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WO2000058886A1 - Systeme et methode de traitement de donnees de mise en commun d'options/actions et methode de conduite d'affaires - Google Patents

Systeme et methode de traitement de donnees de mise en commun d'options/actions et methode de conduite d'affaires Download PDF

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Publication number
WO2000058886A1
WO2000058886A1 PCT/US2000/006433 US0006433W WO0058886A1 WO 2000058886 A1 WO2000058886 A1 WO 2000058886A1 US 0006433 W US0006433 W US 0006433W WO 0058886 A1 WO0058886 A1 WO 0058886A1
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WO
WIPO (PCT)
Prior art keywords
security
set forth
sharing method
holder
risk sharing
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PCT/US2000/006433
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English (en)
Inventor
Dan Charash
Boaz Kaplan
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Bdd Ventures Ltd
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Bdd Ventures Ltd
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Filing date
Publication date
Application filed by Bdd Ventures Ltd filed Critical Bdd Ventures Ltd
Priority to IL14540700A priority Critical patent/IL145407A0/xx
Priority to EP00917871A priority patent/EP1212710A4/fr
Priority to CA002362959A priority patent/CA2362959A1/fr
Publication of WO2000058886A1 publication Critical patent/WO2000058886A1/fr
Anticipated expiration legal-status Critical
Ceased legal-status Critical Current

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    • G—PHYSICS
    • G06—COMPUTING OR CALCULATING; COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
    • G06Q40/04—Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Definitions

  • the present invention relates generally to data processing systems, and in particular to a data processing system, method and method for conducting business for creating and managing a common pool of options and shares owned by individuals from different companies.
  • the term "share” is typically used to refer to a share or an option to acquire a share.
  • the concept of acquiring a share includes acquiring such share by way of the purchase thereof, as well as acquiring such share without the need to purchase (i.e., pay for) such share.
  • security is typically used to refer to a share or an option to acquire a share. It will be appreciated that this is for the sake of linguistic convenience, and that where a distinction between share and option is necessary, it will be pointed out.
  • “option” refers to an option to acquire a share, and includes the concept of a warrant to acquire a share.
  • references herein to "shareholder” or “security holder” generally refer equally to a holder of a share as well as a person who holds an option.
  • “security holder” usually refers to an employee, an ex-employee, a consultant, an ex-consultant, an adviser, an ex-adviser, a service-provider, an ex- service provider, or a founder (each, an "employee”, and collectively, “employees”) of a start-up company who holds securities in such start-up company.
  • start-up company refers to a company whose shares are not publicly traded. Related work.
  • target companies For many years, private (non-traded) companies, primarily high tech startup and early-stage companies (collectively, “target companies”) have been and are aiming to develop innovative and promising products in many fields. From a statistical perspective, it is clear that many of such companies have not, and will not, succeed in their projects, for various reasons, such as, for example, technological, financing, marketing and sales barriers, which need to be overcome in order to succeed from a business perspective.
  • VC professional investment vehicles and entities
  • VC's specialize in investing in those high-risk private companies at their earlier stages, before such companies succeed in effecting a public offering of their shares or a merger or acquisition transaction.
  • the examinations which the quality VC's conduct, when checking such companies in order to contemplate an investment therein, are typically thorough and professional.
  • a start-up company in which a quality VC invests is supposed to have a better probability of achieving success from a business perspective, as compared to private companies in which a quality VC has not invested.
  • the option is a form of deferred payment that often provides tax benefits by allowing the optionee to control the time the income is derived, i.e. typically at the time of the exercise of the option and the conversion of such option into shares of the granting company.
  • the provision of the opportunity to purchase shares in the company is considered an attractive mechanism to incentify the optionee to work hard in promoting the company's business.
  • the optionee employee is subject to various contractual terms and conditions which govern his options. These terms and conditions typically include a vesting period during which a fraction of the granted options become exercisable upon the expiration of each pre-determined period, provided that the optionee continues to be employed by the granting company through the end of such period.
  • the options generally set a per-share exercise price, i.e. a pre-determined sum which the optionee would be required to pay in order to convert his option into a share(s) of the granting company.
  • the terms and conditions which govern the employee options generally contain limitations on transferability or sale of the options and underlying shares to others prior to the vesting of the options, termination terms and an expiration period. Other terms and conditions are also typically included.
  • pension plans The core idea of pension plans is the transferring of financial assets on a periodic basis (usually monthly) which will yield cash at the age of retirement.
  • Pension plans are highly regulated under specific legislation.
  • N specific embodiment of a pension plan business model deals with the case whereby the employers transfer their own publicly traded shares or options into employee pension plans (US patent 5,806,047).
  • This business model allows pension plans, which own employer's securities, to transfer the employers' securities into a combined pool.
  • the pool management manages the combined portfolio, selling portions of the contributed stock and purchasing other financial instruments to increase diversification.
  • pension plans are subject to restrictions which make it essential that the securities pooled be ones whose price can be determined every day (continuously) with reasonable precision.
  • the value of shares of privately held companies is determined only in rare occasions, possibly years apart, such as a merger, acquisition or a round of financing.
  • VC venture capital firm
  • a mutual fund is another model that has been unacceptable with respect to securities in start-up companies.
  • a mutual fund usually invests in liquid assets such as publicly traded companies, bonds, foreign currencies, etc. Securities in start-ups are not liquid, however, and cannot be integrated within a mutual fund. An investor in a mutual fund can sell his holdings in the mutual fund every day, and thus realize his earnings. The non-liquidity of shares in a start-up company makes this another reason such shares are generally not held (or are held in small amounts only) by mutual funds.
  • the transfer to the pool is effected by transferring the shares or the options (as the case may be) to a management company, which will hold the shares or options (as the case may be) on behalf of the pool.
  • the management company undertakes to sell the participating shares or shares underlying the participating options (as the case may be) in the event of an Exit (as defined below).
  • the management company would be entitled to exercise discretion in determining the timing of the sale, and would not be required to effect such sale only in connection with an Exit.
  • the security holder would undertake to sell his participating shares or the shares underlying his participating options (as the case may be) upon the earlier of: (i) the consummation of a transaction in which all or substantially all of the shares of the security holder's company are acquired by a third party in a single transaction or a series of transactions, (ii) within a pre-determined period following the consummation of a merger transaction in which such security holder receives shares and/or options of a publicly-traded company in exchange for his participating shares, his participating options, or the shares underlying his participating options and such new shares or the shares underlying such new options (as the case may be) are not subject to any underwriter "lock-ups" and may be sold in the open
  • the relative stake of each security holder is determined by taking into account various parameters, including the number of participating shares and participating options of such security holder as compared with the total number of participating shares and participating options in the pool, the value of each share of such security holder's company as compared with the value of the other participating shares and options prior to the "closing" of the pool, i.e.
  • the point at which no new security holders are permitted to join the pool (such value may be determined based on the price-per-share paid by a pre- approved VC('s) in a recent substantial investment), the vesting terms of such security holder's participating shares and/or participating options (as appropriate) as compared with the vesting terms of the other participating shares and participating options, any stock split or re-capitalization of the shares of such security holder's company after he joined the pool as compared with any stock split or re-capitalization of the shares of the other security holders' companies, and the business status of his company during a certain period following the security holder's joining the pool, i.e.
  • an agreement is made with the security holder obligating him to undertake to transfer the security to the pool management (for purposes of realizing it and distributing the proceeds) when he is no longer prevented from transferring the security.
  • a unique and innovative characteristic of the invention is that it takes a very high-potential, high-risk asset (i.e. shares or options of a start-up company), and converts such asset into a lower-potential, lower-risk asset which statistically is designed to yield a mid-nice return, rather than a more binary result, i.e. big success or nothing.
  • a very high-potential, high-risk asset i.e. shares or options of a start-up company
  • the asset is designed to be a useful tool for employees holding shares or options in a target company who would like to decrease the risk while settling for a more modest, but more probable, return.
  • a system according to the invention described herein is different from pension plans, mutual funds, and VC firms in a variety of ways.
  • Pension plans relate to periodic transfer of assets to realize returns upon retirement from a low-risk portfolio of publicly traded, substantially liquid assets; the present invention deals with a one-time transfer of financial assets expected to yield cash within a few years from a high risk portfolio of non-publicly traded, non-liquid assets.
  • Pension plans involve the acquisition of new assets in a long- term program, but the present invention involves closing participation and the planned selling of all assets without further acquisition. Contrast with VC firms.
  • VC firms involve an investment of cash to be used in acquiring securities in start-up companies, whereas the present invention involves an investment of securities in start-up companies.
  • the business model of a venture capital firm includes three participants: 1) the investor that provides the money to the VC; 2) the VC that serves as a mediator between the investors and the investees (i.e., the start-up companies); and 3) the Start-up companies that receive investments from the VC.
  • the model of the present invention involves only two participants: 1) the members of the pool that hold options / shares of their specific start-up companies; and 2) the management firm which manages the pool. Whereas the main role of a VC is to make investment decisions, the management company might make no investment decisions.
  • VC's take an active role in the management of the portfolio companies, whereas the management company in the present invention has no role in the management of the assets of its participants, nor on the management of the start-up companies.
  • the model set forth herein is the opposite model to the present activity of VC's, which invest real money (not shares and/or options) in high-potential, high-risk target companies.
  • the employees utilize their participating shares and participating options in companies which are the subject of the VC's investments, in order to convert them into real money based on an investment portfolio covering a wide range of target companies.
  • a mutual fund involves liquid assets such as publicly traded companies, bonds, foreign currencies, etc., but the present invention relates to assets that are non-liquid until an "exit".
  • the core idea of a mutual fund firm is to take money and transform it into substantially liquid shares of publicly-traded companies, whereas, in the present invention, a participant transfers non-liquid securities in a start-up company into a portfolio of securities in various start-up companies.
  • FIG. 1 is an overall schematic view of the options/shares common pool management system of the present invention
  • FIG. 2 is a flow diagram describing the steps for adding new options/shares to the common pool. This phase is referred to as the "new investments" process;
  • FIG. 3 is a flow diagram describing the steps for determining each security holder's stake determination ratio. That ratio is used to determine the security holder's stake in the common pool;
  • FIG. 4 is a flow diagram describing the steps for collecting proceeds deriving from sales of participating shares and shares underlying participating options , and distributing them among the security holders of the pool;
  • FIG. 5 is a flow diagram describing the steps for determining the security holder's entitlement to receive proceeds from the common pool.
  • Computer systems The term "computer system” is to be understood to include at least a memory and a processor.
  • the memory will store, at one time or another, at least portions of an executable program code, and the processor will execute one or more of the instructions included in that executable program code.
  • executable program code and the term “software” mean substantially the same thing for the purposes of this description. It is not necessary to the practice of this invention that the memory and the processor be physically located in the same place. That is to say, it is foreseen that the processor and the memory might be in different physical pieces of equipment or even in geographically distinct locations.
  • the software that enables the computer system to perform the operations described further below in detail may be supplied on any one of a variety of media.
  • the actual implementation of the approach and operations of the invention are actually statements written in a programming language. Such programming language statements, when executed by a computer, cause the computer to act in accordance with the particular content of the statements.
  • the software that enables a computer system to act in accordance with the invention may be provided in any number of forms including, but not limited to, original source code, assembly code, object code, machine language, compressed or encrypted versions of the foregoing, and any and all equivalents.
  • media may include a diskette, a tape, a compact disc, an integrated circuit, a ROM, a CD, a cartridge, a remote transmission via a communications circuit, or any other similar medium useable by computers.
  • the supplier might provide a diskette or might transmit the software in some form via satellite transmission, via a direct telephone link, or via the Internet.
  • computer readable medium is intended to include all of the foregoing and any other medium by which software may be provided to a computer.
  • program product is thus used to refer to a computer useable medium, as defined above, which bears in any form of software to enable a computer system to operate according to the above- identified invention.
  • the invention is also embodied in a program product bearing software which enables a computer to perform a risk management process according to the invention described herein. Operational flow.
  • FIG. 1 there is shown in overall scope an operational flow chart for implementing the options/shares common pool management system of the present invention.
  • the broad aspects of the system include an options/shares account and database 1, an account for handling the proceeds from the options/shares 2 and a data processor for managing both the database and the accounts 3.
  • the pool security holders 4 manage their interactions with the pool through the various managers 5, 6, 7.
  • the security holders 4 transfer options/shares to the common pool 1 in return for a stake in the common pool.
  • the data processor 3 determines the relative stake of each security holder.
  • the dashed lines depict the flow of the options/shares and information. Proceeds from options/shares are transferred to an additional account 2, and are distributed between the security holders.
  • the solid lines depict the flow of the proceeds from the options/shares.
  • a management company 9 acts as the options/shares pool administrator.
  • the management company includes managers for handling new investments 5 made by new and existing security holders 4.
  • the term "investment” in this context refers to the addition of participating shares and/or participating options to the pool.
  • the "new investment” process also involves the company 8 whose options/shares the security holder holds. We shall thereby refer to the company 8 as the "participant company”.
  • the participant company will supply information such as the per-share value of such security holder's participating shares or shares underlying such security holder's participating options at the time the security holder joined the pool (such value to be determined based on the price-per-share paid by a pre-approved VC('s) in a recent substantial investment), the vesting terms of his option plan, etc.
  • the management company which organizes and oversees the pool in exchange for a cash payment (which, in the preferred embodiment, is calculated as a percentage of the proceeds deriving from sales of participating shares or shares underlying participating options) in the event of an Exit 9 may require that those reports be confirmed by the participant company's 8 auditor or lawyer.
  • a flow chart describing the "new investments" process appears in FIG. 2, and will be discussed in detail later. All of the information gathered by the new investment managers 5 will be stored in the pool's database 1.
  • a security holder's reports and status manager 6 will communicate with the security holders 4 and the participant companies 8 to receive updated information.
  • Information will be collected about any stock split or re-capitalization after the security holder joined the pool, the status of his entitlement to options of his company at any point of time, the business status of the participant company 8 during a certain period following the security holder's joining the pool, etc. All of the information gathered will be transferred to the pool's database 1.
  • Security holder information is stored in the pool's database 1. The information includes the security holder's identity, the participant company's 8 identity and business status (i.e.
  • this period is the one-year period following the security holder's joining the pool)
  • the database 1 will store each entry with the time of the entry, and the source of the information included in the entry. New and updated entries will be stored in addition to the old entries. No entries will be overrun, and all the current and past entries will remain accessible.
  • the database can be embodied by a variety of memory devices (preferably, non-volatile devices), such as magnetic storage devices, semiconductor based storage devices, optical storage devices, and even printed paper.
  • a magnetic storage device such as a RAID is used. Backups are made routinely and often on a memory storage media, such as compact disks, and are stored safely, for example outside the management company's premises.
  • the data processor 3 computes the stake of each security holder in the pool and controls the flow of options/shares/proceeds through the system. Flow diagrams describing those steps are included in FIG. 3, FIG. 4 and FIG. 5. Processing is both time and event driven, for example when a new security holder joins it is event driven, and when the proceeds distribution dates are reached it is time driven. The proceeds distribution dates are pre-determined dates in which proceeds from the pool are distributed among the security holders. Those dates will be discussed in detail later.
  • the data processor in the preferred embodiment includes a central processing unit (CPU), a non-volatile memory storage device, and IO devices such as a keyboard, scanner, printer, modem, LAN, etc. A desktop personal computer running under a suitable operating system is used in the preferred embodiment.
  • the controlling program can be written in several suitable languages (e.g. Visual C++, Delphi, etc.) and is preferably compiled to an executable program. Additional embodiments could utilize other configurations of hardware and software.
  • the mechanism of collecting and distributing the proceeds from the sales of participating shares and shares underlying participating options is shown schematically.
  • the proceeds are collected from security holders 4 in connection with pool sales.
  • the transfer will be done through a manager 7 who will oversee the process.
  • the data processor 3 will determine the relative stake each security holder has at such time.
  • the proceeds of such "exits” will be withdrawn from the pool's account 2 and distributed among the pool security holders 4 according to the relative stake each of them has at such time.
  • the management company 9 will also receive a portion of the proceeds as a management fee.
  • new investments relates only to the addition of new shares/options to the pool. This is in accordance with the preferred embodiment of the invention. It should be stated, however, that an additional embodiment would allow an investor to invest money (not shares or options) in an existing pool in exchange for a stake, to be determined based on the size of his investment as compared with the total value of the pool at the time of his investment. In such case, the invested funds would be distributed among the then-existing security holders, who would benefit from an immediate cash return on their participation in the pool.
  • FIG. 2 describes the steps for adding new investments to the options/shares pool.
  • This "new investments” process refers to the adding of new options/shares to an existing pool. Typically this process will commence when a candidate security holder wishes to join the pool (or add additional options/shares to his then-current participating shares and/or participating options (as the case may be)). This commencement is shown as 200 in FIG. 2. Therefore this process is defined as an "event driven” process.
  • the first step 201 is to check whether the "participant" company, whose options/shares the candidate security holder was granted, has received an investment(s) in the last 18 months.
  • the second step 202 is to check whether at least US$1.25 M of such investment was invested by pre- approved (quality) VC's.
  • quality quality
  • the management company 9 will create and update the list of "approved VC's".
  • Other embodiments may include different investment requirements. For example, another embodiment is a pool specializing in "seed money" stage startup companies.
  • the "substantial investment” may be defined as above 100 K$ for example (instead of above 1.25 M$ in the preferred embodiment).
  • Another example is an embodiment that will not be limited to investments from pre-approved VC's, but will also be open with respect to participant companies that received investments or other forms of funding from other sources such as private investors, investment banks, investment houses, government investments, investments by technological incubators, and investments made by companies and universities.
  • Another example is an embodiment that will not be limited to investments within the last 18 months but within a longer or shorter period, or that will not be limited to investments within a limited time period at all.
  • Step 203 verifies that the value of the participating shares or shares underlying the participating options that the candidate wishes to transfer is above $5K and below $75 K.
  • the bottom limit is introduced in order to avoid dealing with small amounts, which is not worthwhile from the point of view of the management company.
  • the upper limit is introduced in order to verify that no security holder can become rich solely from his holdings in the pool. This protects the participant companies from security holders becoming rich and losing interest in working hard for the benefit of their companies.
  • step 203 may be discarded because of difficulties in evaluating the security holder's participating securities.
  • Step 204 verifies that the security holder will transfer no more than 20% of his holdings in the participant company.
  • Approval of the new investment 210 is given only if a positive output was received from all the previous steps 201,202,203,204. Otherwise the new investment is denied 280.
  • the management company could exercise subjective discretion with respect to the acceptance or non- i o acceptance of a candidate security holder.
  • the new investment manager 5 and the security holder 4 will determine whether the participating options/shares are transferable/assignable in accordance with the terms and conditions governing such options/shares. If the options/shares are
  • Step 290 marks the end of FIG. 2 and refers us to FIG. 3. Please note that the new investments manager 5 oversees the entire "new investments" process.
  • FIG. 3 a flow diagram describing the stake determination algorithm is shown.
  • the algorithm starts at step 300, which can be viewed as a continuation of step 290 from FIG. 2.
  • the actual computations begin only after the pool 1 has been closed for new investments 310.
  • the pool will be closed to new investments either because an "event driven trigger” such as reaching a certain number of security holders in the pool, or because a "time driven trigger” such as the arrival of a pre-determined date.
  • the pool will close after fifty security holders have joined. In other embodiments this number may be a larger number or a smaller number, provided however, that the number must be sufficiently large to ensure an adequate statistical basis.
  • a limitation will be set such that only one security holder from every participant company will be allowed to join a certain pool. This limitation is based on the desire for the pool to represent a wide range of target companies, thereby increasing the statistical chances of achieving Exits. In other embodiments, this limitation may be revised (e.g., a maximum of two security holders from every participant company may participate) or discarded.
  • the first step 301 is to load the appraised per-security value ("price-per- share" or PPS) of the security holder's participating shares or participating options at the time the security holder made his investment (as shown in FIG. 2).
  • the original price-per-share of a particular security will be referred to as the "original price-per-share" of such security.
  • the appraisal of the "price-per- share" may be based, for example, on a "Black and Scholes” method for appraising the value of securities, as such method may be adapted and/or revised in order to take into account the lack of a trading market for the securities being appraised.
  • Such method may take into account, for example, the price-per-share in the last financing round of the participant company, the exercise price, vesting terms, and other terms and conditions which apply to an option.
  • the Price Per Share (“PPS) 302 is the taken as either the "original price- per-share” or the "updated price-per-share", whichever is higher. This mechanism assures the security holder, that changes with respect to his company that occurred between his investment and the closing of the pool, will always work in his favor.
  • the PPS will be used as an auxiliary variable in the subsequent steps.
  • the evaluation of the securities is performed before the pool is closed to participation by other securities holders. Although it is possible and foreseen that the evaluation of the securities could be delayed until only after the pool is closed to other participation by other security holders, it will be appreciated that participants may wish to know the evaluation of their securities before the closing of the pool. A pre-closing evaluation is thus preferred.
  • the Number Of Securities (NOS) 303 is defined as the total number of shares or the shares underlying options that the security holder has invested in the common pool. This number includes both shares and options for shares. Shares and options are treated equally in this respect.
  • each security holder may invest different types of securities (i.e. shares and options), and each type of security will be assigned its own PPS.
  • the NOS is not affected by the vesting terms, therefore options/shares that are not vested are treated equally as compared with vested shares/options.
  • the NOS also serves as an auxiliary variable, which indicates the full potential size of the security holder's investment, in terms of the number of shares.
  • the theoretical monetary value of the security holder's investments is computed. This is the theoretical value at the point of time that the pool has been closed for new investments.
  • the Member's Initial Investment Value (MIIV) is that theoretical value. The MIIV is computed by multiplying the NOS by the PPS.
  • the Members Stake Determination Ratio is the theoretical stake that the security holder will have in the pool, if both he and all the other pool security holders will have all of their participating shares and participating options vested and valid when the proceeds are distributed.
  • FIG. 4 and FIG. 5 both cover such issues and definition in detail .
  • the MSDR is computed in step 370 by dividing the MIIV of the individual security holder by the sum of all the MIIV's of all of the pool security holders. Please note that the definition "all the pool security holders" also includes the individual security holder himself.
  • the MSDR and/or MIIV are computed without first calculating the PPS and / or NOS.
  • This model is very naive, and can be greatly improved upon by taking into account information about the participating securities (absolute number or as a percentage from the total securities per security holder or from the total securities of the company), information about the security holder (education, work experience, salary, job description, curriculum-vita, time of joining the participant company, organizational position etc.), information about the "participant" company ( field of operation, financing information, business and R&D milestones, subjective evaluation of the companies value and potential, etc.), and the relationship between all those factors at different time points (at the time of joining the pool, at the time of the security holder receiving his securities, etc.).
  • step 380 all of the above mentioned values (MSDR, MIIV, NOS, PPS) are stored in the non-volatile database 1.
  • the values are stored in the individual security holder's personal file, since all of such values are computed individually for each security holder. It is important to note that all of such values may vary from security holder to security holder. The only constant value is the sum of all the MSDRs of all the security holders, which is always equal to one.
  • the security holder could either transfer/assign the options/shares to the pool 220 or undertake to transfer the proceeds in the event of a pool sale by such security holder 230. If the options/shares have been transferred to the pool 220, then the management company 9 will sell them in connection with an Exit, or otherwise at the discretion of the management company. The proceeds will then be transferred to the "proceeds from 'Exits' pool account" 2. If the security holder has undertaken to sell his participating shares or the shares underlying his participating options, then the security holder will transfer the proceeds from his pool sale in connection with an Exit or otherwise as instructed to sell by the management company to the pool's account 2.
  • the security holder's participating shares and shares underlying his participating options may be subject to selling constraints. Whenever the security holder is free to sell additional participating shares and shares underlying his participating options in connection with an Exit, then all of said shares must be sold immediately and the proceeds are transferred to the pool's account 2.
  • An additional embodiment will not require the security holder to sell all the participant shares immediately, if the shares that are not participant shares are still subject to selling constraints.
  • a certain proportional portion of shares must be sold from his overall holdings.
  • the "pool's portion" is equal to the number of participating shares and shares underlying his participating options divided by the total holdings in options/shares that the security holder had, at the time of joining the pool, in the participant company.
  • the pool management will finance the payment of the exercise price by providing such payment to the security holder. This is best when the exercise terms of the options are incorporated into the evaluation process of the "price-per-share".
  • the proceeds are collected in the proceeds account 410.
  • the amount of proceeds collected, after the management company deducts management fees, is deposited for the next periodical distribution among the security holders.
  • the distribution process is "time-driven”; in the preferred embodiment it is performed every six months.
  • the first step in the distribution process is to load 411 the MSDR and NOS, which are stored in the pool's database. Please recall that each security holder has different MSDR and NOS values.
  • the next step 420 is to determine the Number Of Entitled Shares (NOES).
  • the Number of Entitled Shares is the number of shares (including shares underlying participating options) of such security holder that will be considered when the proceeds are distributed. For example, if the security holder has lost all of his stake in the pool (for reasons explained in FIG. 5) then the NOES is zero.
  • the determination of the NOES is a complex process that will be discussed in detail later on with the assistance of FIG. 5.
  • MCES Member's Current Entitled Stake
  • the Pool's Total Current Entitled Stakes is computed as the sum of the MCES's of all the pool's security holders. This too is just an auxiliary variable with no actual meaning. The PTCES will always be equal to or smaller than one.
  • the actual amount of money that the security holder will receive from the proceeds distribution is computed in step 423. That amount is referred to as the Member's Entitled Amount of Proceeds (MEAOP).
  • MEAOP is computed by multiplying the total amount of proceeds for distribution (AOPFD) by the individual security holder's current stake in the overall pool. That stake is computed by dividing the MCES by the PTCES. This mechanism takes into account factors such as different vesting terms, security holders who lose (fully or partially) their stake in the pool, etc. (see FIG. 5 for details).
  • the MEAOP is transferred to the security holder 490.
  • the money is transfe ⁇ ed to the security holder's bank account.
  • a printed report is also sent by mail (or E-mail) to notify him of this transfer. This transfer may represent a major benefit to the security holder, as he gets an actual monetary gain, even if is his own company failed and all of his options/shares are now utterly worthless. Determining The Number Of Entitled Shares (NOES)
  • the Number of Entitled Shares is the number of shares (including shares underlying participating options) of such security holder that will be considered when the proceeds are distributed.
  • the NOES represents an important aspect of the preferred embodiment, as it serves as a mechanism for dealing with the variable legal and business characteristics of the different security holders. The mechanism will become clear after reviewing the detailed descriptions set forth in the following paragraphs.
  • the process of determining the NOES starts at 500. Please recall that FIG.
  • step 420 of FIG. 4 represents a detailed explanation of step 420 of FIG. 4. Therefore it is actually an internal subroutine of the proceeds distribution process.
  • a preliminary step 501 of loading the NOS is performed. During this step the file containing all the security holder's records is opened for easy future access.
  • the common options/shares pool includes a mechanism 510 that dismisses security holders whose participant companies, stopped functioning as a "going concern", within a year from the date the security holder joined the pool.
  • the purpose of this is to prevent employees of companies that are on the brink of bankruptcy/liquidation from joining the pool and enjoying proceeds collected from the other security holders, while contributing nothing.
  • the "going concern” status will be attributed to any company that is not involved in bankruptcy/liquidation proceedings, continues to employ at least four full time employees and has not had a receiver appointed with respect to a material asset of the company.
  • a "going concern” statement will be made by the participant company and certified by its auditor or lawyer. The statement will refer to its status with respect to being a "going concern” as of the date of the first anniversary of the participant joining the pool.
  • the security holder's reports and status manager 6 will oversee this process. It will be understood that, in an embodiment of the invention, indications of continued operations other than a going concern statement will be used to fulfill this function, such as the minimum number of employees or a minimum predetermined amount of expenses per month. Failure to comply with this requirement will result in the NOES being determined as zero 51 1. That means that the security holder will not be entitled to any proceeds from the pool.
  • step 520 an additional mechanism is discussed. Before the proceeds are distributed to a particular security holder, such security holder will have to prove that he is still entitled to his participating options/shares even if such options/shares remain subject to vesting or similar restrictions.
  • the proof required is a letter signed by the participant company and confirmed by its attorney or accountant. The letter will be examined by the security holder's reports and status manager 6, who will enter his approval to the member's database. The entry (like all the entries made by the management company's personnel) will include a time stamp. Such proof is required whenever proceeds are distributed (which is every 6 months in the preferred embodiment).
  • NOES will be determined as zero 521. This means that the security holder will not be entitled to any proceeds from the pool. Note that the NOES is re-computed whenever proceeds are distributed.
  • Vesting terms are a common practice in employee options/shares plans, and are treated in the following step 530.
  • the portion of participating options/shares that the security holder holds in the participant company and are already vested to him, at the time of the proceeds distribution, will be referred to as PJVESTED.
  • P_VESTED is a fraction, so for example when 25%o percent of the participating options/shares that the security holder holds in the participant company are already vested to him, the P_VESTED is equal to 0.25.
  • the computation is done on the number of shares, and both shares and options to shares are treated identically
  • the actual Number of Entitled Options is the number of participating options that were already vested to the security holder and actual participating shares.
  • the NOES can be computed by multiplying the NOS by PJVESTED, as shown in step 531.
  • the issue of vesting may be dealt with by reflecting the relevant vesting provisions in the evaluation of the securities (e.g., the PPS in steps 301 and 302 ). In such other embodiment, steps 530 and 531 may be unnecessary.
  • step 590 Finishing the NOES determination algorithm is step 590, which stores the NOES and returns the NOES to the calling program (which is described at FIG.
  • a pool may be created for shares only, for options only, for vested shares/options only, for unvested options/shares only or for any similar sub-category or combination.
  • the pool could be limited to shares/options of companies in a pre-determined field of activity or a combination of pre-determined fields of activity, such as biotechnology, internet technology, computer technology, communication technology, etc. It will also be appreciated that the method, method for conducting business and data processing system described hereinabove is not limited to a specific number of participants though it is especially suitable for a large number of participants.

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Abstract

Cette méthode de partage des risques pouvant être avantageuse pour les employés d'entreprises émergentes autorise la mise en commun d'actions ou d'options par les membres du groupement (4), même s'il existe des restrictions en matière de transfert de titres. Cette méthode de partage des risques repose sur la mise en commun de titres dans une base de données (1), sur leur évaluation et sur la fourniture aux parties prenantes de participations dans les produits du groupement et ce, en fonction des évaluations. Dans le cas d'un départ, les titres sont vendus et les produits répartis par la suite. La liquidation d'un groupement se produit à un moment préétabli ou après la survenue d'un événement préétabli tel que l'existence d'un nombre maximal de participants. Le volume des titres est limité afin d'encourager la fidélité des employés vis-à-vis de la société.
PCT/US2000/006433 1999-03-29 2000-03-28 Systeme et methode de traitement de donnees de mise en commun d'options/actions et methode de conduite d'affaires Ceased WO2000058886A1 (fr)

Priority Applications (3)

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IL14540700A IL145407A0 (en) 1999-03-29 2000-03-28 A system and method for data processing of options/share pooling, and a method for conducting business
EP00917871A EP1212710A4 (fr) 1999-03-29 2000-03-28 Systeme et methode de traitement de donnees de mise en commun d'options/actions et methode de conduite d'affaires
CA002362959A CA2362959A1 (fr) 1999-03-29 2000-03-28 Systeme et methode de traitement de donnees de mise en commun d'options/actions et methode de conduite d'affaires

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US12678499P 1999-03-29 1999-03-29
US60/126,784 1999-03-29

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Cited By (1)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US9534449B2 (en) 2013-10-22 2017-01-03 Halliburton Energy Services, Inc. Hydraulic control of drill string tools

Citations (1)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US5809484A (en) * 1993-10-08 1998-09-15 Human Capital Resources, Inc. Method and apparatus for funding education by acquiring shares of students future earnings

Patent Citations (1)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US5809484A (en) * 1993-10-08 1998-09-15 Human Capital Resources, Inc. Method and apparatus for funding education by acquiring shares of students future earnings

Cited By (1)

* Cited by examiner, † Cited by third party
Publication number Priority date Publication date Assignee Title
US9534449B2 (en) 2013-10-22 2017-01-03 Halliburton Energy Services, Inc. Hydraulic control of drill string tools

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IL145407A0 (en) 2002-06-30
EP1212710A1 (fr) 2002-06-12
EP1212710A4 (fr) 2002-07-31
CA2362959A1 (fr) 2000-10-05

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