Opinion ID: 779792
Heading Depth: 3
Heading Rank: 2

Heading: Lucente's Retirement from IBM

Text: 9 In the fall of 1990, some few months before he retired, Lucente began to sense that he was no longer in favor at IBM. For example, during a visit to Tokyo in October 1990, Akers reversed a major decision that Lucente had made. Two months later, Akers told Lucente that his business plan for the coming year was unacceptable and that Akers was sending another executive to Tokyo to work as Lucente's assistant group executive. Eventually, Akers informed Lucente that he was being replaced in Tokyo. 10 During their discussions about what awaited Lucente when he returned from Tokyo, Akers told him to expect a job of lesser responsibility. This was so, according to Akers, because there were only two or three jobs of responsibility similar to the Tokyo position in the entire company. Although Akers never offered Lucente a specific position before he retired, Akers did raise the possibility that Lucente might pursue various senior positions in the company. In their discussions, Akers encouraged Lucente to seek the best opportunity that he could find, either within IBM or, ominously, at another company. 11 Thereafter, Lucente accepted a position at Northern Telecom. Lucente had met with Paul Stern, the CEO of Northern Telecom, in the summer of 1990, to discuss employment possibilities. In the fall of 1990, Lucente had several meetings with Stern and others at Northern Telecom. Lucente joined Northern Telecom as the Senior Vice President of Marketing, with a general understanding that he would eventually serve as President and Chief Operating Officer, and potentially succeed Stern as CEO, of the company. Lucente received a salary of $750,000 per year at Northern Telecom, approximately $100,000 more than his yearly salary at IBM, as well as stock options and a variety of other benefits. 12 When he retired, IBM told Lucente that Northern Telecom would not be deemed an IBM competitor, thereby ensuring that he would keep his IBM restricted stock and stock options while working at Northern Telecom. In February 1991, IBM and Lucente entered into a letter agreement (the Letter Agreement). This letter, sent by W.E. Burdick, Senior Vice President of Personnel at IBM, and signed by Lucente, set out the details of Lucente's retirement: 13 In connection with your retirement from IBM, we will pay you a special payment of $675,000.... 14 .... 15 Following your retirement, other than your employment with Northern Telecom, which we deem not to be competitive or in conflict with the best interests of IBM based on the facts in your situation, you shall not engage in any activity as an employee, consultant, or director, personally or with any firm or organization, that is or becomes, in IBM's sole opinion, a competitor of IBM or its subsidiaries, or is otherwise prejudicial to or conflicts with the interests of IBM. This agreement is in addition to the provisions of the IBM Employee Confidential Information and Invention Agreement.... Your outstanding stock options and restricted stock continue to be subject to the Termination of Employment sections of the IBM Stock Option Plans, the 1989 Long Term Performance Plan, and the [1982] IBM Variable Compensation Plan. 16 Additionally, by virtue of his thirty years at IBM, Lucente retired with his full IBM pension of approximately $250,000 per year. 17