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Administration May 6, 2001
Nortel to Give Option Holders Second-Chance
June 5, 2001 (PLANSPONSOR.com) - In a bid to restore
some of the luster to its pay program, Nortel Networks has
decided to allow staff to cancel their old "underwater" stock
options in exchange for new options in six months plus one
day from the cancellation.
Reported by Nevin E. Adams
Nortel’s rewriting strategy avoids a dilution to existing shares and is increasingly adopted by companies listed on U.S. exchanges, according to the company.
The world’s largest supplier of telecommunications equipment plans to reprice as many as 11 million options, with a variety of strike prices.
Board, Officers Stay on Sidelines
Nortel said officers and members of the board of directors cannot participate in the program, but critics don’t expect that to last long.
The Plan
The plan, which has already received regulatory approval, will allow eligible employees to cancel options granted on or after November 12, 1999, and get new options that will be issued at least six months and one day after the cancellation date.
For options issued between Nov. 12, 1999, and Feb. 12, 2001, staff will receive two new options for every three canceled. For options issued on or after Feb. 13, 2001, staff will receive three new options for every four options canceled.
The exercise price for the new options will be equal to 100% of the market price of one Nortel common share on the grant date of the new options.