Lucent Reveals Severance Deals for Former Execs

Aug 13 2001

CHICAGO, Aug 13 - Embattled telecommunication equipment giant Lucent Technologies Inc. <LU.N> said on Monda it will pay its former chairman, who was ousted last fall, severance package that includes a $5.5 million one-time paymen and assumption of bank loans.

The Murray Hill, New Jersey-based company also said in it quarterly filing with the U.S. Securities and Exchang Commission that it will assume $4.3 million in loan former Chairman and Chief Executive Richard McGinn had with tw banks. The company said the three-year loan is at a competitiv interest rate and is fully backed by real estate owned b McGinn.

McGinn is already slated to receive about $1 million a yea for life under his pension plan, according to a Lucent prox statement filed in February.

A portion of McGinn's stock options were vested, althoug all of them have a lower strike price than Lucent's curren stock price of $6.45 a share, rendering them worthless, th company said in the filing. Most were vested at $29 a share with the rest at $58.

Lucent also vested and repurchased a portion of McGinn' restricted stock options for about $7 million, which wa applied toward the loan the company assumed, a source close t the situation said. The current $4.3 million total is wha remains after the $7 million was applied to the loan.

McGinn was forced out last October after the compan suffered through several quarters of disappointing profits operational blunders, and a plummeting stock price. He ha replaced Henry Schacht, Lucent's chairman from 1995 to 1997 an who has returned to lead Lucent's current turnaround plan.

McGinn also will receive up to $9,000 a month for offic space until Dec. 1 or until he is hired by someone else whichever comes first, according to the filing.

He is eligible for health benefits according to his 3 years with the company, and will serve as a consultant fo Lucent up to ten hours a month until he is hired by anothe company or Oct. 22, 2002, whichever comes first, according t the filing.

CFO CASHES IN, TOO

Lucent also revealed details of its severance package wit former chief financial officer, Deborah Hopkins, who was ouste in May after a year with the company.

Lucent's former CFO received a one-time payment of $3. million under her severance package, the filing said. Th source said her restricted stock options were repurchased fo about $1.4 million.

She also had all her existing stock options immediatel vested, although they too are worthless as they have a lowe strike price than Lucent's current price.

Hopkins was cut loose just a year after she joined th company from Boeing Co. <BA.N>. She received a $4 millio signing bonus when she joined Lucent in April 2000.

Both former executives also agreed to non-compete clause of varying lengths -- McGinn for 18 months starting Oct. 22 2000, and Hopkins for six.

Neither executive could be reached to comment.

Lucent officials would only say the company is focused o its restructuring efforts, which were launched in January.

"This chapter is closed," Lucent spokeswoman Michell Davidson said. "We're moving ahead with the business of turnin this company around."

Lucent's shares closed trading on Monday before th documents were filed with the SEC off 6 cents, or almost percent, at $6.45 on the New York Stock Exchange .

Since the start of the year, they have underperformed th Standard & Poor's 500 index by about 48 percent, but hav outperformed its peers in the S&P Communications Equipmen index by about 6 percent.