Draft August 18, 2013 5:14 p.m. PAYMENT IN LIEU OF TAXES AGREEMENT THIS PAYMENT IN LIEU OF TAXES AGREEMENT (this "Agreement") is entered into as of the day of, 2013, by and among CN Associates, LLC, a Kansas limited liability company ("CN Associates"), Teva Neuroscience, Inc., a, Delaware corporation (the "Company"), Teva Pharmaceuticals USA, Inc., a Delaware corporation ("Teva USA") and the City of Overland Park, Kansas, a municipal corporation duly organized, existing, and constituted under and by virtue of the Constitution and laws of the State of Kansas (the "City"). RECITALS A. The City has agreed, pursuant to Kan. Stat. Ann. 12-1740 et seq., to issue Economic Development Revenue Bonds, Series 2013 (Teva Neuroscience, Inc. Project), hereinafter, the Bonds", in the aggregate principal amount of Forty-Four Million Two Hundred Ninety-Three Thousand Two Hundred Fifty Dollars ($44,293,250.00), consisting of $43,400,000 principal amount of Series 2013A Bonds and $893,250 principal amount of subordinate Series 2013 Bonds to acquire, construct, improve and equip the corporate headquarters facility (the "Project") for Teva USA s branded pharmaceutical division, including the Company, from which corporate headquarters the Company and certain other subsidiaries of Teva USA, shall provide direction, management, and administrative services in support of the operations of Teva USA's branded pharmaceutical division. B. The Company and Teva USA have agreed, and the Company has agreed to cause Patient Services and Solutions, Inc., Teva Branded Pharmaceuticals R & D, Inc., and Teva Sales and Marketing, Inc. (each a subsidiary of Teva USA, and collectively with the Company, the "Teva USA Subsidiaries"), to relocate to the City at least four hundred (400) full-time employees and full-time contract employees (collectively, the "Project Employees") to be employed by Teva USA and the Teva USA Subsidiaries (singly, a "Project Employer" and collectively, the "Project Employers") at the Project. The parties to this Agreement further acknowledge that from time to time other subsidiaries of Teva USA may locate employees within the Project, and to the extent this occurs, such subsidiaries shall be deemed to be included as Teva USA Subsidiaries for the purposes of this Agreement and the employees of such subsidiaries shall be deemed to be Project Employees. C. In connection with the Project and issuance of the Bonds, the City will hold fee title to certain land located at College Boulevard and Nall Avenue, legally described on Schedule 1 attached hereto and by this reference made a part hereof, together with the buildings and improvements to be constructed thereon and certain personal property to be acquired for use in connection with the operations thereon, for lease by the City to CN Associates, and for sublease by CN Associates to the Company. D. Pursuant to and subject to the terms of, Kan. Stat. Ann. 79-201a, Second, the Project, subject to receiving the order from the Court of Tax Appeals, shall, upon issuance of the Bonds, be exempt from real property taxation for a period of ten (10) calendar years after the calendar year in which the Bonds are issued (the "Abatement Period").
E. Reference is made to that certain Trust Indenture dated as of September 1, 2013 (the "Indenture"), by and between the City and Security Bank of Kansas City, as trustee, authorizing the issuance of the Bonds. F. In consideration of the issuance of the Bonds, the execution of the Lease Agreement of the Project dated as of September 1, 2013 (the "Lease"), by the City to CN Associates, and the execution of the sublease of the Project dated May 19, 2012 as amended pursuant to those certain Amendment of Lease dated June 21, 2012 and that certain Second Amendment of Lease dated September, 2013 (as amended, the "Company Office Lease"), by CN Associates to the Company, and in further consideration of the laws of the State of Kansas granting an exemption from real estate taxation for the Project for a period of ten (10) years, commencing with the taxable year 2014, CN Associates and the Company have agreed to make certain payments in lieu of the general ad valorem real estate taxes for the Project, all as herein described, for the taxable years 2014 through and including 2023, and Teva USA, as the corporate parent of the Company and the other Teva USA Subsidiaries, in consideration of the exemption from real estate taxation for the Project contemplated hereunder which will benefit the Company, the other Teva USA Subsidiaries and Teva USA, has agreed to guarantee payment of Recaptured Abated Taxes (as hereafter defined) as herein provided. G. In consideration of: the agreement set forth herein by CN Associates and the Company to make the payments in lieu of the general ad valorem real estate taxes as herein provided; the agreement by Teva USA to guarantee payment of Recaptured Abated Taxes as herein provided; the other covenants and agreements of the Company, Teva USA and CN Associates set forth herein; the agreement by the Company to relocate and cause the other Project Employers to relocate to the City, at least four hundred (400) full-time Project Employees with average annual base compensation of One Hundred Thousand Dollars ($100,000) to be employed at the Project, all as hereinafter provided; and other covenants and agreements of CN Associates in the Lease, and of the Company in the Company Office Lease; and in consideration of the covenants and agreements in other documents relating to the issuance of the Bonds and to the Project, the City has agreed to issue the Bonds, to enter into the Lease with CN Associates and to consent to the Company Office Lease. NOW, THEREFORE, for and in consideration of the above recitals, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by all parties hereto, the parties hereby agree as follows: 1. Incorporation of Recitals. The foregoing Recitals are incorporated herein by this reference as though fully set forth herein and constitute express terms of this Agreement. 2. Payment in Lieu of Taxes. (a) Annual PILOT. In lieu of the general ad valorem real property taxes and, if applicable, ad valorem personal property taxes (collectively, the "Ad Valorem Taxes") for the Project for the taxable years 2014 through and including 2023 (excepting special assessments levied on account of special benefits and excepting all other amounts referenced in Section 6 below), CN Associates or the Company shall pay by separate check to the Treasurer of Johnson County, Kansas, or other appropriate officer, an amount which is equal to fifty percent (50%) of 2
the Ad Valorem Taxes which would otherwise be due for the then-applicable taxable year if such Project were not exempt from ad valorem real estate taxation and, if applicable, ad valorem personal property taxation (the "Annual PILOT"). Except as hereinafter provided with respect to Recaptured Abated Taxes under Section 4(b) below (for which CN Associates shall have no liability), each of CN Associates and the Company shall be fully, jointly and severally liable and responsible for payment of the Annual PILOT and any and all other amounts required to be paid under this Agreement, including any and all payments under Sections 4, 6 and 7 hereof, notwithstanding anything in this Agreement, the Lease or the Company Lease to the contrary, including any reference to payment by "CN Associates 'and/or' the Company" herein. In addition, Teva USA hereby guarantees payment of any and all Recaptured Abated Taxes under Section 4(c) hereof. (b) Billing and Payment. The Annual PILOT amount shall be billed by statement of the Director of the Department of Records and Tax Administration of Johnson County, Kansas (the "Director"), or other appropriate officer, issued by approximately November 20 th of each year, and shall be paid by each year of the abatement period as follows: (i) one hundred percent (100%) on or before December 20 th for the then-current calendar year; or (ii) one-half (1/2) on or before December 20 th and the remainder for such calendar year, without interest, on or before May 20 th of the following calendar year; or (iii) as otherwise required by law for the distribution of tax statements and the payment thereof. It is understood and agreed that CN Associates and the Company may elect either option (i) or (ii) above at its discretion, but if a change in law occurs as provided in (iii) above, the Annual PILOT shall be paid as thereby required by law. (c) Determination of Ad Valorem Taxes. The amount of general Ad Valorem Taxes for the Project will be determined by the Director in the same manner and according to the same statutory procedure as general ad valorem taxes are determined, using the valuations determined by the County Appraiser of Johnson County, Kansas (the "County Appraiser"), under the same laws, rules and procedures for which real and personal property taxes are determined for all taxpayers within the taxing jurisdiction(s). 3. Job Requirement. The City has agreed to issue the Bonds, to enter into the Lease of the Project to CN Associates and to consent to the Company Office Lease based upon the covenant and agreement by the Company that it shall relocate, and cause the other Project Employers to relocate to the Project and continue to employ at its corporate headquarters at the Project, collectively at least four-hundred (400) full-time Project Employees with an average annual base compensation paid to such full-time Project Employees of One Hundred Thousand Dollars ($100,000) ( Average Annual Compensation ) at the Project for the entirety of the Abatement Period. 4. Failure to Meet Employment and Average Annual Compensation Requirement. The City, CN Associates, the Company and Teva USA hereby agree as follows: (a) Average Annual Compensation of Less than $80,000 Per Year. (i) If at any time from and after January 1, 2014 through December 31, 2022, the Average Annual Compensation of Project Employees as reported to the City by the Company on February 15 of the applicable next-succeeding tax abatement year (pursuant 3
to Section 5 hereof) is less than Eighty Thousand Dollars ($80,000.00), then CN Associates and/or the Company shall be obligated to pay for such next-succeeding tax abatement year (i.e., the tax abatement year following the year in which the Company failed to meet such compensation requirement), an amount which is equal to fifty percent (50%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation, together with a penalty in the amount of twenty five percent (25%) of the remaining fifty percent (50%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation, for a total payment of sixty two and a half percent (62.5%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation. For example, if in 2019 the annual average of Project Employees fill 400 full-time equivalent jobs, and the Average Annual Compensation of such Project Employees is $79,000, then CN Associates and/or the Company shall be obligated to pay for the tax abatement year 2020 an amount equal to sixty two and a half (62.5%) of the Ad Valorem Taxes which would otherwise have been due for tax year 2020 if the Project were not exempt from ad valorem taxation. The terms "full-time jobs" or "full-time equivalent jobs" shall mean jobs in which the Project Employee is regularly scheduled to work at least forty (40) hours per week on average throughout the year. (ii) The sixty two and a half percent (62.5%) payment in lieu of taxes required to be paid under subsection 4(a)(i) above shall be paid by separate check to the Treasurer of Johnson County, Kansas, or other appropriate officer, in accordance with Section 2(c) hereof. (iii) In the event the terms of this Section 4(a) apply to any tax abatement year, the payment of the sixty two and a half percent (62.5%) payment in lieu of taxes under this Section 4(a) shall be made by CN Associates and/or the Company in lieu of the Annual PILOT for such tax abatement year. (b) Employment of Fewer than 240 Project Employees. (i) If at any time from and after January 1, 2014 through December 31, 2022, the Project Employers employ Project Employees filling fewer than 240 full-time equivalent jobs, as reported to the City by the Company on February 15 of the applicable next-succeeding tax abatement year (pursuant to Section 5 hereof), and fails to meet this requirement within one hundred twenty (120) days thereafter, then CN Associates and/or the Company shall be obligated to pay for the next following tax abatement year (i.e., the tax abatement year following the year in which the Project Employers initially failed to meet such employment requirement), an amount which is equal to one hundred percent (100%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation. For example, if the Project Employers employ Project Employees filling fewer than 240 full-time equivalent jobs commencing on November 1, 2019, and as of February 28, 2020, the Project Employers continue to employ Project Employees filling fewer than 4
240 full-time equivalent jobs, then CN Associates and/or the Company shall be obligated to pay for the tax abatement year 2020 an amount equal to one hundred percent (100%) of the Ad Valorem Taxes which would otherwise have been due for tax year 2020 if the Project were not exempt from ad valorem taxation. (ii) The one hundred percent (100%) payment in lieu of taxes required to be paid under subsection 4(b)(i) above shall be paid by separate check to the Treasurer of Johnson County, Kansas, or other appropriate officer, in accordance with Section 2(b) hereof. (iii) In the event the terms of this Section 4(b) apply to any tax abatement year, the payment of the 100% payment in lieu of taxes under this Section 4(b) shall be made by CN Associates and/or the Company in lieu of the Annual PILOT for such tax abatement year. (iv) In the event that both the terms of Section 4(a) and this Section 4(b) are deemed to apply to a single tax abatement year, then the payment of the 100% payment in lieu of taxes contemplated under this Section 4(b) shall be deemed to satisfy the payments in lieu of taxes required under both Section 4(a) and this Section 4(b). (c) Employment of Fewer than 200 Employees. (i) If at any time from and after January 1, 2015, the Project Employers employ Project Employees filling fewer than 200 full-time equivalent jobs as reported to the City by the Company (pursuant to Section 5 hereof) and fails to meet this requirement within one hundred twenty (120) days thereafter, then the Company, in addition to complying with the terms of subsection 4(b) above for the next-following tax abatement year, shall pay the below-specified percentage of all Ad Valorem Taxes for the applicable property tax year in which the Project Employers initially fail to meet such employment requirement and for all prior tax abatement years, that would have otherwise been due for the Project if the Project had not been exempt from ad valorem taxation, LESS the Annual PILOT paid in each of such years (hereinafter, the "Recaptured Abated Taxes"), in accordance with the following chart: 5
YEAR PROPERTY TAX YEAR EMPLOYMENT YEAR REPORTED ON NUMBER OF EMPLOYEES PERCENTAGE RECAPTURED PROPERTY TAX YEARS RECAPTURED 1 2014 2013 n/a n/a n/a n/a 2 2015 2014 2/15/15 less than 200 100% 2014 3 2016 2015 2/15/16 less than 200 80% 2014 & 2015 4 2017 2016 2/15/17 less than 200 70% 2014, 2015 & 2016 5 2018 2017 2/15/18 less than 200 60% 2014, 2015, 2016 & 2017 6 2019 2018 2/15/19 50% 2014, 2015, 2016, 2017 & 2018 less than 200 7 2020 2019 2/15/20 less than 200 40% 2014, 2015, 2016, 2017, 2018 & 2019 8 2021 2020 2/15/21 less than 200 30% 2014, 2015, 2016, 2017, 2018, 2019 & 2020 9 2022 2021 2/15/22 less than 200 20% 2014, 2015, 2016, 2017, 2018, 2019, 2020 & 2021 10 2023 2022 2/15/23 less than 200 10% 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021 & 2022 For example, if as of November 1, 2019, the Project Employers employ Project Employees filling fewer than the 200 full-time equivalent jobs, and as of February 28, 2020, the Project Employers continue to employ Project Employees filling fewer than 200 full-time equivalent jobs, then: (A) CN Associates and/or the Company shall be obligated to pay the 100% payment in lieu of taxes required to be paid for tax abatement year 2020 in accordance with subsection 4(b) above; and (B) the Company shall be obligated to pay the Recaptured Abated Taxes in an amount equal to forty percent (40%) of the following amount: [the total Ad Valorem Taxes for each of property tax years 2014, 2015, 2016, 2017, 2018, and 2019 that otherwise would have been due if the Project were not exempt from ad valorem taxation LESS the Annual PILOT paid in each of tax abatement years 2014, 2015, 2016, 2017, 2018, and 2019.] In connection with the above example, if it is assumed that the Ad Valorem Taxes due in each of 2014, 2015, 2016, 2017, 2018, and 2019 were $100,000 (for purposes of this example only, Ad Valorem Taxes are assumed to be the same amount for each such tax year) and the Annual PILOT paid in each year was $50,000, the Recaptured Taxes Amount would be $120,000 (i.e. ($100,000 per year Ad Valorem Taxes x 6 years) ($50,000 per year Annual PILOT paid x 6 years) = $300,000 x 40% = $120,000.) 6
(ii) In no event shall the Company be obligated to pay Recaptured Taxes for any tax abatement year, more than one time. For example: assume the facts stated in the immediately preceding subsection (i) above and assume that the Company pays the 100% payment in lieu of taxes for tax abatement year 2020 under (i)a above and the Recaptured Abated Taxes required to be paid under (i)(b) above. If the Project Employers, thereafter, maintain in 2020 and 2021, Project Employees filling more than 240 full-time equivalent jobs, but in 2022, the Project Employers employ Project Employees filling fewer than the 200 full-time equivalent jobs for a period of 120 days or longer, the Recaptured Abated Taxes required to be paid by the Company shall be as follows: Ten percent (10%) of the following amount: [the total Ad Valorem Taxes for each of tax years 2021 and 2022 that otherwise would have been due if the Project were not exempt from ad valorem taxation LESS the Annual PILOT paid in each of tax abatement years 2021 and 2022]. (iii) The payments under this subsection 4(c) shall be due and payable within forty five (45) days after delivery by the City of notice of the amount due and payable (along with a copy to Teva USA) and shall be paid by separate check to the Treasurer of Johnson County, Kansas, or other appropriate officer, in accordance with Section 2(b) hereof. (iv) Teva USA hereby guarantees payment in full to the City of any and all Recaptured Abated Taxes due under Section 4(c) of this Agreement. In the event that the Company fails to pay any Recaptured Abated Taxes in accordance with the terms of this Section 4(c), Teva USA shall be obligated, within fifteen (15) days after receipt of notice thereof from the City, to make payment of any and all unpaid Recaptured Abated Taxes as provided in Section 4(c)(ii) above, and to simultaneously with such payment, provide confirmation to the City of such payment. This guaranty of payment of the Recaptured Abated Taxes is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance by the Company of any Recaptured Abated Taxes and not of the collectability only and is in no way conditioned upon any requirement that the City first attempt to collect any of the Recaptured Abated Taxes from the Company. 5. Reporting. On or before February 15, 2015, and on or before February 15 of each year thereafter through February 15, 2023, the Company shall certify to the City the number of Project Employees employed at the Project as of the end of each month for the applicable tax year and the Average Annual Compensation for the applicable tax year. The Company shall submit such information in the form of the report which is attached hereto as Exhibit A and by this reference made a part hereof (the "Employment Certification"). Within six (6) months of 7
the Company's submission of the Employment Certification form in each year, the City shall have the right to audit and examine records of the Company in order to verify the employment information furnished by the Company to the City as required by this Agreement. The following employee of the Company shall be the employee who will be submitting, on behalf of the Company, the foregoing Employment Certification: Employee: Brooke Rembold, Human Resources Manager Teva Pharmaceuticals 11100 Nall Avenue Overland Park, KS 66211 E-mail address: Brooke.Rembold@tevapharm.com Phone Number: (800) 221-4026 The Employment Certification shall be delivered to the City at the following address: City of Overland Park, Kansas Attn: Kristy Stallings, Deputy City Manager 8500 Santa Fe Drive Overland Park, KS 66212 e-mail address: Kristy.Stallings@opkansas.org Telephone Number: (913) 895-6152 In the event that during the term of this Agreement the person responsible for submitting the Employment Certification form to the City shall change, or the person at the City to whom such Employment Certification shall be submitted shall change, the applicable party shall be obligated to promptly provide notice to the other of the name, e-mail address and telephone number of the employee responsible for submitting or receiving, as applicable, the Employment Certification form. 6. Other Charges and Assessments. All special assessments, wastewater and capital charges, storm-water utility fees and other non ad valorem taxes or charges shall not abate and shall continue to be the obligation of the Company and CN Associates until paid. 7. Penalty/Interest. Should the Company, CN Associates or Teva USA fail to make payments stated in this Agreement, penalty and/or interest will be assessed against the Company, Teva USA and/or CN Associates by the Johnson County Treasurer in accordance with applicable state laws relating to late tax payments. 8. Default. (a) In the event that the Company or Teva USA fails to pay any Recaptured Abated Taxes as provided in, and in accordance with Section 4(c) hereof, including the notice and cure periods set forth in Section 4(c)(iii) and (iv) hereof, then for the remainder of the Abatement Period, CN Associates and the Company (in addition to their obligation to pay such Recaptured abated Taxes) shall be obligated to pay one hundred percent (100%) of the Ad Valorem Taxes 8
that would otherwise be due for each of the applicable taxable years if such Project were not exempt from ad valorem real estate taxation and, if applicable, ad valorem personal property taxation. (b) In the event that the Company or CN Associates fails to pay any payment in lieu of taxes in accordance with Section 4 (a)(ii) or 4(b)(ii) hereof, and, in the event that the Company or CN Associates fails to cure such default by payment of such payment in lieu of taxes within thirty (30) days after notice of default is given by the City in accordance with Section 13, then for the remainder of the Abatement Period (and in addition to their obligation to pay such payment in lieu of taxes) CN Associates and the Company shall be obligated to pay one hundred percent (100%) of the Ad Valorem Taxes that would otherwise be due for each of the applicable taxable years if such Project were not exempt from ad valorem real estate taxation and, if applicable, ad valorem personal property taxation. However, the parties understand that the abatements may thereafter be reinstated by mutual agreement of the parties, and only upon approval of the City's governing body in its sole discretion. (c) In the event that the Company Office Lease is terminated for any reason prior to the expiration of the Abatement Period, or if the Company abandons or vacates the Project prior to the expiration of the Abatement Period, CN Associates and the Company, immediately upon such termination of the Company Office Lease, vacation or abandonment of the Project, and for the remainder of the Abatement Period shall be obligated to pay one hundred percent (100%) of the Ad Valorem Taxes that would otherwise be due for each of the applicable taxable years if such Project were not exempt from ad valorem real estate taxation and, if applicable, ad valorem personal property taxation. (d) The parties hereby acknowledge that it is contemplated that the Company shall pay all obligations hereunder, but that CN Associates shall be jointly and severally liable therefore as provided in Section 2(a) hereof, and that Teva USA shall be jointly and severally liable for payment of any Recaptured Abated Taxes under Section 4(c) hereof. (e) If, as a result of a default by the Company, Teva USA or CN Associates under this Agreement, the City employs an attorney to enforce its rights hereunder, the defaulting party shall, unless prohibited by law, reimburse the City for all reasonable attorneys fees, court costs and other legal expenses incurred by the City in connection with the default. (f) The City hereby agrees that the Company, Teva USA and/or CN Associates' liability for monetary amounts under this Agreement shall be limited to the actual amount in question, and under no circumstances shall such parties be liable for any indirect or consequential damages. Nothing in this Section 8 shall be deemed to waive any right of the City to enforce its right to payment of any amount due under this Agreement. 9. Overland Park Hotel, Convention Facility and Meeting Facility Utilization Requirement. (a) Teva USA agrees that for the Term of this Agreement it shall enter into and continue in full force and effect a room night agreement with at least one (1) hotel in the City of 9
Overland Park, Kansas regarding the term of use and booking of rooms at such hotel for events periodically held by Teva USA and the Teva USA Subsidiaries (a Room Night Agreement ) and, upon request by the City to provide the City an opportunity and right to review such Room Night Agreement (with redactions to preserve confidentiality). Teva USA further agrees to make, and cause the Teva USA Subsidiaries that employ Project Employees at the Project to make, at least sixty percent (60%) of all hotel reservations directly within its or their control for or on behalf of out-of-town guests, employees and other visitors with hotels located in the City of Overland Park and to generally promote the use of hotels and convention/meeting facilities located in the City of Overland Park, Kansas, by the out-of-town guests, employees and other visitors of Teva USA, the Company and the other Teva USA Subsidiaries that employ Project Employees at the Project. For the purposes of this Section, the booking of a hotel reservation shall be considered to be "directly within the control" of the Company, the other Teva USA Subsidiaries, or Teva USA, as applicable, when (i) such reservation is made directly by an employee of the applicable Project Employer for a matter directly related to the business of such Project Employer or any other Project Employer; or (ii) the applicable Project Employer otherwise has control to make such reservation for any guest, employee or other visitor of such Project Employer for a matter directly related to the business of such Project Employer or other Project Employer. (b) By no later than February 15 of each year beginning on February 15, 2015 and continuing until February 15, 2023, the Company shall report to the City on the Hotel, Convention Facility and Meeting Facility Utilization certification form, attached hereto and marked as Exhibit B, its compliance or lack of compliance with the above hotel, convention facility and meeting facility utilization requirement (the "Hotel Requirement"). (c) If at any time from and after January 1, 2015, the Hotel Requirement is not met, then the Company and/or CN Associates shall pay, in addition to any other payments due hereunder, an Annual PILOT equal to five percent (5%) of the Ad Valorem Taxes which would otherwise be due if such Project were not exempt from ad valorem real estate taxation, for the next following tax abatement year. For example, if the Hotel Requirement is not met for the tax year 2019, then, in addition to the Annual PILOT set forth in Section 2(a) hereof, the Company and/or CN Associates shall pay an additional amount equal to five percent (5%) of the Ad Valorem Taxes which would otherwise be due for the tax year 2019. (d) In the event that both the terms of Section 4(b) and this Section 9 are deemed to apply to a single tax abatement year, then the payment of the 100% payment in lieu of taxes contemplated under Section 4(b) shall be deemed to satisfy the payments in lieu of taxes required under both Section 4(b) and this Section 9. (e) The sole remedy for the failure to comply with this Section 9 shall be as stated in Section 9(c) hereof. 10. Termination. This Agreement shall terminate, and the Project shall become subject to general ad valorem taxation, at the expiration of the Abatement Period, and otherwise if the Bonds are redeemed and paid in full pursuant to the terms of the Indenture on or before December 31, 2023, then upon the redemption of the Bonds. Notwithstanding the termination of 10
this Agreement, all unpaid obligations of the Company, CN Associates, and Teva USA hereunder shall survive the termination of this Agreement. 11. No Assignment. This Agreement may only be assigned by CN Associates or by the Company with the prior written approval of the City, which consent may not be unreasonably withheld, conditioned or delayed. 12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns. 13. Notices. All notices, requests, demands and other communications under this Agreement, shall be deemed to have been duly given if the same shall be in writing and shall be delivered personally, via facsimile transmission with a confirmation sent by regular mail, deposited in the United States Mail by registered or certified mail, return receipt requested, postage prepaid, or sent by any nationally recognized delivery service and addressed as set forth below: If to the City: City of Overland Park, Kansas Attn: Kristy Stallings, Deputy City Manager 8500 Santa Fe Drive Overland Park, KS 66212 Facsimile No.: (913) 895-5003 With a copy to: City of Overland Park, Kansas Attn: Michael R. Santos, Esq. 8500 Santa Fe Drive Overland Park, KS 66212 Facsimile No.: (913) 985-5095 If to CN Associates: CN Associates, LLC Attn: Ken Block 700 West 47 th Street, Suite 200 Kansas City, Missouri 64112 With a copy to: Irwin E. Blond Polsinelli PC 700 West 47 th Street, Suite 1000 Kansas City, Missouri 64112 If to the Company: 11
Coert Davis Teva Neuroscience, Inc. 1090 Horsham Road North Wales, PA 19454 With a copy to: Linda Beck Teva Neuroscience, Inc. 11100 Nall Avenue Overland Park, KS 66211 With a copy to: Chase Simmons, Esq. Polsinelli PC 700 W. 47 th Street Kansas City, MO 64112 If to Teva USA: Teva Pharmaceuticals USA, Inc. 1090 Horsham Road North Wales, PA 19454 14. Controlling Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Kansas. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 12
IN WITNESS WHEREOF, the parties have evidenced their agreement to be bound by the terms hereof by executing this AGREEMENT as of the day and year first above written. CN ASSOCIATES, LLC, a Kansas limited liability company ATTEST: By: Name: Title: By: Name: Title: STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on, 2013, by, the [ ] of CN Associates, LLC, a Kansas limited liability company. Notary Public My Commission expires: [Notarial Seal] 13
TEVA NEUROSCIENCE, INC., a Delaware corporation By: Name: Title: ATTEST: By: Name: Title: STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on, 2013, by, the of Teva Neuroscience, Inc., a Delaware corporation. Notary Public My Commission expires: [Notarial Seal] 14
TEVA NEUROSCIENCE, INC., a Delaware corporation By: Name: Title: ATTEST: By: Name: Title: STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on, 2013, by, the of Teva Neuroscience, Inc., a Delaware corporation. Notary Public My Commission expires: [Notarial Seal] 15
TEVA PHARMACEUTICALS USA, INC., a Delaware corporation By: Name: Title: ATTEST: By: Name: Title: STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on, 2013, by, the of Teva Pharmaceuticals USA, Inc., a Delaware corporation. Notary Public My Commission expires: [Notarial Seal] 16
TEVA PHARMACEUTICALS USA, INC., a Delaware corporation By: Name: Title: ATTEST: By: Name: Title: STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on, 2013, by, the of Teva Pharmaceuticals USA, Inc., a Delaware corporation. Notary Public My Commission expires: [Notarial Seal] 17
CITY OF OVERLAND PARK, KANSAS By: Carl Gerlach Mayor (SEAL) ATTEST: By: Marian Cook City Clerk APPROVED AS TO FORM: Michael R. Santos, City Attorney Catherine M. Hauber, Stinson Morrison Hecker LLP, as legal counsel to the City of Overland Park, Kansas STATE OF ) ) SS. COUNTY OF ) The foregoing instrument was acknowledged before me on, 2012, by Carl Gerlach, the Mayor of the City of Overland Park, Kansas, a municipal corporation duly organized, existing, and constituted under and by virtue of the Constitution and laws of the State of Kansas. Notary Public My Commission expires: [Notarial Seal] 18
EXHIBIT A Employment and Annual Average Salary Report Total Full Time Equivalent ( FTE ) Employees as of: Month Ending TOTAL FTE EMPLOYEES Year January 31, February 28/29, March 31, April 30, May 31, June 30, July 31, August 31, September 30, October 31, November 30, December 31, Average Annual Compensation of all FTEs for the Year ending: Month Ending December 31, Year AVERAGE ANNUAL COMPENSATION I hereby certify on behalf of Teva Neuroscience, Inc. that the above information is true and correct as of the date hereof. 19 Authorized Signature Name (Please Print) Title (Please Print) Date
EXHIBIT B Hotel, Convention Facility and Meeting Facility Utilization Certification Form Report for the Year 1. Teva USA shall have entered into room night agreements (in accordance with the terms of Section 9(a) of the PILOT Agreement) with the following Hotel(s). 2. The Company Teva USA and all other Teva USA Subsidiaries have made at least sixty percent (60%) of their hotel reservations for or on behalf of out-of-town guests, employees and other visitors with hotels located in the City of Overland Park; and 3. Below / (attached) is a summary of hotel usage during the calendar year. I hereby certify on behalf of Teva Neuroscience, Inc.. that the above information is true and correct as of the date hereof. Authorized Signature Name (Please Print) Title (Please Print) Date DB04/0102125.0125/9291951.3
PAYMENT IN LIEU OF TAXES AGREEMENT THIS PAYMENT IN LIEU OF TAXES AGREEMENT (this "Agreement") is entered into as of the day of, 2013, by and among CN Associates, LLC, a Kansas limited liability company ("CN Associates"), Teva Neuroscience, Inc., a, Delaware corporation (the "Company"), Teva Pharmaceuticals USA, Inc., a Delaware corporation ("Teva USA") and the City of Overland Park, Kansas, a municipal corporation duly organized, existing, and constituted under and by virtue of the Constitution and laws of the State of Kansas (the "City"). RECITALS A. The City has agreed, pursuant to Kan. Stat. Ann. 12-1740 et seq., to issue Economic Development Revenue Bonds, Series 2013 (Teva Neuroscience, Inc. Project), hereinafter, the Bonds", in the aggregate principal amount not to exceed Sixty Fiveof Forty- Four Million Two Hundred Ninety-Three Thousand Two Hundred Fifty Dollars ($6544,293,250.00), consisting of $43,400,000,000.00), principal amount of Series 2013A Bonds and $893,250 principal amount of subordinate Series 2013 Bonds to acquire, construct, improve and equip the corporate headquarters facility for(the "Project") for Teva USA s branded pharmaceutical division, including the Company, from which corporate headquarters the Company and certain other subsidiaries of Teva USA, shall be providedprovide direction, management, and administrative services in support of itsthe operations (the "Project"). of Teva USA's branded pharmaceutical division. B B. The Company and Teva USA have agreed, and the Company has agreed to cause Patient Services and Solutions, Inc., Teva Branded Pharmaceuticals R & D, Inc., and Teva Sales and Marketing, Inc. (each a subsidiary of Teva USA, and collectively with the Company, the "Teva USA Subsidiaries"), to relocate to the City at least four hundred (400) full-time employees and full-time contract employees (collectively, the "Project Employees") to be employed by Teva USA and the Teva USA Subsidiaries (singly, a "Project Employer" and collectively, the "Project Employers") at the Project. The parties to this Agreement further acknowledge that from time to time other subsidiaries of Teva USA may locate employees within the Project, and to the extent this occurs, such subsidiaries shall be deemed to be included as Teva USA Subsidiaries for the purposes of this Agreement and the employees of such subsidiaries shall be deemed to be Project Employees. C. In connection with the Project and issuance of the Bonds, the City wouldwill hold fee title to certain land located at College Boulevard and Nall Avenue, legally described on Schedule 1 attached hereto and by this reference made a part hereof, together with the buildings and improvements to be constructed thereon and certain personal property to be acquired for use in connection with the operations thereon, for lease by the City to CN Associates, and for sublease by CN Associates to the Company. CD. Pursuant to and subject to the terms of, Kan. Stat. Ann. 79-201a, Second, the Project, subject to receiving the order from the Court of Tax Appeals, shall, upon issuance of the Bonds, be exempt from real property taxation for a period of ten (10) calendar years after the DB02/0102125.0000/9043538.13 MD02
calendar year in which the Bonds are issued (the "Abatement Period"). DE. Reference is made to that certain Trust Indenture dated as of,september 1, 2013 (the "Indenture"), by and between the City and,security Bank of Kansas City, as trustee, authorizing the issuance of the Bonds. EF. In consideration of the issuance of the Bonds, the execution of the Lease Agreement of the Project dated as of,september 1, 2013 (the "Lease"), by the City to CN Associates, and the execution of the sublease of the Project dated May 19, 2012 (as amended pursuant to those certain Amendment of Lease dated June 21, 2012 and that certain Second Amendment of Lease dated September, 2013 (as amended, the "Company Office Lease"), by CN Associates to the Company, and in further consideration of the laws of the State of Kansas granting an exemption from real estate taxation for the Project for a period of ten (10) years, commencing with the taxable year 2014, CN Associates and the Company have agreed to make certain payments in lieu of the general ad valorem real estate taxes for the Project, all as herein described, for the taxable years 2014 through and including 2023, and Teva USA, as the corporate parent of the Company and the other Teva USA Subsidiaries, in consideration of the exemption from real estate taxation for the Project contemplated hereunder which will benefit the Company, the other Teva USA Subsidiaries and Teva USA, has agreed to guarantee payment of Recaptured Abated Taxes (as hereafter defined) as herein provided. FG. In consideration of: the agreement set forth herein by CN Associates and the Company to make the payments in lieu of the general ad valorem real estate taxes as herein provided; the agreement by Teva USA to guarantee payment of Recaptured Abated Taxes as herein provided; the other covenants and agreements of the Company, Teva USA and CN Associates set forth herein; the Company's agreement by the Company to relocate and cause the other Project Employers to relocate to the City, at least threefour hundred fifty (350(400) fulltime employeesproject Employees with average annual base compensation of the Company and fifty (50) full time contract employees to the City;One Hundred Thousand Dollars ($100,000) to be employed at the Project, all as hereinafter provided; and other covenants and agreements of CN Associates in the Lease, and of the Company in the Company Office Lease; and in consideration of the covenants and agreements in other documents relating to the issuance of the Bonds and to the Project, the City has agreed to issue the Bonds, to enter into the Lease with CN Associates and to approveconsent to the Company Office Lease. NOW, THEREFORE, for and in consideration of the above recitals, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by all parties hereto, the parties hereby agree as follows: 1. Incorporation of Recitals. The foregoing Recitals are incorporated herein by this reference as though fully set forth herein and constitute express terms of this Agreement. 2. Payment in Lieu of Taxes. (a) Annual PILOT. In lieu of the general ad valorem real property taxes and, if applicable, ad valorem personal property taxes (collectively, the "Ad Valorem Taxes") for the Project for the taxable years 2014 through and including 2023 (excepting special assessments 2
levied on account of special benefits and excepting all other amounts referenced in Section 6 below), CN Associates or the Company shall pay by separate check to the Treasurer of Johnson County, Kansas, or other appropriate officer, an amount which is equal to fifty percent (50%) of the Ad Valorem Taxes which would otherwise be due for the then-applicable taxable year if such Project were not exempt from ad valorem real estate taxation and, if applicable, ad valorem personal property taxation (the "Annual PILOT"). Except as hereinafter provided with respect to Recaptured Abated Taxes under Section 4(b) below (for which CN Associates shall have no liability), each of CN Associates and the Company shall be fully, jointly and severally liable and responsible for payment of the Annual PILOT and any and all other amounts required to be paid under this Agreement, including any and all payments under Sections 4, 6 and 7 hereof, notwithstanding anything in this Agreement, the Lease or the Company Lease to the contrary., including any reference to payment by "CN Associates 'and/or' the Company" herein. In addition, Teva USA hereby guarantees payment of any and all Recaptured Abated Taxes under Section 4(bc) hereof. (b) Billing and Payment. The Annual PILOT amount shall be billed by statement of the Director of the Department of Records and Tax Administration of Johnson County, Kansas (the "Director"), or other appropriate officer, issued by approximately November 20 th of each year, and shall be paid by each year of the abatement period as follows: (i) one hundred percent (100%) on or before December 20 th for the then-current calendar year; or (ii) one-half (1/2) on or before December 20 th and the remainder for such calendar year, without interest, on or before May 20 th of the following calendar year; or (iii) as otherwise required by law for the distribution of tax statements and the payment thereof. It is understood and agreed that CN Associates and the Company may elect either option (i) or (ii) above at its discretion, but if a change in law occurs as provided in (iii) above, the Annual PILOT shall be paid as thereby required by law. (c) Determination of Ad Valorem Taxes. The amount of general Ad Valorem Taxes for the Project will be determined by the Director in the same manner and according to the same statutory procedure as general ad valorem taxes are determined, using the valuations determined by the County Appraiser of Johnson County, Kansas (the "County Appraiser"), under the same laws, rules and procedures for which real and personal property taxes are determined for all taxpayers within the taxing jurisdiction(s). 3. Job Requirement. The City has agreed to issue the Bonds, to enter into the Lease of the Project to CN Associates and to approveconsent to the Company Office Lease based upon the covenant and agreement by the Company that the Companyit shall relocate, and cause the other Project Employers to relocate to the Project and continue to employ at its corporate headquarters at the Project, at least three hundred fifty (350) full time employees of the Company and fifty (50) full time contract employees for a total ofcollectively at least four - hundred (400) full-time positionsproject Employees with an average annual base compensation paid to such full-time Project Employees of One Hundred Thousand Dollars ($100,000) ( Average Annual Compensation ) at the Project for the entirety of the Abatement TermPeriod. 4. Failure to Meet Employment and Average Annual Compensation Requirement. The City, CN Associates, the Company and Teva USA hereby agree as follows: (a) Employment of Fewer than 240 Employees. 3
(i) If at any time from and after January 1, 2014 through December 31, 2022, the Company employs employees(a) Average Annual Compensation of Less than $80,000 Per Year. (i) If at any time from and after January 1, 2014 through December 31, 2022, the Average Annual Compensation of Project Employees as reported to the City by the Company on February 15 of the applicable next-succeeding tax abatement year (pursuant to Section 5 hereof) is less than Eighty Thousand Dollars ($80,000.00), then CN Associates and/or the Company shall be obligated to pay for such next-succeeding tax abatement year (i.e., the tax abatement year following the year in which the Company failed to meet such compensation requirement), an amount which is equal to fifty percent (50%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation, together with a penalty in the amount of twenty five percent (25%) of the remaining fifty percent (50%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation, for a total payment of sixty two and a half percent (62.5%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation. For example, if in 2019 the annual average of Project Employees fill 400 full-time equivalent jobs, and the Average Annual Compensation of such Project Employees is $79,000, then CN Associates and/or the Company shall be obligated to pay for the tax abatement year 2020 an amount equal to sixty two and a half (62.5%) of the Ad Valorem Taxes which would otherwise have been due for tax year 2020 if the Project were not exempt from ad valorem taxation. The terms "full-time jobs" or "full-time equivalent jobs" shall mean jobs in which the Project Employee is regularly scheduled to work at least forty (40) hours per week on average throughout the year. (ii) The sixty two and a half percent (62.5%) payment in lieu of taxes required to be paid under subsection 4(a)(i) above shall be paid by separate check to the Treasurer of Johnson County, Kansas, or other appropriate officer, in accordance with Section 2(c) hereof. (iii) In the event the terms of this Section 4(a) apply to any tax abatement year, the payment of the sixty two and a half percent (62.5%) payment in lieu of taxes under this Section 4(a) shall be made by CN Associates and/or the Company in lieu of the Annual PILOT for such tax abatement year. (b) Employment of Fewer than 240 Project Employees. (i) If at any time from and after January 1, 2014 through December 31, 2022, the Project Employers employ Project Employees filling fewer than 240 full-time equivalent jobs, as reported to the City by the Company on February 15 of the applicable next-succeeding tax abatement year (pursuant to Section 5 hereof), and fails to meet this requirement within one hundred twenty (120) days thereafter, then CN Associates and/or the Company shall be obligated to pay for the next following tax abatement year (i.e., the 4
tax abatement year following the year in which the CompanyProject Employers initially failed to meet such employment requirement), an amount which is equal to one hundred percent (100%) of the Ad Valorem Taxes which would otherwise have been due for such tax abatement year if the Project were not exempt from ad valorem taxation. For example, if the Company employs employeesproject Employers employ Project Employees filling fewer than 240 full-time equivalent jobs commencing on November 1, 2019, and as of February 28, 2020, the Company continuesproject Employers continue to employ employeesproject Employees filling fewer than 240 full-time equivalent jobs, then CN Associates and/or the Company shall be obligated to pay for the tax abatement year 2020 an amount equal to one hundred percent (100%) of the Ad Valorem Taxes which would otherwise have been due for tax year 2020 if the Project were not exempt from ad valorem taxation. (ii) The one hundred percent (100%) payment in lieu of taxes required to be paid under subsection 4(ab)(i) above shall be paid by separate check to the Treasurer of Johnson County, Kansas, or other appropriate officer, in accordance with Section 2(b) hereof. (iii) In the event the terms of this Section 4(ab) apply to any tax abatement year, the payment of the 100% payment in lieu of taxes under this Section 4(ab) shall be made by CN Associates and/or the Company in lieu of the Annual PILOT for such tax abatement year. (biv) In the event that both the terms of Section 4(a) and this Section 4(b) are deemed to apply to a single tax abatement year, then the payment of the 100% payment in lieu of taxes contemplated under this Section 4(b) shall be deemed to satisfy the payments in lieu of taxes required under both Section 4(a) and this Section 4(b). (c) Employment of Fewer than 200 Employees. (i) If at any time from and after January 1, 2015, the Company employs employeesproject Employers employ Project Employees filling fewer than 200 full-time equivalent jobs as reported to the City by the Company (pursuant to Section 5 hereof) and fails to meet this requirement within one hundred twenty (120) days thereafter, then the Company, in addition to complying with the terms of subsection 4(ab) above for the nextfollowing tax abatement year, shall pay the below-specified percentage of all Ad Valorem Taxes for the applicable property tax year in which the CompanyProject Employers initially failsfail to meet such employment requirement and for all prior tax abatement years, that would have otherwise been due for the Project if the Project had not been exempt from ad valorem taxation, LESS the Annual PILOT paid in each of such years (hereinafter, the "Recaptured Abated Taxes"), in accordance with the following chart: 5