1. Global Stock Plan Design and Redesign: Issues Relating to Broad-Based Plans 2001 Global Equity Compensation Forum San Francisco, California November 5, 2001 Edward D. Burmeister Baker & McKenzie Two Embarcadero Center, Suite 2400 San Francisco, California 94111 (415) 576-3029 edward.d.burmeister@bakernet.com

2. TYPES OF BROAD-BASED PLANS/AWARDS Long-Term Incentive Plan or Omnibus Stock Plan Stock Options (Always) –ISOs –Non-Qualified Options Restricted Stock –Typical for Executives Other Awards –SARs –Stock Bonuses –Restricted Stock Units

3. BROAD-BASED AWARDS Hire Grants (Silicon Valley Model) All-Employee, “One”-Time Grant Ongoing Broad-Based Grants

4. STOCK PURCHASE PLANS 423 Design Non-423 Design –Open Market –No Discount Plans –Other

5. OBJECTIVES FOR BROAD-BASED PLANS One-Time Grant Programs Recognition Event Global “Branding” to Employees Communication Vehicle for Corporate Values, Identify With Creating Shareholder Value Not Typically Designed As Compensation

6. HIRE GRANTS AND ONGOING GRANT PROGRAMS Recruitment and Retention Competitive Practice Incentive for Performance Intended As Compensation

7. EMPLOYEE STOCK PURCHASE PLANS Competitive Practice Recruitment Encouragement for Share Ownership by Employees Build an Ownership Culture

8. STOCK OPTIONS VERSUS STOCK PURCHASE Stock Option AdvantagesStock Purchase Advantages Ease of Administration/Employee Makes Investment Flexibility Virtually Universal andNo ISS Concerns Well Recognized Participation Can Be UpLess Dilution 100% Vesting for RetentionMore Share Ownership Likely Automatic “Repricing”

9. STOCK OPTIONS VERSUS STOCK PURCHASE Stock Option DrawbacksStock Purchase Drawbacks Dilution423 Design Inflexible ISS ResistanceMore Difficult Administration Underwater Options aLower Participation Disincentive Little Employee ShareWithholding Issues Outside OwnershipU.S.

10. STOCK OPTION PLAN DESIGN Global One Size Fits All Design Global Design With Limited Local Variations Global Plan With Significant Local Customization

11. ONE SIZE FITS ALL DESIGN Pros: –Simplicity –Transfers Easier to Accommodate –Equity of Design Cons: –Unfortunate Employee Tax Results France Italy Netherlands Switzerland Belgium

12. ONE SIZE FITS ALL DESIGN (Con’t) Cons: –Unfortunate Company Social Taxes France U. K. Italy Sweden Norway –Failure to Take Advantage of Local Tax Advantages U. K. Ireland Israel Austria Singapore Italy

13. TOTAL CUSTOMIZATION Pros: –Maximizes Employee Tax Results –Locally Competitive –Can Reduce Employer Social Costs Cons: –More Difficult to Administer –Potential Inequities Within Company –Loss of Central Control

14. RECOMMENDATIONS Draft Plan to Permit Local Customization –Sub-Plan Authorization in Option Plans –Non-423 Component in ESPP Decide Process and Parameters for Local Customization –Retain Ultimate Central Control –Do Customize Agreements/Enrollment Forms

15. OTHER DESIGN RECOMMENDATIONS Avoid Beneficiary Forms (at Least in ESPPs) Avoid Transferability Outside U.S. Avoid Stock-for-Stock or Attestation Exercise Methods Outside U.S.

16. OTHER DESIGN RECOMMENDATIONS (Con’t) Avoid U.S. Centric Inflexible Provisions –10-year Term –One-Year Post-Death Exercise –Compensation Definition in ESPP –Definition of “Subsidiary” in Option Plan –Methods of Exercise Locked In Disavow Maintaining “Qualified” Status Tailor Labor Law Language

17. WHAT IS END RESULT? Option Plan –Flexible And General Plan Language Authorization for Sub-plans and Country- Specific Modifications –Much Discretion in Committee

18. WHAT IS END RESULT? (Con’t) Option Plan –Country-Specific Design Modifications U. K.:Approved Plan and NIC Pass-Through France:- Qualified Plan – 4-Year Requirement Mandatory - Closed Period Avoidance Italy:Prior Month’s Average Price as Minimum Grant Price

19. WHAT IS END RESULT? (Con’t) Option Plan –Country-Specific Design Modifications Netherlands:Election to Defer Tax: “Pre-Acceptance” or Mandatory Cashless Exercise Belgium:Special Offer Letter and Undertaking Consideration of Bank Products To Minimize Employee Tax Problem

20. WHAT IS END RESULT? (Con’t) Option Plan –Country-Specific Design Modifications Switzerland:Cantonal Tax Rulings on 10-year, 6-month Term or Mandatory Cashless Singapore:Use of CSOP Scheme Ireland:Consider Approved Plan AustriaConsider Tax-Advantaged Plan

21. WHAT IS END RESULT? (Con’t) Option Plan –Country-Specific Design Modifications Israel: Consider 102 Plan –Mandatory Cashless Exercise Azerbaijan Brazil Bulgaria China Croatia India Indonesia Morocco Nigeria Romania South Africa Thailand Uzbekistan Yugoslavia

22. STOCK PURCHASE PLANS Plan Redesign –423 Plan Component –Non-423 Plan Component –Coverage of “Affiliates” Rather Than Subsidiaries –Sub-Plans Authorized

23. STOCK PURCHASE PLAN (Con’t) Country Modifications –No Payroll Deductions (Alternatives: Direct Deposit, Checks) Hong Kong, Argentina, Mexico (Documentation May be Structured to Permit) –Separate Accounts Australia Japan (if held by local sub) Korea

24. STOCK PURCHASE PLAN (Con’t) Country Modifications –Immediate Transfer of Payroll Deductions –Coverage of Part-Time Employees –EU Countries

25. COUNTRY-SPECIFIC OPTION AGREEMENTS Tax Clauses Labor Law Language/Acknowledgement –Not Part of Severance –Discretionary Data Privacy Consent Special Clauses – France, U.K., Italy, Other

26. STOCK PURCHASE PLAN Tailor Enrollment Form : –Taxes, Labor Laws, Data Privacy –Specific Clauses for United Kingdom (Deemed Loan) Qualified Arrangements –U. K.: SAYE AESOP

27. STOCK PURCHASE PLAN (Con’t) Qualified Arrangements –Ireland: SAYE –France P.E.E. –Japan Employee Association Company Structure Issues –Check-The-Box Issues –Branch Issues