please read bolded section on options. is this a possibility with mory?
>Company Stock Options: How to Exercise, No Sweat
>
>By VANESSA O'CONNELL
>
>Staff Reporter of THE WALL STREET JOURNAL
>
>They pad the pay of Corporate America's top dogs and give wannabe
>tycoons at struggling start-ups a shot at striking it
>rich. Now stock options are trickling down the corporate ladder to
>midlevel bosses and the rank and file.
>
>BankAmerica Corp., Bank of Boston Corp. and NationsBank Corp. are a
>few of the major employers that recently
>started giving stock options to all employees, following similar moves
>by Travelers Group and Monsanto Co. earlier this
>year. Even at companies where most employees still don't get options,
>the number of recipients is growing. The typical
>executive-only program now includes roughly 35% of a work force, with
>a salary floor of about $60,000. That's triple
>the percentage covered in 1991, when the minimum salary for most
>programs was $80,000.
>
>Why are employers becoming more generous? Granting options is cheap.
>Companies can expand programs without
>having to take a charge against earnings and, starting in January,
>show the cost only in a footnote to the annual report.
>
>Options also are a powerful management tool. They boost employee
>morale, foster team spirit and give workers an
>incentive to focus on increasing share value.
>
>Fanfare aside, managing stock options you receive takes careful
>planning. "So many people screw up with these things,"
>says Barry Hamerling, president at Ayco Co., a financial and
>tax-planning firm in Albany, N.Y. But there are tricks to
>help avoid pitfalls. Although none are perfect, they can be handy
>nonetheless.
>
>First, brush up on the basics: Most "nonqualified" options are good
>for 10 years, by which time you must use them or
>lose them. Using them means "exercising" them by purchasing shares of
>the company stock at a below-market price,
>often called the strike price. You'll need the service of a broker and
>cash to buy the shares, although many companies
>hook up with a brokerage firm to offer what's known as a cashless
>exercise. With this routine, a company-selected
>broker lends you the cash to buy shares, and then immediately sells
>some of your new company-stock holdings to cover
>the loan.
>
>When you exercise the option, Uncle Sam levies taxes on the difference
>between the shares' market value and your
>purchase price; the spread is nicked at ordinary income-tax rates of
>as much as 39.6%. When you sell the shares
>acquired by exercising your option, you'll owe taxes on any additional
>price gain; for shares held longer than a year, the
>appreciation is taxed at the long-term capital-gains rate, which is
>capped at 28%.
>
>Now, here are some strategies to help with the tougher issues, such as
>when to exercise, how to count options in your
>investment portfolio and whether to ask for a higher salary to replace
>options lost when you switch jobs.
>
>HOLD ON AS LONG AS POSSIBLE: If the outlook for your company is good,
>don't immediately use your options
>to buy shares. Instead, wait until just before you plan to sell the
>shares. Think of it this way: An option is like a 10-year
>interest-free loan from your company; you're borrowing the right to
>buy shares at below-market prices. It doesn't make
>sense to put an end to this free ride early by converting the options
>to shares well before they expire, says Paula Todd, a
>principal at the human-resource consulting firm Towers Perrin.
>
>PUT ON AN ANALYST'S HAT: More than patience alone, you need an
>objective eye to size up the investment
>potential of your company's shares. The ideal time to exercise an
>option is when the shares are peaking, and you can
>immediately sell your new holdings for a profit.
>
>Find out what professional stock analysts think about your company by
>checking sources such as the Value Line
>Investment Survey, an independent stock-advisory service available in
>many public libraries. Ask your broker for recent
>research reports and get copies of annual and quarterly reports.
>
>SET DEADLINES: No matter how promising your company's future seems,
>you can't wait forever for the stock price
>to jump because most options expire after 10 years. Some financial
>advisers suggest exercising as soon as the shares
>have doubled, but never more than seven years into an option's 10-year
>life. Why? Put off exercising until years eight and
>nine and you could wind up having to do so during a one-year or
>two-year bout of bad fortune for your company or the
>entire stock market, the thinking goes. If the market value of the
>shares is below the option strike price, the options
>expire worthless.
>
>COUNT THEM RIGHT: An option giving you a right to purchase 500 shares
>is like owning 500 shares outright,
>assuming the shares are currently trading at a price above the option
>strike price. People often make the mistake of
>treating "in the money" options as if they deserve a lesser weighting
>than shares held, by counting only the potential profit
>rather than the total market value of a new block of shares as a
>holding.
>
>After getting an option, you may want to cut back on other company
>stock by shifting some money into a mutual-fund
>investing in international stocks, short-term bonds or money-market
>instruments. Start by tinkering with the makeup of
>any 401(k) retirement-savings-plan or profit-sharing-plan accounts.
>These adjustments won't trigger taxes.
>
>PUT A PRICE TAG ON THE PERK: As soon as you quit or are fired, you
>usually must exercise any "vested"
>options, which are options you have held for your employer's required
>waiting period (typically, three to five years). Fail
>to use them, and you'll lose them. Departing employees also forfeit
>"unvested" options, those you haven't owned for
>longer than the required waiting period.
>
>But a lost option should be included as pay when negotiating with a
>new employer, says Stephen R. Scroggins, managing
>director at the executive recruiting firm Russell Reynolds Associates
>Inc. To value them, take 30% to 50% of the shares'
>current market price, and multiply by the number of shares to which
>you would have been entitled. Say you just received
>an option to buy 500 shares, and the company shares were recently
>trading near $30 apiece. These options are worth as
>much as $7,500, as a rule of thumb. Ask for cash or stock worth the
>same amount.
>
>KEEP DOWN COSTS: As a convenience to their employees, many companies
>handing out options will select one or
>more brokerage firms to process the exercises. Stick with these
>selected brokerage firms whenever you're in a hurry to
>exercise and sell shares. They're usually familiar with your company's
>paperwork. Otherwise, take a few days to
>compare the commissions and loan rates charged by other discount and
>full-commission brokerage firms. Many will
>negotiate, especially when you're looking to exercise options for a
>large block of shares. |
