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INTERNATIONAL BUSINESS MACHINES CORP. v. MARTSON
February 5, 1999
INTERNATIONAL BUSINESS MACHINES CORPORATION, PLAINTIFF,
STEPHEN C. MARTSON, DEFENDANT.
The opinion of the court was delivered by: McMAHON, District Judge.
This is a motion for judgment on the pleadings pursuant to Rule
12(c) of the Federal Rules of Civil Procedure. On October 1,
1998, Plaintiff International Business Machines Corporation
("IBM") brought this action for breach of contract against
Defendant Stephen Martson ("Martson"), a former employee of IBM.
The complaint alleges that Martson violated his stock option
agreements by exercising stock options within six months of
working for a competitor and by subsequently failing to repay to
IBM the profits that he realized from the exercise.
IBM is a manufacturer of personal computers with its principal
place of business in New York. The corporation employed Martson
for a period of two years, from 1996 to 1998. Martson served as
Vice President of Procurement in North Carolina.
IBM maintained a 1994 Long Term Performance Plan ("Plan") in
order to keep key senior employees loyal to the company. The
"Objective" provision of the Plan described why IBM initiated the
"The IBM Long Term Performance Plan is designed to
attract and retain executives and other selected
employees whose skills and talents are important to
the Company's operations, and reward them for making
major contributions to the success of the Company.
These objectives are accomplished by making long-term
incentive awards under the Plan, thereby providing
participants with a proprietary interest in the
growth and performance of the Company."
Pursuant to the "Eligibility" provision of the Plan, employees
are eligible for an award when, in the judgment of the committee
administering the plan or in the judgment of the management of
the company, the employee can have a significant effect on the
success of the company.
After an employee receives a stock option award and
acknowledges acceptance of the terms of a stock option agreement,
the award becomes exercisable pursuant to a schedule set forth in
the agreement. The stock option award, however, is subject to
forfeiture under certain circumstances:
13. Cancellation and Recission of Awards
(a) "A Participant shall not render services for any
organization or engage directly or indirectly in any
business which, in the judgment of the chief
executive officer of the Company or other senior
officer designated by the Committee, is or becomes
competitive with the Company, or which organization
or business, or the rendering of services to such
organization or business, is or becomes otherwise
prejudicial to or in conflict with the interests of
the Company . . ."
(d) "[F]ailure to comply with the provisions of
paragraph (a) of this Section 13 prior to, or during
the six months after, any exercise, payment or
delivery pursuant to an Award shall cause such
exercise, payment or delivery to be rescinded. The
Company shall notify the Participant in writing of
any such recission within two years after such
exercise, payment or delivery. Within ten days after
receiving such notice from the Company, the
Participant shall pay to the Company the amount of
any gain realized or payment received as a result of
the rescinded exercise, payment or delivery pursuant
to an award . . ."
Martson received two awards: one on April 15, 1996 and another
on March 13, 1997. After receiving the 1996 grant, he signed a
Stock Option Agreement, in which he acknowledged reading the
terms of the Plan. The agreement further stated:
"In consideration of this option grant, you agree to
comply with the requirements of the Plan and this
Agreement, specifically those portions relating to
cancellation and rescission of `Awards'"
After receiving the 1997 grant, Martson made an audio recording
acknowledging that he had read and agreed to the terms of the
1997 stock option agreement, which contained the same ...
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