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To: chic_hearne who wrote (47740)	2/1/2001 2:06:25 PM
From: The Phoenix	Respond to of 77400

Chic, WoW!!! You're confusing too many subjects into one discussion. Founder shares - incentive for joining a company that may or may not make it. The fellow took a gamble to join a company pre-IPO and as an incentive he recieved part ownership of the private company. When it went public he was allowed to sell shares on the open market. I think you spend too much time worrying about how much everyone else is making (which seems to be a consistent topic on this thread). I think one should worry more about his/her own portfolio. If a person doesn't like a company for whatever reason they should not invest. In the case of your friend others did their due diligence and decided to buy stock. You win some you lose some... investing isn't a guarantee. As for JNPR..and insider sales... it's not the insiders that have bid the price up to ridiculous levels... it's investors that have done their so called due diligence. Insiders were granted options as an incentive to share in the success of the company. I don't think they ever imagined being worth $60B on revenues of $200M... but it wasn't the insiders that caused this "bubble" but as shareholders they have a right to sell. As investors we have a right to know what our exposure is to option sales via SEC filed documentation. I simply think there are a lot of people that are bitter over the windfall that others are getting through options. OG

To: chic_hearne who wrote (47740)	2/1/2001 4:09:44 PM
From: John Koligman	Respond to of 77400

I liked this one, where the SEC has to order firms to note in their annual reports that executives exercised options, and when things got rough late in the year decided 'nah, I'll just take that back'... Regards, John S.E.C. Tells Concerns to Disclose Cancellations of Stock Purchases By FLOYD NORRIS Companies that allowed executives to walk away from the purchase of stock late last year will have to disclose that fact to their shareholders in footnotes to their annual reports, the Securities and Exchange Commission told accountants late yesterday. Lynn Turner, the chief accountant of the S.E.C., also notified the accounting profession that these companies will have to record an expense that will lower profits. But the commission said that in some cases it would allow companies to report a smaller expense than the commission wants to be recorded if it is done in future years. The issue arose after a number of companies allowed executives who had exercised stock options early in 2000 to decide late in the year to rescind that exercise, as if they had never bought the shares. The companies acted after the shares had plunged, and after executives had complained that the taxes they owed as a result of exercising the options were greater than the late December value of the shares they had bought. No names of companies that allowed such rescissions of share purchases have yet been disclosed, but accountants say that a number of companies, primarily technology companies, allowed the rescissions. Companies will not be required to include the names of the executives who were allowed to cancel their purchases. But the disclosure that some executives were allowed to do this is likely to come as news both to outside shareholders and perhaps company employees who were not offered the opportunity to cancel their own purchases. The S.E.C. statement came in a memo to the Emerging Issues Task Force of the Financial Accounting Standards Board, which deals with novel accounting issues. The group discussed the rescissions at a meeting in mid-January, and minutes of that meeting have been delayed to allow the S.E.C. to weigh in with the accounting treatment it will accept. That decision is somewhat urgent because accountants are now working on audits of companies that use calendar years for their accounting. Because the amount of money involved will probably be relatively small compared with the sales and profits of some, if not many, of the companies involved, some accountants had argued that there was no need for disclosure since the amounts would be immaterial to the company's financial results. But the S.E.C. took the position that the decision to allow the rescission of previously exercised options was material because it was a company policy that shareholders deserved to know about. It cited a rule requiring disclosure of "significant modifications of outstanding awards" of options, and said "the terms of the rescission should be clearly disclosed." Most of the options in question appear to be "incentive stock options" as opposed to the more common "nonqualified stock options." Profits from the exercise of nonqualified options are taxed at ordinary income tax rates, and most executives who exercise such options sell the shares when they exercise the options. Executives who exercise incentive options and then hold the shares for at least a year are given the more favorable tax treatment of being allowed to treat all the profits as long- term capital gains, which are taxed at a lower rate. So it is common for executives to hold those shares. The problem arises because the alternative minimum tax can kick in for such executives. The profits — based on the difference of an exercise price and the value of the stock when the option is exercised — are treated as a preference item and can be taxed at a rate of 26 percent under some circumstances. The tax on long-term capital gains tops out at 20 percent. Consider a hypothetical executive who exercised an option to buy 1,000 shares at $10 when the stock price was $100. The executive purchases stock worth $100,000, producing a $90,000 profit. If that executive were subject to the alternative minimum tax, that would create a tax liability of $23,400. If the stock had fallen to less than $23.40 by the end of the year, that executive would owe more in taxes than he could realize by selling the stock. A company gets tax benefits when employees exercise stock options, since it is allowed to deduct as an expense the profit the employee earns when the option is exercised. By allowing the executive to rescind the exercise of the option, the company forgos that tax benefit. The S.E.C., in its statement yesterday, said the proper accounting would be to reflect that lost tax benefit as an expense, and to treat the option in the future as a variable option, which would force the company to report an expense when its value rose because the stock price gained. But it added that it would allow companies that had already closed their books for the year, and had taken a reasonable approach that reflected at least some expense, to use the accounting method they had adopted, although they will have to make changes in later years.

To: chic_hearne who wrote (47740)	2/1/2001 4:40:34 PM
From: Paul Reuben	Read Replies (1) \| Respond to of 77400

At the high point, his options were valued at over $50 million, but now would be a little less than $3 million. Of course, he and every other damn person in the company started bailing right at the top and continued to all the way to the bottom. I mean, what's the difference if you're selling at $20 or $200, it's all free money for them, right? The difference is a Porsche 911 Turbo versus a fully loaded Honda Accord EX coupe. Both nice cars, but, come on!!! :O)