1. CONFIDENTIAL www.mcguirewoodsconsulting.com U.S. – Korea Pharma CEO Forum Christopher D. Lloyd November 4, 2010 Economic Considerations for U.S. Operations

2. 2 Presentation Overview Federal, State, and Local Government Structure Employment issues Incentives – How to Lower Your Costs

3. 3 Federal (US) Government FDA regulation Customs, tariffs, and duties Corporate income tax (15-35%) Employment related taxes (Social Security and Medicare) Employee income tax withholding Intellectual property (patents, trademarks, copyrights) Worker safety Environmental permitting Interstate transportation (road, rail, air, sea)

4. 4 State Governments State corporate income taxes (0%-10%) Employee related taxes (unemployment insurance, workers compensation) Employee income tax withholding Environmental permitting and worker safety (in cooperation with federal government) Sales and use tax Transportation Higher education (Universities and community colleges)

5. 5 Local Governments Property taxes (real property and equipment) Business license taxes Building inspection and permits Utility services Police, fire, rescue Education (K-12) Local transportation

6. 6 Employment Issues Minimum wage requirements Pension contributions Health insurance Vacation and other employee benefits

7. 7 Right-To-Work vs. Union Workforce

8. 8 Reducing Federal Tax Expenses Foreign tax credit Foreign trade zones Net operating loss carry-forwards Accelerated depreciation Research and development tax credits Tax credits for hiring targeted employees

9. 9 Reducing State Tax Expenses Corporate income tax credits for job creation Tax credits/grants for equipment investment Tax credits for research and development Start up investment funds/angel investor tax credits Funds for site development and construction Funds for training Manufacturing-related tax abatements and exemptions

10. 10 Reducing Local Tax Expenses Property tax abatements and exemptions Funds for utility infrastructure Reduction of permit and license fees Funds for site development Low cost/free land Job creation and investment grants

11. 11 Incentive Negotiation Basics Federal programs are fixed in law – little or no negotiation State and local programs must be authorized by the elected legislative body Tax issues are typically not negotiated Grants are negotiated

12. 12 Incentive Negotiation Strategies Understand barriers to successful project development and seek to lower those costs Process starts with a site search to identify potential plant locations Narrow site list to 3-6 sites based on logistics, access to employees, access to suppliers Initiate discussions with state and local governments Interstate competition is important to negotiating the best possible incentives package

13. 13 Incentive Negotiation Strategies Make no commitments to a site or announcements until deal is negotiated Do not start with the chief elected official – start with staff Understand the 10-20 year costs of operating in a specific location Don’t be fooled by large tax credits Cash is king!

14. 14 What Will Governments Expect They get the “right” to announce the project Performance agreements and clawbacks for failure to meet commitments Active participation in the community

15. 15 Business Expansion | Federal Public Affairs | Strategic Communications & Grassroots Mobilization State & Local Government Affairs | Emerging European Markets Atlanta Charlotte Charlottesville Chicago Columbia Norfolk Raleigh Springfield Tyson’s Corner Washington, D.C. | Bucharest, Romania www.mcguirewoodsconsulting.com THE END