Year-end procedures How your equity compensation services provider can help you Andrew Pickering Solutions architect E*TRADE Financial Corporate Services, Inc.

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Agenda Working together to help meet your needs I have eight bosses right now Planning meeting What can you automate? W-8BEN—Tax status (re)certification Some additional things to think about Beginning of the year procedure—Is it over yet? Important tasks to start the year Time to start 6039 reporting Let’s recap the list Tips aimed at getting ahead of the game Q&A

Working together to help meet your needs

A few reasons this might happen 1 Reason 1: No time to save time A tedious and manual process make for an unfortunate “Catch 22.” You’re so bogged down with the current process, there is no time to invest into another. 2 Reason 2: Unexpected events/changes derail the train New plans, major 11th hour surprises, key person risk, regulatory changes. 3 Reason 3: Maybe they just never thought it could be different Manual process happen in almost any complex plan—who’s to know which can be resolved?

I have eight different bosses right now…

Okay… it’s actually only six. but you get the point Your eight “bosses” 1. Participants FAQs - emails, plan documents Elections Insiders, compliance 2. Legal Form filings Ownership requirements Pre-clearance 3. Accounting/finance Reporting Disclosures Share counts 4. subsidiaries/parents Address tracking (and syncing systems) Foreign tax withholdings Corporate tax tracking 5. Payroll Tax withholdings Syncing systems, wage limits, etc. ESPP contributions 6. HR/Compensation Compensation strategy Proxy reporting Participant engagement Okay… it’s actually only six. but you get the point

Planning meeting This should give both you and the provider enough time to come up with a game plan: Create a checklist Discuss timelines, expectations, special procedures, and deadlines Audit list of users and their entitlements and make any necessary adjustments What can you automate? Start planning for disqualifying dispositions: Run the surveys to confirm all the information is loaded correctly Mail the surveys to the participants—can your vendor provide this service?

Create one based on internal procedures Example of Checklist Create one based on internal procedures Ask your vendor NASPP

End of the year– Few things to think about Dec 1 Run report of options expiring in next year and distribute reminder memos if necessary Dec 6 Distribute ESPP Disqualifying Disposition Surveys Dec 15 Window Period Closes: Block all insider accounts if necessary Coordinate Year End Close with Payroll & Verify Drop Dead Date for W-2 info to Finance Dec 21 ESPP Disqualifying Disposition Surveys DUE: Input disposition data Dec 31 Year End Close Begins: Reconcile Plan Summaries for current year with prior year Run Data Check to identify any errors and correct and/or document if necessary BACK UP stock plan database Information taken from NASPP website. Please visit the site for further details

Equity Administration System What can you automate? Integration of systems built independently of each other has the potential to create challenges Users Administrators Accounting/Finance HR/Payroll Third-party Advisors Systems Participant Portal Accounting System Payroll/HRIS Corporate Intranet Equity Administration System

Eight steps to automate data exchange between systems Talk with your Service Providers about your intent, and ask them what steps are needed on their end Step 2 Write business requirements (in house) for data exchange Document which fields will be used Document processes for validation/audit Document process for identifying and implementing updates Step 3 Work with internal IT or vendor resources to build files from HR/Payroll system(s) Step 4 Create a test plan—include deliverables, key business stakeholders, and due dates

Eight steps to automate data exchange between systems Test file imports in a “sandbox” environment Step 6 Work through errors/issues (may require new files and multiple loads to get these files just right) Step 7 Turn on import automation Step 8 Success! Ongoing automated file transfer

W-8BEN—Tax status (re)certification Generally, participants who are not U.S. persons (e.g., U.S. citizens or U.S. resident aliens) must certify their foreign status when opening an account with their broker. They must then (re)certify every three (3) years thereafter. Participants who do not (re)certify may be subject to 28% back up withholding on all gross proceeds and foreign income, and 30% non-resident alien withholding on U.S. dividend distributions. Withholding will continue until certification or re-certification is complete. Once funds have been remitted to the IRS, the broker will not be able to assist them in getting their funds back. They will have to work directly with the IRS.

W-8BEN—Tax status (re)certification—Your provider can help! Hard copy mailings Email communications Online translations of instructions is key Do you know what kind of assistance your provider can provide?

Some additional things to think about Reconciliation! Reconciliation! Reconciliation! Reconcile ESPP Dispositions Reconcile ISO Dispositions Review/Update Tax Table Confirm that both ESPP qualifying and disqualifying dispositions add up to the number of shares sold during the year Reconcile to verify that all ISO dispositions are entered into the platform correctly for reporting Review tax table Review if there were changes in global rates Update YTD tax and wage information Review with third-party advisor Update rates and limits Make sure to account for outside broker transactions

Beginning of the year procedures—Is it over yet? © 2015 E*TRADE Financial Corporation. All rights reserved. This presentation contains confidential information and may not be disclosed without E*TRADE Financial Corporation’s written permission.

Beginning of the year– Few things to think about Jan 1 Verify w/ HR that all year end Employee and Consultant new hires & terminations are input into stock plan database Revisit Leaves of Absence with HR and update if necessary Verify & Change Tax Rates & Limits and Zero out YTD taxes paid Add Evergreen Shares to ESPP & Equity Incentive Plan Verify all plan reserves & capitalization table (shares O/S) & reconcile with Transfer Agent numbers Jan 2 Distribute 4th Quarter Option Summary Reports Provide Finance with ESPP Qualifying and Disqualifying Disposition reports and NQ report with income amounts for W-2s, 1099s and tax credit amount (Provide addresses for BOD members and consultants) Jan 5 Distribute 6039 Statements of Taxable Income w/ Explanatory Memo Jan 10-15 Prepare & File S-8 for Evergreen Shares. Send copy to Transfer Agent & Instruct re Share Reserves Jan 12-16 Hold Option education meetings Jan 15- Feb 1 Prepare & Distribute D&O questionnaires for Proxy & Forms 5 Jan 31 Due Date for W-2s and 6039 Statements of Taxable Income to participants Feb 1 Verify EDGAR password expirations and change if necessary Feb 11 Due Date for Return of completed D&O Questionnaires Feb 11-18 Prepare 1st Draft of Proxy Statement Equity Related Sections Feb 10-18 Hold ESPP Education Meetings Feb 15 Forms 5 Due, if necessary Provide Legal w/ Info re California Disclosure Statement due March 1st Feb 28 ESPP Purchase and New Enrollment/Change Forms Due Mar 1-15 Update all plan Prospectus documents Information taken from NASPP website. Please visit the site for further details

Time to start 6039 reporting Form 3921 Form 3922

Let’s recap the list Update participant HR data in provider database Verify that address and tax rate information is current in your system Mail Disposition Surveys W-8BEN (re)certification Update YTD tax and wage information Reset participant tax data to zero, reset all YTD and supplemental tax data Reconcile ESPP and ISO dispositions Load all outside broker sales into your current vendor system Update tax table rates and limits as necessary 6039 reporting

Tips aimed at getting ahead of the game Build in flexibility before it’s necessary Automate, and repeat Solicit outside perspectives Communicate

Flexibility Flexibility 1. Build in flexibility before it’s necessary Adding more granularity is typically more difficult once processes have been built up.

Automate Automate Flexibility 2. Automate, and repeat It is likely that at least some part of your job can be automated. What’s the best path forward for you?

Outside Perspective Automate Flexibility Outside Perspective 3. Solicit outside perspectives The stock comp industry is fortunate enough to have many experts who can be hired to provide advice and guidance.

Communicate Communicate Automate Flexibility Outside Perspective Both above and below. The more plugged in you are to your participants and cross-functionally, the better able you are to anticipate changes.

Q&A