EMPLOYEE STOCK PURCHASE PLANS

EMPLOYEE STOCK PURCHASE PLANS: EMPLOYMENT

Labor Concerns

In order to reduce the risk of German employment law restrictions applying to purchase rights granted to German employees, it is recommended that the German Subsidiary is not involved in the Plan or party to any enrollment documentation or purchase agreements.

Employees should expressly agree that termination of employment will result in the loss of unvested rights and that the Plan is discretionary and voluntary.

If the German Subsidiary sets up the Plan, it should be determined whether consultation is required with the German works council regarding the terms of the Plan.

Communications

The translation of Plan documents for employees is recommended but is not legally required. Government filings must be in German.

Electronic execution of award agreements may be acceptable under certain conditions.

EMPLOYEE STOCK PURCHASE PLANS: REGULATORY

Securities Compliance

It is possible that a prospectus will be required for participation in the Plan to be offered to employees in Germany and other Member States. However, certain exemptions, exclusions and interpretations may be applicable and, in practice, a prospectus is rarely required. For example, offers made to no more than 150 persons in any one Member State are exempt and certain listed companies are required only to publish summary information about the Plan and the Stock in substitution for a prospectus. Where a prospectus is required, the Issuer may be able to take advantage of a short form regime under which certain requirements for the prospectus' contents are waived. Any prospectus must be approved by the relevant regulatory authority in the Issuer's Home Member State and filed under the passporting system with the relevant regulatory authority of each Member State in which participation in the Plan is being offered.

If the Plan qualifies as an investment fund (Investmentvermögen), the German Investment Act (Kapitalanlagegesetzbuch) would need to be considered.

Foreign Exchange

Minor statistical reporting is required in some circumstances (for example in 2011, reporting applied to the transfer of at least €12,500). See section 59, paragraph 2(1) of the German Foreign Trade Order (Außenwirtschaftsverordnung).

Data Protection

Employee consent for the collection, use, and transfer of personal data is the recommended method of compliance with existing data privacy requirements. If consent is given together with another declaration, it must be distinguishable in its appearance from the other declaration (e.g., by using a different type-face). Additionally, employees must be informed of the purpose for which their information will be processed. Employers may be required to register certain data processing activities with Germany's data protection authorities.

Collecting, processing and transfer of personal data should be assessed under the German "Policy for Employee's Data Privacy".

EMPLOYEE STOCK PURCHASE PLANS: TAX

Employee Tax Treatment

The employee is subject to income tax upon the Stock being booked into his/her deposit account. The amount of income subject to tax is the spread between the fair market value of the Stock at the time the purchase is concluded or the Stock is booked into the employee's deposit account minus the amount paid for the Stock, if any.

In addition, the sale of Stock will, in general, be subject to a separate tax rate of 25% ("flat tax", Abgeltungsteuer), plus 5.5% solidarity surcharge thereon and, if applicable, church tax. The flat tax regime will, however, not apply if the employee at any point in time during the five years preceding the sale has held a stake representing 1% or more directly or indirectly of the share capital of the Issuer. In this case, the part-income system applies, according to which 40% of the capital gains are tax exempt and the remaining 60% of the capital gains are subject to tax at the employee's personal income tax rate.

Social Insurance Contributions

Generally, both the employer and employee must pay social insurance on the spread to the extent that the employee has not exceeded the wage base threshold.

Tax Favored Program

There is a minor tax exemption (up to Euro 360 per annum) for the granting of Stock of the employing company or a related group company if the Plan is available to all employees. In addition, a reduction in tax rates may apply if Stock is granted as part of remuneration for several years.

Withholding and Reporting

Withholding and reporting are required.

Employer Tax Treatment

A deduction is generally available if the Subsidiary reimburses the Issuer pursuant to a written agreement.

Tax Rates

Income tax is generally charged at rates of up to 45% (plus 5.5% solidarity surcharge thereon and church tax, if applicable). However, income from capital investments (Einkünfte aus Kapitalvermögen) is generally subject to the separate flat tax (Abgeltungsteuer) at a rate of 25% (plus 5.5% solidarity surcharge thereon and church tax, if applicable).

The social insurance contributions are to be borne by the employer and the employee in equal or almost equal shares. The overall burden shared by employer and employee in 2016 is approximately 40%.

For regular income there is a ceiling on income subject to social insurance contributions. The applicable contribution ceiling for pension and unemployment insurance in 2016 is Euro 74,400 (West Germany) / Euro 64,800 (East Germany) per year and for health insurance and nursing insurance Euro 50,850 per year in 2016 (West and East Germany).

RESTRICTED STOCK and RSUs

RESTRICTED STOCK and RSUs: EMPLOYMENT

Labor Concerns

In order to reduce the risk of German employment law restrictions (including potential invalidity of forfeiture restrictions) applying to the grant of restricted stock or RSUs to German employees, it is recommended that the German Subsidiary is not involved in the award of restricted stock or RSUs or party to any award agreement.

Employees should expressly agree that termination of employment will result in the loss of unvested rights and that the Plan is discretionary and voluntary.

If the German Subsidiary sets up the Plan, it should be determined whether consultation is required with the German works council regarding the terms of the Plan.

Communications

The translation of Plan documents for employees is recommended, but not legally required. Government filings must be in German. Electronic execution of award agreements may be acceptable under certain conditions.

RESTRICTED STOCK and RSUs: REGULATORY

Securities Compliance

Neither the award nor the vesting of restricted stock or RSUs is likely to trigger any prospectus requirement, provided that the restricted stock or RSUs are awarded and vest free of charge.

Foreign Exchange

Minor statistical reporting may be required (for example, in 2011, reporting was required for the transfer of at least €12,500).

Data Protection

Employee consent for the collection, use, and transfer of personal data is the recommended method of compliance with existing data privacy requirements. If consent is given together with another declaration, it must be distinguishable in its appearance from the other declaration (e.g., by using a different type-face). Additionally, employees must be informed of the purpose for which their information will be processed. Employers may be required to register certain data processing activities with Germany's data protection authorities.

Collecting, processing and transfer of personal data should be assessed under the German "Policy for Employee's Data Privacy".

RESTRICTED STOCK and RSUs: TAX

Employee Tax Treatment

The employee is subject to income tax upon the restricted stock being granted or the RSUs being paid out in cash or in Stock. The amount of income subject to tax is the spread between the fair market value of the Stock at the time the Stock is granted or the Stock is booked into the employee's deposit account or the cash is paid out minus the amount paid for the grant, if any.

In addition, the sale of the Stock will, in general, be subject to a separate tax rate of 25% ("flat tax", Abgeltungsteuer), plus 5.5% solidarity surcharge thereon and, if applicable, church tax. The flat tax regime will, however, not apply if the employee at any point in time during the five years preceding the sale has held a stake representing 1% or more directly or indirectly of the share capital of the Issuer. In this case, the part-income system applies, according to which 40% of the capital gains are tax exempt and the remaining 60% of the capital gains are subject to tax at the employee's personal income tax rate.

Social Insurance Contributions

Generally, both the employer and employee must pay social insurance on the spread to the extent that the employee has not exceeded the wage base threshold.

Tax Favored Program

There is a minor tax exemption (up to Euro 360 per annum) for restricted stock granted by the employing company or a related group company if the Plan is available to all employees. In addition, a reduction in tax rates may apply if the Stock is granted as part of remuneration for several years.

Withholding and Reporting

Withholding and reporting are required.

Employer Tax Treatment

A deduction is generally available if the Subsidiary reimburses the Issuer pursuant to a written agreement.

Tax Rates

Income tax is generally charged at rates of up to 45% (plus 5.5% solidarity surcharge thereon and church tax, if applicable). However, income from capital investments (Einkünfte aus Kapitalvermögen) is generally subject to the separate flat tax (Abgeltungsteuer) at a rate of 25% (plus 5.5% solidarity surcharge thereon and church tax, if applicable).

The social insurance contributions are to be borne by the employer and the employee in equal or almost equal shares. The overall burden shared by employer and employee in 2016 is approximately 40%.

For regular income there is a ceiling on income subject to social insurance contributions. The applicable contribution ceiling for pension and unemployment insurance in 2016 is Euro 74,400 (West Germany) / Euro 64,800 (East Germany) per year and for health insurance and nursing insurance Euro 50,850 per year in 2016 (West and East Germany).

STOCK OPTIONS PLANS

STOCK OPTIONS PLANS: EMPLOYMENT

Labor Concerns

In order to reduce the risk of German employment law restrictions (including potential invalidity of forfeiture restrictions) applying to options granted to German employees, it is recommended that the Subsidiary is not involved in the grant of options or party to any option agreement.

Employees should expressly agree in option agreements or grant documentation that termination of employment will result in the loss of unvested rights and that the Plan is discretionary and voluntary.

If the German Subsidiary sets up the Plan, it should be determined whether consultation is required with the German works council regarding the terms of the Plan for employees.

Communications

The translation of Plan documents for employees is recommended but not legally required. Government filings must be in German.

Electronic execution of award agreements may be acceptable under certain conditions.

STOCK OPTIONS PLANS: REGULATORY

Securities Compliance

Neither the grant nor the exercise of employee options in Germany is likely to trigger any requirement for securities filings, provided the options are non-transferable.

As there is still some uncertainty in Germany regarding the requirement for a prospectus, it is advisable to seek legal advice in any individual case.

Foreign Exchange

Minor statistical reporting is required in some circumstances (for example, in 2011, reporting was required on the transfer of at least €12,500).

Data Protection

Employee consent for the collection, use, and transfer of personal data is the recommended method of compliance with existing data privacy requirements. If consent is given together with another declaration, it must be distinguishable in its appearance from the other declaration (for example, by using a different type-face). Additionally, employees must be informed of the purpose for which their information will be processed. Employers may be required to register certain data processing activities with Germany's data protection authorities.

Collecting, processing and transfer of personal data should always be assessed under the German "Policy for Employee's Data Privacy".

STOCK OPTIONS PLANS: TAX

Employee Tax Treatment

The employee is subject to income tax upon exercise of his/her options. The amount of income subject to tax is the spread between the fair market value of the Stock at the time the options are exercised or the Stock is booked into the employee's deposit account minus the amount paid for the Stock, if any.

In addition, the sale of the Stock will, in general, be subject to a separate tax rate of 25% ("flat tax", Abgeltungsteuer), plus 5.5% solidarity surcharge thereon and, if applicable, church tax. The flat tax regime will, however, not apply if the employee at any point in time during the five years preceding the sale has held a stake representing 1% or more directly or indirectly of the share capital of the Issuer. In this case, the part-income system applies, according to which 40% of the capital gains are tax exempt and the remaining 60% of the capital gains are subject to tax at the employee's personal income tax rate.

Social Insurance Contributions

Generally, both the employer and employee must pay social insurance on the spread to the extent that the employee has not exceeded the wage base threshold.

Tax Favored Program

There is no tax-favored program at the time the stock options are granted. At the time the Stock is actually bought, a minor tax exemption (up to Euro 360 per annum) may apply to any discount on Stock acquired by an employee from the employing company or a related group company if the Plan is available to all employees. In addition, a reduction in tax rates may apply if the Stock is granted as part of remuneration for several years.

Withholding and Reporting

Withholding and reporting are required.

Employer Tax Treatment

A deduction is generally available if the Subsidiary reimburses the Issuer pursuant to a written agreement.

Tax Rates

Income tax is generally charged at rates of up to 45% (plus 5.5% solidarity surcharge thereon and church tax, if applicable). However, income from capital investments (Einkünfte aus Kapitalvermögen) is generally subject to the separate flat tax (Abgeltungsteuer) at a rate of 25% (plus 5.5% solidarity surcharge thereon and church tax, if applicable).

The social insurance contributions are to be borne by the employer and the employee in equal or almost equal shares. The overall burden shared by employer and employee in 2016 is approximately 40%.

For regular income there is a ceiling on income subject to social insurance contributions. The applicable contribution ceiling for pension and unemployment insurance in 2016 is €74,400 (West Germany) / €64,800 (East Germany) per year and for health insurance and nursing insurance Euro 50,850 per year in 2016 (West and East Germany).