Pre-IPO/Post-IPO Planning Overview - Morgan Stanley refer to important information, disclosures and qualifications at the end of this material. Pre-IPO/Post-IPO Planning Overview John

Please refer to important information, disclosures and qualifications at the end of this material.

Pre-IPO/Post-IPO Planning Overview

John Lopez

Financial Advisor

Managing Director – Wealth Management

2775 Sand Hill Road – Suite 120

Menlo Park, CA 94025

P: 650-926-7695

[email protected]

Brendan O’Brien

Financial Advisor

Vice President – Wealth Management

2775 Sand Hill Road – Suite 120

Menlo Park, CA 94025

P: 650-926-7687

[email protected]


Table of Contents

2

Section 2 Overview

Section 3 10b5-1 Preset Diversification Program®

Section 4 Equity Hedging and Monetization Strategies

Section 5 Loans Secured by Restricted and Control Stock

Section 6 Gifting of Restricted and Control Stock

Section 7 Executive Financial Services (“EFS”) Competitive Advantage

Section 1 Wealth Management Team


3

Section 1

Wealth Management Team


The Silicon Valley Group at Morgan Stanley

WEALTH MANAGEMENT TEAM

For the past 25 years, the Silicon Valley Group has been serving corporate executives, entrepreneurs and ultra

high net worth families. Our wealth advisory platform allows us the ability to provide tactical and macro driven

solutions customized to our client needs. Our team approach leverages our background in financial planning,

portfolio structuring, wealth transfer, estate planning as well as control and restricted stock services. We believe

we are uniquely positioned and experienced to deliver the broad range of services that Morgan Stanley has to

offer. Our platform includes the following:

Investment Management Services:

• Customized individual stock and ETF portfolio solutions diversified across global capital markets

• Individual non-fee based bond portfolios with customized duration and credit quality

• Access to in-house Portfolio Management with a combined 45+ years of experience

• Complete portfolio transparency of fees and expenses

Wealth Transfer and Financial/Estate Planning:

• Ultra high net worth planning tools combining cash-flow modeling, asset preservation and risk management

• Pre-IPO estate planning solutions

• Charitable pursuit services and strategies for retirement and education funding

• Access to both internal and external legal services

Liquidity and Monetization Services:

• 10b5-1 trading plan drafting advisory and execution capabilities

• Hedging and monetization solutions for concentrated control and restricted stock

• Stock option and restricted stock administration services

• Access to lending services


The Silicon Valley Group

WEALTH MANAGEMENT TEAM

JOHN LOPEZ

John Lopez is a Managing Director and Corporate Client Group Director with Morgan Stanley. He is a Senior

Wealth Advisor with over 25 years of experience in Private Client Wealth Management. John joined Morgan

Stanley and its predecessor firms in 1987 and has been ranked as Barron’s Top 100 Wealth Advisors (2007)*. John

focuses his practice on the complex needs of the high and ultra high net worth families. John has extensive

experience in pre-IPO planning and estate planning strategies for entrepreneurs and senior executives as well as a

background in employee benefit plan implementation and execution for publicly traded corporations. John holds

a BA in both Finance and Economics from California State University at Chico. He is also the founding member of

the Silicon Valley Group at Morgan Stanley and lives in Portola Valley with his wife and three boys.

BRENDAN O’BRIEN

Brendan O’Brien is a Financial Advisor and Financial Planning Specialist with Morgan Stanley. Brendan joined the

firm in 1999 and has over 14 years of experience in advising clients and corporate executives on liquidation

strategies for control and restricted stock. As a member of the Silicon Valley Group, he also specializes in working

closely with our Executive Financial Services group to help ensure corporate executives and members of senior

management meet any regulatory and reporting requirements associated with stock and option execution. As a

financial planning specialist Brendan works closely with our clients to provide a high level of individualized service

and investment strategies consistent with their individual financial goals and needs. Brendan holds a BS in Finance

from Santa Clara University. In his spare time he is an avid lacrosse fan and contributor in the community

volunteering time to coach and coordinate collegiate lacrosse leagues nationally. He currently lives in Burlingame

with his wife and two sons.

ALEX KAMINARIS

Alex is a Portfolio Manager and Financial Advisor at Morgan Stanley with 12 years of experience. As a member of

the Silicon Valley Group, Alex overseas the discretionary management of client accounts and portfolio positioning.

Alex oversees the implementation and framework for the team's customized composite portfolios based on yield

enhancement, dividend growth equities, and multi-asset class macro ETF strategies. Alex was previously with J.P.

Morgan’s Private Bank in New York focused on the firm’s Ultra-High Net Worth non-US clients. As an analyst, Alex

focused on portfolio and risk management across all asset classes including non-traditional and alternative asset

classes such as hedge funds and private equity. Previous to that, Alex was with J.P. Morgan Partners, L.P., the

firm’s private equity arm with exposure to Leverage Buyout Opportunities & Venture Investments. Alex holds a

BS in Economics and a BA in International Studies from Johns Hopkins University.


3

Section 2

Overview


TimelinePre-IPO

OVERVIEW

4

• Security Safe Keeping

• Record Keeping

• Splitting/Gifting

• Online Access

• Outright Gifts

– Tax Free

– Taxable

• Leveraged Gifts

– Grantor Retained Annuity Trust (“GRAT”)

– Charitable Lead Annuity Trust (“CLAT”)

– Blind Trust

• Stock Option Exercise

– NQSO

– ISO

Custody Services Tax and Estate Planning


Custody Services and BenefitsPre-IPO

OVERVIEW

5

• Track positions

• Access Morgan

Stanley Wealth

Management

resources

• Work with the

Issuer and their

Transfer Agent to

facilitate the clearance

of shares held in

electronic statement

form at the agent

through the Direct

Registration System

(DRS)

Online Access

• Private/Public stock

certificates housed in

Morgan Stanley Wealth

Management’s Vault

• Avoid potential loss of

the physical certificate

and fees/deposits

required to replace

certificate

Security Safekeeping

• Property registered

and reported in

shareholder’s name

• Position included on

the monthly statements

Record Keeping

• Process and record all

splits

• Handle gifting and

other transfers

Splitting/Gifting


TimelinePost-IPO

OVERVIEW

6

• Estate Planning

– Outright Gifts

– Leveraged Gifts

• Philanthropy

• Manner of Gift

– Outright

– Split Interest

• Recipients of Gift

– Public Charity

– Private

– Foundation

– Hybrid

Tax and Estate Planning

• Regulatory

– Rule 144

– Section 16

• Corporate Policy

– Blackout Period

• Contractual

– IPO Lock Up

• Administrative Support

• Cleansing/Processing

Restricted Stock

• Type of Risk

– Market

– Industry

– Company Specific

• Sales

– Open Market

– 10b5-1 Plan

– Block

– Secondary

• Hedging

– Protective Put

– Collar

– Prepaid Forward

• Exchange Fund

Risk Management

• Monetization

– Sales

– Margin Loan

– Covered Call Writing

– Collar/Loan

– Prepaid Forward

• Diversification

– Asset Class

– Investment Style

Monetization and Diversification


Custody Services and BenefitsPost-IPO

OVERVIEW

7

• Securities must be

custodied at Morgan

Stanley Wealth

Management

• Pledged for margin

loan

• Hedging or monetizing

Hedging/Borrow

• Interface with Issuer’s

Counsel to review

proposed transactions

and help ensure

compliance with

regulatory or

contractual restrictions

Prepare Restricted Share Transactions

• Preparation and

processing of required

documentation

– Form 144

– Seller’s Rep Letter

– Broker’s Rep Letter

– Additional requests

per Issuer’s Counsel

Administration Support

• Work with Issuer’s

Counsel to ensure that

the Transfer Agent

receives appropriate

instructions and

documentation

• Clean restricted shares

as per SEC regulations

to settle restricted

trades

Cleaning/Processing


Income Tax ConsiderationsStock and Stock Options Planning

OVERVIEW

8

• Very broadly speaking, upon the exercise of an NQSO, the difference between the then fair market value and the exercise or strike price (“the spread”) is taxed as compensation for Federal income tax purposes. Future appreciation, if any, is treated as capital gain and taxed at a preferential rate if the stock is held for more than one year after the date of exercise

– The benefit of exercise in advance of a liquidity event is, therefore, the potential for a reduced tax burden on future appreciation, if any.

– Additional risk, however, is introduced through the investment of capital (to pay the strike price and any tax liability) for an uncertain tax benefit

– Clients should consult with their tax advisors before undertaking any strategy

• Upon exercise of an ISO, the spread is not taxed as compensation but is treated as an adjustment item for alternative minimum tax (AMT) purposes. After exercise, if the stock is held for the longer of one year from the exercise date and two years from the date the option was granted, all appreciation over the strike price will be considered capital gain when the stock is sold. Some or all of any AMT paid may be available as a credit in the year the stock is sold

– Exercise of an ISO prior to a liquidity event (i.e., when the spread is lower) can minimize or eliminate AMT exposure and starts the individual’s holding period. Exercise early in the year can also give the executive more flexibility in terms of making a disqualifying disposition by year end and/or having the liquidity to pay any AMT by April 15 of the year after exercise. Clients should consult with their tax advisors before undertaking any strategy

Non-Qualified Stock Options (“NQSO”) Incentive Stock Options (“ISO”)


Employee Issued Stock OptionsOVERVIEW

9

• S-8 Registration: Securities Acquired Through Employee Stock Benefit Plans

– If, however, the employee IS an Affiliate of the Issuer, the stock is not freely saleable. In this case, either

the sale must be made using an exemption, or a registration statement must be in effect covering resale.

The exemption provision normally relied upon is Rule 144

– An S-8 registration statement covers the issuance of stock from the corporation to an employee pursuant to

an employee stock option plan or other type of employee benefit plan (e.g., stock purchase plan or stock

option plan). Assuming that an S-8 registration statement is in effect and that the participating employee is

NOT an Affiliate, the employee would have freely saleable stock

Registration of Shares for Sale


Restricted Stock OverviewRegulatory—Rule 144

OVERVIEW

10

• Rule 144 under the Securities Act is a safe harbor

provision that provides an exemption from the

requirement to register certain securities

• Various conditions must be met to sell Restricted

Stock or Control Stock pursuant to Rule 144

• When selling their stock, Affiliates must be

mindful of short-swing profit and reporting

obligations (Section 16)

Two Primary Categories:

Restricted Stock:

• Unregistered stock which has been issued by the

Company or sold by an Affiliate of the Company

in a private transaction.

Control Stock:

• Stock owned by an Affiliate of the Issuer

Rule 144 Conditions to Resale:

• Holding Period

• Volume Limitations

• Notice of Sale

• Manner of Sale

• Current Public Information

Key Points Rule 144—Overview


Restricted Stock Overview (cont’d)Regulatory—Section 16

OVERVIEW

11

• 16(a) Reporting Requirements

– Every officer or director of an Issuer which has a class of equity security registered with the SEC under the

Act and every beneficial owner of more than 10% of such equity interests in the Issuer (collectively,

“Affiliates”) must file reports with the SEC disclosing any equity interest in the Issuer (including options and

derivative securities) as well as any changes in such ownership interest

• 16(b) Liability

– Any profit by an Affiliate from any purchase and sale (or any sale and purchase) of any equity security of

the Issuer (including options and other derivative securities) within any six-month period is recoverable by

the Issuer

• 16(c) Short Sales

– Section 16(c) prohibits an Affiliate from selling short any equity security of the Issuer, but this does not

prohibit selling calls or buying puts with the respect to securities held by the Affiliate

Section 16 Considerations


SEC Rule 144 Resale Reference ChartOVERVIEW

12


Restricted Stock OverviewRegulatory—Corporate Blackout Periods

OVERVIEW

13

• Companies impose blackout periods upon their

employees to limit potential insider trading liability

• Rule 10b5-1 provides an affirmative defense

against allegations of trading on material non

public information. Many companies now exempt

employees from otherwise applicable blackout

period restrictions if a 10b5-1 Preset

Diversification Program (PDP) has been

established in accordance with Rule 10b5-1(c)

• A blackout period is imposed for a preset time

period and subsequent to a company’s earnings

announcement

Flexible Blackout Period

• Company announces from time to time when

employees are prohibited from transactions in the

company stock

Key Points Preset Blackout Period


Restricted Stock Overview (cont’d)Contractual—Lockup Agreements

OVERVIEW

14

• A Lockup Agreement is a

contractual commitment that is

typically made to the

underwriters of an offering by

the Company , its executive

officers, directors and principal

stockholders

• This contractual commitment is

typically secured in connection

with an offering in order to

– Foster price stability after the

offering, and

– Encourage long-term

employee ownership

Key Points

• Generally, a lockup provides

that restricted parties will not

offer, sell or pledge the

Company ‘s stock (or enter into

derivatives on the Company ’s

stock such as options) without

prior consent of the lead

underwriter

Restrictions

• Varies from agreement to

agreement (i.e., 60, 90, or 180

days)

• IPO lockups typically last

longer than lockups relating to

secondary offerings (generally

180 days for an IPO versus 90

days for a secondary offering)

Length


15

Section 3

10b5-1 Preset Diversification Program®


Affirmative Defenses Under SEC Rule 10b5-1(c)10B5-1 PRESET DIVERSIFICATION PROGRAM

16

• This affirmative defense protects persons by recognizing that material nonpublic information is not de facto a

factor in trading executions, provided such trades are made pursuant to a pre-existing contract, instruction or

plan. At Morgan Stanley, these are known as a Preset Diversification Program (“PDP”) or 10b5-1 Trading

Plan

• It provides that a person’s sale (or purchase) of securities is not, in fact, “on the basis of” material nonpublic

information, if that person can demonstrate that before becoming aware of that information, that person had:

– Entered into a binding contract to sell (or purchase) the security,

– Instructed another person to sell (or purchase) the security for the instructing person’s account, or

– Adopted a written plan for trading securities

• This written contract, instruction and plan must either:

– Specify the amounts, prices and dates for such securities to be sold (or purchased), or

– Be based on a written formula for determining such parameters, or

– Delegate all trading discretion and decisions to a person who does not possess material nonpublic

information, and

– Prevent the exercise of subsequent influence over the trading parameters by the person providing the

contract, instruction and plan

Rule 10b5-1(c)(1): Affirmative Defense for Pre-Esta blished Trading Plans


Key Benefits of a PDP10B5-1 PRESET DIVERSIFICATION PROGRAM

17

Affirmative defense against potential claims of insider trading

Access to public markets without regard to corporate blackout periods

Ability to dispose of stock on a predictable and consistent basis

Potential to mitigate signaling issues generally associated with sales by insiders

Convenience of putting diversification on “auto-pilot”

Discipline during volatile market fluctuations

Customization of the selling plan to reflect the particular monetization needs of each individual seller

Potential to facilitate the organized disposition of shares by multiple company insiders

Reduce the risk associated with a concentrated equity position through diversification

1

2

3

4

5

6

7

8

9


A Common Dilemma and Potential Solution10B5-1 PRESET DIVERSIFICATION PROGRAM

18

Illustrative Timeline

Typical Corporate Window Trading Program

1/1Earnings Release

4/1Earnings Release

7/1Earnings Release

10/1Earnings Release

Blackout Blackout Blackout BlackoutTrading Permitted During Window Periods

Certain Events May Cause Trading Windows to Close

1/1Earnings Release

4/1Earnings Release

7/1Earnings Release


Blackout

Litigation Settlement Negotiations

AcquisitionNegotiations

Internal ReceiptOf Clinical Trial Results

Trading Prohibited during Window Periods when Key Employees or Insiders are in Possession of Material Non-public Information

Trading Pursuant to a 10b5-1 Plan

10b5-1 PlanImplemented

Trading Permitted Pursuant to Terms of Plan

Litigation SettlementNegotiations

AcquisitionNegotiations

Internal Receiptof Clinical Trial Results

1/1Earnings Release

4/1Earnings Release

7/1Earnings Release


Notes1. The above illustration is based on hypothetical conditions and are not representative of any specific company

stock


Sample Selling Strategies10B5-1 PRESET DIVERSIFICATION PROGRAM

19

• Morgan Stanley works with each seller participating in a Preset Diversification Program to develop a customized strategy to help meet the specific monetization and diversification objectives of that individual seller

Regular Periodic Selling

• Sell 7,500 each day at the market price

• Sell 50,000 each month at the market price

Use of Limit Prices

• Sell up to 5,000 per day, but no sales at a price of less than $20

• Sell a total of 250,000 shares at a price of not less than $15

Quantity Limits

• Sell no more than 10% of the daily volume as reported on NASDAQ

Tax-Advantaged and Option-Sensitive Selling

• Sell higher basis and near-to-expire option shares

• Cashless option exercise programs

• Exercise and sale of options to reduce AMT exposure

• Incorporate elements of the above into formulaic or hybrid solutions tailored to the individual needs of each

seller

Combination Strategy


Other Considerations10B5-1 PRESET DIVERSIFICATION PROGRAM

20

Clients Executing a PDP Should Keep the Following I mportant Considerations in Mind

• PDP should be approved by the compliance officer or general counsel of the Company

• A PDP may require a cessation of trading activities at times when lockups may be necessary to the Company (e.g., follow-on offerings, secondary offerings, mergers, etc.)

• A PDP does not generally alter the restricted stock regulatory requirements (e.g., Rule 144, Section 16, Section 13D) which may otherwise be applicable

• A PDP that is modified or terminated early may weaken or lose the benefit of the affirmative defense

• Public disclosure of a PDP (e.g., via press release) may be appropriate for some insiders

• Most companies will permit a PDP to be implemented only during open window periods

• Some companies impose a mandatory waiting period between the execution of a PDP and the first sale pursuant to a PDP


10b5-1 Trading Plans Stats10B5-1 PRESET DIVERSIFICATION PROGRAM

21

Source The Washington Service tracks insider trade information filed with the Securities and Exchange Commission. The above numbers are compiled by the Washington Service from Form 4 filings in the period listed. Information contained herein was obtained from sources believed reliable but the accuracy and completeness thereof cannot be guaranteed. Information contained herein is subject to change. 31 December 2012

NotesReprinted with the permission of Washington Service. (301)-913-5100—www.washingtonservice.com1. Reflects a distinct count of companies for the year2. Based on companies in the S&P 500 Index as of December 31st of each reporting year

The Washington Service

Companies with 10b5-1 Plans in the S&P 500 Index (2)

No. of Companies (1)

Year Total With 10b5-1 Filings 10b5-1 Penetration %

2012 499 259 52

2011 497 243 49

2010 491 222 45

2009 489 198 40

2008 486 183 38

2007 483 222 46

2006 475 188 40

2005 467 172 37

2004 459 125 27


22

Section 4

Equity Hedging and Monetization Strategies


Alternative Exit Strategies—Covered CallEQUITY HEDGING AND MONETIZATION STRATEGIES

23

Notes1. Final Call Value is the greater of (i) Stock Price at Maturity—Call Strike Price and (ii) $0.002. Initial Call Value is the premium received by the investor at inception3. Position Value at Maturity = Stock Price at Maturity - Final Call Value + Initial Call Value

• The costs, commissions, fees, interest charges or other expenses associated with the OTC option strategies described in these materialswill vary on a transaction-by-transaction basis because they arecalculated based on a number of factors specific to each transaction, including interest rates, expected dividend yield, and the liquidity and volatility of the underlying asset. Additionally, given the customized nature of OTC options contracts, other risks associated with the negotiated terms of a particular option transaction may influence the cost of the option

Hypothetical Situation

• The investor owns shares of XYZ Corporation (“XYZ”), has a neutral investment view of the stock, and would like to generate income by overwriting the position

• The investor is willing to forgo any potential upside price appreciation above a target stock price

Hypothetical Strategy

• The current price of XYZ stock is $50.00 per share

• The investor sells to Morgan Stanley a six-month call option with a strike price of $55.00 (110.00%) and receives an upfront premium of $4.00 (8.00%) per share

• The risk of this trade is the forgone potential upside price appreciation of the stock above the call strike price minus the premium of $4.00

Payout Table at Maturity $

Stock Price at Maturity Call Strike Price Final Call Value Initial Call Value Position Value at Maturty (1) (2) (3)

30.00 55.00 0.00 4.00 34.00

40.00 55.00 0.00 4.00 44.00

50.00 55.00 0.00 4.00 54.00

60.00 55.00 5.00 4.00 59.00

70.00 55.00 15.00 4.00 59.00

[For Illustrative Purposes Only]


Alternative Exit Strategies—Prepaid ForwardEQUITY HEDGING AND MONETIZATION STRATEGIES

24

A prepaid forward is a strategy enabling the investor to hedge against a decline in an equity position and gain immediate liquidity while forgoing potential upside price appreciation above a certain level. In the strategy, the investor purchases a put option with the strike price at the floor price and sells a call option with the strike price at the ceiling price. The investor monetizes this position by contractually agreeing to deliver a variable amount of shares, or its cash equivalent, at the expiration of the contract. The delivery amount at maturity depends on the stock price at maturity in relation to the floor price and ceiling price. The investor is protected below the floor price and forgoes any potential upside price appreciation beyond the ceiling price

Underlying Stock Prepaid Forward and Stock

Position Value at Maturity

Position Value (%)

Stock Price at Maturity

Floor Price

Ceiling Price


+∆%

100%

- ∆%


Alternative Exit Strategies—Prepaid ForwardEQUITY HEDGING AND MONETIZATION STRATEGIES

25

Clients Executing a PDP Should Keep the Following I mportant Considerations in Mind

• A prepaid forward potentially generates 60%–90% of the stock’s current value immediately while limiting downside exposure and capping some potential upside price appreciation

– Investor forfeits price appreciation above the ceiling price

– 100% of purchase proceeds can be invested in marketable securities

– Purchase price may not be taxable until maturity

– There is no margin call risk

– The risk of entering into a prepaid forward contract is the forgone potential upside price appreciation in the stock above the ceiling price

– Variations of the Prepaid Forward

– drawdown: The investor can draw down the proceeds at any point in the term of the contract, up to the maximum of the present value of the purchase price

– accelerated Return: The investor can participate in twice the price appreciation of the stock up to the ceiling price. However, the prepayment amount is generally lower than the traditional prepaid forward

– uncapped: The investor can participate in the full price appreciation of the stock. However, the prepayment amount is generally lower than the traditional prepaid forward


Payout Table at Maturity Client Owes—Cash Settlement Client Owes—Physical Settlement Client Keeps

Stock Price at Maturity

$

Floor Price

$

Downside Hedge

$

Forgone Upside

$

Total Owed

$

Aggregate Total Owed

$

Delivery

Ratio

Shares

Delivered Residual

Shares

Residual Value

$ (1) (2) (3)

30.00 45.00 - 15.00 + 0.00 = 30.00 30,000,000 1.000 1,000,000 0 0

40.00 45.00 - 5.00 + 0.00 = 40.00 40,000,000 1.000 1,000,000 0 0

50.00 45.00 - 0.00 + 0.00 = 45.00 45,000,000 0.900 900,000 100,000 5,000,000

60.00 45.00 - 0.00 + 0.00 = 45.00 45,000,000 0.750 750,000 250,000 12,500,000

70.00 45.00 - 0.00 + 10.00 = 55.00 55,000,000 0.785 785,710 214,290 10,714,500

Alternative Exit Strategies—Prepaid Forward (cont’d)EQUITY HEDGING AND MONETIZATION STRATEGIES

26

Notes1. Downside Hedge is the greater of (i) Floor Price—Stock Price at Maturity and (ii) $0.002. Forgone Upside is the greater of (i) Stock Price at Maturity—Ceiling Price and (ii) $0.003. Delivery Ratio = 1.00 if Stock Price at Maturity is below Floor Price. The Delivery Ratio = (Floor Price) / (Stock Price at Maturity) if

Stock Price at Maturity is between Floor Price and Ceiling Price. The Delivery Ratio = [1 – (Ceiling Price - Floor Price) / (Stock Price at Maturity)] if Stock Price at Maturity is above Ceiling Price

• The costs, commissions, fees, interest charges or other expenses associated with the OTC option strategies described in these materialswill vary on a transaction-by-transaction basis because they are calculated based on a number of factors specific to each transaction, including interest rates, expecteddividend yield, and the liquidity and volatility of the underlying asset. Additionally, given the customized nature of OTC options contracts, other risks associated with the negotiated terms of a particular option transaction may influence the cost of the option

Hypothetical Strategy

• The current price of XYZ stock is $50.00 per share

• The investor owns 1,000,000 shares and enters a one year prepaid forward contract with Morgan Stanley. The investor receives a purchase price of $42.00 (84.00%) at inception in exchange for an obligation to deliver a number of shares based upon the settlement price determined at maturity. The strategy has a floor price of $45.00 (90.00%) and a ceiling price of $60.00 (120.00%)

• The risk of this trade is the forgone potential upside price appreciation of the stock above the ceiling price of $60.00

Hypothetical Situation

• The investor owns shares of XYZ Corporation (“XYZ”) and would like to hedge against a decline in the stock

• The investor wishes to maintain exposure to partial upside price appreciation

• The investor wishes for substantial liquidity without realizing a taxable sale today



27

Section 5

Loans Secured by Restricted and Control Stock


Elements of Due Diligence on a LoanLOANS SECURED BY RESTRICTED AND CONTROL STOCK

28

• Determination of Affiliate or Insider status with Issuer’s Counsel

• Determine Borrower’s Ability to Sell

– SEC Rule 144 holding periods

– Blackout Periods-Period during which the executives and key employees are restricted by their company’s insider-trading policy from conducting company-stock transactions

• Determine if securities can be pledged at all

– Company insider trading policy regarding pledging company stock

• Contractual restrictions

– IPOs

– Lock up agreement

– Employment arrangements

– Rights of first refusal (shareholder agreement)

• Currency of company’s published financial filings with the SEC

• Confirm that Company will clear shares upon any sale by MSSB as creditor


Notable ConsiderationsLOANS SECURED BY RESTRICTED AND CONTROL STOCK

29

• Loan facilities with recourse allow the pledgee to tack back to the acquisition date of the stock pledged if selling in a demand/default scenario. Therefore, if a Control Person/Affiliate pledges restricted stock for a third-party borrower they must also guarantee the loan facility

• The pledgee is not a Control Person/Affiliate of the Issuer, therefore, as pledgee selling in a demand/default scenario

– Control stock is freely salable

– Restricted stock held for greater than six months but less than one year is salable pursuant to Rule 144, provided the current public information requirement is met

– Restricted stock held for greater than one year is freely salable pursuant to Rule 144(b)(1)

• The pledgee is not subject to Issuer closed windows/blackouts

Pledgee/Lender

• If the pledgee sells stock in a demand/default scenario the Form 4 filing will reflect this. Therefore, it is preferential for the client/pledgor to sell stock on their own behalf

• If the pledgee sells stock in a demand/default scenario the client/pledgor must aggregate their sales with the sales of the pledgee during any period of three months within six months of the demand/default

Pledgor


30

Section 6

Gifting of Restricted and Control Stock


Gifts of Restricted or Control Stock—Some Quirks to Remember

GIFTING OF RESTRICTED AND CONTROL STOCK

31

• If Donating CONTROL Shares

– Donor who is an Affiliate must aggregate his or her sales with any sales by the donee for one year after the date of the gift

– Donee who is not an Affiliate can sell freely without restrictions and without needing to comply with Rule 144 (Remember: An Affiliate must ALWAYS comply with Rule 144)

• If Donating RESTRICTED Shares

– Donee must wait the required holding period (six months or one year) after the shares were acquired by the donor from the Issuer or an Affiliate before selling (i.e., donee can tack to the donor’s holding period)

• If Donating Shares that are both CONTROL and RESTRICTED

– Donor must aggregate for one year; and

– Both donor and donee must wait the required holding period before selling


32

Section 7

Executive Financial Services (“EFS”) Competitive Advantage


Executive Financial ServicesEXECUTIVE FINANCIAL SERVICES (“EFS”) COMPETITIVE AD VANTAGE

33

1. Source: The Washington Service tracks insider trade information filed with the Securities & Exchange Commission. The above data is compiled by the Washington Service from Form 144 filings in the period from 1/1/2008 to 12/31/2012. Data from the period 1/1/2008 to 5/31/2009 reflects the formerly separate Restricted Securities businesses of the Global Wealth Management Group of Morgan Stanley & Co. LLC and the Smith Barney division of Citigroup Global Markets Inc. that now form Morgan Stanley Smith Barney LLC. Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC. Information contained herein was obtained from sources believed reliable but the accuracy and completeness thereof cannot be guaranteed. Information contained herein is subject to change.

Experienced

Services

Market Leaders

Knowledgeable

• Morgan Stanley’s Executive Financial Services (“EFS”) Department, a specialized team of 25 experienced professionals who aim to assist the Financial Advisor in delivering the firm’s wealth management services to corporate executives and holders of concentrated positions. Transacting in restricted shares can be a complicated process and EFS is there to help ensure that both the Financial Advisor and client have as much support as needed

• EFS can assist in the compliance of Securities and Exchange Commission (“SEC”) Rule 144, administration and execution of your 10b5-1 Preset Diversification Program, collateral loans against restricted and control securities, financing and facilitation of employee stock options transactions, corporate repurchase programs for executives or directors as well as hedging and liquidation strategies

• Since 2008, Morgan Stanley Wealth Management’s group has ranked No.1 in Rule 144 business (1) and has

– Conducted the due diligence to facilitate the potential sales of over $54.4Bn (1.9Bn + shares) under SEC rules

– Filed over 29,800 Notices of Proposed Sales under Rule 144 with the Securities and Exchange Commission

• Executive Financial Services, partnering with Financial Advisors designated (“EFS”) Directors, offers premier service while possessing the knowledge to help ensure compliance with SEC rules and regulations

Rule 144 Market Share Report (1)

Calendar Years 2008–2012

Morgan Stanley (1)

22.3%

Bank of AmericaMerrill Lynch20.2%

GoldmanSachs Group9.1%

UBS 8.6%

JP MorganChase7.2%

Credit Suisse 6.2%

FidelityInvestments6.2%

Other Brokers9.9%

Charles Schwab3.7%

E-Trade3.6%

Deutsche3.1%


Competitive Advantage10b5-1 Preset Diversification Program

34

• Morgan Stanley has a competitive advantage in the 10b5-1 PDP business

1. Source: The Washington Service tracks insider trade information filed with the Securities & Exchange Commission. The above data is compiled by the Washington Service from Form 144 filings in the period from 1/1/2008 to 12/31/2012. Data from the period 1/1/2008 to 5/31/2009 reflects the formerly separate PDP businesses of the Global Wealth Management Group of Morgan Stanley & Co. LLC and the Smith Barney division of Citigroup Global Markets Inc. that now form Morgan Stanley Smith Barney LLC. Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC. Information contained herein was obtained from sources believed reliable but the accuracy and completeness thereof cannot be guaranteed. Information contained herein is subject to change.

Experienced

Customization

Market Leaders

Team Approach

• Morgan Stanley (1) helped pioneer the use of creative structures to facilitate the sale of stock by Affiliates outside of restrictive blackout periods as early as 1997

• Morgan Stanley’s 10b5-1 PDP Team works closely with the client and his/her Financial Advisor to structure, draft and execute customized PDP strategies which are in sync with the client’s risk management needs and investment objectives

• Since the adoption of SEC Rule 10b5-1 in August of 2000, Morgan Stanley Wealth Management’s proprietary 10b5-1 PDP Trading Desk has– Monetized over $45Bn in sales (1.2Bn + shares) pursuant to Rule 10b5-1– Adopted, monitored and executed over 18,100 customized selling programs

• Morgan Stanley’s 10b5-1 PDP Team is comprised of an experienced group of firm professionals

Structure • Morgan Stanley has been recognized as one of the first major firms on Wall Street to invest in the establishment of a separate 10b5-1 PDP Trading Desk to preserve open lines of communication between the firm’s PDP clients and their Financial Advisors

EXECUTIVE FINANCIAL SERVICES (“EFS”) COMPETITIVE AD VANTAGE


2005–2012 10b5-1 Market Share (1)

Rank Broker Value

$Bn Total

%

1 Morgan Stanley (1) 36.8 25.56

2 Bank of America 25.9 18.01

3 JPMorgan Chase & Co. 12.1 8.40

4 UBS AG 9.9 6.93

5 Goldman Sachs Group Inc. 9.6 6.71

6 Fidelity Investments 7.8 5.47

7 Allen & Co. 5.9 4.11

8 Credit Suisse Group 5.8 4.07

9 Charles Schwab Corp. 4.3 3.03

10 Deutsche Bank AG 3.5 2.47

Top 10 Total 122.1 84.75

Total 144.1 100.00

2005–2012 10b5-1 Market Share

35

Reprinted with the permission of Washington Service. (301)-913-5100—www.washingtonservice.com1. Source: The Washington Service tracks insider trade information filed with the Securities & Exchange Commission. The above data is compiled by the Washington Service from

Form 144 filings in the period from 2/1/2005 to 12/31/2012. Data from the period 2/1/2005 to 5/31/2009 reflects the formerly separate PDP businesses of the Global Wealth Management Group of Morgan Stanley & Co. LLC and the Smith Barney division of Citigroup Global Markets Inc. that now form Morgan Stanley Smith Barney LLC. The above data also includes transactions from Morgan Stanley & Co. LLC. Morgan Stanley Wealth Management is the trade name of Morgan Stanley Smith Barney LLC. Information contained herein was obtained from sources believed reliable but the accuracy and completeness thereof cannot be guaranteed. Information contained herein is subject to change.

• With more than 25%of share value, Morgan Stanley Wealth Management is the market leader in Rule 10b5-1 trading (1)



Disclaimers

36

• This material has been prepared for informational purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security/instrument, or to participate in any

trading strategy. This material was not prepared by the Morgan Stanley research department. It was prepared by Morgan Stanley sales, trading or other non-research personnel.Any such

offer would be made only after a prospective investor had completed its own independent investigation of the securities, instruments or transactions, and received all information it required

to make its own investment decision, including, where applicable, a review of any offering circular or memorandum describing such security or instrument. That information would contain

material information not contained herein and to which prospective participants are referred. This material is based on public information as of the specified date, and may be stale thereafter.

We have no obligation to tell you when information herein may change. We make no representation or warranty with respect to the accuracy or completeness of this material. Morgan

Stanley Smith Barney has no obligation to provide updated information on the securities/instruments mentioned herein.

• This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. This information is not intended to, and should not, form a

primary basis for any investment decisions that you may make. Morgan Stanley Smith Barney is not acting as a fiduciary under either the Employee Retirement Income Security Act of

1974, as amended or under section 4975 of the Internal Revenue Code of 1986 as amended in providing this material.

• Tax laws are complex and subject to change. This information is based on current federal tax laws in effect at the time this was written. Morgan Stanley Smith Barney and its affiliates do not

render advice on tax and tax accounting matters to clients. This material was not intended or written to be used, and it cannot be used or relied upon by any recipient, for any purpose,

including the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Each client should consult his/her personal tax and/or legal advisor to learn

about any potential tax or other implications that may result from acting on a particular recommendation.

• Options are not suitable for all investors.

• Before engaging in the purchase or sale of options, potential clients should understand the nature of and extent of their rights and obligations and be aware of the risks involved, including,

without limitation, the risks pertaining to the business and financial condition of the Issuer of the underlying security or instrument. Options investing, like other forms of investing, involves

tax considerations, transaction costs and margin requirements that can significantly affect the profit and loss of buying and writing options. The transaction costs of options investing consist

primarily of commissions (which are imposed in opening, closing, exercise and assignment transactions), but may also include margin and interest costs in particular transactions.

Transaction costs are especially significant in options strategies calling for multiple purchases and sales of options, such as multiple leg strategies, including spreads, straddles and collars. If

you are considering options as part of your investment plan, your Morgan Stanley Smith Barney Financial Advisor or Private Wealth Advisor is required to provide you with the

"Characteristics and Risks of Standardized Options" booklet from the Options Clearing Corporation. Clients should not enter into options transactions until they have read and understood the

Disclosure Document, as options are not suitable for everyone, and discuss transaction costs with their Financial Advisor or Investment Representative. Please ask your Financial Advisor,

Private Wealth Advisor for a copy of the Characteristics and Risks of Standardized Options booklet. A copy of the ODD is also available online at:

http://theocc.com/publications/risks/riskchap1.jsp.

• Preset Diversification Program is a registered Trademark of Morgan Stanley Smith Barney LLC, protected in the United States and other countries.

• © 2012 Morgan Stanley Smith Barney LLC. Member SIPC.



Disclaimers

37

Express Credit Line is currently offered through Morgan Stanley Smith Barney LLC. All credit facilities are subject to the underwriting standards and independent approval of Morgan Stanley Smith Barney LLC. The Express CreditLine account is a securities-based loan, which can be risky and is not suitable for all investors: Funds that are drawn cannot be used to purchase, carry or trade in securities, including, without limitation, to repay margin debt, and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account.

Portfolio Loan Accounts are provided by Morgan Stanley Bank, N.A. All credit facilities are subject to the underwriting standards and independent approval of Morgan Stanley Bank, N.A. Portfolio Loan Accounts may not be available in all locations. Rates, terms and programs are subject to change without notice. To be eligible for a Portfolio Loan Account, applicants must have a brokerage account at Morgan Stanley Smith Barney LLC, which shall serve as collateral for the Portfolio Loan Account. The ongoing availability of a Portfolio Loan Account is contingent on the client maintaining sufficient eligible collateral. The proceeds from a Portfolio Loan Account may not be used to purchase, trade, or carry margin stock, and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account.

Tailored Lending is provided by Morgan Stanley Private Bank, National Association. All credit facilities are subject to the underwriting standards and independent approval of Morgan Stanley Private Bank, National Association. Tailored Lending may not be available in all locations. Rates, terms and programs are subject to change without notice. To be eligible for Tailored Lending, applicants must maintain a sufficient amount of assets under management at Morgan Stanley or any of its affiliates. The ongoing availability of a credit facility of line of credit is contingent, in part on, the borrower maintaining sufficient eligible collateral, unencumbered liquidity, cash flow or any combination thereof. Some restrictions apply to loans used to purchase, trade, or carry margin stock, and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account.

Securities Based Lending (SBL) Risks: Borrowing against securities may not be suitable for everyone. Securities-based loans involve a high degree of risk and market conditions can magnify any potential for loss. Most importantly: (1) Sufficient collateral must be maintained to support your loan(s) and to take future advances (2) You may have to deposit additional cash or marginable securities on short notice (3) Some or all of your securities may be sold without prior notice in order to maintain account equity at required collateral maintenance levels and you will not be entitled to choose the securities that will be sold. These actions may interrupt your long-term investment strategy and may result in adverse tax consequences or in additional fees being assessed. (4) Morgan Stanley Smith Barney LLC or its affiliates (the Firm) reserves the right not to fund any advance request due to insufficient collateral or for any other reason (5) The Firm can increase your collateral maintenance requirements at any time without notice (6) The Firm may have the right to call securities-based loans at any time and for any reason.

Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services. Investment services are offered through Morgan Stanley Smith Barney LLC, member SIPC. Unless specifically disclosed in writing, investments and services offered through Morgan Stanley Smith Barney LLC are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by, any bank and involve investment risks, including possible loss of principal amount invested.

Barron's “Top 100 Financial Advisors,” as identified by Barron's magazine, using quantitative and qualitative criteria and selected from a pool of over 800 nominations. Advisors in the Top 100 Financial Advisors have a minimum of seven years of financial services experience and $600 million in assets under management. Qualitative factors include, but are not limited to, compliance record, interviews with senior management, and philanthropic work. Investment performance is not a criterion. The rating may not be representative of any one client's experience and is not indicative of the Financial Advisor's future performance. Neither Morgan Stanley Smith Barney LLC nor its Financial Advisors pay a fee to Barron's in exchange for the rating. Barron's is a registered trademark of Dow Jones & Company, L.P. All rights reserved.


CRC # 747227 – 10/2013

Documents

Pre-IPO/Post-IPO Planning Overview - Morgan Stanley refer to important information, disclosures and qualifications at the end of this material. Pre-IPO/Post-IPO Planning Overview John