Stock option exchange program

Therefore, a company that structures its exchange program as a cash buyout of underwater options should still plan on seeking shareholder approval, even though not required by the applicable exchange. Due to these ISS guidelines and the expectations of institutional investors, directors and executive officers are frequently excluded from participating in option exchange programs.

Nevertheless, because those individuals typically hold a large number of options, excluding them can undermine the goals of the program and can exacerbate executive retention and motivation concerns. As an alternative to excluding them outright, companies could consider having directors and executive officers participate in a similar program on less favorable terms than other employees, and could also consider seeking separate shareholder approval for that offering to avoid jeopardizing the overall program.

Equity Plan Proposals. Accounting Treatment. Companies should consult with their auditors before proposing an option exchange. Under Accounting Standard Certification Topic , an option exchange is considered a modification of the outstanding options participating in the exchange and incremental compensation expense will have to be recognized to the extent that the fair value of the replacement awards exceeds the fair value of the cancelled options.

Tender Offer Rules. The exemptive order permits a company to exclude certain employees and tranches of outstanding stock options from the program and enables a company to provide different considerations for different grants.

For example, a company may offer different exchange ratios based upon the exercise price or the remaining term of the underwater stock options being exchanged. In order to qualify for relief under the exemptive order, the following conditions must be satisfied: 1 the company must be eligible to use a registration statement on Form S-8; 2 the stock options subject to the exchange offer and the securities offered in the exchange offer must be issued under an employee benefit plan [4] ; 3 the program must be conducted for compensatory purposes; 4 the company must disclose the essential features and significance of the exchange offer, including risks that option holders should consider in deciding whether to accept the offer; and 5 except as set forth in the exemptive order, the company must comply with the tender offer rules of Rule 13e Pursuant to Rule 13e-4, upon commencement of a stock option exchange program, a company is required to file a Schedule TO with the SEC and leave the offer open for at least 20 business days.

The offer to exchange must be distributed to all eligible employees either electronically or by mail. Generally, a company must file with the SEC all written communications made prior to, or following, the commencement of the tender offer, including any press releases and employee communications whether written or oral.

Once a tender offer has commenced, it is subject to SEC review and comment. Given the compensatory nature of stock option exchange offers, in most instances the SEC will be satisfied with additional supplemental information which is provided only to the SEC supporting the original disclosure or clarifying amendments to the Schedule TO. If, however, a major disclosure issue arises with the SEC, a company may be directed by the SEC to send participants in the offer a supplement to the offer in order to clarify or supplement the original disclosure.

Securities Laws Disclosure. If shareholder approval is required to implement a stock option exchange program, a company must disclose the material terms of the exchange in the proxy statement in which approval is sought. Stock option exchanges and repricings also will trigger the need for any participating directors and executive officers to file a Form 4 with the SEC, both with respect to cancelled stock options and new equity grants.

Share Registration. Before launching an option exchange program, companies should determine whether they have share capacity on an already filed registration statement on Form S If additional shares are needed, an amended registration statement will need to be filed. Tax Treatment—Incentive Stock Options.

Finally, if an option exchange offer remains open for more than 30 days, any outstanding ISOs offered to participate in the exchange will be considered modified and therefore newly granted on the date the offer was made, which will lead to disqualification of ISOs held by employees who choose not to participate in the exchange. Tax Treatment—Section A. The cancellation or repricing of stock options is generally treated as a nontaxable exchange under U.

Under the U. Cash payments made in exchange for stock options are immediately taxable, unless the cash is subject to vesting or other forfeiture conditions. A stock option repricing or a stock option-for-stock option exchange will result in a modification of a stock option, and will need to have a new exercise price that is at or above the fair market value of the stock to continue to be exempt from Section A. Multiple repricings of the same stock option may be problematic, because this may indicate that the exercise price is in fact adjustable, which is prohibited for Section A-exempt options.

The cancellation of a stock option or the exchange of a stock option for an alternative equity security will generally not raise Section A implications; however, the new equity award may be subject to Section A. Tax Treatment—Section m.

These changes apply to tax years beginning after December 31, An option exchange or repricing would constitute a material modification to the original option and eliminate their grandfathered status. Every 2 minutes, a real-time audio feed announces the latest big news via my PC speakers; this service alone is worth the upgrade to Benzinga PRO Essential. Imagine chatting directly with the analyst or reporter that submitted an article. This feature allows you to do just that by directly questioning the Benzinga news desk to dive deep into your specific questions straight from the news hub.

The news team also highlights what they believe to be important news via the sentiment indicators only for Benzinga Pro Essential users. Benzinga Pro also has a very active user community, with eight live-chat channels and a Benzinga TV channel featuring Benzinga studios live broadcasts.

Benzinga Pro has dramatically improved its technical analysis charting over the past few years by integrating a cut-down version of TradingView our review winner. The TradingView integration offers indicators, real-time stocks charts, and seven chart types, including bars, candles, Heiken Ashi, Line, Area, and Baseline charts. You can now draw on charts and perform solid technical analysis.

Sentiment indicators are an excellent feature that allows you to see the sentiment of the analyst who submits the news item; you see this in the color of the ticker symbol; red is bearish, green is bullish; this is unique and a great asset. It is designed to give you a clean, quick view of the whole picture for a given stock. This includes all the core financial documents like balance sheets and important income statement information. The main functionality missing from Benzinga Pro is the ability to perform any backtesting or automated trading.

This trading software is not for algorithmic or system traders; it is designed to deliver tailored market-moving news fast. I have been using Benzinga Pro for five years now; the news platform is exceptionally configurable and can run in multiple windows on multiple monitors. In the screenshot below, you can see how I have my Benzinga Pro interface configured.

Benzinga Pro is extremely powerful yet easy to use, which is often a delicate balance to strike, and to top it all off, they have also now added real-time price quotes to the service, so you can see when news breaks what the impact is on the stock price.

Yes, Benzinga Pro is worth buying for day traders and investors who want an actionable real-time news service, sentiment indicators, market scanning, and financial reporting to get a profitable edge in the market. After using Benzinga Pro for five years, I can say the exclusive features like audio squawk box, chat to the newsdesk, and the powerful calendar suite, make Benzinga Pro worth it.

Free 7 Day Trial. The TrendSpider team is innovating at breakneck speed, and the features they are innovating are unique to the industry with trendline automation, pattern recognition, and multi-timeframe analysis.

The Premium plan has multi-time-frame analysis and trendline pattern recognition for stocks, ETFs, currencies, and OTC markets, plus 25 alerts. The Elite Trader Plan includes after-hours and pre-market data, OTC, Crypto, Forex, and Futures, plus dynamic alerts and full backtesting, meaning you can apply the auto trendlines and multi time-frame analysis on many different markets.

The system runs on all platforms, from smartphones to PCs. Packed full of innovative technical analysis tools means that TrendSpider is catapulted to the top of this list. If you are a serious market analyst, then TrendSpider will help you do the job quicker, with better quality, and help you not to miss an opportunity.

The automated trendline detection and plotting do a better job than a human can; using algorithms, the system can detect thousands of trends-lines and flag the most important ones with the highest backtested probability of success.

Another great feature is the advanced plotting of support and resistance lines into a subtlely integrated chart heatmap. The latest innovation from the TrendSpider team is the market scanner, which enables you to scan a specific stock and the entire market for trades matching your technical criteria. Combining AI trend detection and analysis with scanning the whole stock market is a unique advantage. TrendSpider takes a different approach to backtesting.

The platform is built from the ground up to detect trendlines and Fibonacci patterns automatically, meaning it already has backtesting built into the code. The highest probability trendlines are automatically flagged, and you can adjust the sensitivity of the algorithm that controls the detection to show more or fewer lines. TrendSpider has also implemented a strategy tester that allows you to type what you want to test freely, and it will do the coding for you. It is a smooth and straightforward implementation.

You can jump into coding if you want to, but the key here is that you do not HAVE to. Integrated backtesting of automated trendlines, showing win-rate, profitability, and drawdown is a new addition and warmly welcome; the team has propelled TrendSpider into one of the leading technical analysis packages in the industry.

For example, seeing hourly, daily, weekly trend lines plotted on the same chart might be confusing at first. Still, after applying a little effort, you might find you cannot live without them—an excellent score on usability. Yes, TrendSpider is worth buying if you are a stock trader who wants to utilize cutting-edge automation for technical stock chart analysis.

The automated pattern recognition of trendlines, Fibonacci, and candlesticks, plus backtesting, make it a compelling proposition. MetaStock is best for stock traders who need real-time news, access to a huge stock systems marketplace, and the best technical stock chart analysis, backtesting, and forecasting.

Special Deal: 3 Months for the Price of 1. The latest release of Metastock is a big hit with improvements across the board. Considerable advances in scanning, backtesting, and forecasting make this one of the best offerings on the market.

MetaStock is designed as a broker agnostic technical analysis platform. It does provide limited broker integration, but the execution of trades from charts and live integrated profit and loss analysis of your live portfolio is limited.

Excellent watchlists featuring company financials and powerful scanning of the markets make MetaStock unique. Refinitiv is the fastest global news service available in the industry. For international investors, MetaStock is unique because the news is also translated into all major languages. MetaStock has over stock tools for charting, annotation, drawing trendlines and indicators; the broadest selection of technical analysis tools on the market today. Innovative additions to MetaStock, like Foreign Exchange forecasting based on market sentiment, are exceptional.

This makes MetaStock our recommendation for the best technical chart analysis software. This is a unique differentiator from the competition. The most significant addition to the MetaStock arsenal is the forecasting functionality, which sets it apart from the crowd. MetaStock has over computerized stock market systems called Expert Advisors. The Expert Advisor systems, either in-built or as 3rd part add-ons, will help you understand and profit from technical analysis patterns in price and volume.

You can even use artificial intelligence-like functionality to test a set of variables within your backtesting. Fuzzy logic is an incredibly powerful feature that is often overlooked with MetaStock. The most significant MetaStock innovation is the forecasting functionality, which does not exist with any other software.

You are then presented with an interactive report which enables you to scan through the many predictive recognizers, which help you understand the basis for the prediction and the methodology. No, MetaStock is not easy to use because it feels like a collection of separately developed applications that require user education to make them work together.

TC has an integrated brokerage, meaning you can trade stocks and options directly from charts. Get TC Free. TC has long been one of my favorite tools; I have been a subscriber for over 20 years and find the latest release another step forward.

Endlessly customizable and scalable, the platform offers nearly everything a trader will need. TC is a slick and powerful technical analysis platform, enabling entire US market scanning and screening for fundamentals and technical analysis. You can use the huge library of available indicators and create your custom indicators and conditions without coding. The service is available for free so that you can try it out. TC is one of the best Stock Options analysis software programs, allowing you to scan and build options strategies seamlessly.

You can scan on gamma, delta, expiration, options spread, and even short interest. If you want fundamentals screened in real-time layered with technical screens integrated into live watch lists connected to your charts, TC is a power player. TC Easyscan can be set up with a few clicks, and you do not need any coding experience.

If you want social community and integrated news, you will need to roll back to TC v With over 70 different indicators, you will have plenty to play with. They have also introduced live alerts that you can configure to email or pop up if an indicator or trend line is breached; very useful indeed. If you want to perform powerful backtesting, then TC is not for you.

You may be able to utilize the add-on product called StockFinder if you are a Platinum Member, and you specifically call support to ask for it.

However, StockFinder is no longer in active development, which is a shame because I think it was a very good backtesting suite. Yes, TC is incredibly easy to use, which masks the power of the software. You will be up and running quickly and feel productive in minutes. TC also has a support desk located in the USA and is one of the few vendors you can call by phone and speak with a real person. Visit Optuma. Optuma is a technical analysis stock charting tool created by Mathew Verdouw, a leading technical analyst.

Optuma is developed for professional technical analysts in financial institutions but is also available to retail investors. Optuma is at the top end when it comes to price. Optuma is squarely aimed at professional traders and wealth managers, as you can see from the price. Their clients are tier one Wall Street investment houses. But you can still take advantage of their first-class solution.

If you have a Bloomberg feed already established, this also offers a new world of data and fundamental analytics.

This slick integration of fundamentals into the charting and analysis means this is a significant improvement over a Bloomberg terminal and warrants it as a clear leader in this space. You can build watchlists with fundamental data, and everything operates in real-time; advanced scanning includes an excellent 3-dimensional sector map.

To top it off, they have also implemented an excellent astrological analysis suite as an upgrade for those who believe in that sort of thing; yes, commodity traders, I am talking about you :. Optuma has backtesting well covered also, with a well-implemented backtesting and system analysis toolset, which is up there with the industry leaders.

Still, unlike the others, you do not need a Ph. The advanced programming language that connects all of Optuma is simple to use, and there are many detailed and helpful videos available to teach yourself. The code runs lightning-fast, and you can scan entire markets quickly and effectively.

So the quality of the testing tools is first class. Scanz is for day traders, who want a super simple and slick workflow, real-time streaming charts, news, unique Level II data, dollar volume information, and excellent broker integration. Visit Scanz. However, with the advent of TradingView , the largest trading community platform Scanz has fierce competition. Scanz specializes in providing real-time data and news fast directly to your screen.

The deal news section in Scanz is very good; I like the simple implementation; you can get the low down on contracts and deals struck between companies. Scanz also focuses on news services, but it is let down by having no social integration.

This single window contains a wealth of critical trading information, including real-time streaming news, level 2 data, including time and sales. The Scanz Team has a fantastic set of integrations to your broker to enable this, including RealTick, Sterling Trader, LightSpeed, and, most importantly, TD Ameritrade and Interactive Brokers, two of the powerhouses of the brokerage world. So, the chances are your broker of choice already covers you. Scanz contains many fundamental screens and the ability to scan entire markets for liquidity and volume patterns to find volatility that you can trade for a profit.

This functionality makes Scanz a unique offering. VectorVest helps simplify market timing by providing buy and sell ratings on stocks in the US, Australia, and Europe.

But beware, some customers complain about data integrity. Option exchange programs also trigger other disclosure requirements. For example, if a company reprices or exchanges options of any of its named executive officers, then it must explain its rationale in its Compensation Discussion and Analysis and must also disclose the incremental fair value with respect to such an exchange program in its "Grant of Plan-Based Awards" table in the next proxy statement.

In addition, an option exchange program involves the disposition of the existing option and the acquisition of the new option or other equity grant, both of which are reportable under Section 16 a of the Exchange Act. What are the accounting consequences? Companies will want to determine whether their option exchange program will result in an additional accounting charge.

Value-for-value exchanges are commonly structured to avoid any incremental accounting charge under FAS R. Any accounting consequences must be stated in the tender offer filings with the SEC. Also, FAS R requires that companies describe the exchange program in the stock plan footnote to their financial statements.

What are the potential tax consequences? Companies should consider whether the structure of an option exchange program will comply with Section m of the Internal Revenue Code. The length of time for which an exchange program offer is open can also result in negative tax consequences. If an exchange program offer is open for more than 30 days with respect to options intended to qualify for ISO treatment, those ISOs are considered newly granted on the date the offer was made, whether or not the optionholder accepts the offer.

Another consequence of the new grant date is that the holding period to obtain capital gains treatment is restarted. Will the option exchange program increase overtime costs? Subject to compliance with Section 7 e of the Fair Labor Standards Act "FLSA" , any income that a non-exempt employee earns from the exercise of stock options is excluded from the employee's regular rate of pay for purposes of determining overtime pay.

One of the conditions of Section 7 e of the FLSA is that the option cannot be exercisable for at least six months after the grant, with limited exceptions for death, disability, retirement or a change in control. Therefore, a company should consider the potential increase in overtime pay if it intends to grant a repriced stock option to a non-exempt employee without imposing a vesting condition of at least six months.

What are some other practical issues? A company contemplating an option exchange program should plan for sufficient time for board of director and committee review and approvals, and advance review of the program by proxy advisors, accountants and legal advisors. The company may also want to retain a proxy solicitor to assist with obtaining shareholder approval of the option exchange program, as well as a compensation consultant, whose input on the program terms may prove helpful in structuring a program that will be able to clear the hurdle of shareholder approval.

Finally, a company should be mindful that any communications, written or oral, it makes to its employees regarding a possible option exchange program will likely need to be filed with the SEC on the day on which such a communication is made as part of the tender offer documents, including as a pre-commencement communication if such communication is made prior to launch of the option exchange program and the filing of the exchange program documentation.

Marian A. Nicole G. Lynda T. Scott A. If you've followed along this year, it has been quite the saga of events in Washington, D. Cullen and Dykman. Now, in a competent authority arrangement "CAA" between the US and Malta, this interpretation has effectively been shut down. After negotiating for months with the White House and congressional Democratic leaders, Sen. Like last year, has been a difficult year. Sign Up for our free News Alerts - All the latest articles on your chosen topics condensed into a free bi-weekly email.

Register For News Alerts. Article Tags. JAN More Webinars. Artificial Intelligence.