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option grants as collateral to secure a nonrecourse loan to
exercise her stock options through CIBC Oppenheimer (CIBC), a
brokerage firm affiliated with Allegiance.
CIBC was an investor and market maker in Allegiance stock.
CIBC provided Mrs. Racine with a loan based solely on the
collateral value of the exercised shares for 100 percent of the
exercise price plus withholding taxes to exercise her employee
stock options. The nonrecourse loan secured by Mrs. Racine
imposed conditions including margin debt requirements, loan
collateral requirements, and margin call requirements. Pursuant
to the loan security agreement, the stock was required to be held
by the lender until the debt was paid in full. If the stock
declined below a specified loan-to-value ratio and additional
funds were not provided, the collateral could be liquidated by
the lender.
In 2000, Mrs. Racine used margin debt from CIBC to exercise
her stock options on three separate occasions. Mrs. Racine’s
purchases, including the exercise prices and the amount of
withholding taxes for each purchase funded through the margin
debt, are as follows:
Purchase Shares Exercise Tax Market value
date purchased price withholding of shares
Mar. 9, 2000 20,210 $45,579.66 $584,496.16 $1,695,113.75
Apr. 12, 2000 2,524 6,616.39 53,524.27 151,124.50
Aug. 7, 2000 2,523 6,614.75 45,536.28 126,465.38
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Last modified: May 25, 2011