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

Heading: IBM's Cancellation of Lucente's Incentive Awards

Text: 18 Lucente worked at Northern Telecom for two years. When another executive was named President of the company, Lucente realized that he would not succeed Stern. He resigned from Northern Telecom and began looking for another job. 19 In early April 1993, Lucente considered accepting the position of Vice President of Worldwide Sales and Marketing at Digital Equipment Corporation (Digital), an IBM competitor. On April 8th, 1993, concerned about the status of his IBM restricted stock and stock options, Lucente consulted IBM before signing the Digital agreement (he had already verbally accepted) to inquire whether his employment at Digital would affect his IBM restricted stock and stock options. Four days later, IBM's General Counsel, Dan Evangelista, told Lucente that working for Digital would indeed be a violation of his non-compete agreements. Nevertheless, on April 14th, Lucente chose to accept Digital's offer: a base salary of $630,000, a minimum bonus of $150,000, as well as thousands of shares of Digital stock and stock options. 20 On April 15, 1993, IBM sent a letter (the cancellation letter) to Lucente informing him that his restricted stock and stock options were now cancelled as a result of his employment with Digital. On this date, all of Lucente's stock options were underwater; that is, their exercise prices (between $96 and $159) were greater than the market price for IBM shares ($48). Over the next few years, Lucente repeatedly asked IBM to reconsider this decision. IBM, however, refused to reverse its decision. Regrettably for Lucente, IBM's stock price increased considerably after 1993.