METHOD AND SYSTEM FOR CREATING AND MARKETING EMPLOYEE STOCK OPTION MIRROR IMAGE WARRANTS

• US 20100138332A1
• Filed: 01/29/2010
• Published: 06/03/2010
• Est. Priority Date: 08/06/2004
• Status: Active Grant

• Current Assignee: David A. Seaman, Mark J. Zanoli, Santosh V. Nabar
• Original Assignee: David A. Seaman, Mark J. Zanoli, Santosh V. Nabar
• Inventors: Seaman, David A., Nabar, Santosh V., Zanoli, Mark J.
• Granted Patent: US 8,090,639 B2
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

A warrant on company stock that is used to determine value of employee options for U.S. accounting purposes on company stock. The warrant comprises an amortization factor, an exercise term that is the same or substantially similar to an exercise term of the employee options, and a strike price that is the same or substantially similar to a strike price of the employee options. The warrant also comprises a provision to periodically determine the amortization factor based on early forfeiture and/or early exercise of the employee options, a provision to apply the amortization factor to the warrants; and a provision to determine an intrinsic value of the warrants. Value of the employee options for U.S. accounting purposes is determined using market value of the warrants at issue.

Claims

1. A system for determining value of employee stock options, the system comprising:

a computer configured to;

facilitate issuance of a plurality of options to company employees on company stock, wherein the options include an exercise term, a strike price and a restriction on transfer or hedge;

facilitate issuance of a plurality of warrants on the company stock, wherein the warrants include an amortization factor, the same or a substantially similar exercise term as the options, the same or a substantially similar strike price as the options, and provisions to periodically determine the amortization factor based on early forfeiture or exercise of the options, apply the amortization factor to the warrants and determine an intrinsic value of the warrants;

determine the market value of the warrants at issue; and

determine the value of the options using the market value of the warrants at issue.

2. A system according to claim 1, wherein the plurality of warrants are issued by a SEC registered offering.

3. A system according to claim 1, wherein the plurality of warrants are issued by a 144A offering.

4. A system according to claim 1, wherein the plurality of warrants are issued by a private placement offering.

5. A system according to claim 1, wherein the plurality of warrants do not include a restriction on transfer.

6. A system according to claim 1, wherein the plurality of warrants include a limited restriction on transfer.

7. A system according to claim 1, wherein the plurality of warrants include a full restriction on transfer and hedging.

8. A system according to claim 1, wherein the provision to periodically determine the amortization factor is based on early forfeiture and early exercise of the options.

9. A system according to claim 1, wherein the provision to periodically determine the amortization factor is based on vested options.

10. A system according to claim 1, wherein the provision to periodically determine the amortization factor is based on a reference pool of options.

11. A system according to claim 1, further comprising hedging the warrants.

12. A system according to claim 1, further comprising hedging the warrants after a certain period or not at all.

13. A system according to claim 1, wherein the number of warrants issued is a percentage of the number of options issued.

14. A system according to claim 1, wherein the number of warrants issued is about 5 to 15 percent of the number of options issued.

15. A system according to claim 1, wherein the provision to determine the amortization factor occurs about every quarter.

16. A system according to claim 1, wherein the provision to apply the amortization factor occurs a predetermined number of days after determining the amortization factor.

17. A system according to claim 1, wherein the provision to apply the amortization factor occurs about 30 days after determining the amortization factor.

18. A system according to claim 1, wherein the plurality of warrants further comprise a provision to settle a value due to holders of the warrants after determining the amortization factor.

19. A system according to claim 1, wherein the plurality of warrants further comprise a provision to change terms of the plurality of warrants in response to a change in terms of the options.

20. A system according to claim 1, wherein the plurality of warrants further comprise a provision to deliver a product of the intrinsic value and a fraction subject to prepayment.

21. A system according to claim 1, wherein the provision to determine an intrinsic value of the warrants is after applying the amortization factor.