required to comply with any reserve ratio requirement or analogous requirement (including any capital or liquidity requirements) of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of Loans, such additional costs or reduced rate of return (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs or reduced rate of return allocated to such Commitment or Loan by such Lender or its holding company (as determined by the Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Parent shall have received at least 15 days’ prior notice of such additional costs from such Lender. If such Lender fails to give notice 15 days prior to the relevant Interest Payment Date, such additional costs shall be due and payable 15 days from receipt of such notice.

(c) Delay in Requests . Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Parent and the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Parent of the Change in Law or other factor giving rise to such increased costs or reductions and of such 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 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

Section 2.13 Illegality . Notwithstanding any other provision of this Agreement, (a) if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender to perform its obligations hereunder or to fund any Loans or (b) if as a result of any merger, consolidation, amalgamation or acquisition by or of the Parent or any Subsidiary with, into or of another Person it is or becomes unlawful due to group or company lending limitations or other similar limitations under Israeli law (or rule, regulation or interpretation thereof or any rules, regulations or interpretations of the Bank of Israel) for any Lender to perform its obligations hereunder or to fund any Loans (each of clauses (a) and (b) , an “ Illegality ”), then (x) such Lender shall promptly notify the Parent upon becoming aware of that event and the Commitment of such Lender will be immediately cancelled and (y) the Borrower shall repay the Loans granted to it by such Lender on the last day of the Interest Period for each Loan occurring after such Lender has notified the Borrower or, if earlier, the date specified by such Lender in the notice delivered to the Borrower (being no earlier than the last day of any applicable grace period permitted by law).

Section 2.14 Break Funding Payments . In the event of (a) the payment of any principal of any Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the failure to borrow or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.08(b) and is revoked in accordance therewith), or (c) the assignment of any 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 2.17 , then, in any such event, the Borrower shall compensate each Lender for Break Costs attributable to such event. A certificate of any Lender setting forth, in reasonable detail showing the computation thereof, any Break Costs that such Lender is entitled to receive pursuant to this Section shall be delivered to the Parent 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, if such certificate complies herewith.

If at any point the Borrower contemplates delivering a Prepayment Notice for a date other than the end of an Interest Period, it shall be entitled (but not obligated) to request from each Lender (by submitting such request in writing to the Administrative Agent, which will notify the applicable Lenders of receipt of such request), and each Lender so requested, acting on its own behalf, shall use commercially reasonably efforts to work with the Borrower in good faith to provide the Borrower with an indicative estimate of any Break Costs that would be incurred were the Borrower to deliver a Prepayment Notice. Borrower shall not be required to deliver a Prepayment Notice simply as a result of Borrower’s request for an estimate. The parties hereto agree and understand that any such estimate provided by any Lender shall be a non-binding indicative estimate based on then existing market conditions (which are subject to fluctuation) and actual Break Costs, if any, shall be calculated by each individual Lender in accordance with the terms of this Section 2.14.

For the purposes of this Section:

“ Break Costs ” means the amount (if any, excluding loss of anticipated profits) by which (x) the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or any Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period, exceeds (y) the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“ Unpaid Sum ” means any sum (including without limitation principal) due and payable but unpaid by any Loan Party under the Loan Documents.

Section 2.15 Taxes .

(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes (including any Other Taxes). If any Loan Party shall be required to deduct any Indemnified Taxes (including any Other Taxes) from or in respect of any sum payable hereunder or under any other Loan Document, if any, to the Administrative Agent or any Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15 ) the Administrative Agent or such Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) Payment of Other Taxes by the Loan Parties . Without limiting the provisions of paragraph (a) above, each Loan Party shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Indemnification by Loan Parties . The applicable Loan Party shall indemnify the Administrative Agent and each Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other 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 a Loan Party by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(d) Evidence of Payments . As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the applicable Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) Status of Lenders . Any Lender, if requested by the Borrower or the Administrative Agent, in writing, shall deliver such documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding, deduction at source or information reporting requirements or as would be necessary for the Borrower to obtain or apply for an authorization or exemption to make a payment hereunder without a tax deduction or withholding (or at a reduced rate), including the provision of a residency certificate, if reasonably requested by the Borrower.

(f) Treatment of Certain Refunds . If the Administrative Agent, or a Lender determines in its sole discretion that it has received a refund of any Taxes or Other 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, it shall promptly after such determination pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is later required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

(g) Value Added Tax .

(i) All consideration or other payments or amounts expressed to be payable under a Loan Document by any Loan Party to a Lender or Administrative Agent shall be deemed to be exclusive of any VAT. If VAT is to be added or imposed under applicable law to any consideration or other payments or amounts to be paid by any Loan Party in connection with a Loan Document, that Loan Party shall pay to the Lender or Administrative Agent or the relevant tax authority, as the case may be (in addition to and at the same time as paying the consideration or other payments or amounts), an amount equal to the amount of the VAT.

(ii) Where a Loan Document requires any Loan Party to reimburse a Lender or Administrative Agent for any costs or expenses, that Loan Party shall also at the same time pay and indemnify the Lender or the Administrative Agent, as the case may be, against all VAT incurred by the Lender or the Administrative Agent, as the case may be, in respect of the costs or expenses to the extent that the Lender or the Administrative Agent, as the case may be, is not entitled to credit or repayment of the VAT.

(iii) If any Loan Party shall be required to deduct VAT from or in respect of any sum payable hereunder or under any other Loan Documents, if any, to the Administrative Agent or any Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15(g) ) the Administrative Agent or such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with the applicable law.

Section 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set -offs .

(a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 2.12 , 2.13 , 2.14 , 2.15 or 11.04 or otherwise) prior to 11:00 a.m., Tokyo time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent in accordance with account instructions as provided to the Borrower from time to time by the Administrative Agent, except that payments pursuant to Sections 2.12 , 2.13 , 2.14 , 2.15 and 11.04 shall be made indirectly 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; provided that at the Parent’s election in connection with any prepayment of any Loans pursuant to Section 2.08 , such prepayment shall not, so long as no Default or Event of Default then exists, be applied to any Loan of a Defaulting Lender. 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 at such rate of accrual for the period of such extension. All payments hereunder shall be made in JPY.

(b) If at any time insufficient funds are received by and available to the Administrative Agent 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 then due (or being prepaid) hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties (rounded down to the nearest whole Yen per Lender, and to the extent that any Lender would otherwise be entitled to a fraction of a whole Yen, such excess amounts shall be paid to the Lender that is an Affiliate of the Administrative Agent, if any). In all cases, the Administrative Agent’s determination in respect of pro rata treatment among Lenders (and rounding if any) shall be conclusive.

(c) If any Lender under any Tranche shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest or fees on any of its Loans under any Tranche resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans under such Tranche and accrued interest and fees thereon than the proportion received by any other Lender under such Tranche, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans under such Tranche of other Lenders under such Tranche to the extent necessary so that the benefit of all such payments shall be shared by the Lenders under such Tranche ratably in accordance with the aggregate amount of principal of and accrued interest and fees on their respective Loans under such Tranche; 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 Parent or the Borrower pursuant to and in accordance with the express terms of this Agreement (including without limitation Section 2.17(b)) 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 Parent, the Borrower or

any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each of the Parent and 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 this subsection (c) may exercise against the Parent and the Borrower’s rights of set off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Parent and the Borrower in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders under the applicable Tranche severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender 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 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 2.04(b) , 2.16(d) or 11.04(c) , 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.

(f) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 2.16(a) and (c) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.

Section 2.17 Mitigation Obligations; Replacement of Lenders .

(a) If (x) any Lender requests compensation under Section 2.12 , 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 2.15 (other than in respect of the original Lenders set forth on Schedule 2.01 as of the Effective Date and their respective Affiliates and Approved Funds), or (y) any Lender provides notice of the occurrence of an Illegality in accordance with Section 2.13 , then such Lender shall use reasonable efforts 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 designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.15 , as the case may be, in the future (or eliminate such Illegality in the case of (y) above) 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, in respect of any Tranche:

(i) any Lender requests compensation under Section 2.12 ,

(ii) any Lender becomes a Defaulting Lender, or

(iii) any Lender fails to approve an amendment, waiver or other modification to this Agreement that requires the approval of all Lenders and at least the Required Lenders have approved such amendment, waiver or other modification or,

then the Parent may, at its sole expense and effort, 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 11.05 ), all its interests, rights and obligations under this Agreement (or applicable Tranche, if applicable) to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that, in all cases under this Section 2.17(b) , (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.14 ), 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) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 , such assignment or termination will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

Section 2.18 Defaulting Lenders .

(a) Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender, any amount payable to such Defaulting Lender hereunder or under any other Loan Document (whether on account of principal, interest, fees or otherwise and including any amount that would otherwise be payable to such Defaulting Lender) shall, in lieu of being distributed to such Defaulting Lender, subject to any applicable requirements of law, be applied by the Administrative Agent, in the following order of priority: first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second , as the Parent may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; third , if so determined by the Administrative Agent and the Parent, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of such Defaulting Lender to fund Loans under this Agreement; fourth , to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any of the foregoing against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement (pro rata among all such amounts owed and only to the extent the applicable Lenders have provided written notice to the Administrative Agent of such judgment (with sufficient evidence thereof) (and written request to apply amounts otherwise payable to such Defaulting Lender in accordance with this sub-clause) at least 10 Business Days prior to the Administrative Agent having otherwise applied such amounts pursuant to any of the subsequent provisions of this paragraph (or such shorter time as may be acceptable to the Administrative Agent in

its sole discretion)); fifth , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement (only to the extent the Borrower has provided written notice to the Administrative Agent of such judgment (with sufficient evidence thereof) (and written request to apply amounts otherwise payable to such Defaulting Lender in accordance with this clause) at least 10 Business Days prior to the Administrative Agent having otherwise applied such amounts pursuant to any of the subsequent provisions of this paragraph (or such shorter time as may be acceptable to the Administrative Agent in its sole discretion)); and sixth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this paragraph shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(b) The rights and remedies against a Defaulting Lender under this Section 2.18 are in addition to other rights and remedies that the Borrower, the Administrative Agent or any Lender may have against such Defaulting Lender.

(c) In the event that the Administrative Agent and the Parent agree that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans ratably (in the relevant Tranche) in accordance with its Commitment (or, if the applicable Aggregate Commitments have terminated, as last in effect) and such Lender shall no longer be a Defaulting Lender.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Loan Party represents and warrants to the Administrative Agent and the Lenders that:

Section 3.01 Organization; Powers . It (a) is validly existing and (if applicable) in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted and (c) except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and (if applicable) is in good standing in, every jurisdiction where such qualification is required.

Section 3.02 Authorization; Enforceability . The Transactions are within such Loan Party’s powers and have been duly authorized by all necessary corporate and, if required, shareholder action. This Agreement has been duly executed and delivered by such Loan Party and constitutes a legal, valid and binding obligation thereof, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. All corporate and shareholder action required to make each Loan Document to which it is a party admissible in evidence in its jurisdiction of incorporation or organization have been obtained or effected and are in full force and effect. The choice of Japanese law as the governing law of the Loan Documents will be recognized and enforced in Japan and any judgment obtained in Japan in relation to a Loan Document will be recognized and enforced in Japan.

Section 3.03 Approvals; No Conflicts .

(a) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other third party is required for the due execution, delivery and performance by such Loan Party of any Loan Document to which it is a party, or the consummation of the transactions contemplated thereby, except such as have been obtained or made and are in full force and effect.

(b) The execution, delivery and performance by such Loan Party of the Loan Documents to which it is a party and the consummation of the transactions contemplated thereby (x) do not contravene (i) such Loan Party’s organizational documents or (ii) any law applicable to such Loan Party, (y) will not violate or result in a default or require any consent or approval under any indenture, agreement or other instrument binding upon such Loan Party or its property or Subsidiaries, or give rise to a right thereunder to require any payment to be made by such Loan Party, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect, and (z) will not result in the creation or imposition of any Encumbrance on any property of such Loan Party, except Encumbrances expressly permitted by this Agreement.

Section 3.04 Financial Condition; No Material Adverse Change .

(a) The Parent’s consolidated balance sheet and statements of income, shareholder’s equity and cash flows as of and for the fiscal years ended December 31, 2014, 2015 and 2016 audited by and accompanied by an unqualified opinion of Kesselman & Kesselman, certified public accountants (Isr.) Such financial statements, and all financial statements delivered pursuant to Section 5.01(a) or (b) (A) have been prepared in accordance with GAAP and (B) present fairly and accurately in all material respects the financial position and results of operations and cash flows of the businesses of the Parent and its consolidated subsidiaries as of such dates and for such periods in accordance with GAAP, subject, in the case of financial statements relating to a fiscal quarter, to the absence of footnotes.

(b) The Borrower has heretofore furnished to the Lenders the audited balance sheet and statement of income of the Borrower as of and for the fiscal year ended December 31, 2015. Such financial statements and all financial statements delivered pursuant to Section 5.01(c), (A) have been prepared in accordance with Japanese GAAP and (B) present fairly and accurately in all material respects the financial position and results of operations and cash flows of the businesses of the Borrower as of such dates and for such periods in accordance with Japanese GAAP, subject, in the case of financial statements relating to a fiscal quarter, to the absence of footnotes.

(c) (x) Except with respect to any event or circumstance disclosed in (i) the Parent’s SEC Documents (but excluding any disclosure in the “Risk Factors” or “Forward-Looking Statements” (or equivalent) sections of any Parent SEC Document and similar statements included in any Parent SEC Document that are generic or solely forward looking in nature and any information in the Parent Disclosure Schedule) or (ii) the Parent Disclosure Schedule (including any investigation disclosed therein or the results thereof) relating to events or circumstances that occurred prior to the Signing Date, on and as of the Signing Date (after giving effect to the Loans), since December 31, 2016, there has been no event, change, circumstance or occurrence that individually or in the aggregate has had or could reasonably be expected to result in a Material Adverse Effect.

(y) On and as of each Drawdown Date (after giving effect to the Loans), no event or circumstance disclosed in the Parent Disclosure Schedule (including any investigation disclosed therein or the results thereof) individually or in the aggregate has had or could reasonably be expected to result in a Payment Material Adverse Effect.

Section 3.05 Litigation .

(a) Except as disclosed in (i) (A) the “Commitments and Contingencies – Contingent Liabilities” note (or similarly titled notes) to the Parent’s annual financial statements filed with or furnished to the SEC on Form 20 F for the year ended December 31, 2016 (but excluding any information in the Parent Disclosure Schedule) and (B) the Segment Disclosure Schedule and (ii) the Parent Disclosure Schedule (including any investigation disclosed therein or the results thereof) relating to events or circumstances that occurred prior to the Signing Date, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Parent, threatened against or affecting the Parent or any of its Subsidiaries (x) as to which there is a reasonable possibility of an adverse determination and that would reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (y) that purport to adversely affect the legality, validity and enforceability of the Loan Documents. The representation contained in clause (x) of the preceding sentence is made on and as of the Signing Date only.

(b) On and as of each Drawdown Date (after giving effect to the Loans), in relation to the matters disclosed in the Parent Disclosure Schedule (including any investigation disclosed therein or the results thereof), there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Parent, threatened against or affecting the Parent or any of its Subsidiaries as to which there is a reasonable possibility of an adverse determination and that would reasonably be expected, individually or in the aggregate, to result in a Payment Material Adverse Effect.

Section 3.06 Environmental Matters . It is not subject to any judicial, administrative, government, regulatory or arbitration proceeding alleging the violation of any applicable Environmental Laws, except to the extent that any such proceeding would not reasonably be expected to have a Material Adverse Effect.

Section 3.07 Disclosure . No written report, financial statement, certificate, exhibit, schedule or other written document furnished by or on behalf of such Loan Party to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto, taken as a whole, contained or contains any material misstatement of fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were or are made, not misleading as of the date such information is dated or certified; provided that to the extent any such written report, financial statement, exhibit, schedule or document was based upon or constitutes a forecast or projection, each Loan Party represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such written report, financial statement, exhibit, schedule or document.

Section 3.08 Solvency . Such Loan Party is, and immediately after giving effect to the Loans will be, together with its consolidated Subsidiaries, Solvent.

Section 3.09 ERISA . No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, would reasonably be expected to result in a Material Adverse Effect.

Section 3.10 Investment Company Status . Neither such Loan Party nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

Section 3.11 Margin Securities . Such Loan Party is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System of the United States of America), and no part of the proceeds of any Loan will be used to purchase or carry any margin stock in violation of said Regulations T, U or X or to extend credit to others for the purpose of purchasing or carrying margin stock in violation of said Regulations T, U or X. Not more than 25% of the value of the assets (either of any Loan Party only or of any Loan Party and its Subsidiaries on a consolidated basis) subject to any limitation on sale, pledge or other restriction under this Agreement or subject to any restriction contained in any agreement or instrument, between any Loan Party and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of Section 7.01(f) of this Agreement, will be margin stock (within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System of the United States of America).

Section 3.12 Properties .

(a) Such Loan Party has good title to, or valid leasehold interests in, all of its real and personal property material to its business, except for defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes and except, in each case, where failure to have such title or interest, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(b) It owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by such Person 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 3.13 Compliance with Laws and Agreements .

(a) Except with respect to any event or circumstance disclosed in (i) the Parent’s SEC Documents (but excluding any disclosure in the “Risk Factors” or “Forward-Looking Statements” (or equivalent) sections of any Parent SEC Document and similar statements included in any Parent SEC Document that are generic or solely forward looking in nature and any information in the Parent Disclosure Schedule) or (ii) the Parent Disclosure Schedule (including any investigation disclosed therein or the results thereof) relating to events or circumstances that occurred prior to March 24, 2015, such Loan Party is in compliance with all laws, regulations, orders, writs, injunctions and decrees of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except, in each case, where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(b) In relation to the matters disclosed in the Parent Disclosure Schedule, such Loan Party is in compliance with all laws, regulations, orders, writs, injunctions and decrees of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except, in each case, where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Payment Material Adverse Effect.

Section 3.14 Taxes . Such Loan Party has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Person has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

Section 3.15 Pari Passu Ranking . Such Loan Party’s payment obligations under the Loan Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

Section 3.16 Permits, Etc . Except to the extent that any of the following, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (i) such Loan Party has all permits, consents, licenses, authorizations, approvals, entitlements and accreditations required for it lawfully to own, lease, manage or operate, or to acquire each business owned on the date hereof, leased, managed or operated, or to be acquired, by it, and (ii) no condition exists or event has occurred which, in itself or with the giving of notice or lapse of time or both, would result in the suspension, revocation, impairment, forfeiture or non-renewal of any such permit, consent, license, authorization, approval, entitlement or accreditation, and, to the knowledge of such Loan Party, there is no claim that any such permit, consent, license, authorization, approval, entitlement or accreditation is not in full force and effect.

Section 3.17 Insurance . All material policies of insurance of any kind or nature owned by or issued to such Loan Party are in full force and effect.

Section 3.18 No Filing or Stamp Tax . Under the law of such Loan Party’s jurisdiction of incorporation it is not necessary that the Loan Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Loan Documents or the transactions contemplated by the Loan Documents (including the Transactions) (other than any such stamp, registration or similar tax that has been paid as of the Effective Date or such later date when due, in each case, to the extent referenced on Schedule 3.18 ).

Section 3.19 No Anti-Social Forces . No Loan Party, nor any of its directors or officers, falls under any of the following:

(a) an Organized Crime Group;

(b) an Organized Crime Group Member;

(d) an Organized Crime Group Quasi-Member;

(e) a company affiliated with or association of an Organized Crime Group (means a corporation in effect managed by Organized Crime Group Members, a corporation managed by Organized Crime Group Quasi-Members or former Organized Crime Group Members that provide financial support and actively assists with the maintenance and management of or is involved with an Organized Crime Group or a corporation that uses an Organized Crime Group it its business and assists with the maintenance and management of an Organized Crime Group);

(f) a corporate racketeer (a corporate racketeer, hoodlum, or blackmailer who would likely engage in violent illegal acts against companies seeking illegal profit and pose a threat to the public safety);

(g) a blackmailer disguising as a supporter of a social movement (blackmailer disguising as a supporter of a social or political movement who would likely engage in violent illegal acts seeking illegal profit and pose a threat to the public safety);

(h) a white-collar crime group or member of another similar special intellectual violence group or such groups or members (a group or an individual other than listed in paragraphs (a) through (g) above who are connected with an Organized Crime Group, uses such connection, are linked to an Organized Crime Group financially and forms a core of illegal acts);

(i) any other Person who conforms to any of those listed in paragraphs (a) through (h) above (collectively, the “ Organized Crime Group Member Person ”);

(j) a company whose operations are controlled by one or more Organized Crime Group Member Persons;

(k) a company in which an Organized Crime Group Member Person substantially engages in its operations;

(l) a person who unjustly uses an Organized Crime Group Member Person for the purpose of unfair profit or causing a third party to profit unfairly or damaging to a third party or other;

(m) a company which engages with an Organized Crime Group Member Person by, for example, providing funds or facilities for an Organized Crime Group Member Person; or

(n) a company of which an officer or a person who engages in its operations has a socially accusable relationship with an Organized Crime Group Member Person.

ARTICLE IV

CONDITIONS

Section 4.01 Effective Date . The obligations of the Lenders to make Loans on the Effective Date shall be subject to the prior or concurrent satisfaction or waiver of the conditions precedent set forth in this Section 4.01 :

(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 fax or email pdf transmission 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 written opinions (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of (x) (i) Tulchinsky Stern Marciano Cohen Levitski & Co., Israeli counsel to the Parent, and (ii) Herzog, Fox and Neeman, Israeli counsel to the Administrative Agent (with respect to certain Israeli tax matters) and (y) Nishimura & Asahi, Japanese counsel to the Loan Parties, with respect to this Agreement, each in form and substance reasonably satisfactory to the Administrative Agent.

(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent may reasonably request relating to (i) the organization and existence of each Loan Party, and (ii) the authorization of any relevant Transactions (including without limitation certified secretary or board certificates (or the functional equivalent thereof) containing a copy or extract of the relevant resolutions of each Loan Party approving and authorizing the execution of this Agreement) and any other legal matters relating to each Loan Party, and this Agreement, all in form and substance reasonably satisfactory to the Administrative Agent.

(d) [Reserved].

(e) (i) The Administrative Agent shall have received a certificate of the representative director or the board of directors of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered hereunder. (ii) If the Borrower uses its corporate seal to execute this Agreement, a certificate of seal impression ( inkan shomeisho ) shall be obtained and provided to the Administrative Agent.

(f) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the Chief Financial Officer of the Parent, confirming compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02 .

(g) The Administrative Agent shall have received (i) evidence that each Fee Letter has been signed by each party thereto and (ii) all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including the legal fees and expenses of one special counsel to the Administrative Agent and the Lenders, and the fees and expenses of one Israeli counsel and one Japanese counsel) required to be reimbursed or paid by the Parent hereunder or under any other Loan Document as of the Effective Date.

(h) The Mandated Lead Arrangers, the Administrative Agent and the Lenders shall have received documentation and information satisfactory to the Administrative Agent, as required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the U.S. Patriot Act.

(i) The Administrative Agent shall have received copies of any consents or approvals required pursuant to Section 3.03 of this Agreement (reasonably satisfactory to the Mandated Lead Arrangers and the Administrative Agent).

(j) To the extent applicable, the Administrative Agent shall have received evidence of payment of the appropriate stamp tax and the applicable Loan Documents shall have been appropriately stamped.

The conditions set forth above in clauses (a) through (j) in this Section 4.01 shall be satisfied as of and on the Signing Date.

Section 4.02 Each Credit Event . The obligation of each Lender to make any Loan to the Borrower on a Drawdown Date is subject to the satisfaction of the following conditions with respect to the Borrower and the Parent:

(a) No Default or Event of Default shall have occurred and be continuing on such date nor will result from the making of such Loan.

(b) Each of the representations and warranties made by any Loan Party set forth in Article III hereof or in any other Loan Document shall be true and correct on and as of the date of such Loan with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct as of such earlier date.

(c) In connection with each Drawdown Date, the Borrower shall demonstrate to the satisfaction of the Administrative Agent that, after giving effect to the making of the Loan on such Drawdown Date (and after giving effect to any substantially concurrent repayment of outstanding amounts under the 2012 JPY Tranche A or the 2016 JPY Tranche A (to the extent such repayment occurs substantially concurrently with such borrowing)), the aggregate principal amount of Loans under this Agreement then outstanding, when taken together with the aggregate principal amount of loans then outstanding under the 2012 JPY Tranche A and under the 2016 JPY Tranche A do not, in the aggregate, exceed the total Commitments of all Lenders under this Agreement.

The borrowing on the Drawdown Date shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

ARTICLE V

AFFIRMATIVE COVENANTS

Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable hereunder shall have been paid in full the Loan Parties covenant and agree with the Administrative Agent and the Lenders that:

Section 5.01 Financial Statements and Other Information . The Parent will furnish, or cause to be furnished, to the Administrative Agent:

(a) within 90 days after the end of each fiscal year of the Parent, the Parent’s audited consolidated balance sheet and related statements of income, shareholders’ equity and cash flows of the Parent and its consolidated Subsidiaries as of the end of and for such year of the Parent, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by the Parent’s independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Parent and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

(b) within 60 days after the end of each of the first three fiscal quarters of each fiscal year of the Parent, the Parent’s consolidated balance sheet and related statements of income, shareholders’ equity and cash flows of the Parent and its consolidated Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year of the Parent, 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 a Financial Officer of the Parent as presenting fairly in all material respects the financial condition and results of operations and cash flows of the Parent and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments;

(c) within 120 days after the end of each fiscal year of the Borrower (which fiscal year ends at December 31 (the “ KK Fiscal Year ), the Borrower’s audited balance sheet and related statements of income, changes in equity and cash flows of the Borrower as of the end of and for such year of the Borrower presented on a consolidated basis reflecting the results on the Borrower and each of its consolidated Subsidiaries, setting forth in each case in comparative form the figures for the previous fiscal year (to the extent applicable), all reported on by the Borrower’s independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such financial statements present fairly in all material respects the financial condition and results of operations of the Borrower (and its consolidated Subsidiaries on a consolidated basis) in accordance with Japanese GAAP consistently applied;

(d) [Reserved];

(e) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Parent substantially in the form of Exhibit D attached hereto, (i) certifying as to whether a Default or Event of Default or, to the knowledge of the Parent, any investigation, circumstance, development or other matter that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect has occurred and, if such a Default, Event of Default, investigation, circumstance, development or other matter has occurred, specifying the details thereof and the action taken or proposed to be taken with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with Section 6.04 and (iii) stating whether any change in the application of GAAP (or Japanese GAAP, as applicable) has occurred since the date of the fiscal year 2016 (or 2015, as applicable) audited financial statements referred to in Section 3.04 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate (or, in the case of any change in the application of Japanese GAAP, the financial statements delivered pursuant to clauses (c) above);

(f) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Parent or any of its Subsidiaries with the SEC, or any Governmental Authority succeeding to any or all of the functions of said SEC, or with any national or foreign securities exchange, or distributed by the Parent to its equity holders generally, as the case may be; provided , however , that the Parent shall not be required to deliver to the Administrative Agent (and shall be deemed to have furnished to the Administrative Agent) such financial statement or other materials referred to in sub -clauses (a) or (b) or any other report, proxy statement and other materials if such financial statement, report, proxy statement and any other material is posted on the SEC’s website at www.sec.gov or on the Parent’s website at www.tevapharm.com (provided that in the case of financial statements referred to in (a) and/or (b) above, the Parent provides written notice to the Administrative Agent that the same has been posted on such website);

(g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower, that may reasonably affect the Borrower’s compliance with the terms of this Agreement, as the Administrative Agent or any Lender may reasonably request, provided , however , that the Parent shall not be required to deliver such information to the extent such information is posted on the SEC’s website at www.sec.gov or on the Parent’s website at www.tevapharm.com (provided that if so requested, the Parent advises such Administrative Agent or Lender where such information can be accessed on such website); and

(h) promptly upon receipt by any Loan Party of any order of provisional attachment ( kari-sashiosae ), preservative attachment ( hozen-sashiosae ) or attachment ( sashiosae ) regarding loan receivables under this Agreement, a written notice detailing such order.

Section 5.02 Notices of Material Events . The Parent will furnish (or cause to be furnished) to the Administrative Agent prompt written notice of the occurrence of any Default or Event of Default, which notice shall be provided to the Administrative Agent and each Lender no later than 3 Business Days after any officer of such Person becomes aware or should have become aware of the same, specifying the details thereof and any action taken or proposed to be taken with respect thereto. Each notice delivered under this Section shall be accompanied by a statement of a Responsible Officer of the Parent setting forth the details of the Default or Event of Default requiring such notice and any action taken or proposed to be taken with respect thereto.

Section 5.03 Existence; Conduct of Business . Each Loan Party will, and will cause each of its Subsidiaries to, do or cause to be done all things necessary to (i) preserve, renew and keep in full force and effect its existence, and (ii) except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, preserve, renew and keep in full force and effect its rights and privileges and the rights, licenses, permits, approvals, privileges and franchises applicable to the conduct of its business; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution expressly permitted under Section 6.01 .

Section 5.04 Payment of Taxes . Each Loan Party will, and will cause each of its Subsidiaries to, pay its Tax liabilities, that, if not paid, could result in a Material Adverse Effect before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Loan Party or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

Section 5.05 Maintenance of Properties; Insurance . Each Loan Party will, and will cause each of its Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, and (b) maintain, with responsible, financially sound and reputable insurance companies, insurance with respect to its properties and business.

Section 5.06 Books and Records; Inspection Rights . Each Loan Party will keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities in accordance with GAAP or in accordance with the accounting standards applicable in such entity’s jurisdiction. Each Loan Party will permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice and subject to signing by such representative of customary confidentiality undertakings, at the Lenders’ expense so long as no Event of Default exists and at the Borrower’s expense during the continuance of an Event of Default, to visit and inspect its properties, to examine and make extracts from its books and records relating to financial and other similar matters (other than materials protected by the attorney-client privilege and materials which such Person may not disclose without violation of any applicable law or a confidentiality obligation binding upon it), and to discuss its affairs, finances and condition with its directors, officers, employees, accountants or other representatives, all at such reasonable times and as often as reasonably requested. As long as no Default exists, the Lenders and/or the Administrative Agent shall use reasonable efforts to minimize the disruption of such Person’s business resulting from any such visit or inspection and shall limit any such visits or inspections under this Section 5.06 to once per fiscal year. A representative of the applicable Loan Party shall be provided a reasonable opportunity to be present at any such visit or inspection, but the actual attendance of any such representative shall not be required.

Section 5.07 Compliance with Laws . Each Loan Party will, and will cause each of its Subsidiaries to, comply with all requirements of law applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 5.08 Use of Proceeds . The proceeds of the Loans will be used by the Borrower for refinancing the “Tranche A” under the 2016 Yen Facility and the “Tranche A” under the 2012 Yen Facility and for general corporate purposes (including, without limitation working capital but excluding acquisitions). No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the Board of Governors of the Federal Reserve System of the United States of America, including Regulations T, U and X.

Section 5.09 Environmental Laws, Etc . Each Loan Party will, and will cause each of its Subsidiaries to, comply with all applicable Environmental Laws and governmental authorizations issued pursuant thereto, the non-compliance with which could reasonably be expected to have a Material Adverse Effect. In the event any Loan Party or any of its Subsidiaries undertakes any remedial action with respect to any Hazardous

Materials, such Loan Party will, and will cause each of its Subsidiaries to, conduct and complete such remedial action in material compliance with all applicable Environmental Laws, and in accordance with the policies, orders, directions and other requirements of law of all federal, state and local Governmental Authorities of the United States, Japan or any other applicable jurisdiction, except when, and only to the extent that, the liability of the applicable Loan Party and its Subsidiaries for such presence, storage, use, disposal, transportation or discharge of any Hazardous Materials is being contested in good faith by such Person or such liability could not reasonably be expected to result in a Material Adverse Effect.

ARTICLE VI

NEGATIVE COVENANTS

Until the principal of and interest on each Loan and all fees payable hereunder have been paid in full, the Loan Parties covenant and agree with the Administrative Agent and the Lenders that:

Section 6.01 Fundamental Changes and Asset Sales . No Loan Party or Subsidiary will merge into or consolidate or amalgamate with (or engage in any other substantially similar transaction) any other Person, or permit any other Person to merge into or consolidate or amalgamate with (or engage in any other substantially similar transaction) it, or sell, transfer, lease or otherwise dispose (each, a “ disposal ” or “ disposition ”) of (in one transaction or in a series of transactions) of any assets (whether now owned or hereafter acquired) to any Person, or liquidate or dissolve. Notwithstanding the foregoing the following, shall be permitted:

(i) if at the time thereof and immediately after giving effect thereto no Default or Event of Default shall have occurred and be continuing, any Person may merge, consolidate or amalgamate (or engage in a substantially similar transaction) with the Borrower in a transaction in which the Borrower is the surviving entity ( provided that if the Subsidiary Borrower merges or consolidates with or into the Parent, the Parent is the surviving corporation and the Parent has assumed the Borrower’s obligations hereunder as the Borrower),

(ii) any Subsidiary may merge, consolidate or amalgamate (or engage in a substantially similar transaction) with any other Person in a transaction in which the surviving entity is a wholly-owned Subsidiary (in the case of a Loan Party, subject to preceding clause ( i )),

(iii) assets or equity interests of any Subsidiary may be disposed of to any other wholly-owned Subsidiary or to the Parent or by the Borrower to a wholly-owned Subsidiary,

(iv) the Parent or any Subsidiary may dispose of assets or property to any other Person; provided , that, the aggregate book or fair market value of all assets disposed (to a Person other than the Parent, the Borrower or any other wholly-owned Subsidiary) under this clause (iv) during any fiscal year of the Parent shall not exceed 15% of the total consolidated assets of the Parent and its consolidated Subsidiaries, determined in accordance with GAAP, measured as of the last day of the immediately preceding fiscal year for which financial statements have been or were required to be delivered pursuant to this Agreement,

(v) the Parent and its Subsidiaries may dispose of inventory in the ordinary course of business,

(vi) the Parent and its Subsidiaries may transfer assets in connection with a Financing Arrangement permitted under Section 6.03 ,

(vii) the Parent or any Subsidiary may lease, as lessor or sublessor, or license, as licensor or sub licensor, real or personal property (other than any intellectual property) in the ordinary course of business, provided that no such lease or license shall materially interfere with the ordinary course of business of the Parent or any Subsidiary,

(viii) the Parent or any Subsidiary may liquidate or sell Cash Equivalents,

(ix) the Parent or any Subsidiary may, in the ordinary course of business, licence or sublicense intellectual property owned or held by the Parent or such Subsidiary, so long as each such license is non-exclusive and in the ordinary course of business.

(x) the Parent or any Subsidiary may dispose of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business and may dispose of property no longer used or useful in the conduct of the business of the Parent or any Subsidiary,

(xi) the Parent or any Subsidiary may sell Receivable Assets to a Securitization Entity in a Qualified Securitization Transaction for the fair market value thereof; provided that at no time shall more than US$2,500,000,000 (or its equivalent in another currency or currencies) in fair market value of assets be subject to such Qualified Securitization Transaction,

(xii) any Subsidiary may pay dividends or make any other distribution,

(xiii) the Parent may pay cash dividends (or dividends paid in the form of common equity of the Parent) to its shareholders, to the extent lawful,

(xiv) any Subsidiary may liquidate or dissolve (with any residual assets being applied in accordance with one of the other clauses of this Section 6.01 ), and

(xv) the Parent or any Subsidiary may dispose of any shares of Mylan N.V. or its successors held by any of them as of July 31, 2015 and any other shares issued thereon.

Section 6.02 Fiscal Year and Accounting.

(a) The Parent shall not change its fiscal year-end to a date other than December 31 and shall not make or permit any changes in accounting policies or practices which would have an effect on whether or not the Parent is in compliance with Section 6.04 , without the consent of the Required Lenders, which consent shall not be unreasonably withheld or delayed, except: (i) changes that are required or permitted by GAAP, or (ii) changes permitted under sub-paragraph (b) of this Section 6.02 .

(b) If at any time any change in GAAP or Japanese GAAP (including without limitation as a result of the adoption of IFRS) would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Parent or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Parent shall negotiate

in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or Japanese GAAP; provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP or Japanese GAAP, as applicable, prior to such change therein and (ii) the Parent shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP or Japanese GAAP.

Section 6.03 Negative Pledge . No Loan Party will, nor will any Loan Party permit any of its Subsidiaries to, (x) create or permit to subsist any Encumbrance over all or any of its present or future revenues or assets or (y) enter into a Financing Arrangement, except for the following (“ Permitted Encumbrances ”):

(a) Encumbrances imposed by law, including, without limitation, for taxes that are not yet due or, if due, are being contested in good faith and for which adequate reserves have been established in accordance with GAAP;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and similar liens imposed by law arising in the ordinary course of business that do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Parent or its Subsidiaries and, if securing obligations that are overdue by more than 90 days, are being contested in good faith and for which adequate reserves have been established in accordance with GAAP;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations or to obtain letters of credit to post for such purposes;

(d) deposits or Encumbrances to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under Section 7.01(j) ;

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Parent or its Subsidiaries;

(g) other liens incidental to the conduct of the business of the Parent or any Subsidiary or the ownership of the property or assets of the Parent or such Subsidiary that are not in respect of Indebtedness and do not in the aggregate materially detract from the value of such properties or assets or materially impair the use thereof in the operation of the business of the Parent or such Subsidiary;

(h) Encumbrances existing on the date hereof in connection with any Indebtedness outstanding on the date hereof and disclosed in the public filings of the Parent or on Schedule 6.03 hereof (and any Encumbrance granted as collateral for any refinancing or replacement of such Indebtedness, provided that such Encumbrance secures a principal amount of Indebtedness not in excess of the amount so disclosed (plus reasonable refinancing costs) and does not encumber any property or assets other than the property or assets to the original Encumbrance as so disclosed or improvements thereon or replacements thereof);

(i) any netting or set-off arrangement entered into by the Parent or any Subsidiary in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;

(j) any Encumbrance arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Parent or any Subsidiary in the ordinary course of business;

(k) any Encumbrance securing any hedging obligation of the Parent or any Subsidiary in respect of interest rate, currency exchange rates or commodity pricing hedging, swaps or similar transactions entered into in the ordinary course of business for bona fide business purposes;

(l) Encumbrances on property of a Person existing at the time such Person is merged into or consolidated with any Loan Party or any Subsidiary; ( provided that such Encumbrances were not created in contemplation of such merger, consolidation or acquisition and do not extend to any assets other than those of the Person so merged into or consolidated with such Loan Party or Subsidiary or acquired by such Loan Party or Subsidiary) and extensions, replacements and renewals thereof that do not increase the outstanding principal amount thereof that is secured by such Encumbrance as of such date and do not result in such Encumbrance extending to additional assets (other than improvements thereon or replacements thereof);

(m) Encumbrances in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(n) purchase money Encumbrances upon or in any real property or equipment acquired by any Loan Party or any Subsidiary in the ordinary course of business to secure the purchase price of such property or equipment, or Encumbrances existing on such property or equipment at the time of its acquisition (other than any such Encumbrances created in contemplation of such acquisition that were not incurred to finance the acquisition of such property) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided , however , that no such Encumbrances shall extend to or cover any properties of any character other than the real property or equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any property not theretofore subject to the Encumbrance being extended, renewed or replaced;

(o) Encumbrances securing capital lease obligations in respect of property acquired; provided that no such Encumbrance shall extend to or cover any assets other than the assets subject to such capitalized leases;

(p) any other Encumbrances securing obligations and other Financing Arrangements; provided that the aggregate amount of obligations and other Financing Arrangements secured in accordance with this subclause (p) shall not exceed US$2,000,000,000 (or its equivalent in another currency or currencies) at any time outstanding;

(q) any Encumbrance entered into pursuant to any Loan Document;

(r) Encumbrances over any Receivable Assets subject to a Qualified Securitization Transaction; provided that the aggregate fair market value of all Receivable Assets secured in accordance with this subclause (r) shall not exceed US$2,500,000,000 (or its equivalent in another currency or currencies) at any one time outstanding; and

(s) Encumbrances over any shares of Mylan N.V or its successors held by any of the Parent or its Subsidiaries as of July 31 2015 and any other shares issued thereon.

Section 6.04 Financial Covenants .

(a) The Parent shall procure that (i) the Total Consolidated Net Debt to EBITDA for the periods set forth below (calculated as of the last day of, and for, such period) does not exceed the ratio referred to under “Leverage Ratio” below and (ii) the Interest Cover Ratio for all Test Periods (calculated as of the last day of, and for, such period) is as set forth below:


(i) Total Consolidated Net Debt to EBITDA		Leverage Ratio
(y)	Four-quarter Test Period ending with the quarters below (Q1 being the quarter in which the Signing Date occurs)
	Q1	No greater than 5.25x
	Q2	No greater than 5.00x
	Q3	No greater than 5.00x
	Q4	No greater than 4.25x
	Q5	No greater than 4.25x
	Q6	No greater than 4.00x
	Q7	No greater than 4.00x
	Q8 and thereafter	No greater than 3.50x

(ii) Interest Cover Ratio		The Interest Cover Ratio for any Test Period shall be not less than 3.50:1.

All the terms used in this Section 6.04(a) shall be calculated in accordance with the accounting principles applied in connection with the latest consolidated financial statements of the Parent required to be delivered pursuant to Section 5.01(a) or (b) .

Section 6.05 No Anti-Social Forces .

(a) No Loan Party shall become an Anti-Social Force.

(b) No Loan Party has conducted or will conduct, either by itself or through the use of third parties, any actions that fall under any of the following:

(i) a demand with violence;

(ii) an unreasonable demand beyond legal responsibility;

(iii) an action with the use of intimidating words, actions or force in relation to transactions;

(iv) an action to defame the reputation or interfere with the business of any Mandated Lead Arranger, the Administrative Agent, or any Lender by spreading rumour, using fraudulent means or resorting to force; or

(v) other actions similar to the foregoing.

ARTICLE VII

EVENTS OF DEFAULT

Section 7.01 Events of Default . If any of the following events (“ Events of Default ”) shall occur:

(a) default shall be made in the payment of any principal of any Loan 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 otherwise except if such failure to pay is due to an administrative or technical error, Loan Party shall have three (3) days to cure such failure;

(b) default shall be made in the payment of any interest on any Loan or other fee payable under the Loan Documents, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five (5) days;

(c) (i) any representation or warranty made or deemed made by the Loan Parties in this Agreement or in any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made,

(ii) no Event of Default under paragraph (c)(i) above will occur if the failure to comply is capable of remedy and is remedied within 15 days of the Administrative Agent giving notice to a Loan Party or a Loan Party becoming aware of the failure to comply (it being understood that any materially incorrect or misleading information contained in any financial statements delivered in accordance with this Agreement or referred to in Section 3.04 cannot be so remedied);

(d) the Loan Parties shall fail to observe or perform any covenant, condition or agreement contained in Section 5.03(i) (with respect to the Loan Parties) or in Article VI ;

(e) the Loan Parties shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those specified in clause (a) , (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after written notice thereof from the Administrative Agent or a Lender to the Borrower;

(f) any Loan Party or Material Subsidiary shall (i) fail to pay any principal of or premium or interest due in respect of Material Indebtedness when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Material Indebtedness; or (ii) default in the observance or performance of any covenant or obligation contained in any agreement of such

Material Indebtedness that is a default (in each case, other than a failure to pay specified in clause (i) of this subsection (f) ) and such default shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect thereof is to accelerate the maturity of such Material Indebtedness or require such Material Indebtedness to be prepaid prior to the stated maturity thereof;

(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization, stay of proceedings, freeze order (“ Hakpa’at Halichim ”), civil rehabilitation under the Civil Rehabilitation Act ( Minji Saisei Ho ), reorganisation under the Corporate Reorganisation Act ( Kaisha Kosei Ho ), bankruptcy under the Bankruptcy Act ( Hasan Ho ), special liquidation ( tokubetsu seisan ) under the Companies Act ( Kaisha Ho ) or special mediation ( tokutei chotei ) under the Special Mediation Act ( Tokutei Saimu to no Chosei no Sokushin no Tame no Tokutei Chotei ni Kansuru Horitsu ) or other relief in respect of any Loan Party or any Material Subsidiary or its debts, or of a substantial part of its assets (each a “ Bankruptcy Event ”), under any Japanese, United States federal or state, or any other foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect (“ Bankruptcy Law ”) or (ii) the appointment of a receiver, liquidator, trustee, custodian, sequestrator, conservator, compulsory manager or similar official for any Loan Party or any Material Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 30 days or a final, not temporary or interim, unappealable order or decree approving or ordering any of the foregoing shall be entered;

(h) any Loan Party or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking a Bankruptcy Event or other relief under any Bankruptcy Law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of this Article, (iii) apply for or consent to the appointment of a receiver, liquidator, trustee, custodian, sequestrator, conservator, compulsory manager or similar official for any Loan Party or any Material Subsidiary or for a substantial part of its assets, (iv) make a general assignment for the benefit of creditors or (v) take any action for the purpose of effecting any of the foregoing;

(i) any Loan Party or any Material Subsidiary shall admit in writing its inability to pay its debts generally;

(j) one or more judgments for the payment of money in an aggregate uninsured amount equal to or greater than US$200,000,000 (or its equivalent in another currency or currencies) in excess of the amount of insurance coverage shall be rendered against any Loan Party or any Material Subsidiary or any combination thereof and the same shall remain undischarged for a period of 45 consecutive days during which execution shall not be effectively stayed, vacated or bonded pending appeal or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Loan Party or any such Material Subsidiary to enforce any such judgment for the payment of money in an aggregate uninsured amount in excess of US$200,000,000 (or its equivalent in another currency or currencies);

(k) one or more ERISA Events or similar event with respect to a Non-US Plan shall have occurred, which individually or in the aggregate results in liability of any Loan Party, any of its subsidiaries, or any of their respective ERISA Affiliates in excess of US$200,000,000 (or its equivalent in another currency or currencies) during the term hereof;

(l) this Agreement shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by any Loan Party or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions or interpretation of any provision thereof), or any Loan Party shall repudiate or deny any portion of its financial obligation under this Agreement;

(m) any order or notice of provisional attachment ( kari-sashiosae ), preservative attachment ( hozen-sashiosae ) , or attachment ( sashiosae ) (or any analogous procedure) has been issued, or any adjudication that orders an enforcement of preservative attachment ( hozen-sashiosae ) or attachment ( sashiosae ) has been rendered (or any analogous procedure taken), with respect to deposits, deposit receivables or other receivables held in any account of any Loan Party or any Material Subsidiary against any Lender, and (in the case of provisional attachment ( kari-sashiosae )) such procedure is not discharged within 30 Business Days; or

(n) if transactions of any Loan Party or Material Subsidiary have been suspended by central promissory note clearinghouse ( tegata-koukanjo ) in Japan, transactions of any Loan Party or Material Subsidiary have been suspended by densai.net Co., Ltd., or equivalent procedures have been taken by other electric monetary claim recording institutions;

then, (x) and in every such event (other than an event with respect to a Loan Party described in clause (g) (other than with respect to special mediation ( tokutei chotei ) under the Special Mediation Act ( Tokutei Saimu to no Chosei no Sokushin no Tame no Tokutei Chotei ni Kansuru Horitsu )), (h) or (m) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent at the request of the applicable Required Lenders shall, by notice to the Parent, take any of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and (y) in case of any event with respect to a Loan Party described in clause (g) (other than with respect to special mediation ( tokutei chotei ) under the Special Mediation Act ( Tokutei Saimu to no Chosei no Sokushin no Tame no Tokutei Chotei ni Kansuru Horitsu )), (h) or (m) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and (iii) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents. For the avoidance of doubt, an acceleration of the obligations hereunder pursuant to an occurrence of a special mediation ( tokutei chotei ) under the Special Mediation Act ( Tokutei Saimu to no Chosei no Sokushin no Tame no Tokutei Chotei ni Kansuru Horitsu ) as described in clause (g) above shall occur only at the request of the Required Lenders as described in (x) above. In the case of an Event of Default arising from breach of Section 6.05, the Loan Parties hereby each expressly indemnify each of the Administrative Agent and each Lender from and against all losses due to or resulting from such breach (or any alleged breach thereof) and no Loan Parties shall claim any indemnity from the Administrative Agent or any Lender for any loss to any Loan Parties due to or arising from such breach (or alleged breach).

ARTICLE VIII

THE ADMINISTRATIVE AGENT

Section 8.01 Appointment and Authority . Each Lender Party (as defined below) hereby irrevocably appoints SUMITOMO MITSUI BANKING CORPORATION to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent and the Lender Parties, and no Loan Party shall have rights as a third party beneficiary of any of such provisions. It is understood that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

Section 8.02 Administrative Agent Individually .

(a) The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender Party as any other Lender Party and may exercise the same as though it were not the Administrative Agent and the term “ Lender Party ” or “ Lender Parties ” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Parent or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lender Parties.

(b) Each Lender Party understands that the Person serving as Administrative Agent, acting in its individual capacity, and its Affiliates (collectively, the “ Agent’s Group ”) are engaged in a wide range of financial services and businesses (including investment management, financing, securities trading, corporate and investment banking and research) (such services and businesses are collectively referred to in this Article VIII as “ Activities ”) and may engage in the Activities with or on behalf of one or more of the Parent or its Affiliates. Furthermore, the Agent’s Group may, in undertaking the Activities, engage in trading in financial products or undertake other investment businesses for its own account or on behalf of others (including the Parent and its Affiliates and including holding, for its own account or on behalf of others, equity, debt and similar positions in the Parent or its respective Affiliates), including trading in or holding long, short or derivative positions in securities, loans or other financial products of one or more of the Parent or its Affiliates. Each Lender Party understands and agrees that in engaging in the Activities, the Agent’s Group may receive or otherwise obtain information concerning the Parent or its Affiliates (including information concerning the ability of the Parent to perform its obligations hereunder and under the other Loan Documents) which information may not be available to

any of the Lender Parties that are not members of the Agent’s Group. None of the Administrative Agent nor any member of the Agent’s Group shall have any duty to disclose to any Lender Party or use on behalf of the Lender Parties, and shall not be liable for the failure to so disclose or use, any information whatsoever about or derived from the Activities or otherwise (including any information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Parent or any Affiliate thereof) or to account for any revenue or profits obtained in connection with the Activities, except that the Administrative Agent shall deliver or otherwise make available to each Lender Party such documents as are expressly required by any Loan Document to be transmitted by the Administrative Agent to the Lender Parties.

(c) Each Lender Party further understands that there may be situations where members of the Agent’s Group or their respective customers (including the Parent and its Affiliates) either now have or may in the future have interests or take actions that may conflict with the interests of any one or more of the Lender Parties (including the interests of the Lender Parties hereunder and under the other Loan Documents). Each Lender Party agrees that no member of the Agent’s Group is or shall be required to restrict its activities as a result of the Person serving as Administrative Agent being a member of the Agent’s Group, and that each member of the Agent’s Group may undertake any Activities without further consultation with or notification to any Lender Party. None of (i) this Agreement nor any other Loan Document, (ii) the receipt by the Agent’s Group of information (including Information) concerning the Parent or its Affiliates (including information concerning the ability of the Parent to perform its obligations hereunder and under the other Loan Documents) or (iii) any other matter shall give rise to any fiduciary, equitable or contractual duties (including, without limitation, any duty of trust or confidence) owing by the Administrative Agent or any member of the Agent’s Group to any Lender Party including any such duty that would prevent or restrict the Agent’s Group from acting on behalf of customers (including the Parent or its Affiliates) or for its own account.

Section 8.03 Duties of Administrative Agent; Exculpatory Provisions .

(a) The Administrative Agent’s duties hereunder and under the other Loan Documents are solely ministerial and administrative in nature and the Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Administrative Agent shall not be subject to any fiduciary or other implied duty, whether or not a Default or Event of Default has occurred or is continuing and shall not have any duty to take any discretionary action or exercise any discretionary powers, but shall be required to act or refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the written direction of the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent or any of its Affiliates to liability or that is contrary to any Loan Document or applicable law.

(b) The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 11.03 or Article VII ) or (ii) in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default or the event or

events that give or may give rise to any Default unless and until the Borrower or any Lender Party shall have given notice to the Administrative Agent describing such Default and such event or events. The Loan Parties acknowledge that the Administrative Agent shall only be obliged to fund a Loan if the Administrative Agent receives funds from the Lenders and shall not be obliged to make an equivalent amount available to the Borrower in the event a Lender fails to transfer such funds to the Administrative Agent. The Loan Parties also acknowledge that the Administrative Agent is not able to guarantee any time for payments. For the avoidance of doubt and to the fullest extent permitted by applicable law, (i) the Administrative Agent shall not be liable to the Loan Parties and (ii) no Loan Party shall assert, and hereby waives, any claim against the Administrative Agent, in each of cases (i) and (ii), on any theory of liability, for special, indirect, consequential or punitive damages arising out of, in connection with, the timing of the transfer of proceeds with respect to the Loans hereunder.

(c) Neither the Administrative Agent nor any member of the Agent’s Group shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty, representation or other information made or supplied in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith or the adequacy, accuracy and/or completeness of the information contained therein, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than (but subject to the foregoing clause (ii) ) to confirm receipt of items expressly required to be delivered to the Administrative Agent.

(d) Nothing in this Agreement or any other Loan Document shall require the Administrative Agent or any of its Related Parties to carry out any “know your customer” or other checks in relation to any person on behalf of any Lender Party and each Lender Party confirms to the Administrative Agent that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Administrative Agent or any of its Related Parties.

Section 8.04 Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender Party, the Administrative Agent may presume that such condition is satisfactory to such Lender Party unless an officer of the Administrative Agent responsible for the transactions contemplated hereby shall have received notice to the contrary from such Lender Party prior to the making of such Loan, and in the case of a Loan, such Lender Party shall not have made available to the Administrative Agent such Lender Party’s ratable portion of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

Section 8.05 Delegation of Duties . The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub agents appointed by the Administrative Agent. The Administrative Agent shall use reasonable care in its selection of any such sub-agent, the standard of such care not to be below that which it would use for its own affairs and in performing its duties in respect hereof, such sub-agent shall use reasonable care in the performance of such duties, the standard of such care not to be below that which it would use for its own affairs. The Administrative Agent and any such sub agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. Each such sub agent and the Related Parties of the Administrative Agent and each such sub agent shall be entitled to the benefits of all provisions of this Article VIII and Section 11.04 (as though such sub agents were the “Administrative Agent” under the Loan Documents) as if set forth in full herein with respect thereto.

Section 8.06 Resignation of Administrative Agent . The Administrative Agent may at any time give notice of its resignation to the Lender Parties and the Parent (such notice not to be effective until 30 days have lapsed). Upon receipt of any such notice of resignation, the Required Lenders shall have the right (which, unless an Event of Default under subsection (a) , (g) , (h) or (m) of Section 7.01 has occurred and is continuing, shall be with the consent of the Borrower (such consent not to be unreasonably withheld or delayed)), to appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (such 30-day period, the “ Lender Party Appointment Period ”), then the retiring Administrative Agent may on behalf of the Lender Parties, appoint a successor Administrative Agent, which shall be a commercial bank or a trust company with an office in Japan, the United States of America or the United Kingdom, or any member state of the European Union (provided it was a member state as of January 1, 2004), or an affiliate of such a bank or trust company; provided that if the Administrative Agent shall notify the Parent and the Lender Parties that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of any Lender Party under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each applicable Lender Party, directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this paragraph; provided further that so long as no such successor Administrative Agent shall have accepted such appointment the Parent shall have the right to appoint, at its own cost and expense, a successor Administrative Agent, which successor Administrative Agent shall be a commercial bank or a trust company with an office in the United States of America, the United Kingdom, any member state of the European Union (provided it was a member state as of January 1, 2004), or Japan, and which shall have a combined capital and surplus of at least $250,000,000 (or foreign currency equivalent thereof) (an “ Interim Administrative Agent ”), which Interim Administrative Agent shall serve as Administrative Agent in all respects (with the rights, privileges and obligations

thereof, including without limitation the right to resign (and appoint a successor) as set forth above in this Section 8.06 ) until such time as the Required Lenders appoint a successor thereto in accordance with the provisions described above in this Section 8.06 ). Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and (i) the retiring Administrative Agent shall be discharged from its duties and obligations as Administrative Agent hereunder and under the other Loan Documents and (ii) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender Party directly, until such time as a successor Administrative Agent or Interim Administrative Agent has been appointed as provided for above in this paragraph. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties as Administrative Agent of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations as Administrative Agent hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 11.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

Section 8.07 Non -Reliance on Administrative Agent and Other Lender Parties .

(a) Each Lender Party confirms to the Administrative Agent, each other Lender Party and each of their respective Related Parties that it (i) possesses (individually or through its Related Parties) such knowledge and experience in financial and business matters that it is capable, without reliance on the Administrative Agent, any other Lender Party or any of their respective Related Parties, of evaluating the merits and risks (including tax, legal, regulatory, credit, accounting and other financial matters) of (x) entering into this Agreement, (y) making Loans and other extensions of credit hereunder and under the other Loan Documents and (z) taking or not taking actions hereunder and thereunder, (ii) is financially able to bear such risks and (iii) has determined that entering into this Agreement and making Loans and other extensions of credit hereunder and under the other Loan Documents is suitable and appropriate for it.

(b) Each Lender Party acknowledges that (i) it is solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with this Agreement and the other Loan Documents, (ii) it has, independently and without reliance upon the Administrative Agent, any other Lender Party or any of their respective Related Parties, made its own appraisal and investigation of all risks associated with, and its own credit analysis and decision to enter into, this Agreement based on such documents and information as it has deemed appropriate and (iii) it will, independently and without reliance upon the Administrative Agent, any other Lender Party or any of their respective Related Parties, continue to be solely responsible for making its own appraisal and investigation of all risks arising under or in connection with, and its own credit analysis and decision to take or not take action under, this Agreement and the other Loan Documents based on such documents and information as it shall from time to time deem appropriate, which may include, in each case:

(i) the financial condition, status and capitalization of the Borrower;

(ii) the legality, validity, effectiveness, adequacy or enforceability of this Agreement and each other Loan Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Loan Document;

(iii) determining compliance or non-compliance with any condition hereunder to the making of a Loan and the form and substance of all evidence delivered in connection with establishing the satisfaction of each such condition; and

(iv) the adequacy, accuracy and/or completeness of and any information delivered by the Administrative Agent, any other Lender Party or by any of their respective Related Parties under or in connection with this Agreement or any other Loan Document, the transactions contemplated hereby and thereby or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Loan Document.

Section 8.08 [Reserved]

Section 8.09 Certain Titles . Notwithstanding any other provision of this Agreement or any provision of any other Loan Document, each Mandated Lead Arranger and Bookrunner is named as such for recognition purposes only, and in its capacity as such shall have no powers, duties, responsibilities or liabilities with respect to this Agreement or the other Loan Documents or the transactions contemplated hereby and thereby; it being understood and agreed that such Persons shall be entitled to all indemnification and reimbursement rights in favor of the Administrative Agent as, and to the extent, provided for under Section 11.04 . Without limitation of the foregoing, none of the Mandated Lead Arrangers and Bookrunners shall, solely by reason of this Agreement or any other Loan Documents, have any fiduciary relationship in respect of any Lender or any other Person.

ARTICLE IX

GUARANTY

Section 9.01 Guaranty . The Parent hereby absolutely, unconditionally and irrevocably guarantees, jointly with the Borrower and severally, guarantees ( rentai hosho ) as a primary obligor and not as a surety, to the Administrative Agent and the Lenders, the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all obligations of each Subsidiary Borrower now or hereafter existing under this Agreement and the Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such obligations being the “ Guaranteed Obligations ”), and agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Administrative Agent or any Lender

in enforcing any rights under this Agreement. Without limiting the generality of the foregoing, the Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower to the Administrative Agent or any Lender under or in respect of this Agreement and the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower.

Section 9.02 Guaranty Absolute . Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of this Agreement and the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Administrative Agent or any Lender with respect thereto. The obligations of Guarantor under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other obligations of the Borrower under or in respect of this Agreement and the Loan Documents, and a separate action or actions may be brought and prosecuted against Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower or whether the Borrower is joined in any such action or actions. To the extent permitted under applicable laws, the liability of Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of this Agreement, any Loan Document or any agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of the Borrower under or in respect of this Agreement and the Loan Documents, or any other amendment or waiver of or any consent to departure from this Agreement or any Loan Documents, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or any of its Subsidiaries or otherwise;

(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of any collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other obligations of the Borrower under this Agreement and the Loan Documents or any other assets of the Borrower or any of its Subsidiaries;

(e) any change, restructuring or termination of the corporate structure or existence of the Borrower or any of its Subsidiaries;

(f) any failure of the Administrative Agent or any Lender to disclose to the Guarantor any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower now or hereafter known to the Administrative Agent or such Lender (the Guarantor waiving any duty on the part of the Administrative Agent and the Lenders to disclose such information); or

(g) any other circumstance that might constitute a defense of the Borrower or the Guarantor.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by the Administrative Agent or any Lender or any other Person upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment had not been made.

Section 9.03 Waivers and Acknowledgments .

(a) Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of non-performance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that the Administrative Agent or any Lender protect, secure, perfect or insure any Encumbrance or any property subject thereto or exhaust any right or take any action against the Borrower or any other Person or any collateral.

(b) Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Administrative Agent or any Lender that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of Guarantor or other rights of Guarantor to proceed against the Borrower or any other Person or any collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the obligations of the Guarantor hereunder.

(d) Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Administrative Agent or any Lender to disclose to the Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or any of its Subsidiaries now or hereafter known by the Administrative Agent or such Lender.

(e) Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the waivers set forth in Section 9.02 and this Section 9.03 are knowingly made in contemplation of such benefits.

Section 9.04 Subrogation . Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Borrower that arise from the existence, payment, performance or enforcement of the Guarantor’s obligations under or in respect of this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender against the Borrower or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower, directly or indirectly, in cash or other property or by

set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations shall have been indefeasibly paid in full in cash and the Commitments shall have expired or been terminated. If any amount shall be paid to the Guarantor in violation of the immediately preceding sentence at any time prior to the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, such amount shall be received and held in trust for the benefit of the Administrative Agent and the Lenders, shall be segregated from other property and funds of the Parent and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the Notes, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising.

Section 9.05 Subordination . The Guarantor hereby subordinates any and all debts for borrowed money owed to the Guarantor by any Subsidiary Borrower (the “ Subordinated Obligations ”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 9.05 :

(a) Prohibited Payments, Etc. Except during the continuance of any Specified Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to such Subsidiary Borrower), the Parent may receive regularly scheduled payments from the Borrower on account of the Subordinated Obligations. After the occurrence and during the continuance of any Specified Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to such Subsidiary Borrower), however, unless the Required Lenders otherwise agree, the Guarantor shall not demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

(b) Prior Payment of Guaranteed Obligations. In any proceeding under any Bankruptcy Law relating to the Subsidiary Borrower, the Guarantor agrees that the Administrative Agent and the Lenders shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Bankruptcy Law, whether or not constituting an allowed claim in such proceeding (“ Post Petition Interest ”)) before the Guarantor receives payment of any Subordinated Obligations. In the event the Guarantor receives payment of any Subordinated Obligations in any proceeding under any Bankruptcy Law relating to the Subsidiary Borrower contrary to the immediately preceding sentence, the Guarantor shall immediately pay such amount to the Administrative Agent for the benefit of the Lenders.

(c) Turn Over. After the occurrence and during the continuance of any Specified Event of Default (including the commencement and continuation of any proceeding under any Bankruptcy Law relating to the Subsidiary Borrower), the Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Administrative Agent and the Lenders and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty.

(d) Agent Authorization. After the occurrence and during the continuance of any Specified Event of Default, the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of the Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require the Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

For purposes of this Section 9.05 , a “ Specified Event of Default ” means an event described in clause (a) , (g) , (h) , (i) , (l) , (m) or (n) of Section 7.01 of this Agreement.

Section 9.06 Continuing Guaranty . This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, (b) be binding upon the Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Administrative Agent and the Lenders and their successors, transferees and assigns.

ARTICLE X

[RESERVED]

ARTICLE XI

MISCELLANEOUS

Section 11.01 Notices .

(a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices, demands, requests, consents and other communications provided for in this Agreement shall be given in writing, or by any telecommunication device capable of creating a written record (including electronic mail at an address provided by the applicable Person), and addressed to the party to be notified as follows:

(i) if to any Loan Party:

Teva Pharmaceutical Industries Limited

Attention: Group Executive Vice President and Chief Financial Officer

Address: 5 Basel Street, Petach Tikva 4951033

Telephone: +972-3-926-7289

Fax: +972-3-906-2501;

Email: eyal.desheh@tevapharm.com

(ii) if to the Administrative Agent:

Sumitomo Mitsui Banking Corporation

Attention: Syndication Group, Capital Markets And Treasury Operations Dept.

Address Yusen-Odenmacho Build. 13-6, Nihonbashi Kodenma-cho, Chuo-ku, Tokyo, 103-0001 Japan

Telephone: +81-3-5640-6688

Fax: +81-3-5695-5214

(iii) if to any other Lender, to it at its address (or fax number) set forth in its Administrative Questionnaire;

or at such other address as shall be notified in writing (x) in the case of the Borrower, the Administrative Agent, to the other parties and (y) in the case of all other parties, to the Parent and the Administrative Agent.

(b) All notices, demands, requests, consents and other communications described in clause (a) shall be effective (i) if delivered by hand, including any overnight courier service, upon personal delivery, (ii) if delivered by registered mail, ten Business Days after being deposited in the mails and (iii) if delivered by electronic mail or any other telecommunications device, when transmitted to an electronic mail address (or by another means of electronic delivery) as provided in clause (a) ; provided , however , that notices and communications pursuant to Article II or Article VIII shall not be effective until received by the addressee.

Section 11.02 [ Reserved]

Section 11.03 Waivers; Amendments .

(a) No waiver of any provision of this Agreement or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Parent and the Required Lenders or by the Parent and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the relevant Commitment of any Lender (including for the avoidance of doubt by amending the definition of “Drawdown Date” or any provision of Section 2.06) without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees or other amounts payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan under the applicable Tranche, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby (other than a Defaulting Lender), (iv) change Section 2.08(a) or Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender affected thereby, (v) change the durations provided for in the definition of “Interest Period” hereunder, without the written consent of each Lender affected thereby (other than a Defaulting Lender), (vi) after the occurrence of a Change of Control, amend the rights of any or all Lenders (in a manner detrimental to such Lender) under Section 2.08(c) in respect of such Change of Control (including postponing the date on which amounts thereunder are payable or reducing the amounts so payable or terminable) (it being understood that prior to the occurrence of such Change of Control, the Required Lenders, the Administrative Agent and the Parent may amend or waive any provision of Section 2.08(c) or the definition of “Change of Control”), without the written consent of each Lender affected thereby (other than a Defaulting Lender), (vii) release the Parent from the Guaranty, or limit the Parent’s

liability in respect of such Guaranty, without the written consent of each Lender (other than a Defaulting Lender), (viii) change any of the provisions of this Section 11.03 or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender (or each Lender of such Tranche, as the case may be) (other than a Defaulting Lender), (ix) amend any substantive provision of Section 2.12 or 2.13 in a manner adverse to any Lender without the consent of Lenders (other than a Defaulting Lender) having Credit Exposures or unused Commitments, as applicable, representing the total Credit Exposures and unused Commitments of all Lenders (excluding any Defaulting Lender’s Credit Exposure or unused Commitments, as applicable) at such time, (x) permit any changes to the Borrower or the Guarantor (other than as specified in this Agreement) or (xi) amend any provision of Section 5.08 without the consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or any Mandated Lead Arranger hereunder or under any other Loan Document without the prior written consent of the Administrative Agent or such Mandated Lead Arranger as the case may be.

(c) Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by the Parent, the Borrower, the Required Lenders and the Administrative Agent if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment (including pursuant to an assignment to a replacement Lender in accordance with Section 11.05) in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement.

Section 11.04 Expenses; Indemnity; Damage Waiver .

(a) The Loan Parties shall pay (i) all reasonable invoiced out-of-pocket expenses incurred by the Administrative Agent and the Lenders, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Lenders, in connection with the negotiation and administration of this Agreement or any amendments, modifications or waivers of the provisions hereof (whether or not the transactions contemplated thereby shall be consummated) and (ii) all out-of-pocket expenses invoiced to and incurred by the Administrative Agent and/or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent and the Lenders, in connection with the enforcement or protection of their rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

(b) The Parent agrees to the fullest extent permitted by law, to indemnify and hold harmless each Mandated Lead Arranger, the Administrative Agent and each Lender and each Related Party of any of the foregoing Persons (the “ Indemnified Parties ”) from and against any and all claims, damages, losses, liabilities, costs, penalties, fees and expenses (including reasonable fees and disbursements of counsel) of any kind or nature whatsoever for which any of them may become liable or which may be incurred by or asserted against any of the Indemnified Parties (other than claims and related damages, losses, liabilities, costs, penalties, fees and expenses made by one Lender (or its successors or assignees) against

another Lender) arising out of, related to or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) (i) any Loan Document or any other document or instrument delivered in connection herewith, (ii) any violation by the Borrower or any Subsidiary of the Borrower of any Environmental Law or any other law, rule, regulation or order, (iii) the actual or proposed use of the proceeds of any Loan, or (iv) any transaction in which any proceeds of any Loan are applied (EXCLUDING ANY SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, PENALTY, FEE OR EXPENSE SOUGHT TO BE RECOVERED BY ANY INDEMNIFIED PARTY TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, PENALTY, FEE OR EXPENSE HAS BEEN DETERMINED BY A FINAL NON -APPEALABLE JUDGMENT OF A COURT OF COMPETENT JURISDICTION TO HAVE SOLELY RESULTED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY). IT IS THE INTENT OF THE PARTIES HERETO THAT EACH INDEMNIFIED PARTY SHALL, TO THE EXTENT PROVIDED IN THIS SECTION 11.04(b) , BE INDEMNIFIED FOR ITS OWN ORDINARY, SOLE OR CONTRIBUTORY NEGLIGENCE. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 11.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any Loan Party, its directors, shareholders or creditors, any Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto and whether or not the Transaction is consummated.

(c) To the extent that any Loan Party fails to pay any amount required to be paid by it to the Administrative Agent or any Mandated Lead Arranger under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to such Person such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought and determined without giving effect to the Applicable Percentage of any applicable Defaulting Lender) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability, cost, penalty, fee or related expense, as the case may be, was incurred by or asserted against such Person in its respective capacity as such.

(d) To the fullest extent permitted by applicable law, no Loan Party shall assert, and hereby waives, any claim against any Indemnified Party, 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, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnified Party referred to in paragraph (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

(e) All amounts due under this Section shall be payable not later than 3 Business Days after written demand therefor, such demand to be in reasonable detail setting forth the basis for and method of calculation of such amounts.

Section 11.05 Successors and Assigns .

(a) Successors and Assigns Generally . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Parent nor the Borrower may assign or otherwise transfer any of their rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Assignments by Lenders . Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of any of its Commitments and Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i) Minimum Amounts .

(A) No minimum amount needs to be assigned (x) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment under any applicable Tranche and the relevant Loans under such Tranche at the time owing to it or (y) in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund; or

(B) in any case not described in paragraph (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than JPY 500,000,000 and shall be an integral multiple of JPY 100,000,000, unless each of the Administrative Agent and, so long as no Event of Default under Section 7.01(a) , (b) , (g) , (h) , (i) or (m) has occurred and is continuing, the Parent otherwise consents (each such consent not to be unreasonably withheld or delayed) (provided that the Parent shall be deemed to have consented thereto unless it shall object thereto by written notice to the Administrative Agent within 5 Business Days after having received notice or request for such consent).

(ii) Proportionate Amounts . Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the relevant Loan or the Commitment under the applicable Tranche assigned.

(iii) Required Consents . No consent shall be required for any assignment except to the extent required by paragraph (b)(i)(B) of this Section and, in addition the consent of the Parent (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default under Section 7.01(a) , (b) , (g) , (h) , (i) or (m) has occurred and is continuing at the time of such assignment or (y) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the consent of the Parent to an assignment must not be withheld solely because the assignment or transfer may result in increased obligations under Sections 2.15 ; provided further that the Parent shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 5 Business Days after having received notice or request for such consent.

(iv) Assignment and Assumption . The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of JPY 500,000 (plus VAT (or consumption tax, as the case may be), if any), and the assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

(v) No Assignment to the Parent or its Affiliates . No such assignment shall be made to the Parent or any of the Parent’s Affiliates or Subsidiaries.

(vi) No Assignment to Natural Persons . No such assignment shall be made to a natural person.

(vii) Perfection . The assignor shall promptly send the notification with date-certification ( kakutei-hizuke ) to the Borrower and the Guarantor in relation to the assignment to the assignee pursuant to the law of Japan including the Civil Code of Japan (Act No. 89 of 1896).

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.12 , 2.15 and 11.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.

(c) Register . The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders

may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Parent and any Lender as to its own Commitments and amounts owing to it, at any reasonable time and from time to time upon reasonable prior notice.

(d) Participations . Any Lender may at any time, without the consent of, or notice to, the Parent, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person or the Parent or any of the Parent’s Affiliates or Subsidiaries) (each, a “ Participant ”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in Section 11.03 that affects such Participant. Subject to paragraph (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.09 as though it were a Lender, provided such Participant agrees to be subject to Section 2.16(c) as though it were a Lender.

(e) Limitations upon Participant Rights . A Participant shall not be entitled to receive any greater payment under Section 2.12 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Parent’s prior written consent. A Participant that would be a Non-Qualifying Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(e) as though it were a Lender.

(f) Certain Pledges . Any Lender may at any time pledge, charge or assign a security interest in or over all or any portion of its rights to repayment of Loans made under this Agreement to secure obligations of such Lender, including any pledge, charge or assignment to secure obligations, including, to a Federal Reserve Bank, the European Central Bank, the Bank of Japan or any other central bank; provided that no such pledge, charge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

Section 11.06 Survival . All covenants, agreements, representations and warranties made by the Loan Parties herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such

other party or on its 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 and so long as the Commitments have not expired or terminated. The provisions of Sections 2.12 , 2.14 and 2.15 , Article VIII and Sections 11.04 and 11.13 (and the obligations under Article IX , to the extent relating to any of the foregoing) shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof.

Section 11.07 Counterparts; Integration; Effectiveness . This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective on the Effective Date, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 11.08 Severability . Any provision of this Agreement or the Loan Documents held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

Section 11.09 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 applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender to or for the credit or the account of the Borrower or the Guarantor against any and all of the obligations of any the Borrower or the Guarantor existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such obligations of the Borrower or Guarantor may be owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.18 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender may have. Each Lender agrees to notify the Parent and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

Section 11.10 Governing Law; Jurisdiction; Consent to Service of Process .

(a) This Agreement and any non-contractual obligations arising out of or in connection with it shall be construed in accordance with and governed by Japanese law (without regard to conflicts of laws principles).

(b) Each party hereto hereby irrevocably and unconditionally submits to the exclusive jurisdiction of (i) the Supreme Court of the State of New York sitting in New York County, (ii) the United States District Court of the Southern District of New York, (iii) the Tokyo District Court and (iv) any appellate court from any thereof, in any suit, action or proceeding arising out of or relating to this Agreement (including any non-contractual obligations arising out of or relating to this Agreement) and each of the parties hereto hereby irrevocably and unconditionally agrees that any such suit, action or proceeding (“ Proceedings ”) may be heard and determined in such courts. Each party hereto hereby further irrevocably waives any claim that any such courts lack personal jurisdiction over it and agrees not to plead or claim in any Proceedings that any such courts lack personal jurisdiction over it. To the extent that any Loan Party in any jurisdiction has, may claim or hereafter may acquire any immunity from jurisdiction, suit, enforcement, execution, attachment (whether through prior to judgment, in aid of execution, or otherwise) or any other legal process with respect to itself or its property, such Loan Party hereby agrees not to claim and irrevocably waives such immunity to the full extent permitted by law. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against the Borrower or the Guarantor or any of their respective properties in the courts of any jurisdiction to enforce a judgment obtained in accordance with this Section. Each Loan Party agrees that, if the Administrative Agent or any Lender has brought or initiated Proceedings in any jurisdiction referred to in this paragraph (the “ Original Proceedings ”), no Loan Party may bring Proceedings which relate to the Original Proceedings or concern dispute(s) which are the same as or related to any dispute(s) which are the subject of the Original Proceedings in any other jurisdiction, including, for the avoidance of doubt, any other jurisdiction referred to in this paragraph. Nothing in this Section shall (or shall be construed so as to) limit the right of the Administrative Agent or any Lender to take Proceedings in any of the courts referred to in this paragraph, nor shall the taking of Proceedings in any such jurisdiction by any Loan Party preclude the taking of Proceedings by the Administrative Agent or any Lender in any other such jurisdiction (whether concurrently or not) if and to the extent permitted by law.

(c) Each Loan Party 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 Proceedings in any court referred to in paragraph (b) 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 any Proceedings in any such court, including, without limitation, with respect to enforcement and/or proceedings for breach claims, and agrees not to plead that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 11.01 . Such service may be made by mailing (by registered or certified mail, postage prepaid or any other method which generates a receipt or proof of delivery) or delivering a copy of such process to such Person at the address provided in Section 11.01 (and in the case of service to be delivered to any Loan Party, each Loan Party hereby acknowledges that, to the extent required, the address for delivery of a copy of such service to counsel for such Loan Party shall be: Office of the General Counsel, Teva Pharmaceutical Industries Limited, 5 Basel Street, Petach Tikva 4951033 Israel, Attention: General Counsel); each party hereto hereby irrevocably waives any objection to such service of process and agrees not to plead or claim in any Proceedings that any such service was in any way invalid or ineffective. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by applicable relevant law.

Section 11.11 Waiver of Jury Trial . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING IN ANY APPLICABLE JURISDICTION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (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 BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 11.12 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 shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 11.13 Confidentiality . Each of the Administrative Agent and the Lender Parties agrees to maintain the confidentiality of the Information (as defined below) and not to disclose or permit its disclosure to any Person, for a period of at least 1 year following the termination of this Agreement, except that Information may be disclosed (a) to its Related Parties (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential) on a need-to-know basis to the extent used in connection with the administration of this Agreement and/or credit examination or credit monitoring , (b) to the extent requested by or legally obligated to disclose it pursuant to a request of any regulatory authority or Governmental Authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners) and in connection with a pledge or assignment permitted under Section 11.05(f) (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions no less restrictive than those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective party (or its managers, administrators, trustees, partners, directors, officers, employees, agents, advisors and other

representatives) to any swap, derivative or other similar transaction under which payments are to be made by reference to the Borrower and its obligations, this Agreement or payments hereunder or to a credit insurance provider relating to a Borrower and its obligations or any party or potential party to any securitization or similar transaction in relation to this Agreement or the obligations hereunder (iii) any rating agency, or (iv) the CUSIP Service Bureau or any similar organization, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Lender or any of their respective Affiliates lawfully from a source other than the Borrower. It is agreed that in case of the Lender becoming aware of a requirement to disclose Information in accordance with sub- Sections (b) or (c) above (other than in the case of a regulatory or industry examination, review or audit or disclosure made to any of the Persons referred to in such sub Sections during the ordinary course of its supervisory or regulatory functions, it will notify the Parent and the relevant Borrower of such requirement as soon as reasonably practicable, to the extent it is lawfully permitted to so notify (as determined in its sole discretion).

For purposes of this Section, “Information” means all information received in connection with the administration of this Agreement at any time prior to the date hereof and afterwards from the Parent or any of its Subsidiaries relating to the Parent or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender lawfully prior to disclosure by the Parent or any of its Subsidiaries, provided that, in the case of information received from the Parent or any of its Subsidiaries after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information, and at least reasonable care.

Each Lender undertakes not to make use of any Information without the prior written consent of the Parent including, for the avoidance of doubt, the issuance of any public announcement, press release or other similar communication, which consent shall not be unreasonably withheld; provided that , such Lender shall be permitted to (i) make use of such information as permitted by the preceding paragraphs of this Section 11.13 and (ii) disclose the existence of the business relationship hereunder and this Agreement’s signing in connection with the Lender’s marketing efforts following the Effective Date, each without the consent of the Parent.

Section 11.14 Treatment of Information .

(a) Certain of the Lenders may enter into this Agreement and take or not take action hereunder or under the other Loan Documents on the basis of information that does not contain material non-public information with respect to the Parent or its securities (“ Restricting Information ”). Other Lenders may enter into this Agreement and take or not take action hereunder or under the other Loan Documents on the basis of information that may contain Restricting Information. Each Lender Party acknowledges that United States federal and state securities laws prohibit any person from purchasing or selling securities on the basis of material, non-public information concerning such issuer of such securities or, subject to certain limited exceptions, from communicating such information to any other Person. Neither the Administrative Agent nor any of its Related Parties shall, by making any Communications (including Restricting Information) available to a Lender Party, by

participating in any conversations or other interactions with a Lender Party or otherwise, make or be deemed to make any statement with regard to or otherwise warrant that any such information or Communication does or does not contain Restricting Information nor shall the Administrative Agent or any of its Related Parties be responsible or liable in any way for any decision a Lender Party may make to limit or to not limit its access to Restricting Information. In particular, none of the Administrative Agent nor any of its Related Parties (i) shall have, and the Administrative Agent, on behalf of itself and each of its Related Parties, hereby disclaims, any duty to ascertain or inquire as to whether or not a Lender Party has or has not limited its access to Restricting Information, such Lender Party’s policies or procedures regarding the safeguarding of material, nonpublic information or such Lender Party’s compliance with applicable laws related thereto or (ii) shall have, or incur, any liability to the Borrower or Lender Party or any of their respective Related Parties arising out of or relating to the Administrative Agent or any of its Related Parties providing or not providing Restricting Information to any Lender Party.

(b) The Borrower agrees that (i) all Communications it provides to the Administrative Agent intended for delivery to the Lender Parties shall be clearly and conspicuously marked “PUBLIC” if such Communications do not contain Restricting Information which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof, (ii) by marking Communications “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent and the Lender Parties to treat such Communications as either publicly available information or not material information (although, in the latter case, such Communications may contain sensitive business information and, therefore, remain subject to the confidentiality undertakings of this Section 11.14 ) with respect to the Parent or its securities for purposes of United States federal and state securities laws, (iii) all Communications marked “PUBLIC” may be delivered to all Lender Parties and (iv) the Administrative Agent shall be entitled to treat any Communications that are not marked “PUBLIC” as Restricting Information. Neither the Administrative Agent nor any of its Affiliates shall be responsible for any statement or other designation by the Borrower regarding whether a Communication contains or does not contain material non-public information with respect to the Parent or its securities nor shall the Administrative Agent or any of its Affiliates incur any liability to the Borrower, any Lender Party or any other Person for any action taken by the Administrative Agent or any of its Affiliates based upon such statement or designation, including any action as a result of which Restricting Information is provided to a Lender Party that may decide not to take access to Restricting Information. Nothing in this Section 11.14 shall modify or limit a Lender Party’s obligations under Section 11.13 with regard to Communications and the maintenance of the confidentiality of or other treatment of Information.

(c) Each Lender Party acknowledges that circumstances may arise that require it to refer to Communications that might contain Restricting Information. Accordingly, each Lender Party agrees that it will nominate at least one designee to receive Communications (including Restricting Information) on its behalf and identify such designee (including such designee’s contact information) on such Lender Party’s Administrative Questionnaire. Each Lender Party agrees to notify the Administrative Agent from time to time of such Lender Party’s designee’s e-mail address to which notice of the availability of Restricting Information may be sent by electronic transmission.

(d) Each Lender Party acknowledges that Communications delivered hereunder and under the other Loan Documents may contain Restricting Information and that such Communications are available to all Lender Parties generally. Each Lender Party that elects not to take access to Restricting Information does so voluntarily and, by such election, acknowledges and agrees that the Administrative Agent and other Lender Parties may have access to Restricting Information that is not available to such electing Lender Party. None of the Administrative Agent nor any Lender Party with access to Restricting Information shall have any duty to disclose such Restricting Information to such electing Lender Party or to use such Restricting Information on behalf of such electing Lender Party, and shall not be liable for the failure to so disclose or use, such Restricting Information.

(e) The provisions of the foregoing clauses of this Section 11.14 are designed to assist the Administrative Agent, the Lender Parties and the Borrower in complying with their respective contractual obligations and applicable law in circumstances where certain Lender Parties express a desire not to receive Restricting Information notwithstanding that certain Communications hereunder or under the other Loan Documents or other information provided to the Lender Parties hereunder or thereunder may contain Restricting Information. Neither the Administrative Agent or any of its Related Parties warrants or makes any other statements with respect to the adequacy of such provisions to achieve such purpose nor does the Administrative Agent or any of its Related Parties warrant or make any other statement to the effect that the Borrower’s or Lender Party’s adherence to such provisions will be sufficient to ensure compliance by the Borrower or Lender Party with its contractual obligations or its duties under applicable law in respect of Restricting Information and each of the Lender Parties and the Borrower assumes the risks associated therewith.

(f) Any Lender Party may disclose to any Person to whom or for whose benefit such Lender Party charges, assigns or otherwise creates an Encumbrance (or may do so) pursuant to Section 11.05(f) .

Section 11.15 Interest Rate Limitation . Notwithstanding anything herein to the contrary, if at any time the interest rate and default interest applicable to any Loan, together with all fees, charges including Break Costs and other amounts which are treated as interest on such Loan under applicable law (including, without limitation, the Interest Rate Restriction Act of Japan (Act No. 100 of 1954, as amended) (the “ IRRA ”)) (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Administrative Agent or any Lender holding such Loan in accordance with applicable law (including the IRRA), 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, to the extent lawful, 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 be cumulated and the interest and Charges payable to such Administrative Agent or Lender (as applicable), in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together (to the extent lawful) with interest thereon at a rate determined by the Administrative Agent in accordance with banking industry practice to the date of repayment, shall have been received by such Lender.

Section 11.16 No Waiver; Remedies . No failure on the part of any party hereto to exercise, and no delay in exercising, any right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies of the Administrative Agent and the Lenders provided in this Agreement are cumulative and not exclusive of any remedies that they would otherwise have. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time.

Section 11.17 USA Patriot Act Notice; “ Know Your Customer ” ; OFAC, Sanctions, Anti-Corruption and Anti-Money Laundering Provisions .

(a) Each Lender Party and the Administrative Agent (for itself and not on behalf of any Lender Party) hereby notifies the Loan Parties that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Act ”) and pursuant to other applicable “know your customer” and Anti-Money Laundering Laws, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender Party or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the Act. Each Loan Party shall, following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender Party reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and Anti-Money Laundering Laws, including the Act.

(b) Without limiting the foregoing, if:

(i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement; or

(ii) any change in the status or composition of shareholders of a Loan Party after the date of this Agreement; or

(iii) a proposed assignment or transfer by any Lender or Administrative Agent of its rights and obligations under this Agreement,

obliges the Administrative Agent or any Lender Party or, in the case of paragraph (iii) above, any prospective new Lender Party or Administrative Agent to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, each Loan Party shall promptly upon the request of the Administrative Agent or any Lender Party supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender Party (for itself or, in the case of the event described in paragraph (iii) above, any prospective new Lender Party) to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Loan Documents.

(c) Each Lender Party shall promptly upon the request of the Administrative Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Administrative Agent (for itself) in order for the Administrative Agent to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Loan Documents.

(d) Each Loan Party represents (on the Signing Date and the Effective Date only), warrants (on the Signing Date and the Effective Date only), agrees and covenants that (I) neither it nor any of its Subsidiaries is an Embargoed Person, (II) neither it, nor any of its Subsidiaries, nor to the best of their knowledge any of the respective officers or directors of such Loan Party or such Subsidiary (x) is an Embargoed Person or (y) is engaging or has engaged in any business that evades or avoids or has the purpose of evading or avoiding, or breaches or attempts to breach, directly or indirectly, any Sanctions or conducts or has conducted, directly or indirectly, any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Embargoed Person, in each case except where such conduct or transactions would not reasonably be likely to expose the Administrative Agent or any Lenders to any material liability or material detriment (which, for the avoidance of doubt, would include any reputational harm) (it being understood that should any harm result therefrom, the indemnity provisions of Section 11.04 shall apply in respect thereof in accordance with the terms and conditions of such Section) and (III) neither it nor any of its Subsidiaries will use, lend, contribute or otherwise make available the proceeds of any Loan hereunder (i) to fund or facilitate any activities or business of or with an Embargoed Person or any other Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions, (ii) in any other manner that would result (x) in a violation of any Sanctions or becoming an Embargoed Person or (y) in any violation of any Anti-Money Laundering Laws or violation of Anti-Corruption Laws, in each case by any Person (including any Person participating in a Loan whether as Administrative Agent, Mandated Lead Arranger, Lender or otherwise) or (iii) for any purpose which would breach any Sanctions or result in a breach of any Anti-Money Laundering Laws or a breach of any Anti-Corruption Laws.

(e) (x) Except as disclosed in the Parent Disclosure Schedule (including any investigation disclosed therein or the results thereof) relating to events or circumstances that occurred prior to December 31, 2016, each Loan Party represents (on the Signing Date and the Effective Date only), warrants (on the Signing Date and the Effective Date only), agrees and covenants that it and its Subsidiaries and, to the best of their knowledge, the respective officers and directors of such Loan Party or such Subsidiary, comply with the requirements of all Anti-Corruption Laws and all Anti-Money Laundering Laws and the Parent shall, and shall cause each of its Subsidiaries to comply with the requirements of all Anti-Corruption Laws and all Anti-Money Laundering Laws, except, in each case, where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(y) In relation to the matters disclosed in the Parent Disclosure Schedule, each Loan Party represents (on the Signing Date and the Effective Date only), warrants (on the Signing Date and the Effective Date only), agrees and covenants that it and its Subsidiaries and, to the best of their knowledge, the respective officers and directors of such Loan Party or such Subsidiary, comply with the requirements of all Anti-Corruption Laws and all Anti-Money Laundering Laws and the Parent shall, and shall cause each of its Subsidiaries to comply with the requirements of all Anti-Corruption Laws and all Anti-Money Laundering Laws, except, in each case, where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Payment Material Adverse Effect.

(f) At the written request of the Administrative Agent, such Loan Party shall, promptly after the date of any such request, provide the Administrative Agent or any Lender any information regarding the Loan Parties necessary for the Administrative Agent or such Lender to comply with all applicable Anti-Corruption Laws, Anti-Money Laundering Laws or Sanctions.

Section 11.18 Preparation of Notarized Deed ( kousei shosho ) . At any time upon request of the Administrative Agent or the Required Lenders, each Loan Party shall do all things reasonably necessary to retain a notary public to execute a notarized deed ( kousei shosho ) in which such Loan Party acknowledges its obligations under this Agreement and agrees to be subject to compulsory enforcement procedure ( kyousei shikkou ) with regard thereto.

Section 11.19 Judgment Currency .

(a) The Loan Parties’ obligations hereunder and under the other Loan Documents to make payments in JPY (pursuant to such obligation, the “ Obligation Currency ”) shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent or the respective Lender of the full amount of the Obligation Currency expressed to be payable to the Administrative Agent or such Lender under this Agreement or the other Loan Documents. If, for the purpose of obtaining or enforcing judgment against any Loan Party in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the “ Judgment Currency ”) an amount due in the Obligation Currency, the conversion shall be made at the rate of exchange (as quoted by the Administrative Agent or if the Administrative Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by the Administrative Agent) determined, in each case, as of the Business Day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the “ Judgment Currency Conversion Date ”).

(b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Loan Parties covenant and agree to pay, or cause to be paid, either (i) such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date, or (ii) such amount, in the Obligation Currency, equal to the amount of the applicable judgment denominated in Judgment currency, converted to the Obligation Currency in accordance with the Judgment Currency Conversion Date.

(c) For purposes of determining the rate of exchange for this Section 11.19 , such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency.

Section 11.20 Language .

(a) Any notice given to or by a Loan Party under or in connection with any Loan Document must be in English, it being understood that certain constitutional, statutory or other official document which is required to be prepared in Japanese delivered by a Loan Party hereunder may be in Japanese, provided that, if so required by the Administrative Agent, the applicable Loan Party shall promptly prepare and provide to the Administrative Agent a certified English translation and, in this case (and only in this case), the Japanese version will prevail.

(b) If requested by any Lenders, the Administrative Agent may choose to deliver Japanese translations of certain notices hereunder to such Lenders (it being understood that the provisions of clause (a) above shall apply to such translations).

Section 11.21 No Fiduciary Duty .

(a) Each Mandated Lead Arranger, each Bookrunner, the Administrative Agent and each Lender and their respective Affiliates (collectively, solely for purposes of this paragraph, the “ Banks ”), may have economic interests that conflict with those of the Borrower. The Borrower agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between the Banks and the Borrower, their stockholders or their affiliates. The Borrower acknowledges and agrees that (i) the transactions contemplated by the Loan Documents are arm’s-length commercial transactions between the Banks, on the one hand, and the Borrower, on the other, (ii) in connection therewith and with the process leading to such transaction each of the Banks is acting solely as a principal and not the agent or fiduciary of the Borrower, its management, stockholders, creditors or any other person, (iii) no Bank has assumed an advisory or fiduciary responsibility in favor of the Borrower with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether any Bank or any of its affiliates has advised or is currently advising the Borrower on other matters) or any other obligation to the Borrower except the obligations expressly set forth in the Loan Documents and (iv) the Borrower has consulted its own legal and financial advisors to the extent it deemed appropriate. The Borrower further acknowledges and agrees that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. The Borrower agrees that it will not claim that any Bank has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Borrower, in connection with such transaction or the process leading thereto.

Section 11.22 Money Lending Business Act of Japan .

(a) Each Non-Bank Lender entering into this Agreement or becoming a party hereto prior to the entering into this Agreement shall promptly deliver to the Borrower and the Guarantor the document provided for in Article 16-2 of the Money Lending Business Act of Japan in accordance with its terms and prior to the Drawdown Date shall promptly deliver to the Borrower and the Guarantor the document provided for in Article 17 of the Money Lending Business Act of Japan in accordance with its terms.

(b) Each Non-Bank Lender shall promptly deliver to the Borrower the document provided for in Article 18 of the Money Lending Business Act of Japan as necessary upon each repayment of all or part of a Loan.

(c) If a Non-Bank Lender assigns or transfers all or any part of a Loan, it shall send the notification provided for in Article 24 of the Money Lending Business Act of Japan in accordance with its terms.

(d) Each Non-Bank Lender shall perform all of such Non-Bank Lender’s obligations pursuant to clauses (a) through (c) above and all the other obligations of such Non-Bank Lender under the Money Lending Business Act of Japan, and neither the Administrative Agent nor any other Lender shall have any responsibility for any such obligations.

(e) Any Lender who has been assigned all or part of a Loan from a Non-Bank Lender shall perform the obligation pursuant to Item 2 of Article 24 of the Money Lending Business Act of Japan in accordance with its terms, and the neither the Administrative Agent nor any other Lender shall have any responsibility for any such obligations.

(f) Each Non-Bank Lender shall, promptly after the execution of this Agreement, notify the Administrative Agent in writing of the matters to be notified or disclosed to the Borrower by the Administrative Agent in accordance with the Money Lending Business Act of Japan (including, but not limited to, those under Article 21 thereunder). If there are any amendments to any such matters, the Non-Bank Lender shall immediately notify the Administrative Agent in writing thereof.

(g) Notwithstanding anything to the contrary herein, all expenses arising from the performance by a Non-Bank Lender of its duties under the Money Lending Business Act of Japan (including, but not limited to, the duties as set out in this Section 11.22 ) shall be borne by such Non-Bank Lender.

[Signature Pages to Follow]

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.


TEVA PHARMACEUTICAL INDUSTRIES LIMITED

By:		/s/ Eyal Rubin
		Name: Eyal Rubin
		Title: VP, Head of Corporate Treasury

By:		/s/ Eran Ezra
		Name: Eran Ezra
		Title: Senior Vice President and Global Treasurer

( Signature page to JPY Term Loan )


TEVA HOLDINGS K.K.

By:		/s/ Kimio Nishimura
		Name: Kimio Nishimura
		Title: Represent Director

By:		/s/ Erez Israeli
		Name: Erez Israeli
		Title: President and CEO of Growth Markets

( Signature page to JPY Term Loan )


SUMITOMO MITSUI BANKING CORPORATION, as Administrative Agent

By:		/s/ Takeshi Kunibe
		Name: Takeshi Kunibe
		Title: President and Chief Executive Officer

( Signature page to JPY Term Loan )


MIZUHO BANK, LTD., as Lender

By:		/s/ Nobuhide Hayashi
		Name: Nobuhide Hayashi
		Title: President and Chief Executive Officer

( Signature page to JPY Term Loan )


SUMITOMO MITSUI BANKING CORPORATION, BRUSSELS BRANCH as Lender

By:	/s/ Thierry Muschs	/s/ Françoise Bouchat
Name:	Thierry Muschs	Françoise Bouchat
Title:	Deputy General Manager	Manager

( Signature page to JPY Term Loan )

SCHEDULE 1A

Parent Disclosure Schedule

The following disclosure is extracted from the Parent SEC Documents (and shall be interpreted in accordance therewith):

“We are required to comply with the U.S. Foreign Corrupt Practices Act (the “FCPA”) and similar anti-corruption laws in other jurisdictions around the world where we do business. Compliance with these laws has been the subject of increasing focus and activity by regulatory authorities, both in the U.S. and elsewhere, in recent years. Actions by our employees, or by third-party intermediaries acting on our behalf, in violation of such laws, whether carried out in the United States or elsewhere in connection with the conduct of our business (including the conduct described below) have exposed us, and may further expose us, to significant liability for violations of the FCPA or other anti-corruption laws and accordingly may have a material adverse effect on our reputation and our business, financial condition or results of operations.

For several years, we conducted a voluntary worldwide investigation into business practices that may have implications under the FCPA, following the receipt, beginning in 2012, of subpoenas and informal document requests from the SEC and the Department of Justice (“DOJ”) with respect to compliance with the FCPA in certain countries. In December 2016, we reached a resolution with the SEC and DOJ to fully resolve these FCPA matters. The resolution, which relates to conduct in Russia, Mexico and Ukraine during 2007-2013, provides for: penalties of approximately $519 million, which includes a fine, disgorgement and prejudgment interest; a three-year deferred prosecution agreement (“DPA”); a guilty plea by our Russian subsidiary to criminal charges of violations of the anti-bribery provisions of the FCPA; consent to entry of a final judgment against us settling civil claims of violations of the anti-bribery, internal controls and books and records provisions of the FCPA; and the retention of an independent compliance monitor for a period of three years. The SEC civil consent and DOJ deferred prosecution agreement have each obtained court approval. We are awaiting the scheduling of a plea and sentencing hearing for the guilty plea agreement by our Russian subsidiary.

Under our DPA with the DOJ, we admitted to the conduct that violated the FCPA described in the statement of facts attached to the DPA and the DOJ agreed to defer the prosecution of certain FCPA-related charges against us and not to bring any further criminal or civil charges against us or any of our subsidiaries related to such conduct. We agreed, among other things, to continue to cooperate with the DOJ, review and maintain our anti-bribery compliance program and retain an independent compliance monitor. If, during the term of the DPA (approximately three years, unless extended), the DOJ determines that we have committed a felony under federal law, provided deliberately false or misleading information or otherwise breached the DPA, we could be subject to prosecution and additional fines or penalties, including the deferred charges.

As a result of the settlement and the underlying conduct, our sales and operations in the affected countries may be negatively impacted, and we may be subject to additional criminal or civil penalties or adverse impacts, including lawsuits by private litigants or investigations and fines imposed by authorities other than the U.S. government. We have received inquiries from governmental authorities in certain of the countries referenced in our resolution with the SEC and DOJ, and we have been informed by Israeli authorities that they have initiated an investigation into the conduct that was the subject of the FCPA investigation and resulted in the above-mentioned resolution with the SEC and DOJ. In addition, there can be no assurance that the remedial measures we have taken and will take in the future will be effective or that there will not be a finding of a material weakness in our internal controls. Any one or more of the foregoing, including any violation of the DPA, could have a material adverse effect on our reputation and our business, financial condition or results of operations.”

SCHEDULE 1B

Segment Disclosure Schedule

“In particular, Teva has relied heavily on sales of Copaxone ^® , its leading specialty medicine. A key element of Teva’s business strategy for Copaxone ^® has been maintaining patients on the three-times-a-week 40 mg/mL version introduced in 2014, and protecting its patents for the 40 mg/mL version. Any substantial reduction in the number of patients taking Copaxone ^® , whether due to new or emerging therapies, increased use of oral medicines or other competing products, including competing 20 mg/mL generic products (with one generic version introduced in the U.S. in 2015 and follow-on products in some European countries) and potential competing 40 mg/mL generic products following the court ruling invalidating four Copaxone ^® 40 mg/mL patents in January 2017, would likely have a material adverse effect on Teva’s financial results and cash flow.

Copaxone ^® 40 mg/mL is protected by five U.S. Orange Book patents that expire in 2030. All of the claims of three of those patents were declared to be unpatentable by the U.S. Patent Office in inter parties review (“IPR”) proceedings, and Teva has appealed those decisions. In addition, a petition for an IPR has been filed against a fourth Orange Book patent; a decision on whether the Patent Office will move forward with this proceeding is expected by May 2017. These four patents have also been challenged in paragraph IV litigation in the United States. A trial was held in the U.S. District Court for the District of Delaware, and in January 2017 the court held that the asserted claims of these four patents were invalid. Teva has appealed this decision; however, it is possible that certain competitors may receive FDA approval and launch before either appeal is decided. The fifth Orange Book patent, which was issued in August 2016, is being challenged in a separate paragraph IV litigation in the United States. Teva has also filed suit against multiple ANDA filers to assert a non-Orange Book process patent in various jurisdictions. Copaxone ^® 40 mg/mL is also protected by one European patent expiring in 2030.

In 2016, Copaxone ^® revenues in the United States, which include revenues from both Copaxone ^® 20 mg/mL and Copaxone ^® 40 mg/mL, were $3.5 billion in the U.S. (approximately 30% of Teva’s total 2016 U.S. revenues) and approximately $744 million in markets outside the U.S. (approximately 7% of Teva’s total 2016 non-U.S. revenues).”

SCHEDULE 2.01

COMMITMENTS

Part (a) – Tranche A Commitments


Tranche A Lender	Tranche A Commitment (JPY)
Mizuho Bank, Ltd.		14,132,500,000
Sumitomo Mitsui Banking Corporation, Brussels Branch		14,132,500,000

Total		JPY 28,265,000,000

Part (b) – Tranche B Commitments


Tranche B Lender	Tranche B Commitment (JPY)
Mizuho Bank, Ltd.		29,250,000,000
Sumitomo Mitsui Banking Corporation, Brussels Branch		29,250,000,000

Total		JPY 58,500,000,000

SCHEDULE 3.18

STAMP TAXES

Credit Agreement

This Agreement is executed in Japan and is subject to the stamp tax in the amount of JPY 600,000. If such stamp tax is not paid, three times the amount of such stamp tax would need to be paid as delinquent tax for such default. If, however, a taxpayer voluntarily reports that it did not pay stamp tax and had no expectation that such stamp tax would be determined delinquent, 110% of such stamp tax would need to be paid. In any event, failure to pay the aforementioned stamp will not render the Credit Agreement or any other Loan Document unenforceable.

SCHEDULE 6.03

EXISTING LIENS

None.

EXHIBIT A

FORM OF

ASSIGNMENT AND ASSUMPTION

Reference is made to the Credit Agreement dated as of March 22, 2017 (as restated, amended, modified, supplemented and in effect from time to time, the “ Credit Agreement ”), among Teva Pharmaceutical Industries Limited, Teva Holdings K.K., the Lenders named therein and Sumitomo Mitsui Banking Corporation, as Administrative Agent for the Lenders. Terms defined in the Credit Agreement are used herein with the same meanings. 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.

The Assignor named herein hereby sells and assigns, without recourse, to the Assignee named herein, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Assignment Date set forth herein the interests set forth herein (the “ Assigned Interest ”) in the Assignor’s rights and obligations under the Credit Agreement, including, without limitation, the interests set forth herein in the Commitment of the Assignor on the Assignment Date and Loans owing to the Assignor which are outstanding on the Assignment Date (and, to the extent permitted to be assigned under applicable law, including all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned under the Credit Agreement), but excluding accrued interest and fees to and excluding the Assignment Date. The Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and after the Assignment Date (i) the Assignee shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the Assigned Interest, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the Assigned Interest, relinquish its rights and be released from its obligations under the Credit Agreement.

This Assignment and Assumption is being delivered to the Administrative Agent together with (i) any documentation required to be delivered by the Assignee pursuant to Section 2.15(e) of the Credit Agreement, duly completed and executed by the Assignee, and (ii) if the Assignee is not already a Lender under the Credit Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by the Assignee. The [Assignee/Assignor] shall pay the fee payable to the Administrative Agent pursuant to Section 11.05(b) of the Credit Agreement.

This Assignment and Assumption shall be governed by and construed in accordance with the laws of Japan.

Date of Assignment:

Legal Name of Assignor:

Legal Name of Assignee:

Assignee’s Address for Notices:

Effective Date of Assignment

(“ Assignment Date ”):


Facility	Principal Amount Assigned	Percentage Assigned of Loan/Commitment (set forth, to at least 8 decimals, as a percentage of the Loan and the aggregate Commitments of all Lenders thereunder)
[Commitment]:	JPY	%
[Loans]:

The terms set forth above are hereby agreed to:


[ Name of Assignor ], as Assignor

By:
		Name:
		Title:

[ Name of Assignee ], as Assignee

By:
		Name:
		Title:

The undersigned hereby consent to the within assignment:


[Teva Pharmaceutical Industries Limited] ¹		Sumitomo Mitsui Banking Corporation, as Administrative Agent

By:		By:
	Name:		Name:
	Title:		Title:

By:
	Name:
	Title:

¹	To the extent Parent consent is required under the Credit Agreement in connection with such Assignment.

ANNEX 1 to Assignment and Assumption

TEVA HOLDINGS K.K.

CREDIT AGREEMENT

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 or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents, (iii) the financial condition of any of the Loan Parties, any of their Subsidiaries or Affiliates or any other person obligated in respect of any Loan Document or (iv) the performance or observance by any Loan Party, any of their Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

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 meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Assignment Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type and (v) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements referred to in Section 3.04(a) and (b) of the Credit Agreement or delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and 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 or any other Lender; and (b) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Assignor 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 the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations that by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments . From and after the Assignment Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts that have accrued to but excluding the Assignment Date and to the Assignee for amounts that have accrued from and after the Assignment 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. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be construed in accordance with and governed by, the law of Japan without regard to conflicts of principles of law that would require the application of the laws of another jurisdiction.

EXHIBIT B

FORM OF BORROWING REQUEST

Dated

[Sumitomo Mitsui Banking Corporation]

as Administrative Agent

1-2, Marunouchi 1 chome,

Chiyoda-ku Tokyo 100 0005

Japan

Attention: Administrative Agent

Ladies and Gentlemen:

This Borrowing Request is delivered to you by (the “ Borrower ”), under Section 2.03 of the Senior Unsecured Japanese Yen Term Loan Credit Agreement dated as of March 22, 2017 (the “ Credit Agreement ”), by and among Teva Pharmaceutical Industries Limited, Teva Holdings K.K., the Lenders party thereto, and Sumitomo Mitsui Banking Corporation, as Administrative Agent.

1. The Borrower hereby requests that the Lenders make a Loan or Loans in the aggregate principal amount of JPY (the “ Loan ” or the “ Loans ”), under Tranche [A/B]. ²

2. The Borrower hereby requests that the Loan or Loans be made on . ³

3. All of the conditions applicable to the Loans requested herein as set forth in the Credit Agreement will be satisfied on the date of such Loans.

4. All capitalized undefined terms used herein have the meanings assigned thereto in the Credit Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Borrowing Request this day of , .


[ ]

By:
		Name:
		Title:

²	Complete with an amount in accordance with Section 2.03 of the Credit Agreement.

³	Complete with a Business Day in accordance with Section 2.03 of the Credit Agreement.

EXHIBIT C

FORM OF PREPAYMENT NOTICE

Dated

Sumitomo Mitsui Banking Corporation

as Administrative Agent

1-2, Marunouchi 1 chome,

Chiyoda-ku Tokyo 100 0005

Japan

Attention: Administrative Agent

Ladies and Gentlemen:

This Prepayment Notice is delivered to you by (the “ Borrower ”), under Section 2.08 of the Senior Unsecured Japanese Yen Term Loan Credit Agreement dated as of March 22, 2017 (the “ Credit Agreement ”), by and among Teva Pharmaceutical Industries Limited, Teva Holdings K.K., the Lenders party thereto, and Sumitomo Mitsui Banking Corporation, as Administrative Agent.

1. The Borrower hereby notifies you that it will be making a prepayment in the aggregate principal amount of JPY (the “ Prepayment ”) which will be applied toward Tranche [A/B] and will prepay an aggregate principal amount of . ⁴

2. The Borrower hereby notifies you that such prepayment will be made on . ⁵

3. This Prepayment Notice is irrevocable.

[4. This Prepayment Notice is conditional upon [the effectiveness of ].] ⁶

[4/5]. All capitalized undefined terms used herein have the meanings assigned thereto in the Credit Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Prepayment Notice this day of , .


[ ]

By:
		Name:
		Title:

⁴	The Prepayment Notice must specify the principal amount of each Loan or portion thereof to be prepaid.

⁵	This Prepayment Notice must be delivered by not later than 10:00a.m., Tokyo time, at least five Business Days prior to the date of prepayment, and such date of prepayment must be a Business Day.

⁶	This Prepayment Notice may be conditioned upon the effectiveness of other credit facilities or another event.

EXHIBIT D

FORM OF COMPLIANCE CERTIFICATE

The undersigned hereby certifies that he is the of TEVA PHARMACEUTICAL INDUSTRIES LIMITED (the “ Parent ”), and that as such he is authorized to execute this certificate on behalf of the Parent. With reference to the Credit Agreement dated as of March 22, 2017 (as restated, amended, modified, supplemented and in effect from time to time, the “ Credit Agreement ”), among the Parent, Teva Holdings K.K. and Sumitomo Mitsui Banking Corporation, as Administrative Agent (the “ Administrative Agent ”) for the lenders (the “ Lenders ”), which are or become a party thereto, and such Lenders, the undersigned represents and warrants as follows (each capitalized term used herein having the same meaning given to it in the Agreement unless otherwise specified);

(a) [There currently does not exist any Default or Event of Default under the Agreement.] [Attached hereto is a schedule specifying the details of [a] certain Default[s] [Event[s] of Default] which exist under the Agreement and the action taken or proposed to be taken with respect thereto.]

(b) Attached hereto are the detailed computations necessary to determine whether the Parent is in compliance with Section 6.04 of the Credit Agreement as of the end of the [fiscal quarter][fiscal year] ending .

EXECUTED AND DELIVERED this day of , 20 .


TEVA PHARMACEUTICAL INDUSTRIES LIMITED



By:
		Name:
		Title:

EXHIBIT E

FORM OF TERMINATION OR REDUCTION OF COMMITMENT NOTICE

Dated

Sumitomo Mitsui Banking Corporation

as Administrative Agent

1-2, Marunouchi 1 chome,

Chiyoda-ku Tokyo 100 0005

Japan

Attention: Administrative Agent

Ladies and Gentlemen:

This Termination or Reduction of Commitment Notice is delivered to you by Teva Pharmaceutical Industries Limited (the “ Parent ”), under Section 2.06 of the Senior Unsecured Japanese Yen Term Loan Credit Agreement dated as of March 22, 2017 (the “ Credit Agreement ”), by and among Teva Pharmaceutical Industries Limited, Teva Holdings K.K., the Lenders party thereto, and Sumitomo Mitsui Banking Corporation, as Administrative Agent. Each capitalized term used herein having the same meaning given to it in the Credit Agreement unless otherwise specified.

1.	The Parent hereby notifies you that it is electing to [terminate/reduce] the Tranche [A/B] Commitment under paragraph (b) of Section 2.06 in the aggregate principal amount of JPY .

2.	The Parent hereby notifies you that such election to [terminate/reduce] the Tranche [A/B] Commitment will be effective on .

3.	This Termination or Reduction of Commitment Notice is irrevocable and permanent.

[4.	This Prepayment Notice is conditional upon [the effectiveness of ].]

[5.	This reduction shall be made ratably among the Lenders in accordance with their respective Commitments.]

[4/5/6].

All capitalized undefined terms used herein have the meanings assigned thereto in the Credit Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Termination or Reduction of Commitment Notice this day of , .

[ ]


By:
Name:
Title:

EXHIBIT F

FORM OF NET FUNDING NOTICE

Dated ⁷

Sumitomo Mitsui Banking Corporation

as Administrative Agent

1-2, Marunouchi 1 chome,

Chiyoda-ku Tokyo 100 0005

Japan

Attention: Administrative Agent

Ladies and Gentlemen:

This Net Funding Notice is delivered to you by [ ] (the “ Net Funding Lender ”), under Section 2.04 of the Senior Unsecured Japanese Yen Term Loan Credit Agreement dated as of March 22, 2017 (the “ Credit Agreement ”), by and among Teva Pharmaceutical Industries Limited, Teva Holdings K.K., the Lenders party thereto, and Sumitomo Mitsui Banking Corporation, as Administrative Agent. Each capitalized term used herein having the same meaning given to it in the Credit Agreement unless otherwise specified.

1.	The Borrower has submitted a Borrowing Request with a specified Drawdown Date of and a JPY Tranche A Facility is being repaid with the net proceeds of such Borrowing Request.

2.	The Net Funding Lender hereby notifies you that it is electing to net fund its Commitments in respect of such drawdown in accordance with Section 2.04 .

IN WITNESS WHEREOF, the undersigned have executed this Net Funding Notice this day of , .

[ ]


By:
Name:
Title:

⁷	Must be four Business Days prior to Drawdown Date

Annex A

CONFIDENTIALITY OF REFERENCE BANK QUOTATIONS

1.1.

Confidentiality and disclosure

(a)

The Administrative Agent agrees to keep each Reference Bank Quotation confidential and not to disclose it to anyone, save to the extent permitted by paragraphs (a) and (b) below.

(b)

The Administrative Agent may disclose any Reference Bank Quotation to any person appointed by it to provide administration services in respect of this Agreement to the extent necessary to enable such service provider to provide those services if the service provider to whom that information is to be given has entered into a confidentiality agreement substantially in the form of the loan market association (“LMA”) Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Administrative Agent and the relevant Reference Bank, as the case may be

(c)

The Administrative Agent may disclose any Reference Bank Quotation to:

(i) any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives if any person to whom that Reference Bank Quotation is to be given pursuant to this paragraph (i) is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of that Reference Bank Quotation or is otherwise bound by requirements of confidentiality in relation to it;

(ii) any person to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation if the person to whom that Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of the Administrative Agent it is not practicable to do so in the circumstances;

(iii)

any person to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes if the person to whom that Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of the Administrative Agent it is not practicable to do so in the circumstances; and

(iv)

any person with the consent of the relevant Reference Bank.

1.2.

Related obligations

(a)

The Administrative Agent acknowledges that each Reference Bank Quotation is or may be price-sensitive information and that its use may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and the Administrative Agent undertakes not to use any Reference Bank Quotation for any unlawful purpose.

(b)

The Administrative Agent agrees (to the extent permitted by law and regulation) to inform the relevant Reference Bank:

(i)

of the circumstances of any disclosure made pursuant to paragraph 1.1(c)(ii) of this Annex A ( Confidentiality of Reference Bank Quotations ) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and

(ii)

upon becoming aware that any information has been disclosed in breach of this Annex A ( Confidentiality of Reference Bank Quotations ).

1.3.

Definition

(a)

For the purposes of this Annex A, “Representative” means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.