rstonge

If you have constant return (e.g. 5%) this will show up as a linear growth function on a log scale. It will be exponential on a normal scale, which over time gets very steep. Using a log scale allows you to compare the growth rates of different investments in a consistent way.

I use DTN's NxCore for US Level I real-time data (last sale + bid/ask updates). The feed is excellent, but costs $500 per month. Here is the link: http://www.dtnmarketaccess.com/

SQL queries would be really good. I have been in many situations where I would like to do a simple query on a large spreadsheet and can't so I have to resort to programming. Most of the time it is not worth the effort, so I don't bother. This feature would be a big help.

tptacek's forth point is probably correct. You also may need to bring in someone with a series 7 license to close the sale. It's just the government looking after you for your own good.

tptacek's third point is moot as you will be getting shares in the company, not options, since the $1 per share is an exercise price.

The main issue here is: does the company allow the early employee to sell shares from an executed option when there is no public market for the shares. Most companies don't allow these shares to be sold (or have right of first refusal on a sale), so in this case the early employee would have to hold the shares.

If you are going to approach the CFO and let him know what you are thinking, this is the main issue to bring up. If the company will allow the early employee to sell the shares, than I would structure the $10,000 as a short term loan with tangible property as collateral (such as his car). The loan can either be paid back in 30 days or a set number of shares can be delivered at a set price. The $10,000 would be subtracted from YOUR_PRICE * SHARES_SOLD when the shares are delivered. You would write a check to the early employee for the difference. If no cash or shares are delivered you would get title to the car.

If a liquidity event is required to sell the shares to a third party, you could simply extend the loan period long enough for a liquidly event to emerge. This is more risky as the time frame is unknown, and would bring in concepts such as interest on the $10,000, etc.

The CFO should know the share price the board set at the last meeting. These prices tend to be low, but in general I think you should pay less than this amount for the shares. A discount of 50% is not unreasonable.

The other issue is taxes. The early employee will be incurring taxes at exercise on non-qualified options and at sale on incentive options, so in either case this needs to be factored in. The early employee will pay ( BOARD_SET_PRICE – EXERCISE_PRICE ) * NUMBER_OF_SHARES * MARGINAL_TAX_RATE for NQO at exercise and (YOUR_PRICE - EXERCISE_PRICE) * NUMBER_OF_SHARES * MARGINAL_TAX_RATE for ISO when he sells them to you. As long as the tax amount is greater than (YOUR_PRICE – EXERCISE_PRICE) * SHARES_SOLD he will be covered. His profit would be the shares he retains from the deal.

Good luck.