Stock option control and exercise system

Abstract

A system and method for managing a plurality of stock option accounts each for a plurality of participants. The system invokes a particular option plan defined in the system that governs the transaction choices available to each participants The governing option plans are defined by the sponsoring company in terms of grant, vest and expiration date for the option contracts, and are defined in the system via a database of option holding information for each participant and an axiomatic rule system defining the criteria under which a given participant can exercise given options under the particular plan. The system implements the plans for multiple client companies providing several distinct modes for option exercise by the participant. The system preferably also allows for disbursement of proceeds in a currency different than that in which the underlying security for the option is traded, real time execution of the option transaction, and/or simulating the outcomes of different manners in which the participant may exercise vested options and the resulting economic outcome (disbursement, taxes, transaction fees).

Claims

What is claimed is:

1. A system for the management of a plurality of distinct accounts each corresponding to a set of privately issued option contract rights granted to a group of individuals in accordance with pre-established plan criteria, comprising:

addressable data storage means for storing in relation to said accounts (i) options holding information including demographic and employment-related information on each participant and information on the options granted, vested, and exercised by each participant, and (ii) an axiomatic rule system at least in part defining said plan criteria for the exercise of said options;

communication means for entry of option transaction requests and confirmation of stored information;

processing means for accessing said storage means, receiving said transaction requests, and validating whether and how to process the options exercise requests;

brokerage means for accessing market price data on the security underlying said option and implementing said option transaction in accordance with said option holdings information and said axiomatic rule system when said transaction request is validated; and

further comprising at least one processor system selected from the following: for

(a) converting and disbursing currency received from implementing said option transaction into a different currency,

(b) operating said brokerage means in real time, and/or

(c) providing a participant and/or broker accessible simulation of one or more options transactions and the expected results from the transactions prior to the actual implementation of the option transaction requested.

2. The system of claim 1, wherein said processor for operating said brokerage means in real time further includes one or more means for receiving input from the participant about, and for verifying, the participant's account identification and password.

3. The system of claim 1, wherein the simulation calculates federal, state, and/or local tax consequences of the requested option transaction.

4. The system of claim 1, wherein the simulation calculates transaction fees.

5. The system of claim 1, further including means for receiving option transaction information from said participant via telephone.

6. The system of claim 5, wherein the receiving means operates through touch-tone phone signals and navigates through an interactive menuing system and accepts information entered thereby from the participant.

7. The system of claim 5, wherein the receiving means operates through modem communication and navigates through an interactive menuing system and accepts information entered thereby from the participant.

8. The system of claim 5, wherein the receiving means operates through modem communication and navigates through an interactive menuing system and accepts information entered thereby from the participant.

9. A method for managing a plurality of separate accounts corresponding to individual option grants to a participant pursuant to a company-sponsored privately issued stock option plan, comprising the steps of:

accessing a device for storing in relation to said accounts (i) options holding information including demographic and employment-related information on each participant and information on the options granted, vested, and exercised by each participant, and (ii) an axiomatic rule system at least in part defining said criteria for said plan in accordance with which options are exercised;

receiving from said participant option transaction requests;

processing said transaction requests, and validating whether and how to process the options exercise requests;

brokering said option transaction request in accordance with said option holdings information, said axiomatic rule system, and the participant's request when the request is validated; and

providing at least one system selected from the following: for

(a) converting and disbursing currency received from implementing said option transaction into a different currency,

(b) brokering the transaction in real time, and/or

(c) simulating one or more options transactions and outputting the expected results from the transactions prior to the actual implementation of the option transaction requested.

10. The method of claim 9, wherein the brokering in real time further includes one or more receiving input from the participant about, and for verifying, the participant's account identification and password.

11. The method of claim 9, wherein the simulation calculates federal, state, and/or local tax consequences of the requested option transaction.

12. The method of claim 9, wherein the simulation calculates transaction fees.

13. The method of claim 9, further comprising receiving option transaction information from said participant via telephone.

14. The method of claim 13, wherein the option transaction information is received through touch-tone phone signals and navigation through an interactive menuing system, and accepting information entered thereby from the participant.

15. A method for managing J client stock option plans, wherein for each Jth client's plan there are I participants in the plan, where J and I are positive whole numbers, comprising:

storing the identity of each client;

storing the identity of each participant for each said client;

creating one or more accounts, each said account associated with a participant;

storing information in each said account regarding stock options held by said participant under the stock option plan; said information comprising:

the number of shares of stock remaining for each said stock option that may be executed;

the strike price of each said stock option; and

a target price at which each said stock option is to be executed, said target price set by an axiomatic rule system;

monitoring current market prices for all said companies;

comparing the current market prices with said stored target prices;

executing a trade on each said stock option when the market price equals or exceeds said target price; and

wherein trades are executed by accumulating orders from each Ith participant of said J clients and exercising said orders in blocks.

16. The invention of claim 15 further comprising:

performing at least one step selected from the following:

(a) converting and disbursing currency received from implementing said option transaction into a different currency;

(b) brokering the transaction in real time; and/or

(c) simulating one or more options transactions and outputting the expected results from the transactions prior to the actual implementation of the option transaction requested.

Description

BACKGROUND OF THE INVENTION

The present invention generally relates to computer controlled account management systems for stock option management, and more particularly to a data processor for implementing a management control system for tracking and processing a plurality of segmented stock option accounts corresponding to individual participants in a company sponsored stock ownership plan.

For many years, publicly owned companies have provided payment to upper level executives in the form of options to purchase shares of stock in the company for whom they were employed at discounts from the prevailing market price. These stock options are attractive for many reasons. For one, the option is a form of deferred payment that provides certain tax benefits and allows the individual to control the times during which the income is derived. In addition, the opportunity to buy stock in the company is an additional incentive to the option recipient to work to increase the value of the company, and so also the value of the stock options.

Early forms of option plans were limited in scope and available only to a handful of key executives. Indeed, the use of options as a form of compensation was routinely limited to the officers of a corporation, while the remaining employees were either granted stock pursuant to pension plans or, more often than not, unable to participate in company sponsored ownership. As alternative forms of compensation grew in popularity, companies were increasingly interested in providing payment to select employees in untraditional forms. Concepts such as flex time, position sharing, benefit tailoring, and others became the terminology of personnel departments for mechanisms to address staffing needs in a cost efficient manner.

More recently, companies are examining the possible broader use of stock option-based compensation to cover greater numbers of employees in order to stretch out staffing dollars and to provide remuneration to employees in a form particularly desired by many staff members. Although greeted with substantial enthusiasm, the problems in implementing a company sponsored stock option plan are daunting. As the number of participants grows, tracking salient data becomes increasingly complex. For the most part, companies are not equipped to handle the transactional attributes of stock option processing on a scale above a handful of participants. Each of the options (or each block of options) for each grant to each participate in the plan must be individually tracked for proper delineation of such parameters as the granting, vesting, exercise, and expiration dates, and the particular strike price for which the option right was granted. Also, the practical exercise of an option requires the use of a brokerage house and an established exchange for trading and consummating the options and the underlying security in accordance with the plan attributes.

The complexities of option account processing increase disproportionately when more than one company is involved; this is especially true for multinational companies working within the borders of multiple countries--each with its own set of legal requirements on stock ownership and tax consequences for resident employees. Heretofore, there has been an absence of processing capabilities available to address the management of a multi-country, multi-company stock option account compensation plan for a plurality of individual accounts. In addition, stock option plans for multinational corporations, or for multinational employees (i.e., employees who work for one or more companies in two or more countries), have the added practical problem of exercising options where the underlying security and the funds are in different currencies.

Besides currency differences, from the participant's point of view there can be significant uncertainties in how to exercise options because options may be granted in qualified (i.e., qualifying for preferential tax treatment) or non-qualified plans, and the option may be exercised so that the participant receives the underlying security, a cash disbursement representing essentially (less taxes, commissions, and fees) the difference between the strike price and the then present market price of the underlying security, or some combination thereof. It would be beneficial to the participant if she could simulate various financial outcomes (e.g. including estimated taxes, fees, or cash disbursements, or combinations thereof) to arrive at what is best for the participants financial needs precipitating exercise of the options.

OBJECTS AND SUMMARY OF THE INVENTION

It is an object of the present invention to provide a data processing system for managing a plurality of individual accounts directed to the holding and transacting of options for the purchase of securities in accordance with pre-established plan criteria.

It is another object of the present invention to provide a data processing apparatus for managing the implementation of one or more company stock option plans on a continuous basis.

A further object of the present invention to provide a system for processing plan constraints in a manner to provide responsive transactions in accordance with plan dictates and select inputs from plan participants.

An additional object of the present invention to provide a cashless transaction for the exercise of vested options in accordance with plan terms, through the use of a linked brokerage account for the plan participants.

Still further objects of this invention include providing such apparatus and systems that can function across currency differences, provide option execution in real time, allow the participant to simulate different exercise scenarios to define the desired parameters for the execution of the options, or a combination thereof.

The above and other objects of the present invention are realized in a data processing system including controlling stored programming directed to the managing and tracking of a plurality of individual accounts, current stock pricing, individual biographic data, company option plans and current withholding and other tax requirements. For each participant in a given plan, the system tracks the number of options to purchase stock that have been granted, the grant date, the number vested and vest date, and the number expired and date of expiration. At participant determined dates, the system implements a participant requested exercise of select options in accordance with the governing plan, e.g., option price, withholding percent, etc.

In accordance with the varying attributes of the present invention, the system uses a corresponding brokerage account held in the participant's name to implement the actual trades of stock necessary for the option exercise, with the market sale price on the exchange used to pay the plan sponsor (company) the option price, and remaining proceeds as compensation to the participant.

The foregoing features of the present invention may better appreciated from the following detailed description of a specific illustrative embodiment thereof, presented in conjunction with the following drawings:

DESCRIPTION OF THE FIGURES

FIG. 1 provides a functional block diagram of the operative activities encompassed by the present invention;

FIG. 2 provides a logic flowchart of the participant attribute module of the present invention;

FIGS. 3A and 3B provide logic flowcharts of the daily transaction processing implemented by the present invention;

FIG. 4 depicts a logic flowchart of the option exercise module of the present invention; and

FIG. 5 provides a flowchart for the cumulative trading of shares in accordance with the instructions from participants on a plan or client basis.

FIG. 6 depicts a flowchart showing a sequence of steps by which the participant can exercise options in real time and other actions taken by the present system.

DETAILED DESCRIPTION OF SPECIFIC EMBODIMENTS

First briefly in overview, the present invention is directed to managing the operations associated with the broad scale implementation of individual stock option accounts for different companies and in accordance with distinct plans. The implementation is governed by an integrated control program implementing commands in response to program logic and current environmental inputs. The system maintains in memory records of participating individuals having present or future rights to exercise options of select stock, as well as a plurality of distinct option plans that dictate the implementation of the plan participants' rights in exercising the options granted to the participants. Processing is both time-driven and event-driven; for example, periodic updates to the participant's records occur at regular (preferably at least daily) intervals. In addition, select inputs preferably trigger system processing, e.g., option exercise request or target price acquisition.

A sophisticated data processing system is used for this implementation, which preferably includes one or more microprocessor-based central processor units (cpu) interconnected with multiple I/O (input/output) controllers, segmented memory in both semiconductor and magnetic disk form (i.e., immediate memory and permanent storage), communication ports for distributed processing and real time input communication for, e.g., incoming stock quotes (i.e., real time quotation of the option's underlying security price). The controlling program can be written in various commercially well-known programming languages (e.g., Cobol, "C", Pascal, etc.), as long as the resulting executable version is compilable in a manner compatible with hardware selected for the central processor and any peripheral work stations. For example, excellent results can be expected implementing this invention using Cobol II programmed and running on an IBM 3090 (Sierra) system platform.

With the foregoing overview in mind, attention is directed to FIG. 1 which provides a block diagram of the processing relationship between the various institutions involved in the operation of the present invention. More particularly, the system proprietor operates the system at a centralized location, block 10 where the central processing hardware is maintained. As stated above, the invention is directed to a plurality of separate accounts involving at a minimum segregated files on the participant and participant's brokerage account. This will of course require database 20 for maintenance of past and updated account files.

Continuing with FIG. 1, the individual blocks are interconnected with lines indicating channels of communication. For example, each participant 30 has access to a corresponding account record via system management and may use this channel for entering option exercise orders, submit cash for execution, or request records for tax purposes. The system proprietor is operating the system for the benefit of one or more separate client companies, block 40, each with a diverse set of processing requirements for their respective group of employees. In this regard, the system incorporates communication channels for the client 40, the participants 30, and the system manager 10.

Actual transactions made in accordance with the dictates of the present invention are processed practically through one or more transfer agents 50, typically a bank or other trustee formed for the transactions involved. The transfer agent releases newly issued or treasury shares of stock in the client company, which are passed to the system manager (or associated broker) either directly or through a depository trust company (DTC), block 55. Finally, the system is linked via per se well-known communications systems to one or more exchanges, block 60, for execution of the transactions of shares in accordance with plan dictates, client constraints, participant requests, and brokerage account limitations.

To understand the logic commands governing the implementation of the present inventive system, a brief description of the salient terms may be helpful and thus provided in Table 1 below:

TABLE I

1. Option(s). Options are granted to one or more eligible employees at a strike price set on the giant date. The options have a limited lifetime, and expire at the end of their term if not exercised. An option is a right to a purchase a set number of shares of the underlying security at the strike price.

2. Vesting Period. Options granted to an employee are not exercisable until the completion of a vesting period, typically at least one year after grant date. Sponsors may specify their own vesting schedule. Accordingly, each participant may have both vested and non-vested options in her account.

3. Exercise. An option is typically exercised by paying the purchase price for up to the number of shares granted in the option at the strike price, so the person exercising the option then owns the underlying security. Option exercise methods for employee stock option plans typically include stock swap, traditional participant cash payments from private resources, as well as the effectively immediate sale of underlying security after exercise to pay for the grant price (also known as the "cashless" exercise method because the participant need not actually buy and then sell the stock; the participant effectively receives what would have been the disbursement for such a transaction). For global operations, the system must implement country specific restrictions that may inhibit cash or cashless transactions by law.

4. Income. Upon exercise, participants realize cash disbursements, such as the spread between the option grant price and the exercise price (fair market value on exercise date), as taxable income. Plan sponsors typically deduct this spread as a compensation expense. The income and expense realized may be governed otherwise by IRS, SEC, and/or the particular plan regulations. Participants can also defer income by exercising the option and receiving the stock.

5. Withholding Taxes. Taxes on each participant's exercise income are withheld at rates specified by the plan sponsor. Funds to pay withholding taxes are raised through the sale of a number of the shares obtained through the exercise, share withholding, cash on deposit, or swapping of shares of stock already owned, with the resulting funds forwarded to the plan sponsor for payment to taxing authorities.

6. Brokerage Services. Each participant is required to open a brokerage account to facilitate exercises. The net number of shares obtained through the exercise is deposited into the account. Participants may hold the shares or sell them at their convenience.

7. Exercise Costs. Each exercise entails a variety of possible exercise costs, against which some percentage of the shares obtained on exercise are sold.

These costs can include:

Option price. Participants owe their employer, which issues the stock they receive on exercise, the option price times the number of options being exercised. (e.g., 100 options with a grant price of $37.50 equal an option price of $3,750.00.)

Withholding Taxes. As described above, the spread on an option is taxable as ordinary income. Some option awards and international participants, however, may not be subject to taxation on this income.

Commissions and Fees. The exercise of stock option and sale of shares to cover exercise costs entail transaction fees. Plan sponsors may choose to pay these commissions and fees on behalf of their stock option plan participants, or specify that participants pay for these through a cash or stock deposit or through the sale of shares obtained from the exercise.

Now turning to FIG. 2, the set up module is presented in flowchart delineating the entry of set up data for a new or updated client/participant account file and associated operations. More particularly, logic begins at block 100 and branches to the database manager module. This manager system permits access to the database of existing accounts, clients and participant records for retrieval and update purposes. As the population of clients/participants grow, the database manager will be automatically invoked via the link to system management for update processing.

For the purposes of the present discussion, the database manager is used to add new records and files for new client and/or participants and update existing files via test 120. A positive response to test 120 (indicating a new client entry, i.e., a new company interested in starling a plan for its participating employees that permit the granting and transacting of stock options on an ongoing managed basis) branches logic to block 130 wherein a designated addressable file location is allocated in the database for client profile parameters; these parameters as ascertained by the system manager are then entered at block 140.

The exemplified system described herein includes several prepackaged Plans for delineating the rights and obligations of the client to the participants regarding option processing. These Plans will be available to the new client as set forth in test 150, where a negative response invokes the selection process from the received client criteria. Based thereon, the selected Plan is entered into the database for governing future transactions for the new client. Alternatively, the client may customize a stock option Plan in accordance with the client's particular needs and interests. This is done via a positive response to test 150 and the entry of custom Plan parameters at block 170. Processing then continues to the next client (new) test 180 or to continue block 190.

Continuing with FIG. 2, assuming a negative response to test 120, logic branches to test 200 which identifies whether the participant is new or existing within the database for that client. A positive response to test 200 (new participant) continues to block 210 for open/entry of a new record corresponding to that participant. The participant is then logically concatenated to the proper client, block 220 thus inheriting all the client delineated option Plan features previously entered for that client. Thereafter, the system seeks the remaining defining parameters for that participant for storage within the addressable database record, block 230. This continues for the next participant entry in que, test 280.

If the participant is already in the system ("no" to test 200), logic branches to test 240 to determine if a status change has been made to the participant's file. A status change is directed to the parameters stored for that participant and can include biographic, demographic or payment information such as a promotion, vesting of select options, termination, expiration of options, exercising options, or other changes. If a positive response is received, the salient records are accessed, block 250, and the appropriate changes entered into the records, block 260.

In the foregoing logic structure, the client and participant are system-defined through a specified option Plan and in fact this Plan may be modulated and incremented in accordance with the client so that a plurality of differing Plans are implemented by the system (e.g., Plan(I), wherein I is an indexing variable for the differing clients using the option management system). In this context, the Plan can incorporate the profile of information shown in Table II in the processing of option accounts for the various participants. Each plan managed by the system preferably includes (i) a set of parameters for such purposes as identifying and/or categorizing the necessary particulars for each participant and their option(s), (ii) a database containing each of these parameters, and (iii) an axiomatic system at least in part defining the plan criteria for the exercise of the options by a plan participant.

    TABLE II
    Description                  Resp.       Size
    PLAN LEVEL RULES
    Plan name                    Mrking      50 Chars
    Plan source code             Oper        9 Chars
    Plan stock cusip             Oper        8 Chars
    Plan stock desciiptioil      Oper        20 Chars
    VRS                          Mrking      Yes or No
    VRS phone number             Oper        999-999-9999
    Annual or quarterly statements Mrking      Annl or Qtrly
    Customer letter short name 1 Systems     20 Chars
    Customer letter short name 2 Systems     20 Chars
    Customer letter phone number Systems     999-999-9999
    Account Assignment           Oper        Yes or No
    Plan active date             Systems     CC/YY/MM/DD
    Incentive Compensation       Mrking      Yes or No
    Fractional grants            Mrking      Yes or No
    Allow zero grants            Mrking      Yes or No
    Payroll data required for exercise Mrking      Yes or No
    Maximum year to date exercises Mrking      999
    Minimum exercise amount      Mrking      9,999,999.9999
    Maximum exercise amount      Mrking      9,999,999.9999
    Target price exercise duration (d) Mrking      999
    Exercise blackout start date Mrking      CC/YY/MM/DD
    Exercise blackout end date   Mrking      CC/YY/MM/DD
    Limit price %                Mrking      9.9999
    1st sale inflation %         Mrking      9.9999
    1st sale minimum commission  Mrking      999.99
    1st sale commission %        Mrking      9.9999
    2nd sale inflation %         Mrking      9.9999
    2nd sale minimum commission  Mrking      999.99
    2nd sale commission %        Mrking      9.9999
    Repeat following for each valid exercise type for the plan (max. 30 types)
    Exercise type                Mrking      6 Chars
    Exercise code                Systems     1 Char
    Exercise description         Mrking      30 Chars
    COUNTRY RULES
    Country number               Oper        999
    Country Name                 Mktg        30 Chars
    Allow VRS exercises?   Mktg        Yes or No
    New account form required? Mktg/Legal  Yes or No
    Force share delivery         Oper/Legal  Yes or No
    Special user authority needed Oper        Yes or No
    Special userid's       Oper        8 Chars
    Repeat following for each valid exercise allowed (max. 30 types)
    Valid exercise type          Mrking      6 Chars
    Valid exercise code          Systems     1 Char
    Valid exercise description   Mrking      30 Chars
    GRANT RULES
    Grant date                   Mrking      CC/YY/MM/DD
    Grant price                  Mrking      99,999.99999
    Grant expiration date        Mrking      CC/YY/MM/DD
    Maximum year to date exercises Mrking      999
    Minimum vesting amount       Mrking      9,999,999.9999
    Vested outstanding cusip     Oper        8 Chars
    Vested outstanding account   Oper        9 Chars
    Vested lapsed cusip          Oper        8 Chars
    Vested lapsed account        Oper        9 Chars
    Unvested outstanding cusip   Oper        8 Chars
    Unvested outstanding account Oper        9 Chars
    Unvested lapsed cusip        Oper        8 Chars
    Unvested lapsed account      Oper        9 Chars
    Exercise cusip               Oper        8 Chars
    Exercise account             Oper        9 Chars
    EMPLOYEE STATUS RULES
    Status code                  Mrking      1 Char
    Status description           Mrking      30 Chars
    Exercise cutoff amount       Mrking      9999
    Exercise cutoff type         Mrking      Years/Months/Days
    VESTING RULES
    Grant date                   Mrking      CC/YY/MM/DD
    Status code                  Mrking      1 Char
    Vesting rate                 Mrking      9.9999
    Vesting calculation type     Mrking      Truncate or Round
    Special vesting check        Systems     Yes or No
    100% vesting date            Systems     CC/YY/MM/DD
    Repeat following for each event date (up to 25 event dates)
    Event vesting date           Mrking      CC/YY/MM/DD
    Event vesting date           Mrking      9.9999

    Fees/Commissions and Residual Proceeds
    Step 1
    A - B = C
    If C > 0
         Then [(Stock Sale Proceeds - Option Reimbursement) - C] =
         Net Gain
    If C < 0
         Than Negative (C) = Residual SAR Proceeds
    Step 2
    Commissions Calculation
         Net Gain/Stock Prices .times. (Plan Commission Schedule = X
                   if X .gtoreq. 0.005 then round up to the next penny,
                   if X < 0.005 then round down.
    SEC Fee Calculation
    (Net Gain / 300) .times. 0.1 = SEC Fee
         if SEC Fee goes to thousandths place, then round up to next full
         hundredth.
    Transaction Fees (set by the plan administrator)
         $3.85 for only CLF for all option types except for "K" and "F".
    Step 3
    Total Fees and Commissions
         Commissions + SEC Fee + Transaction Fees = Total Fees/
         Commissions

    FICA OAS Taxes
    Step 1
    (Gross Gain) .times. (FICA OAS % from payroll file) = Estimated FICA Tax
    Step 2
    (Estimated FICA Tax) + (Participant YTD FICA OAS Amount)
    = Subtotal FICA
    Step 3
    (the dollar amount shown can change depending upon IRS regulations)
    If subtotal FICA .ltoreq. $4054.80
         Estimated FICA Tax = FICA OAS Transaction TAX
    If subtotal FICA > $4058.80
         (Subtotal FICA) - (FICA Work 1) = FICA OAS Transaction Tax

    Top of Screen
    Acct No.    States client's account number
    Grant Date  Indicated option grant date from database
    Grant Price Indicated grant price (strike price) for this option.
    Status Date Date of an employee status change. (e.g., if all 0's, the
                status is active and unchanged).
    Status      Indicates type of status change; e.g., voluntary or
                involuntary termination, death, or retired.
    Available   The number of options available to exercise.
    Options
    Available   Available attached SAR's
    SAR
    Grant Type  One letter code indicating the grant type
    Column One
    Exercise    The exercise method chosen; e.g., C = \CASH,
    Type        CLP = CASHLESS PARTIAL, CLP = CASHLESS FULL,
                SS = STOCK FOR STOCK
    Reload      CASHLESS FULL, SS=STOCK Indicate a "Y"or a "N" to
                reload the stock option
    No. of      The number of options to use in the transaction
    Options
    Disquali-   Systematic default will be N unless a disqualifying exer-
    fying ISO   cise is placed. An ISO will become disqualified if shares
                are sold and or taxes are paid with share withholding. The
                participant can also elect to disqualify an option.
    Number      Total SAR's to use.
    of SAR's
    Tax         The tax field will read the demographic screen fed tax field
    (Fed/Int'l) for domestic and aggregate tax rate for Int'l. Can adjust
                upward in increments of 0.1% up to 39.6% for domestic.
                International taxes cannot be adjusted. The Federal tax will
                be added to all other taxes provided in a demographic feed
                for calculations.
    Stock Price Current stock price for model
    Tax Payment Method for paying taxes. C = Credit Balance/Check
                amount, S = Share Withholding, D = Tax Deferral , and
                P = Stock Sale
    Credit      Amount of cash to be used for exercise from cash balance.
    Balance
    Check Amt   Total check partcipant will use to complete a cash exercise
                (Use in the case of wired funds as well.)
    Share       The amount of shares used from the account to complete a
    Amount      stock for stock exercise.
    Shares      The amount of shares used from outside accounts to
    Attested    complete a stock for stock exercise.
    Use price   Indicate a "Y"or "N"if the stock price entered in the model
    as limit    will be used as the limit price for a real time trade. Indicate
                "N" for market order.
    Column Two
    Exercise    The type of exercise will be spelled out fully. C = Cash,
    Type        CLP = CASHLESS PARTIAL, CLF = CASHLESS FULL,
                SS = STOCK FOR STOCK
    Net Shares  The shares that will be received by the participant. The
                following is tlie calculation: Options - Required Shares for
                Stock Swap - Share Withholding - Shares Sold = Net
                Shares
    Net Proceeds Any cash that will be received by the participant from a
                option exercise. The following is a calculation: [(Credit
                Balance + Check Amount) + Gross Proceeds + (Shares
                Required .times. Stock Price) + Gross SAR Proceeds] -
                [Reimbursement + (Total Tax - Taxes form Share
                Withholding - Taxes Deferred) + fees + Commissions +
                Residual SAR Proceeds] = Net Proceeds
    SAR         Information displayed whenever a SAR or a Unit Option is
    Proceeds    exercised with the net proceeds generated from a SAR
                exercise or Unit surrender. The following is a calculation:
                (Stock Price - Grant Price) .times. # of SAR's - SAR taxes =
                SAR Proceeds
    Required    The minimum cash needed to complete a cash exercise.
    Cash
    Amount
    Required    Calculation of the total shares required to do a stock for
    Shares      stock exercise. The following is a calculation: [(number
    for SS      of options .times. grant price)]/stock price = required shares
    Stock Sale  Total proceeds generated by a stock sale on a exercise
    Proceeds

• Inventors
  Cristofich, John; Warner, Susan; Howard, Deborah; Berkley, Karen; Radcliffe, Eric;
• Assignee
  Merrill Lynch, Pierce, Fenner & Smith (New York, NY)
• Published
  Jan-9-2001
• Current US Classes:
  705/37
• Application #
  935709
• International Classes
  G06F 017/60
• Field of Search
  705/37 705/35 705/36 705/39
• Examiner
  Trammell; James P.
• Agent
  Hopgood, Calimafde, Kalil & Judlowe, LLP
• US Patent References:
  4346442
  4376978
  4674044
  4815741
  5077665
  5126936
  5270922
  5297032
  5315634
  5597046
  5671363
  5710889
  5765144
  5781654
  5826243
  5890141