Entity Rationalization Alignment Planning September 2011

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Entity Rationalization & Alignment Planning September 2011

General Background Ø Key objective is to rationalize existing legal entities and reduce the global footprint in a tax optimized manner in order to mitigate administrative and compliance burden of nonvital legal entities Ø Further, as part of its entity rationalization, Companies can consider implementing taxaligned holding company structures Ø In the current environment, there exist specific planning opportunities to maximize tax attributes and erode local country tax base by re-purposing subsidiaries. 2 Footer

Benefits of Entity Simplification [Cross-Functional Efficiencies] Legal and Regulatory § Reduced time and costs associated with duplicative licensing, permitting and regulatory filing costs resulting from structure designed to meet outdated legal and regulatory requirements § Reduced costs associated with records maintenance § Savings of time expended by Board of Director members attending annual meetings and meeting other statutory formalities § § Reduced time and related costs associated with the preparation and filing of public notices Savings associated with elimination/consolidation of registered agents in applicable jurisdictions Operations § Reduced costs incurred from duplicative administrative and shared services costs (e. g. , consolidation of regional structures into national structure) § Elimination of costs related to intercompany transactions (e. g. , work orders, re-titling of property, fleet sharing, subleases, etc. ) § Savings realized through the consolidation of duplicative insurance policies and elimination of duplicative premiums § Time savings associated with aligning the structure to match the pension, 401(k) plans, insurance plans, etc. § Savings relating to reduced costs associated with employee/ executive mobility (e. g. , visa, work counsel, union, etc. ) § Time and cost savings relating to the preparation and filing of multiple 990’s and 5500’s § Savings related to payroll registration fees § Reduction of time required to maintain intercompany agreements § Time and cost savings associated with the creation of structure that labor contracts can follow Simplify structure to align with operating model § HR/Payroll § Savings realized through vendor rationalization across legal entities and jurisdictions

Benefits of Entity Simplification [Cross-Functional Efficiencies] Treasury and Finance § Savings from reduced bank account service fees and transaction charges (e. g. , accounts maintenance, cash sweeps, interest charges, etc. ) IT Reduced time required for cash budgeting and forecasting § Accounting § § Reduced time and cost of monitoring covenants (e. g. , maintaining ratios, monitoring thin cap, meeting minimum cash requirements, etc. ) § § § Savings of time required to compile and reconcile month-end and year-end legal entity financial reports § Savings of time required to roll forward and reconcile intercompany account balances Reduction of time required to input and update general ledger legal entity coding § Savings from reduced system reconfiguration costs § Reduced cost associated with incremental system capacity § Savings of time required to draft, process and maintain reports requests Savings of time required to prepare and post intercompany journal entries Reduction of time required to maintain intercompany positions § Savings from elimination of extraneous minimum deposit requirements in multiple jurisdictions resulting in lower cost of capital and more efficient cash management Savings of time required to reconcile legal entity books including posting, adjusting and eliminating journal entries § Savings of time related to IFRS implementation readiness Simplify currency hedging strategy

Deloitte’s Approach [Holistic Strategy Aligned w/ Operating Model] Corporate Strategy Operating Model Implications Misalignment between legal entity structure and operating model typically results in: Legal Entity Structure Corporate Strategy § Cumbersome and inefficient use of internal resources resulting in duplication of effort § Unnecessary complexity involved in execution of strategies, alignment of people, sharing of customer data and investment in infrastructure Detailed Designs for People, Process Technology, and Governance Optimal Approach § Inefficient financial statement and tax filing processes and excessive risk Multiple Iterations Common Approach Operating Model Legal Entity Structure § Potential employee morale and retention issues due to heavy focus on tactical activities that are manual and/or redundant § Higher effective tax rate and inability to realize other tax savings opportunities § Missed financial targets Detailed Designs for People, Process Technology, and Governance

Deloitte’s Approach [Phased Execution with Cross-Functional Teaming] Operating Model Development Approach Understand Current State of Operating Model Perform Gap Analysis Develop Hypotheses Develop Operating Model Drafts Legal Entity Structure Development Approach Develop Business Case Finalize Operating Model and LES Develop Implementation Workplan Facilitate Implementation Discussions Critical Success Factors § The organization’s end state operating model should be used to drive the development of the legal entity structure § Active involvement from intra-departmental stakeholders is essential during the development of the operating model and legal entity structure § It is imperative to obtain executive alignment on the operating model and legal entity structure before implementation § A multi-wave work plan that is iterative in nature, should be employed to ensure successful implementation and adoption of the operating model and legal entity structure

Some General Considerations Ø What are the current legal and regulatory restrictions in the jurisdictions that may dictate legal entity designs? Ø What are the key operating model components that drive legal entity design (customers vs. back office operations, decentralized operations in the regions, breakdown by product/service offerings, etc. )? Ø What are the treasury requirements? Ø What non-core activities are/will be outsourced and what is the holistic outsourcing strategy? Ø What capabilities need to be “localized” and executed as management considers strategic shifts and pursues organic and inorganic growth strategies? Ø How may transaction flows be centralized in certain tax jurisdictions to minimize the effective tax rate?

General Observations/Considerations Benefits of Reducing Global Footprint ü Reduced administrative costs, tax compliance burden and stewardship expense Considerations ü Need to evaluate US and Local tax consequences of liquidations • In-bound liquidations may result in “all earnings and profits amount” to be included in US taxable income and/or local taxation on transfer of shares • Intercompany debt could result in “springing debt” or capital conversion upon liquidation • Variances in functional currency could result in gain/loss to be recognized on asset transfers ü Opportunity to repurpose existing entities to utilize and/or preserve existing tax attributes into IP holding company, shared-service center, principal company • Existing losses could create natural profit sink • Need to consider “hovering deficit” issues ü Maintain/utilize existing entities to mitigate impact of certain tax provisions that aim to target acquisitions made to evade or avoid income tax 8 Footer

Some Common Tax Opportunities & Traps to Consider Tax Legal Entity Simplification Observations Potential Trap Experience Insufficient historical records • • • Risk of unknowns Tax audit risk Inefficiencies for tax department and service providers • • • Insufficient buy-in Implementation failure Unrealized benefits • • • NOLs and Credits Tax Holidays Basis ELAs DITS - 13 deferred gains and related state income tax consequences Federal, state, and foreign income tax Transfer and sales and use tax VAT, customs duties Withholding tax Failure to consider tax organizational impact Inadvertent loss of attributes Triggering gains on transactions Failure to consider all types of taxes • • • Failure to consider downstream system/process implications • • Source system reporting changes Updates to automated compliance tools Necessary updates to offline tools/processes (spreadsheets) Access and understanding of historical data files (e. g. , spreadsheets, FAS, etc. ) Opportunity Experience • • Compliance & tax department processes • • Reduced number of required tax filings Enhanced data risk management Lower advisor costs Increased tax departmental capacity to focus on higher value planning U. S. Federal Tax • • Code § 165 losses Attribute and basis preservation State income tax savings • State income tax savings Transfer Pricing • • Intellectual Property Domicile Multi-state and foreign charges • • • Improved tracking of cash and assets Multi-state and foreign tax planning Improved cash flow Tax efficient repatriation Manage exposure • • Improved capacity Enhanced risk management Leverage and financing Foreign Tax Credit Withholding tax planning Increased automation Redeploy resources to • higher value activities • Improved morale Capitalize on planning opportunities

Holding Company Structuring Benefits ü Efficient movement of cash via treaty network ü Create “no where” income ü Opportunity to insert tax advantaged leverage, utilize hybrid instruments ü Utilization of tax attributes (NOLs, tax credits, etc) more efficiently ü Tax efficiently redeploy offshore cash without residual US tax burden ü Exit planning – capital gain mitigation, tax advantaged spin-offs, worthless stock deduction, etc. ü Selection of jurisdiction that is flexible to grow with the Company as the business environment changes (see Appendix II) Considerations in Selecting Holding Company Location (See attached matrix for comparison of common holding company jurisdictions) ü Substance requirements ü Statutory tax rate ü Flexible ruling regime ü Controlled foreign company legislation ü Treaty network 10 Footer

Brazil – Reduction in local tax base • Background ‒ Brazil is profitable, cash tax-paying jurisdiction US Interest expense Brazil Lux Hold. Co Other Foreign Entities 11 Footer • Strategy ‒ Transfer profitable entities under Lux Hold. Co ‒ Transfer Lux Hold. Co under Brazil in exchange for debt and equity ‒ Reduce local Brazil tax base via interest payments and increased interest on net equity • Considerations ‒ Brazil CFC rules ‒ Possibility to obtain amortizable step-up in Brazil as a result of restructuring in order to further reduce Brazil tax base ‒ Recent Supreme Court cases break in favor of, and against taxpayers on the issue about supremacy of domestic law over foreign tax treaties and protocols.

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