Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. Equity Awards on the Move: Creating Effective Strategies for Equity Awards Granted to Globally Mobile Employees NASPP Austin Chapter September 23, 2015 Denise Glagau Baker & McKenzie LLP

© 2015 Baker & McKenzie LLP Discussion Topics 2 Types of mobile employees Key tax and regulatory risks for mobile employees Effective grant documentation for mobile employees Best practices and risk mitigation strategies Questions

Types of Mobile Employees

© 2015 Baker & McKenzie LLP Types of Mobile Employees Cross-border travelers Short-term international assignments Expatriate assignments Indefinite/permanent transfers Others Rotators Virtual Assignments Global Nomads Business Commuters Working from Home Just in time assignments Accidental expatriates

© 2015 Baker & McKenzie LLP Key Tax and Regulatory Risks for Mobile Employees

© 2015 Baker & McKenzie LLP 6 Tax Risks Taxes may be due: o in multiple countries o on different amounts o at different times Double taxation of same income may occur Timing of employee movement or grant of award may increase or decrease tax amounts due Employer tax withholding and/or reporting may be required

© 2015 Baker & McKenzie LLP 7 Considerations Impacting Tax Risks Countries involved Type of award Tax status of award recipient in each country (i.e., tax resident vs. non-tax resident) Location of employment and timing of taxable event (i.e., where is equity award income “sourced”) Type of tax due (income tax, social security / social insurance contributions, other taxes) Recharge arrangement between issuer and local entity Availability of double taxation relief: income tax treaties, social security totalization agreements, foreign tax credits Applicability of tax equalization / protection arrangement

© 2015 Baker & McKenzie LLP 8 Securities Law Risks What are applicable requirements? Depends on award type Depends on whether employee in country at “relevant time” Applicable requirements may include registration / prospectus requirement or exemption / notice filing Sometimes can be avoided if award subject to specific terms and conditions E.g., cashless exercise options, cash-settled RSUs Do the securities laws apply to a mobile employee? Generally, yes, because securities laws “territorial” in nature If employee is in territory at relevant time (e.g., grant, vest, issuance), award subject to applicable requirements

© 2015 Baker & McKenzie LLP 9 Securities Law Risks (con’d) Is compliance possible for mobile employee? Does filing cover all employees? Can specific terms be imposed on award? Otherwise: Take risk Delay vesting / share issuance Cancel award In any case, need to consider plan / award agreement provisions

© 2015 Baker & McKenzie LLP 10 Labor and Employment Risks Types of Risks Special rights may apply once employee resides or habitually works in country, e.g., Danish Stock Option Act Payroll deductions may need to be approved by local authorities or special consent/power of attorney may be required Acquired rights Termination indemnities Discrimination (age, gender, part-time worker status

© 2015 Baker & McKenzie LLP 11 Labor and Employment Risks (con’d) Consider whether local labor laws apply to employees transferring into country o Mobile employee may or may not be subject to / benefit from local labor laws o May depend on whether employed by local employer or home country employer

© 2015 Baker & McKenzie LLP 12 Foreign Currency / Exchange Control Risks What are applicable requirements? o Approval / registration requirements o Repatriation requirements o Conversion requirements / restrictions o Restrictions on inbound / outbound remittance of currency o “Foreign” asset reporting  Equity awards, shares, brokerage and bank accounts Do the exchange control laws apply to a mobile employee? o Often based on nationality / citizenship but may be based on residency (which may be established while mobile employee / expat working in country) o Examples: China, Vietnam

© 2015 Baker & McKenzie LLP 13 Data Privacy Risks What are applicable requirements? o Company must have basis to collect, process, use and transfer “personal data”, e.g.,  Consent  Required for performance of contract  “Safe harbor” o Registration requirements o Other (e.g., Russia) Do the local data privacy laws apply to a mobile employee? o Depends on country and applicable requirements

© 2015 Baker & McKenzie LLP Effective Grant Documentation for Mobile Employee Grants

© 2015 Baker & McKenzie LLP Global Form of Award Agreement ALL award recipients in ALL work locations receive same form of award agreement + country-specific appendices Governing law = U.S. law (not local country law) Ensures that necessary restrictions in place at time of grant Become applicable as employee moves to new country Retain discretion to impose requirements after grant May be viewed as modification 15

© 2015 Baker & McKenzie LLP Global Form of Award Agreement (con’d) Employee should acknowledge that company / employer may be required to withhold tax in more than one jurisdiction Company should reserve the right to: Employee should acknowledge that appendix for respective country of residence will govern grant and new country terms may apply upon transfer 16 Restrict available methods of exercise or payout Impose other requirements if legally obligated to do so to comply with law

© 2015 Baker & McKenzie LLP 17 What Grant Materials Should be Distributed? Generally distribute grant documentation based on country of residence o Usually ensures compliance with securities laws or other regulatory requirements o May be necessary for tax purposes, e.g., Belgium offer documents for options In some cases, using home country grant documents is preferable E.g., granting ISOs to US expat or French-qualified awards to French expat on a short assignment

Best Practices and Risk Mitigation Strategies

© 2015 Baker & McKenzie LLP Best Practices and Risk Mitigation Strategies 1.Adopt global form(s) of agreement 2.Assess extent and nature of mobile employee population 3.Establish manageable tracking system, e.g.,  Electronic Tracking System  Manual Tracking System 4.Develop “assumptions” generally applicable for your employee population 5.Prepare “rules” for key home / host country combinations  E.g., Mobile Employee Tax Grid 6.Implement appropriate procedures for tax events 7.Update practices periodically 19

© 2015 Baker & McKenzie LLP Questions?

© 2015 Baker & McKenzie LLP 21 For More Information Denise Glagau | Partner, San Francisco Denise Glagau | Partner, San Francisco