Mergers & Acquisitions (Things you need to know…but no one will tell you!)

Mergers & Acquisitions(Things you need to know…but no one will tell you!)

SpeakersBarbara Wallace, CPAOracle CorporationJean Wong, CEP (Formerly of Sun Microsystems, Inc.)Moderator: Jim Vincent, CEPE*TRADE Financial

Why this panel? Why now? • M & A on the rise • Tips for surviving M & A – Acquirer vs. Acquiree • Every deal is different – no “one size fits all” to M & A • M & A deals rarely take into the downstream effects on stock administration • Be prepared! Know both sides before the next one happens….

Overview “merger" vs. "acquisition“ – what’s the difference? Acquisition: One company takes over another Target company ceases to exist Buyer’s stock continues to trade Unfriendly deals always called acquisitions Merger Pure definition - two same size firms agree to go forward as a single new company Both companies' stocks are surrendered and new company stock is issued in its place. Daimler-Benz + Chrysler = DaimlerChrysler Real life – few true mergers of equals Allows company being bought to save face by being called merger Conclusion In real life, not much difference between acquisition or merger Classification of purchase really depends on whether friendly or hostile Real difference lies in how communicated to Board, employees and shareholders E*TRADE Financial Corporate Services, Inc. and its affiliates do not provide legal, accounting or tax advice. Always consult your own legal, accounting and tax advisers. 4

Information flow - Acquirer • Acquirer – what do you know/when do you know it? • Involved in due diligence vs. total surprise • How much control do you have? • What can you say? When can you say it? • Waiting on regulatory approval • Once approval is obtained, communication can begin • Sun – Long waiting period

Information flow – Acquiree • Acquiree – what do you know/when do you know it? • What can/cannot disclose to Acquirer • 2 independent companies until close • Want the information, but sometimes are ‘shut out’ or provided only on a “need to know” basis • Large vs. Small – different dynamic • Controlling employee inquiries and panic • Frequency and types of communication

Acquiree – How does this all start? • Acquired company – How does it all start? How can you tell something’s up • Sudden request for plan documents and forms of grant agreements from Legal Department • Unusual requests from Legal Departments to “put together a few reports” as of different dates • Officers and Board OS, in the money • Employee rank and file grant lists • Requests for stock based comp expense information • Vesting, vested v. unvested, outstanding

Acquiree – How does this all start? • Included in initial due diligence and pre-announce activities? • NDA • May learn about merger from press release • Special meeting may be held by management immediately after announcement • IBM vs. Oracle vs. Cisco

Acquirer – How does it all start? • “We got Sun!” Finally!!! • Press release, other media • Stock Services may not get involved until much later • Smaller companies – may be sooner • Larger acquisitions – fewer hands involved during due diligence • Risk of leak has higher consequences • Insider Trading risk • Cisco example

Acquirer – How does it all start? Oracle and Sun Advantage in knowing who you’re dealing with Wait for clearance and legal approval What to expect for the first meeting with Acquiree E*TRADE Financial Corporate Services, Inc. and its affiliates do not provide legal, accounting or tax advice. Always consult your own legal, accounting and tax advisers. 10

Acquirer – Next Steps Mining information – know what you’re dealing with TA, Broker – who do they use? Database – what are we dealing with? Vested vs. unvested – terms of the acquisition Country specific approved plans? Timing on S-8 E*TRADE Financial Corporate Services, Inc. and its affiliates do not provide legal, accounting or tax advice. Always consult your own legal, accounting and tax advisers. 11

Acquiree – Next Steps • First conversation – advantage in knowing each other • Set a positive tone • Get a copy of the merger agreement • “What do I need to do?” notifications, special situations • Understand the definitions, i.e. exchange ratio calculation • Create a detailed project plan • Ensures team to stay focus

Acquiree • Look for special considerations • ESPP ‘special purchase’ • Vest accelerations, 1st and 2nd triggers • Handling of terminated employees – global labor law considerations • Know your database, know your plans • May require dedicated sources – use consultants if necessary to facilitate transition to acquirer

Acquiree • What are the expectations on when transition is done? • Will my team and I have a job? • What shape is my database in? • Realistic: Make it a successful transition, make it work • Making the transition successful does more for you • Build your resume • Establish good will with the acquirer • Be prepared for anything!

Acquiree Challenge: How do you keep your staff around for the duration of the transition? Increase frequency of one-one-ones, staff meetings Know your team Keep Management up to date on issues/potential problems Continue to work closely with business partners, i.e. Payroll, Tax, Finance, External Reporting E*TRADE Financial Corporate Services, Inc. and its affiliates do not provide legal, accounting or tax advice. Always consult your own legal, accounting and tax advisers. 15

“Gotcha’s” To Look Out For • Data Privacy • Acquirer need for info vs. data privacy laws • Cash Out Procedures • Unique country situations, i.e. Belgium • Broker re-organization process • Distribution of cash exchange proceeds for stock plan accounts • Transfer Agent DWAC process • Issuing shares during “chill” period • Final share count: plan reserves & outstanding common stock

“Gotcha’s” To Look Out For • Handling of Disqualification of Qualified Stock Plans • Employee Communication • Collection/payment of taxes deferred taxes • Post close actions with tax authorities • Grant data conversion to Acquirer stock admin system • Data mapping • Resources requirements • Data Privacy • Pre Close vs. post close • Global considerations

Gotcha’s” To Look Out For • ESPP Disqualifying Dispositions • Need to report upon close – Acquiree or Acquirer? • Solicit support from broker(s) for data • Final period reporting “close” • Actual close date may require completing another period close cycle – double work • Coordinate closely with External Reporting – will need to finalize FAS123r numbers as of close date • Need to maintain employee tax records through following tax cycle

Mergers & Acquisitions (Things you need to know…but no one will tell you!)