Nortel offers stock option exchange

In response to its devalued stock price, Nortel Networks is offering its employees a chance to exchange higher-priced options with options more in line with the current economy.

“Stock options are a key component of a competitive rewards package in the global technology industry where competition for the best talent is always fierce, even in a market downturn,” said Nortel president and CEO John Roth in a statement.

Employees who choose to participate in the program will be required to tender for cancellation all options granted between November 12, 1999 and February 12, 2001. For every three of these options cancelled, employees will receive two options with the lower exercise price. For options received on or after February 13, 2001, participants will receive three new options for every four options cancelled. Members of the Nortel board and officers appointed by the board are not eligible for the exchange program.

The new options’ exercise price will be set at the market price of one share of Nortel common stock on the day the new options are granted. These options, however, cannot be exercised for six months after they are granted.

As of May 31 there were about 333 million outstanding options to purchase common shares of Nortel. Approximately 1/3 of these are expected to be eligible for the program.

With share prices down across the board, options have become a hot-button issue in the communications sector. Lucent Technologies Chairman and CEO Henry Schact recently remarked that, “we're scratching our heads like everybody else in high tech as to what to do with the options.”