Source: https://patents.google.com/patent/US8352340B2/en
Timestamp: 2019-06-20 16:29:17
Document Index: 365153356

Matched Legal Cases: ['arty 105', 'arty 105', 'arty 105', 'arty 105', 'arty 105', 'arty 105', 'arty 105', 'arty 105']

US8352340B2 - Methods and systems for exercising stock options - Google Patents
Methods and systems for exercising stock options Download PDF
US8352340B2
US8352340B2 US11/051,049 US5104905A US8352340B2 US 8352340 B2 US8352340 B2 US 8352340B2 US 5104905 A US5104905 A US 5104905A US 8352340 B2 US8352340 B2 US 8352340B2
US11/051,049
US20050192875A1 (en
2004-02-06 Priority to US54250404P priority Critical
2005-02-04 Application filed by UBS AG Stamford Branch filed Critical UBS AG Stamford Branch
2005-02-04 Priority to US11/051,049 priority patent/US8352340B2/en
2005-05-13 Assigned to UBS AG reassignment UBS AG ASSIGNMENT OF ASSIGNORS INTEREST (SEE DOCUMENT FOR DETAILS). Assignors: FURLONG, JOHN, TAM, LANDY, WHITE, ELIZABETH
2005-09-01 Publication of US20050192875A1 publication Critical patent/US20050192875A1/en
2013-01-08 Publication of US8352340B2 publication Critical patent/US8352340B2/en
Referring to FIG. 1 the parties to stock option exercises according to the present invention include at least one company 101, at least one employee 103, and at least one third party 105. The company 101 is generally a party that offers or otherwise provides the stock option for an employee 103, which option typically allows the receiving party to purchase a predetermined amount of securities, e.g., in the company 101, at a predetermined price and/or at a predetermined time. The company 101 can be any type of entity, including a business, a corporation, a partnership, etc. The employee 103 is generally a party that receives the stock option and has the authority to exercise the option at the predetermined price and/or time. The third party 105, such as UBS Securities, is a party that purchases the securities due to the employee 103 under the stock option exercise.
In addition to the parties of the stock option and the third parties, one or a number of individuals/entities may be involved in administering accounts and/or executing more steps of the present invention. For example, an entity, such as UBS Financial Services (“UBS-FS”) 107, or a department of the entity, such as Corporate Employee Financial Services (“CEFS”) 109, may administer the overall process, and an entity, such as UBS Trust 111, may administer escrow accounts for the transfer of property between the parties and may serve as an agent for the accounts, an entity, such as UBS-FS 107, may administer non-escrow or retail accounts for the parties, such as money market accounts, securities accounts, etc. It is understood that the roles of the parties described herein, including that of the third party and the administering entities 113, may be accomplished by a single entity or a single entity with one or more affiliates. Accordingly, although the invention may be described in relation to a number of entities, the invention is not limited thereto.
In instances where the employee 103 chooses to exercise a stock option and purchase securities due thereto at the option price directly from the company 101, property, e.g., money, equivalent to the option price of the securities (exercise price per security * number of securities) may be transferred from the employee 103 to the company 101 and the securities may subsequently be transferred from the company 101 to the employee 103. The property transfers may occur in a variety of ways, including electronically, manually, or a combination thereof. For example, each of the parties may have a retail account(s) with one or more financial service companies, such as UBS-FS 107, which track the parties' property deposited therewith, such as cash, securities, etc. In this instant, the employee may instruct the financial service company to transfer, e.g., via wire transfer, the option price of the securities from an employee account 115 to a company account 117. Similarly, the company may instruct the financial service company to transfer company securities to the employee 103, e.g., electronically via Depository Trust Company (“DTC”), once the option price has been received. In either event, the parties' accounts will be updated to reflect the transfer. With respect to the example above, the employee may wire the $100,000 option price from an employee account 113 to a company account 117 and the company may then transfer 1,000 shares of company stock to an employee account 115.
In instances where the employee 103 chooses an exercise in accordance with the present invention, a notice of an employee intent 119 to exercise the stock option is communicated to the company 101, a third party 105, an administrating entity 113, or a combination thereof, the company 101 transfers company securities 125 to a company escrow account 121, and the third party purchaser of the securities transfers a third party purchase price 135 (the price agreed upon for the securities by the employee and the third party) to a third party escrow account 123. The notice may be communicated in any documentary format including hard copy or electronic format, using any communication medium, such as personally, telephone, fax, electronically, e.g., email, through a web site, etc. In one embodiment, the notice of intent to exercise is transferred to and held in an employee escrow account. Once the formalities of the exercise have been completed, the option price 127 is transferred to the company 101, the net proceeds 129 from the exercise (third party purchase price—option price—(taxes and fees)) are transferred to an employee account 115, and the securities 125 are transferred to the third party 105. The notice of intent 119 may also be transferred to the company 101 and/or third party 105 from the employee escrow account 115. In one embodiment, the transfers occur essentially simultaneously. Further with respect to the above example, assuming the employee 103 and the third party 105 agree to a $200/share purchase price, in order for the cashless exercise to occur, the third party 105 will transfer $200,000 to a third party escrow account 123 and the company 101 will transfer 1,000 shares of company securities 125 to another escrow account, a company escrow account 121. Upon exercise, the option price 127 of $100,000 transfers to a company account 117, the net proceeds 129 of $100,000 transfers to an employee account 131, and 1,000 shares of company securities 125 are transferred to a third party account 133. The transfers preferably occur essentially simultaneously.
Referring to FIG. 2, a method for exercising stock options according to one embodiment of the invention begins with the employee communicating, and the relevant party or parties receiving, a notice of intent to exercise stock option, step 102. As a preliminary matter, the employee, the company, and at least one third party have established at least one account such as an employee retail account, a company corporate account, a third party retail account, accompany corporate account, a third party retail account, etc., for tracking property transfers in accordance with the exercise of the present invention. The accounts may be maintained with more than one financial service entity or preferably with one financial service company, such as with UBS-FS 107. In one embodiment, at least one employee stock plan is administered using a stock plan administration system, such as that described in U.S. patent application Ser. No. 10/718,883, entitled “Employee Stock Plan Administration System and Methods,” which is hereby incorporated herein by reference. In this respect, the notice of intent to exercise the stock option plan may be communicated to an entity that administers the stock plan for the company, such as UBS-FS 107.
A plurality of escrow accounts may be established for holding the property to facilitate the transfer of property for the exercise of the stock option, step 110. The escrow accounts may be established at any time prior to the transfer at closing. For instance, the escrow accounts may be established in anticipation of a transfer either at the inception of the stock option, at the time notice of intent to exercise a stock option is received or soon thereafter, or at any time in between. In one embodiment, the escrow accounts are established when the notice of intent is received by the administering entity. In another embodiment, three escrow accounts are established, an employee escrow account, a company escrow account, and a third party escrow account. The employee escrow account generally holds property, such as the notice of intent, for the benefit of the employee. The company escrow account holds property, such as the securities due under the stock option, for the benefit of the company. The third party escrow account holds property, such as the third party purchase price, for the benefit of the third party purchaser of the securities. In one embodiment, the escrow accounts are established only after the company at least preliminary approves the exercise, step 108.
Once the purchase price has been accepted by the employee, step 124, assuming any conditions have been satisfied, such as successful transfer of the necessary property into the escrow accounts or of the documents necessary to the relevant party/entity, the property in the plurality of escrow accounts may then be transferred to the respective parties' account or accounts in accordance at least in part with the stock option, step 126. The property may be transferred to the parties' retail or corporate accounts or between the escrow accounts. In one embodiment, the property in each of the plurality of escrow accounts is transferred essentially simultaneously to the respective accounts. In this respect, the securities 125 held in the company escrow account 121 are transferred to the third party escrow 123 or the third party account 133, the net proceeds 129 of the third party purchase price 135 are transferred to the employee account 131 from the sale of securities from the company escrow 121 or retail/corporate accounts, and the notice 119 of intent to either the company 101, the third party 105, an administering entity 113, or a combination thereof.
2. CEFS also ensures that duplicate statements and confirmations will be sent to UBS 30 Trust for each of the escrow accounts, including duplicate confirmation of the stock option exercise advice.
8. Ensure delivery of the third party purchase price via fed funds wire from UBS securities to UBS securities escrow account. The amount of the wire should overfund the sale to allow for rising market conditions. Provide evidence to UBS Trust of delivery of the purchase price to the UBS securities escrow account.
9. If the employee does not trade, the escrow shares must be returned to the transfer agent. (NB: same day settlement transactions are note expected to involve legended shares, but if these procedures are modified to allow for same day settlement of restricted shares, the transfer agent should be instructed to retire restrictive legends to any unsold shares.)
15. Make a journal entry of unsold shares from the company escrow account to the corporate client retail account.
16. Make a journal entry of options costs and taxes from the employee's retail account to the corporate client retail account for the cash exercise portion.
17. Make a journal entry of cash exercises shares from the corporate client retail account to the employees' retail account (if applicable).
18. Fax the UBS Trust a copy of the administering package exercise confirmation.
2. If executive does not trade, a transfer agent letter for a reverse DWAC
(Deposit/Withdrawal at Custodian) is produced.
2. Quotes purchase price during the conference call(s) to the employee and US
Financial Services for, e.g., the same day settlement of funds.
4. Allow for the sale of shares to UBS Securities to process through DTC. G. Company
I Trade Date—1 (T−1)
A By 11:00 a.m. ET—Executive has given notice of intent to trade in a same day settlement environment including all required documents. The notice may be revocable. CEFS operations logs the Intent to trade and forward the information to CEFS' plan administration department. UBS-FS notifies UBS Trust of intent to trade and delivers the Exercise Notice to be held in Escrow.
B By 11:15 a.m. ET—CEFS plan admin. department contacts the company client, creates the Transfer Agent letter, and returns the paperwork to CEFS operations. CEFS operations requests delivery of shares from the Transfer Agent to escrow account at UBS-FS in the name of the UBS Trust f/b/o company. CEFS operations open a STAR case to Security Allocation Department to ensure shares are received. They should be received by 4:00 a.m. on T−1, but no later than 10:00 a.m. on the trade date.
C By 4:00 p.m. ET—UBS Executive Services desk obtains preauthorization for transactions as required in conjunction with rule 144 procedures of Specialized and Restricted Securities Department. Some exercises may require corporate client approval.
D 4:00 p.m. ET—CEFS [Operations] blocks the optionee's (company) account.
E 4:00 p.m. ET—CEFS [Operations] contacts UBS securities with the intent to trade.
II Trade Date
A After 9:45 a.m. ET—UBS-FS verifies unrestricted share in Street Name have been received from transfer agent into the company escrow account. If not, escalate to company/corporate client.
B By 11:00 a.m. ET—UBS Securities deposits funds into UBS Securities escrow account ready for the transaction.
C 11:00 a.m. ET—Conference call(s) occur. UBS Securities quotes a third party purchase price; employee or authorized agent accepts or rejects the quote.
D By 12:15 p.m. ET—
1 UBS-FS communicates trade information to Plan Administration Dept.
2 CEFS' Admin. Dept. enters exercise information into admin. package and produces settlement work for CEFS operations.
3 UBS-FS computes and transfers option cost and taxes from account in the name of UBS Trust to corporate omnibus account.
4 Transfer net proceeds from account in name of UBS Trust to employee's account.
E 12:30 p.m. ET—
1 UBS-FS instructs the clearance and settlement area to delivery the position and debit to the UBS Securities account via the automated DTC process.
2 UBS-FS journals funds from the UBS Securities account back the general ledger account.
3 UBS-FS unblocks the employee account.
F By 3:00 p.m. ET—UBS-FS faxes UBS Trust a copy of the Admin. package exercise information.
III Trade Date+1
9:00 a.m. ET—UBS-FS checks all accounts involved in the transaction the previous day to ensure all journals were run correctly.
The notice may be communicated in a variety of ways, such as personally, by telephone, by fax, electronically, etc. The employee may communicate the notice electronically, for example, with an email or with a web site that includes therein form elements for the employee to indicate that the employee is giving such notice. The web site, for instance, may provide the employee with access to the employee account.
The communications network 206 is any suitable communications link, such as a local area network (LAN), wide area network (WAN), the Internet, a wireless network, or any combinations thereof. A computing device 202, 204 is generally a multipurpose computer having a processor and memory that is capable of communicating with the server computers 210, 212, 214 and also capable of displaying information received therefrom. A computing device may therefore be a personal computer (PC), special purpose computer, a workstation, a wireless device, such as personal digital assistants (PDA), cellular phones, two-way pagers, etc. The computing device 202 for instance, may be a terminal for use by an employee, or company, third party, or administering entity personnel, etc. The database 220 generally includes therein information or data regarding the accounts and the parties described above.
1. A computer implemented method for exercising employee stock option provided by a company, comprising:
receiving notice of an employee intent to exercise an employee stock option having an option price;
establishing a company escrow account and a third party escrow account in a database;
transferring, by a server computer, property equivalent to a third party purchase price to the third party escrow account;
transferring, by the server computer, the securities to satisfy the employee stock option to the company escrow account;
exercising the employee stock option by the server computer, wherein exercising includes transferring the property equivalent to the option price of the employee stock option from the third party escrow account to the company and the securities to satisfy the employee stock option from the company escrow account to the third party; and
transferring, by the server computer, net proceeds from the exercise of the employee stock option from the third party escrow account to the employee;
wherein the third party purchase price is an anticipated purchase price-based at least in part on a market price for the securities at the time of transfer, the anticipated purchase price including an additional amount to account for fluctuations in the market price.
2. The method of claim 1, further comprising establishing the third party escrow account and the company escrow account in response to receipt of the notice of intent by the server computer.
3. The method of claim 1, further comprising communicating a request, by the server computer, to at least one third party for a quote for purchasing the securities to satisfy the stock option exercise.
4. The method of claim 3, further comprising receiving, by the server computer, a response from the third party that indicates an agreement to purchase the securities to satisfy the option at the third party purchase price.
5. The method of claim 1, wherein the step of transferring the property equivalent to the option price of the employee stock option from the third party escrow account to the company comprises transferring the property to the company escrow account or another company account.
6. The method of claim 1, wherein the step of transferring the securities to satisfy the employee stock option from the company escrow account to the third party comprises transferring the securities to the third party escrow account or another third party account.
7. The method of claim 1, wherein the step of transferring the net proceeds from the exercise of the employee stock option from the third party escrow account to the employee comprises transferring the net proceeds to an employee escrow account or another employee account.
8. A computer system for exercising employee stock options provided by a company comprising:
a server computer and a database for exercising an employee stock option having an option price;
the server computer configured to transfer property equivalent to the third party purchase price to a third party escrow account established in the database;
the server computer configured to transfer the securities to satisfy the employee stock option to a company escrow account established in the database;
the server computer configured to exercise the employee stock option, wherein the exercise includes transferring the property equivalent to the option price from the third party escrow account to the company and the securities to satisfy the employee stock option from the company escrow account to the third party; and
the server computer configured to transfer net proceeds from the exercise of the employee stock option from the third party escrow account to the employee;
wherein the third party purchase price is an anticipated purchase price based at least in part on a market price for the securities at the time of transfer, the anticipated purchase price including an additional amount to account for fluctuations in the market price.
9. The computer system of claim 8, wherein the server computer is further configured to establish the third party escrow account and the company escrow account in response to receipt of the notice of intent.
10. The computer system of claim 8, wherein the server computer is further configured to communicate a request for a quote for purchasing the securities to satisfy the stock option exercise to at least one third party.
11. The computer system of claim 10, wherein the server computer is further configured to receive a response from the third party that indicates an agreement to purchase the securities to satisfy the option at the third party purchase price.
12. The computer system of claim 8, wherein the server computer is further configured to transfer the property equivalent to the option price of the employee stock option from the third party escrow account to the company escrow account or another company account.
13. The computer system of claim 8, wherein the server computer is further configured to transfer the securities to satisfy the employee stock option from the company escrow account to the third party escrow account or another third party account.
14. The computer system of claim 8, wherein the server computer is further configured to transfer the net proceeds from the exercise of the employee stock option from the third party escrow account to an employee escrow account or another employee account.
15. A computer implemented method for exercising employee stock options provided by a company, comprising: receiving notice of an employee intent to exercise an employee stock option having an option price; establishing a company escrow account and a third party escrow account in a database; transferring, by a server computer, property equivalent to a third party purchase price to the third party escrow account; transferring, by the server computer, the securities to satisfy the employee stock option to the company escrow account; exercising the employee stock option by the server computer, wherein exercising includes transferring on the same date as a trade date of the securities underlying the employee stock option the property equivalent to the option price of the employee stock option from the third party escrow account to the company and the securities to satisfy the employee stock option from the company escrow account to the third party; and transferring, by the server computer, net proceeds from the exercise of the employee stock option from the third party escrow account to the employee; wherein the third party purchase price is an anticipated purchase price-based at least in part on a market price for the securities at the time of transfer, the anticipated purchase price including an additional amount to account for fluctuations in the market price.
16. The method of claim 15, wherein the step of transferring the property equivalent to the option price of the employee stock option from the third party escrow account to the company comprises transferring the property to the company escrow account or another company account.
17. The method of claim 15, wherein the step of transferring the securities to satisfy the employee stock option from the company escrow account to the third party comprises transferring the securities to the third party escrow account or another third party account.
18. The method of claim 15, wherein the step of transferring the net proceeds from the exercise of the employee stock option from the third party escrow account to the employee comprises transferring the net proceeds to an employee escrow account or another employee account.
19. A computer system for exercising employee stock options provided by a company comprising: a server computer and a database for exercising an employee stock option having an option price; the server computer configured to transfer property equivalent to the third party purchase price to a third party escrow account established in the database; the server computer configured to transfer the securities to satisfy the employee stock option to a company escrow account established in the database; the server computer configured to exercise the employee stock option, wherein the exercise includes transferring on the same date as a trade date of the securities underlying the employee stock option the property equivalent to the option price from the third party escrow account to the company and the securities to satisfy the employee stock option from the company escrow account to the third party; and the server computer configured to transfer net proceeds from the exercise of the employee stock option from the third party escrow account to the employee; wherein the third party purchase price is an anticipated purchase price-based at least in part on a market price for the securities at the time of transfer, the anticipated purchase price including an additional amount to account for fluctuations in the market price.
20. The computer system of claim 19, wherein the server computer is further configured to transfer the property equivalent to the option price of the employee stock option from the third party escrow account to the company escrow account or another company account.
21. The computer system of claim 19, wherein the server computer is further configured to transfer the securities to satisfy the employee stock option from the company escrow account to the third party escrow account or another third party account.
22. The computer system of claim 19, wherein the server computer is further configured to transfer the net proceeds from the exercise of the employee stock option from the third party escrow account to an employee escrow account or another employee account.
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2005-02-07 WO PCT/US2005/003894 patent/WO2005077010A2/en active Search and Examination
2005-02-07 CA CA 2554669 patent/CA2554669A1/en not_active Abandoned
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US20050192875A1 (en) 2005-09-01
CA2554669A1 (en) 2005-08-25
WO2005077010A2 (en) 2005-08-25
WO2005077010A3 (en) 2007-04-05
AU2005213496A1 (en) 2005-08-25
US7904388B1 (en) 2011-03-08 Method and system for processing recurring payments
Free format text: ASSIGNMENT OF ASSIGNORS INTEREST;ASSIGNORS:WHITE, ELIZABETH;FURLONG, JOHN;TAM, LANDY;REEL/FRAME:016012/0273