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<SEC-DOCUMENT>0000005907-98-000013.txt : 19980330
<SEC-HEADER>0000005907-98-000013.hdr.sgml : 19980330
ACCESSION NUMBER: 0000005907-98-000013
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 27
CONFORMED PERIOD OF REPORT: 19971231
FILED AS OF DATE: 19980327
SROS: BSE
SROS: CSX
SROS: NYSE
SROS: PHLX
SROS: PCX
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: AT&T CORP
CENTRAL INDEX KEY: 0000005907
STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
IRS NUMBER: 134924710
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-01105
FILM NUMBER: 98575795
BUSINESS ADDRESS:
STREET 1: 32 AVENUE OF THE AMERICAS
CITY: NEW YORK
STATE: NY
ZIP: 10013
BUSINESS PHONE: 2123875400
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN TELEPHONE & TELEGRAPH CO
DATE OF NAME CHANGE: 19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<TEXT>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _________ to _________
Commission File Number 1-1105
AT&T CORP.
A NEW YORK I.R.S. EMPLOYER
CORPORATION NO. 13-4924710
32 Avenue of the Americas, New York, New York 10013-2412
Telephone Number 212-387-5400
Securities registered pursuant to Section 12(b) of the Act: See attached
SCHEDULE A.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes....x.... No........
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
At February 28, 1998, the aggregate market value of the voting stock held by
non-affiliates was $98,828,206,879.
At February 28, 1998, 1,620,390,922 common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's annual report to shareholders for the year
ended December 31, 1997 (Part II)
(2) Portions of the registrant's definitive proxy statement dated March 26,
1998, issued in connection with the annual meeting of shareholders (Part
III)
<PAGE>
SCHEDULE A
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Shares # New York, Boston, Chicago,
(Par Value $1 Per Share) ## Philadelphia and Pacific Stock
# Exchanges
Thirty-Seven Year 4-3/4% Debentures, #
due June 1, 1998 #
#
Thirty-Six Year 4-3/8% Debentures, #
due May 1, 1999 #
#
Thirty-Three Year 6% Debentures, #
due August 1, 2000 #
#
Thirty-Five Year 5-1/8% Debentures, # ##New York Stock Exchange
due April 1, 2001 #
#
Ten Year 7-1/8% Notes, #
due January 15, 2002 #
#
Ten Year 6-3/4% Notes, #
due April 1, 2004 #
#
Ten Year 7% Notes, #
due May 15, 2005 #
#
Twelve Year 7-1/2% Notes, #
due June 1, 2006 #
#
Twelve Year 7-3/4% Notes, #
due March 1, 2007 #
#
Thirty Year 8-1/8% Debentures, #
due January 15, 2022 #
#
Medium Term Note 8.2%, #
due February 15, 2005 #
#
Thirty Year 8.35% Debentures, #
due January 15, 2025 #
#
Thirty-Two Year 8-1/8% Debentures, #
due July 15, 2024 #
#
Forty Year 8-5/8% Debentures, #
due December 1, 2031 #
<PAGE>
TABLE OF CONTENTS
PART I
Item Description Page
1. Business ........................................................ 1
2. Properties ...................................................... 9
3. Legal Proceedings ............................................... 10
4. Submission of Matters to a Vote of Security-Holders ............. 11
PART II
Description
5. Market for Registrant's Common Equity and Related Stockholder
Matters ....................................................... 13
6. Selected Financial Data ......................................... 13
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 13
8. Financial Statements and Supplementary Data ..................... 13
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ...................................... 13
PART III
Description
10. Directors and Executive Officers of the Registrant .............. 13
11. Executive Compensation .......................................... 13
12. Security Ownership of Certain Beneficial Owners and Management .. 13
13. Certain Relationships and Related Transactions .................. 13
PART IV
Description
14. Exhibits, Financial Statement Schedule, and Reports on
Form 8-K....................................................... 14
See page 12 for "Executive Officers of the Registrant."
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
AT&T Corp. ("AT&T" or the "Company") was incorporated in 1885
under the laws of the State of New York and has its principal executive offices
at 32 Avenue of the Americas, New York, New York 10013-2412 (telephone number
212-387-5400).Internet users can access information about AT&T and its services
at http://www.att.com.
AT&T is among the world's communications leaders, providing
voice, data and video telecommunications services to large and small businesses,
consumers and government entities. AT&T and its subsidiaries furnish regional,
domestic, international and local communication services. AT&T's wholly owned
subsidiaries, including AT&T Wireless Services, Inc., provide cellular telephone
and other wireless services. AT&T also provides billing, directory, and calling
card services to support its communications business.
DEVELOPMENT OF BUSINESS
During 1996 AT&T separated its business into three publicly
held stand-alone companies: the current AT&T, focused on communication and
information services, Lucent Technologies Inc. ("Lucent") focused on
communications systems and technology and NCR Corporation ("NCR") focused on
transaction-intensive computing. AT&T distributed to its shareowners all of the
shares AT&T owned of Lucent on September 30, 1996 and all of the shares of NCR
on December 31, 1996.
Following the separation, AT&T has focused on its core
business and disposed of assets and businesses that were not strategic. In
October 1996, AT&T completed the sale of its majority interest in AT&T Capital
Corporation (leasing services business) in which AT&T received $1.8 billion in
cash. In 1997, AT&T completed the sales of AT&T Skynet (satellite services),
AT&T Tridom (satellite data and video communications services) and its submarine
systems business. In addition, AT&T sold its investments in DirectTV
(direct-broadcast television service and DSS equipment business) and decreased
its investment in Smartone Communications (a wireless joint venture in Hong
Kong).
In addition, in 1997, AT&T agreed to sell AT&T Universal Card
Services, Inc.(credit card services business), American Transtech Inc. (customer
care services), its investment in LIN Television Corporation (commercial
television broadcasting) and WOOD-TV (AT&T's television station in Grand Rapids,
Michigan).
On January 8, 1998, AT&T entered into a definitive merger
agreement with Teleport Communications Group, Inc. ("TCG"). The merger with TCG,
which remains subject to regulatory approvals and a number of other conditions,
is expected to close mid to late 1998. Under the merger agreement, each share of
TCG will be exchanged for .943 of an AT&T share in an all-stock transaction
valued at the time at approximately $11.3 billion. TCG is the largest
competitive local exchange carrier in the United States, with networks in
operation or under construction in 66 U.S. markets as of December 31, 1997. As
of September 30, 1997, TCG's local networks encompassed over 8,680 route miles,
over 460,285 fiber miles, and 33 local digital voice switches. These local
networks are aimed at addressing high-volume business customers. AT&T believes
<PAGE>
that the TCG merger will accelerate its ability to offer local services to
business customers and, ultimately, to other customers.
LONG DISTANCE SERVICES
AT&T's communication and information services business
addresses the needs of consumers, large and small businesses, the Federal
government and state and local governments for voice, data and video
telecommunications services. Business units within this group provide regular
and custom long distance communications services, data transmission services,
500 services, toll-free or 800 and 888 services, 900 services, private line
services, software defined network services ("SDN"), integrated services digital
network ("ISDN") technology based services, and electronic mail, electronic data
interchanges and enhanced facsimile services.
AT&T also provides special long distance services, including
AT&T Calling Card services, special calling plans and the Company's domestic and
international operator services. AT&T provides communications services
internationally, including transaction services, global networks, network
management and value added network services (i.e., services offered over
communications transmission facilities that employ computer processing
applications).
AT&T provides interstate and intrastate long distance
telecommunications services throughout the continental United States and
provides, or joins in providing with other carriers, telecommunications services
to and from Alaska, Hawaii, Puerto Rico and the Virgin Islands and international
telecommunications services to and from virtually all nations and territories
around the world.
In the continental United States, AT&T provides long distance
telecommunications services over its own network. Virtually all switched
services are computer controlled and digitally switched and interconnected by a
packet switched signaling network. Transmission facilities consist of
approximately 2 billion circuit-miles using lightwave, satellite, wire and
coaxial cable and microwave radio technology. International telecommunications
services are provided via multiple international transoceanic submarine cable
(primarily lightwave) systems and via international satellite and radio
facilities.
WIRELESS SERVICES
AT&T is one of the world's largest wireless service providers.
In the United States, AT&T holds licenses to operate systems providing 850 Mhz
broadband wireless services covering markets with a population of over 92
million nationwide and messaging and air-to-ground services throughout the
country. The services provided by AT&T currently include cellular, voice and
data, messaging and air-to-ground communications. As of December 1997, AT&T
served over 6 million cellular subscribers.
In addition, AT&T has purchased (primarily in auctions
conducted by the Federal Communications Commission ("FCC")) 1900 Mhz wireless
broadband licenses covering markets with a population of over 112 million. AT&T
is required by the FCC to provide adequate broadband PCS service to at least
one-third of the population in its licensed areas within five years of being
licensed and two-thirds of the population in its licensed areas within ten years
of being licensed. The licenses are granted for ten year terms from the original
<PAGE>
date of issuance and may be renewed by AT&T by meeting the FCC's renewal
criteria and upon compliance with the FCC's renewal procedures.
AT&T has created service clusters in major metropolitan areas
and linked its and other service providers systems into a network which permits
its wireless cellular subscribers to both place and receive calls anywhere they
travel in areas served by the network, even if the local wireless telephone
service is not provided by AT&T. AT&T is now integrating other communications
technologies into the network. AT&T will continue to explore the use of emerging
technologies to expand the reach of the network and to provide additional
services (especially data and internet services).
AT&T also offers one-way messaging systems such as paging
services. As of December 31, 1997, the Company had over 1.3 million messaging
service subscribers. The majority of these subscribers are in locations where
AT&T holds cellular licenses.
AT&T's wireless services are conducted primarily through
subsidiaries of AT&T Wireless Services, Inc. (formerly McCaw Cellular
Communications, Inc., which was merged with a special-purpose subsidiary of AT&T
in September 1994).
LOCAL SERVICES
Following passage of the Telecommunications Act of 1996 (the
"Telecommunications Act"), AT&T applied for permission to provide local service
in all 50 states. As of December 31, 1997, AT&T had received authority to
provide service in 48 states and the District of Columbia. As of December 31,
1997, AT&T offered AT&T Digital Link service for business customers on an
outbound only basis in 48 states and on an inbound and outbound basis in one
state. Also as of such date, AT&T offered resold local service to consumers in
Alaska, California, Connecticut, Georgia, Illinois, Michigan, Texas and
Rochester, New York as well as offering resold local service to small business
customers in California and Connecticut.
Notwithstanding these efforts, AT&T has experienced
significant difficulty in penetrating local markets. AT&T's ability to purchase
combined network elements from incumbent local exchange carriers (ILECS), one of
the primary methods by which AT&T intends to provide local service to
residential and small business customers, was severely limited by, among other
factors, regulatory and judicial actions and a lack of technical and operational
interfaces necessary to order network elements from ILECs. In spite of strong
demand, in the fourth quarter of 1997 AT&T stopped actively marketing resold
local service to residential and small business customers in most of the areas
in which it offered such service because of limitations on ILECs' ability to
handle anticipated demand and because discounts AT&T receives from ILECs on the
sale of such service are insufficient to make resale a viable long-term method
of offering service. AT&T's ability to provide facilities-based local service to
business customers through AT&T Digital Link service was also hampered by the
inability to provide local number portability and other factors. AT&T will
continue to pursue the development of alternative methods of local entry, which
remains a key growth opportunity. See "Competition" and "Forward Looking
Statements" for a discussion of the potential impact on AT&T of an inability to
profitably provide local service.
<PAGE>
AT&T SOLUTIONS
AT&T Solutions, Inc., established in 1995, provides
outsourcing, consulting, networking integration and multimedia call center
services. AT&T Solutions provides clients with customized information technology
solutions to operate and manage voice, data and video services, including local
and wide area networks, PBXs, voice-processing systems and voice and data
terminals.
ONLINE SERVICES
AT&T also provides a variety of online and internet access
services. These include AT&T WorldNet(R) Service, a service providing dedicated
and dial-up access to the internet, AT&T Easy World Wide Web(R) Service, an
internet web site creation and hosting service, custom web site hosting
services, and AT&T SecureBuy SM Service, an Internet transaction service that
simplifies buying and selling on the Internet.
INTERNATIONAL
AT&T has established a number of international alliances to
increase the reach and scope of AT&T's services and network over time and has
invested in certain countries in order to increase the range of services AT&T
offers in those countries. For example, AT&T founded the WorldPartners alliance
in 1993 to provide multinational customers with seamless telecommunications and
related services. As of the end of 1997, WorldPartners included 17 members who
provide services to multinational customers in North America, Latin America,
Europe, the Middle East and Asia. In addition, in 1996 AT&T began offering
business and consumer services in the United Kingdom and in early 1997 AT&T's
joint venture in Mexico, Alestra, began offering long distance service. AT&T
also has an interest in several wireless communications companies outside of the
United States, including cellular operators licensed to serve Hong Kong,
Columbia, Taiwan and parts of India.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
Telecommunications Act of 1996
In February 1996, the Telecommunications Act became law. The
Telecommunications Act, among other things, was designed to foster local
exchange competition by establishing a regulatory framework to govern new
competitive entry in local and long distance telecommunications services. The
Telecommunications Act will permit the Regional Bell Operating Companies
("RBOCs") to provide interexchange services originating in any state in its
region after demonstrating to the FCC that such provision is in the public
interest and satisfying the conditions for developing local competition
established by the Telecommunications Act.
In August 1996, the FCC adopted rules and regulations,
including pricing rules (the "Pricing Rules") to implement the local competition
provisions of the Telecommunications Act, including with respect to the terms
and conditions of interconnection with local exchange carrier ("LEC") networks
and the standards governing the purchase of unbundled network elements and
wholesale services from LECs. These implementing rules rely on state public
utilities commissions to develop the specific rates and procedures applicable to
particular states within the framework prescribed by the FCC.
<PAGE>
On July 18, 1997, the United States Court of Appeals for the
8th Circuit issued a decision holding that the FCC lacks authority to establish
pricing rules to implement the sections of the local competition provisions of
the Telecommunications Act applicable to interconnection with LEC networks and
the purchase of unbundled network elements and wholesale services from LECs.
Accordingly, the Court vacated the rules that the FCC had adopted in August
1996, and which had been stayed by the Court since September 1996.
Absent effectiveness of the Pricing Rules, each state will
determine the applicable rates and procedures independent of the framework
established by the FCC. However, since the stay was issued, many states have
used the Pricing Rules as guidelines in establishing permanent rates, or interim
rates that will apply pending the determination of permanent rates in subsequent
state proceedings. Nevertheless, there can be no assurance that the prices and
other conditions established in each state will provide for effective local
service entry and competition or provide AT&T with new market opportunities.
On October 14, 1997, the 8th Circuit Court of Appeals vacated
an FCC Rule that had prohibited incumbent LECs from separating network elements
that are combined in the LEC's network, except at the request of the competitor
purchasing the elements. This decision could increase the difficulty and costs
of providing competitive local service through the use of unbundled network
elements purchased from the incumbent LECs.
On January 26, 1998, the United States Supreme Court agreed to
review the aforementioned decisions of the Eighth Circuit Court of Appeals.
Under the normal procedures of the Court, arguments are expected to be heard in
October 1998, and a decision is expected sometime in the first half of 1999.
On December 31, 1997, the U.S. District Court for the Northern
District of Texas issued a memorandum opinion and order holding that the
Telecommunications Act's restrictions on the provision of in-region, interLATA
service by the RBOCSs are unconstitutional. AT&T and other carriers
(collectively, "intervenors") and the FCC filed prompt appeals with the United
States Court of Appeals for the Fifth Circuit. On February 11, 1998, the
District Court stayed the effectiveness of its December 31 memorandum opinion
and order pending appeal.
The United States Court of Appeals for the Fifth Circuit will
review the aforementioned decision of the U.S. District Court for the Northern
District of Texas under an expedited briefing schedule, whereby oral arguments
will be heard in July 1998. If the memorandum opinion and order is permitted to
take effect, the Telecommunications Act's restrictions on the provision of
in-region interLATA services will no longer apply to the plaintiffs in the case,
SBC Communications, Inc., U S West, Inc. and Bell Atlantic Corporation.
Modification of Final Judgment of 1982
Prior to 1996, AT&T and the RBOCs were subject to the
provisions of the Modification of Final Judgment of 1982 (the "MFJ") since its
implementation. The Telecommunications Act effectively superseded future
operation of the MFJ.Consequently, on April 11, 1996, Judge Harold Greene issued
an order terminating the MFJ.
<PAGE>
Regulation of Rates
AT&T is subject to the jurisdiction of the FCC with respect to
interstate and international rates, lines and services, and other matters. From
July 1989 to October 1995, the FCC regulated AT&T under a system known as "price
caps" whereby AT&T's prices, rather than its earnings, were limited. On October
12, 1995, recognizing a decade of enormous change in the long distance market
and finding that AT&T lacked market power in the interstate long distance
market, the FCC reclassified AT&T as a "non-dominant" carrier for its domestic
interstate services. As a result, AT&T became subject to the same regulations as
its long distance competitors for such services. Thus, AT&T was no longer
subject to price cap regulation for these services, was able to file tariffs
that are presumed lawful on one day's notice, and was free of other regulations
and reporting requirements that apply only to dominant carriers.
In addition, on October 31, 1996, the FCC issued an order that
would have prohibited non-dominant carriers, including AT&T, from filing tariffs
for their domestic interstate services. AT&T and other parties have filed an
appeal of the FCC's order with the United States Court of Appeals for the D.C.
Circuit. In February 1997, the D.C. Circuit stayed the effectiveness of the
FCC's order pending appeal. Oral argument has not yet been scheduled. If the
Court affirms the FCC's order and lifts the stay, non-dominant carriers,
including AT&T, will have to utilize mechanisms other than tariffs to establish
the terms and conditions that apply to domestic, interstate telecommunications
services.
Furthermore, in May 1997, the FCC adopted three orders
relating to Price Caps, Access Reform, and Universal Service that will result in
substantial revisions to the level and structure of access charges that AT&T as
a long distance carrier pays to incumbent LECs. AT&T has agreed to pass through
to consumers any savings to AT&T as a result of access charge reform. AT&T began
implementing these reductions July 15, 1997. Consequently, AT&T's results after
June 1997 reflects lower revenue per minute of usage and lower access and other
interconnection costs per minute of usage.
The Price Cap Order requires LECs to reduce their price cap
indices by 6.5 percent annually, less an adjustment for inflation, which is
likely to result in a reduction in the interstate access charges that long
distance carriers, such as AT&T, pay to LECs. The Access Charge Reform Order
restructured access charges so that certain costs that do not vary with usage
will be recovered on a flat-rate basis and permitted increased flat-rate
assessments on multiline business customers and on residential lines beyond the
primary telephone line. This restructuring allows a reduction in access charges
assessed on long distance carriers on a usage basis. Finally, the Universal
Service Order (which represents an FCC mandated contribution to support schools
and libraries and rural health care programs, high cost support and low income
support mechanisms which are paid to the Universal Service Administrative
Company) adopts a new mechanism for funding universal service which expands the
set of carriers that must contribute to support universal service from only
long-distance carriers to all carriers, including LECs, that provide interstate
telecommunications services. Similarly, the set of carriers eligible for the
universal service support has been expanded from only LECs to any eligible
carrier providing local service to a customer, including AT&T as a new entrant
in local markets. The Universal Service Order also adopted measures to provide
discounts on telecommunications services, Internet access and inside wire to
eligible schools and libraries and rural health carrier providers.
<PAGE>
AT&T remains subject to the statutory requirements of Title II
of the Communications Act. AT&T must offer service under rates, terms and
conditions that are just, reasonable and not unreasonably discriminatory; it is
subject to the FCC's complaint process, and it must give notice to the FCC and
affected customers prior to discontinuance, reduction, or impairment of service.
AT&T has also made certain commitments that address concerns that had been
raised with regard to the potential impact of declaring AT&T to be non-dominant,
including a three-year rate assurance for low income and low usage residential
users and a three-year limit on, and 5 days advance notice for, rate increases
on 800 directory assistance and analog private line services.
AT&T's international private line services have been
classified as non-dominant for several years. AT&T's switched international
services have become subject to increased competition, similar to its domestic
services and on May 9, 1996, the FCC adopted an order reclassifying AT&T as a
non-dominant carrier for such services. AT&T has made certain voluntary
commitments that address issues raised in that proceeding, including
commitments: (i) to maintain its annual average revenue per minute for
international residential calls at or below the 1995 level through May 9, 1999,
and in the event of a significant change that substantially raises AT&T's costs,
to provide the FCC five business days notice prior to implementing rate
increases that would raise the annual average revenue per minute for such calls
above the 1995 level; and (ii) to maintain certain discount calling plans
providing at least a 15% discount off basic pricing schedules until May 9, 1999.
AT&T also made voluntary commitments relating to its operation of international
cable facilities, its negotiation of settlement agreements with foreign carriers
and its relationship with foreign partners.
In addition to the matters described above with respect to the
Telecommunications Act, state public service commissions or similar authorities
having regulatory power over intrastate rates, lines and services and other
matters regulate AT&T's local and intrastate communications services. The system
of regulation used in many states is rate-of-return regulation. In recent years,
many states have adopted different systems of regulation, such as: complete
removal of rate-of-return regulation, pricing flexibility rules, price caps and
incentive regulation.
COMPETITION
AT&T currently faces significant competition in the
communication and information services industry and expects that the level of
competition will continue to increase. As competitive, regulatory and
technological changes occur, including those occasioned by the
Telecommunications Act, AT&T anticipates that new and different competitors will
enter and expand their position in the communications services markets. These
may include entrants from other segments of the communication and information
services industry or global competitors seeking to expand their market
opportunities. Many such new competitors are likely to enter with a strong
market presence, well recognized names and pre-existing direct customer
relationships.
The Telecommunications Act has already impacted the
competitive environment. Anticipating changes in the industry, non-RBOC LECs,
which are not required to implement the Telecommunications Act's competitive
checklist prior to offering long distance in their home markets, have begun
integrating their local service offerings with long distance offerings in
<PAGE>
advance of AT&T being able to offer combined local and long distance service in
these areas, adversely affecting AT&T's revenues and earnings in these service
regions.
In addition, the Telecommunications Act will permit RBOCs to
provide interLATA interexchange services after demonstrating to the FCC that
such provision is in the public interest and satisfying the conditions for
developing local competition established by the Telecommunications Act. Three
RBOCs have petitioned the FCC for permission to provide interLATA interexchange
services in one or more states within their home market; to date the FCC has not
granted any petition. To the extent that the RBOCs obtain in-region interLATA
authority before the Telecommunications Act's checklist of conditions have been
fully or satisfactorily implemented and adequate facilities-based local exchange
competition exists, there is a substantial risk that AT&T and other
interexchange service providers would be at a disadvantage to the RBOCs in
providing both local service and combined service packages. Because it is widely
anticipated that substantial numbers of long distance customers will seek to
purchase local, interexchange and other services from a single carrier as part
of a combined or full service package, any competitive disadvantage, inability
to profitably provide local service at competitive rates or delays or
limitations in providing local service or combined service packages could
adversely affect AT&T's future revenues and earnings. In any event, the
simultaneous entrance of numerous new competitors for interexchange and combined
service packages is likely to adversely affect AT&T's future long distance
revenues and could adversely affect future earnings.
Furthermore, in February 1997, a General Agreement on Trade in
Services (the "GATS") was reached under the World Trade Organization. The GATS,
which became effective January 1, 1998, is designed to open each country's
domestic telecommunications markets to foreign competitors. The GATS, and future
trade agreements, may accelerate the entrance into the U.S. market of foreign
telecommunications providers, certain of whom are likely to possess dominant
home market positions in which there is not effective competition. The GATS may
also permit AT&T's entrance into other markets as only a small number of
countries refused to eliminate their foreign ownership restrictions.
In addition to the matters referred to above, various other
factors, including market acceptance, start-up and ongoing costs associated with
the provision of new services and local conditions and obstacles, could
adversely affect the timing and success of AT&T's entrance into the local
exchange services market and AT&T's ability to offer combined service packages
that include local service.
FORWARD LOOKING STATEMENTS
Except for the historical statements and discussions contained
herein, statements contained in this Report on Form 10-K constitute "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Any Form 10-K,
Annual Report to Shareholders, Form 10-Q or Form 8-K of AT&T may include forward
looking statements. In addition, other written or oral statements which
constitute forward looking statements have been made and may in the future be
made by or on behalf of AT&T, including statements concerning future operating
performance, AT&T's share of new and existing markets, AT&T's short- and
long-term revenue and earnings growth rates, and general industry growth rates
and AT&T's performance relative thereto. These forward looking statements rely
on a number of assumptions concerning future events, including the outcome of
<PAGE>
litigation, the adoption and implementation of balanced and effective rules and
regulations by the FCC and the state public regulatory agencies, and AT&T's
ability to achieve a significant market penetration in new markets. These
forward looking statements are subject to a number of uncertainties and other
factors, many of which are outside AT&T's control, that could cause actual
results to differ materially from such statements. These factors include, but
are not limited to:
- - the efficacy of the rules and regulations to be adopted by the FCC and state
public regulatory agencies to implement the provisions of the Telecommunications
Act; the outcome of litigation relative thereto; and the impact of regulatory
changes relating to access reform and international settlement reform;
- - the outcome of negotiations with LECs and state regulatory arbitrations and
approvals with respect to interconnection agreements; and the ability to
purchase unbundled network elements or wholesale services from LECs at a price
sufficient to permit the profitable offering of local exchange service at
competitive rates;
- - success and market acceptance for new initiatives, many of which are untested;
the level and timing of the growth and profitability of new initiatives,
particularly local (consumer and business) service and business data service;
start-up costs associated with entering new markets, including advertising and
promotional efforts; successful deployment of new systems and applications to
support new initiatives; and local conditions and obstacles;
- - competitive pressures, including pricing pressures, technological
developments, alternative routing developments, and the ability to offer
combined service packages that include local service; the extent and pace at
which different competitive environments develop for each segment of the
telecommunications industry; the extent at and duration for which competitors
from each segment of the telecommunications industry are able to offer combined
or full service packages prior to AT&T being able to; and the degree to which
AT&T experiences material competitive impacts to its traditional service
offerings prior to achieving adequate local service entry;
- - the availability, terms and deployment of capital; the impact of regulatory
and competitive developments on capital outlays; the ability to achieve cost
savings and realize productivity improvements; the ability to effectively
integrate TCG's operations with AT&T; the ability to realize cost-saving and
revenue synergies from the merger; and
- - general economic conditions, government and regulatory policies, and business
conditions in the communications industry.
Readers are cautioned not to put undue reliance on such
forward looking statements. For a more detailed description of these and
additional uncertainties and other factors that could cause actual results to
differ materially from such forward looking statements, see "Results of
Operations", "Financial Condition", "Regulatory and Legislative Developments",
and "Competition" included in or incorporated by reference into this Form 10-K.
As described elsewhere in this Form 10-K, these uncertainties and factors could
adversely affect the timing and success of AT&T's entrance into the local
exchange services market and AT&T's ability to offer combined service packages
that include local service, thereby adversely affecting AT&T's future revenues
and earnings. AT&T disclaims any intention or obligation to update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise.
<PAGE>
SEGMENT, OPERATING REVENUE AND RESEARCH AND DEVELOPMENT EXPENSE INFORMATION
For information about the Company's research and development
expense, see Note 5 to the Consolidated Financial Statements. For information
about the consolidated operating revenues contributed by the Company's major
classes of products and services, see the revenue tables and descriptions on
pages 28 through 30 and Consolidated Statements of Income on page 40 of the
Company's annual report to shareholders for the year ended December 31, 1997.
All such information is incorporated herein by reference pursuant to General
Instruction G(2).
EMPLOYEE RELATIONS
At December 31, 1997 AT&T employed approximately 128,000
persons in its operations, approximately 122,000 of whom are located
domestically. About 48% of the domestically located employees of AT&T are
represented by unions. Of those so represented, about 96% are represented by the
Communications Workers of America ("CWA"), which is affiliated with the AFL-CIO;
about 4% by the International Brotherhood of Electrical Workers ("IBEW"), which
is also affiliated with the AFL-CIO. In addition, there is a very small
remainder of domestic employees represented by other unions. Labor agreements
with most of these unions extend through May 1998.
ITEM 2. PROPERTIES.
The properties of AT&T consist primarily of plant and
equipment used to provide long distance and wireless telecommunications services
and administrative office buildings.
Telecommunications plant and equipment consists of: central
office equipment, including switching and transmission equipment; connecting
lines (cables, wires, poles, conduits, etc.); land and buildings; and
miscellaneous properties (work equipment, furniture, plant under construction,
etc.). The majority of the connecting lines are on or under public roads,
highways and streets and international and territorial waters. The remainder are
on or under private property. AT&T also operates a number of sales offices,
customer care centers, and other facilities, such as research and development
laboratories.
AT&T continues to manage the deployment and utilization of its
assets in order to meet its global growth objectives while at the same time
ensuring that these assets are generating economic value added for the
shareholder. AT&T will continue to manage its asset base consistent with
globalization initiatives, marketplace forces, productivity growth and
technology change.
A substantial number of the administrative offices of AT&T are
in leased buildings. Substantially all of the important long distance
communications facilities are in buildings wholly owned by AT&T or in buildings
owned partially by AT&T and partially by the regional holding companies created
at divestiture. Many of the smaller facilities are in rented quarters. Most of
the important buildings used in connection with long distance services are on
land held in fee, but a few are on land held under long-term leases.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
In the normal course of business, AT&T is subject to
proceedings, lawsuits and other claims, including proceedings under government
laws and regulations related to environmental and other matters. Such matters
are subject to many uncertainties and outcomes are not predictable with
assurance. Consequently, AT&T is unable to ascertain the ultimate aggregate
amount of monetary liability or financial impact with respect to these matters
at December 31, 1997. While these matters could affect operating results of any
one quarter when resolved in future periods, it is management's opinion that
after final disposition, any monetary liability or financial impact to AT&T
beyond that provided for at year-end would not be material to AT&T's annual
consolidated financial position or results of operations.
On July 6, 1997, MCI Telecommunications Corp. and Ronald A.
Katz Technology Licensing, L.P. filed suit in United States District Court in
Philadelphia, Pennsylvania against AT&T. The suit alleges that a number of AT&T
services infringe patents owned by Katz but licensed to MCI for enforcement
against AT&T. AT&T is reviewing the allegations of the Complaint. Based on
review to date, it is management's opinion that the claims do not present any
material monetary liability or financial impact to AT&T that is not subject to
patent indemnity agreements with third-party equipment vendors.
AT&T is also a named party in a number of environmental
actions, none of which is material to the consolidated financial statements or
business of the Company. In addition, pursuant to the Separation and
Distribution Agreement by and among AT&T, Lucent, and NCR, dated as of February
1, 1996, and amended and restated as of March 29, 1996, Lucent has assumed
liability, subject to the liability sharing provisions of that agreement, for a
number of actions in which AT&T remains a named party. AT&T is working to be
released as a party to these actions, although there can be no assurance that it
will be successful in this regard.
There are four environmental proceedings which are required to
be reported pursuant to Instruction 5.C. of Item 103 of Regulation S-K. In
September 1997, the government of the U.S. Virgin Islands filed suit in the
federal district court of the Virgin Islands against the Company, AT&T Submarine
Systems International ("SSI International"), A&L Underground, Inc., a contractor
for SSI International at that time, and other entities. In connection with the
purported 1996 release of non-toxic bentonite drilling mud within the coastal
region of St. Croix by the contractor, the suit seeks penalties for violations
of various federal and Virgin Island statutes; damages under several statutory
and common law theories; removal of the mud (which has since been completed to
the satisfaction of the federal agency that ordered the cleanup); and
restitution of response costs allegedly incurred by the Virgin Islands. SSI
International was a wholly owned subsidiary of AT&T at the time of the alleged
violation. The foregoing environmental proceeding is not material to the
consolidated financial statements or business of the Company and would not be
reported but for Instruction 5 C. of Item 103 of Regulation S-K, which requires
disclosure of such matters.
In addition, three proceedings involve matters for which
Lucent has assumed liability, as described above. On July 31, 1991, the United
States Environmental Protection Agency Region III issued a complaint pursuant to
Section 3008a of the Resource Conservation and Recovery Act alleging violations
of various waste management regulations at the Company's Richmond Works,
Richmond, Virginia. The complaint seeks a total of $4.2 million in penalties. In
<PAGE>
addition, on July 31, 1991, the United States Environmental Protection Agency
filed a civil complaint in the U.S. District Court for the Southern District of
Illinois against the Company and nine other parties seeking enforcement of its
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
Section 106 cleanup order, issued in November 1990 for the NL Granite City
Superfund site, Granite, Illinois, past costs, civil penalties of $25,000 per
day and treble damages related to certain United States' costs. Finally, during
1994, AT&T Nassau Metals Corporation ("Nassau"), a wholly owned subsidiary of
AT&T, and the New York State Department of Environmental Conservation ("NYSDEC")
were engaged in negotiations over a study and cleanup of the Nassau plant
located on Richmond Valley Road in Staten Island, New York. During these
negotiations, in June 1994, NYSDEC presented Nassau with a draft consent order
which included not only provisions relating to site investigation and
remediation but also a provision for payment of a $3.5 million penalty for
alleged violations of hazardous waste management regulations. No formal
proceeding has been commenced by NYSDEC.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matter was submitted to a vote of security holders in the
fourth quarter of the fiscal year covered by this report.
Executive Officers of the Registrant
(as of March 25, 1998)
Became AT&T
Executive
Name Age Officer On
- ---- --- -----------
C. Michael Armstrong* . 59 Chairman of the Board and Chief
Executive Officer . . . . . . . . . . . . . 10-97
R.C.M. Baker . . . . . 51 Executive Vice President, International . . 9-97
Harry S. Bennett . . . 53 Executive Vice President, Local Services
Division . . . . . . . . . . . . . . . . . . 3-97
Harold W. Burlingame . 57 Executive Vice President, Human Resources . . 9-86
Dan R. Hesse. . . . . 44 Executive Vice President & President,
AT&T Wireless Services . . . . . . . . . . . 3-97
Frank Ianna . . . . . 48 Executive Vice President, Network &
Computing Services . . . . . . . . . . . . . 3-97
Jim G. Kilpatric***. . 59 Executive Vice President, Law & Government
Affairs . . . . . . . . . . . . . . . . . . 11-97
Marilyn Laurie***. . . 58 Executive Vice President, Brand Strategy &
Marketing Communications . . . . . . . . . 2-87
Richard J. Martin . . . 51 Executive Vice President, Public Relations . 11-97
Gail J. McGovern . . . 45 Executive Vice President, Consumer Markets
Division . . . . . . . . . . . . . . . . . 1-96
David C. Nagel . . . . 53 President, AT&T Labs & Chief Technology
Officer . . . . . . . . . . . . . . . . . 3-97
John C. Petrillo . . . 48 Executive Vice President, Corporate Strategy
& Business Development . . . . . . . . . 1-96
Richard Roscitt . . . . 46 Executive Vice President & President,
AT&T Solutions . . . . . . . . . . . . . . 9-97
Daniel E. Somers . . . 50 Senior Executive Vice President and Chief
Financial Officer . . . . . . . . . . . . . 5-97
John D. Zeglis**. . . . 50 President . . . . . . . . . . . . . . . . . . 9-86
- -----------
*Chairman of the Board of Directors and Chairman of the Executive
and Proxy Committees.
**Member of the Board of Directors.
***Mr. Kilpatric and Ms. Laurie will retire from the Company in April 1998.
All of the above executive officers have held high level
managerial positions with AT&T or its affiliates for more than the past five
years, except Messrs. Armstrong, Nagel and Somers. Prior to joining AT&T in
October 1997, Mr. Armstrong was Chairman and Chief Executive Officer of Hughes
Electronics from 1991 and prior to that time, Mr. Armstrong held various other
positions with IBM, including Senior Vice President and Chairman of the board of
IBM World Trade Corporation. Prior to joining AT&T in April 1996, Mr. Nagel was
with Apple Computer, a computer company, serving as Senior Vice President from
1995 and General Manager from 1988 through 1995. Prior to joining AT&T in May
1997, Mr. Somers was Chairman and Chief Executive Officer for Bell Cablemedia,
plc, of London for two years and from 1992 to 1995, Mr. Somers was Executive
Vice President and Chief Financial Officer for Bell Canada International.
<PAGE>
PART II
Items 5. through 8.
The information required by these items is included in pages
25 through 56 of the Company's annual report to shareholders for the year ended
December 31, 1997. Such information is incorporated herein by reference,
pursuant to General Instruction G(2). The referenced information from the
Company's annual report to share holders has been filed as Exhibit 13 to this
document.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There have been no changes in independent accountants and no
disagreements with independent accountants on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure during the last two years.
PART III
Items 10. through 13.
Information regarding executive officers required by Item 401
of Regulation S-K is furnished in a separate disclosure in Part I of this report
because the Company did not furnish such information in its definitive proxy
statement prepared in accordance with Schedule 14A.
The other information required by Items 10 through 13 is
included in the Company's definitive proxy statement dated March 26, 1998, the
third and fourth paragraphs on page 6, the carryover paragraph on page 7, the
first, second and third full paragraphs on page 7, the second full paragraph on
page 8 through the final footnote on page 13 and the last paragraph on page 23
through page 48. Such information is incorporated herein by reference, pursuant
to General Instruction G(3).
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.
(a) Documents filed as a part of the report:
(1) Financial Statements:
Pages
-----
Report of Management ...................................... *
Report of Independent Accountants ......................... *
Statements:
Consolidated Statements of Income ..................... *
Consolidated Balance Sheets ........................... *
Consolidated Statements of Changes in
Shareowners' Equity ................................ *
Consolidated Statements of Cash Flows ................. *
Notes to Consolidated Financial Statements ........... *
(2) Financial Statement Schedule:
Report of Independent Accountants ..................... 18
Schedule:
II -- Valuation and Qualifying Accounts ............... 19
Separate financial statements of subsidiaries not consolidated and
50 percent or less owned persons are omitted since no such entity
constitutes a "significant subsidiary" pursuant to the provisions of
Regulation S-X, Article 3-9.
(3) Exhibits:
Exhibits identified in parentheses below, on file with the
Securities and Exchange Commission ("SEC"), are incorporated herein
by reference as exhibits hereto.
Exhibit
Number:
(3)a Restated Certificate of Incorporation of the registrant
filed January 10, 1989, Certificate of Correction of the
registrant filed June 8, 1989, Certificate of Change of
the registrant filed March 18, 1992, Certificate of
Amendment of the registrant filed June 1, 1992, and
Certificate of Amendment of the registrant filed
April 20, 1994. (Exhibit 4 to Registration Statement
No. 333-00573).
- ------------
*Incorporated herein by reference to the appropriate portions of the Company's
annual report to shareholders for the year ended December 31, 1997. (See
Part II.)
<PAGE>
(3)b By-Laws of the registrant, as amended January 15, 1997
(Exhibit (3)b to Form 10-K for 1996, File
No. 1-1105).
(4) No instrument which defines the rights of holders of
long term debt, of the registrant and all of its
consolidated subsidiaries, is filed herewith pursuant to
Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this
regulation, the registrant hereby agrees to furnish a
copy of any such instrument to the SEC upon request.
(10)(i)1 Form of Separation and Distribution Agreement by and
among AT&T Corp., Lucent Technologies Inc. and NCR
Corporation, dated as of February 1, 1996 and amended
and restated as of March 29, 1996 (Exhibit
(10)(i)1 to Form 10-K for 1996, File No. 1-1105).
(10)(i)2 Form of Distribution Agreement, dated as of November 20,
1996, by and between AT&T Corp. and NCR Corporation
(Exhibit (10)(i)2 to Form 10-K for 1996, File No.
1-1105).
(10)(i)3 Tax Sharing Agreement by and among AT&T Corp., Lucent
Technologies Inc. and NCR Corporation, dated as of
February 1, 1996 and amended and restated as of
March 29, 1996 (Exhibit (10)(i)3 to Form 10-K for
1996, File No. 1-1105).
(10)(i)4 Employee Benefits Agreement by and between AT&T Corp.
and Lucent Technologies Inc., dated as of February 1,
1996 and amended and restated as of March 29, 1996
(Exhibit (10)(i)4 to Form 10-K for 1996, File No.
1-1105).
(10)(i)5 Form of Employee Benefits Agreement, dated as of
November 20, 1996, between AT&T Corp. and NCR
Corporation (Exhibit (10)(i)5 to Form 10-K for
1996, File No. 1-1105).
(10)(ii)(B)1 General Purchase Agreement between AT&T Corp. and
Lucent Technologies Inc., dated February 1, 1996 and
amended and restated as of March 29, 1996 (Exhibit (10)
ii)(B)1 to Form 10-K for 1996, File No. 1-1105).
(10)(ii)(B)2 Form of Volume Purchase Agreement, dated as of
November 20, 1996, by and between AT&T Corp. and NCR
Corporation (Exhibit (10)(ii)(B)2 to Form 10-K for
1996, File No. 1-1105).
(10)(iii)(A)1 AT&T Short Term Incentive Plan as amended March, 1994
(Exhibit (10)(iii)(A)1 to Form 10-K for 1994, File No.
1-1105).
(10)(iii)(A)2 AT&T 1987 Long Term Incentive Program as amended
December 17, 1997.
<PAGE>
(10)(iii)(A)3 AT&T Senior Management Individual Life Insurance Program
as amended March 3, 1998.
(10)(iii)(A)4 AT&T Senior Management Long Term Disability and Survivor
Protection Plan, as amended and restated effective
January 1, 1995 (Exhibit (10)(iii)(A)4 to Form 10-K for
1996, File No. 1-1105).
.
(10)(iii)(A)5 AT&T Senior Management Financial Counseling Program
dated December 29, 1994 (Exhibit (10)(iii)(A)5 to Form
10-K for 1994, File No. 1-1105).
(10)(iii)(A)6 AT&T Deferred Compensation Plan for Non-Employee
Directors, as amended December 15, 1993 (Exhibit (10)
(iii)(A)6 to Form 10-K for 1993, File No. 1-1105).
(10)(iii)(A)7 The AT&T Directors Individual Life Insurance Program as
amended March 2, 1998.
(10)(iii)(A)8 AT&T Plan for Non-Employee Directors' Travel Accident
Insurance (Exhibit (10)(iii)(A)8 to Form 10-K for 1990,
File No. 1-1105).
(10)(iii)(A)9 AT&T Excess Benefit and Compensation Plan, as amended
and restated effective October 1, 1996 (Exhibit (10)
(iii)(A)9 to Form 10-K for 1996, File No. 1-1105).
(10)(iii)(A)10 AT&T Non-Qualified Pension Plan, as amended and restated
January 1, 1995 (Exhibit (10)(iii)(A)10 to Form 10-K for
1996, File No. 1-1105).
(10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan, as
amended December 17, 1997.
(10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective January
1, 1988 (Exhibit (10)(iii)(A)4 to Form SE, dated March
25, 1988, File No. 1-1105) including AT&T Mid-Career
Pension Plan, as amended and restated October 1, 1996
(Exhibit (10)(iii)(A)(12) to Form 10-K for 1996, File
No. 1-1105).
(10)(iii)(A)13 AT&T 1997 Long Term Incentive Program as amended
December 17, 1997.
(10)(iii)(A)14 Form of Indemnification Contract for Officers and
Directors (Exhibit (10)(iii)(A)6 to Form SE, dated
March 25, 1987, File No. 1-1105).
(10)(iii)(A)15 Pension Plan for AT&T Non-Employee Directors revised
February 20, 1989 (Exhibit (10)(iii)(A)15 to Form 10-K
for 1993, File No. 1-1105).
(10)(iii)(A)16 AT&T Corp. Senior Management Basic Life Insurance
Program, as amended February 27, 1998.
(10)(iii)(A)17 Form of AT&T Benefits Protection Trust Agreement
(Exhibit (10)(iii)(A)17 to Form SE, dated March 25,
1992, File No. 1-1105).
<PAGE>
(10)(iii)(A)18 AT&T Senior Officer Severance Plan effective October 9,
1997, as amended October 30, 1997.
(10)(iii)(A)19 Form of Pension Agreement between AT&T Corp. and Frank
Ianna dated October 30, 1997.
(10)(iii)(A)20 Form of Pension Agreement between AT&T Corp. and Gail J.
McGovern dated October 30, 1997.
(10)(iii)(A)21 Form of Pension Agreement between AT&T Corp. and John C.
Petrillo dated October 30, 1997.
(10)(iii)(A)22 Form of Pension Agreement between AT&T Corp. and John
Zeglis dated May 7, 1997.
(10)(iii)(A)23 Form of Employment Agreement between AT&T Corp. and
C. Michael Armstrong dated October 17, 1997.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Specified portions (pages 25 through 56) of the
Company's Annual Report to Shareholders for the year
ended December 31, 1997.
(21) List of subsidiaries of AT&T.
(23) Consent of Coopers & Lybrand L.L.P.
(24) Powers of Attorney executed by officers and directors
who signed this report.
(27) Financial Data Schedules.
AT&T will furnish, without charge, to a shareholder upon
request a copy of the annual report to shareholders and the proxy statement,
portions of which are incorporated herein by reference thereto. AT&T will
furnish any other exhibit at cost.
(b) Reports on Form 8-K:
During the fourth quarter 1997, Form 8-K dated October 20,
1997 was filed pursuant to Item 5 (Other Events) and Item 7 (Financial
Statements and Exhibits) on October 24, 1997, Form 8-K dated October 20, 1997
was filed pursuant to Item 5 (Other Events) on November 4, 1997 and Form 8-K
dated December 18, 1997 was filed pursuant to Item 2 (Acquisition or Disposition
of Assets) and Item 7 (Financial Statements and Exhibits) on December 23, 1997.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareowners of AT&T Corp.:
Our report on the consolidated financial statements of AT&T
Corp. and subsidiaries has been incorporated by reference in this Form 10-K from
page 39 of the 1997 Annual Report to the Shareowners of AT&T Corp. In connection
with our audits of such financial statements, we have also audited the related
consolidated financial statement schedule listed in the index on page 14 of this
Form 10-K.
In our opinion, the consolidated financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
January 26, 1998
<PAGE>
<TABLE>
Schedule II--Sheet 1
AT&T CORP.
AND ITS CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Millions of Dollars)
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -------------------------------------------------------------------------------------------------------
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions(a) of Period
- -------------------------------------------------------------------------------------------------------
Year 1997
<S> <C> <C> <C> <C>
Allowances for doubtful accounts (b) ..... $ 994 $1,957 $1,925 $1,026
Reserves related to business
restructuring, including force
and facility consolidation (c) ..........$1,388 $ -- $ 481 $ 907
Deferred tax asset valuation allowance ... $ 166 $ 48 $ 2 $ 212
Year 1996
Allowances for doubtful accounts (b) ..... $ 832 $1,938 $1,776 $ 994
Reserves related to business
restructuring, including force
and facility consolidation (c) ......... $2,092 $ -- $ 704 $1,388
Deferred tax asset valuation allowance ... $ 129 $ 39 $ 2 $ 166
The Notes on Sheet 2 are an integral part of this Schedule.
</TABLE>
<PAGE>
<TABLE>
Schedule II--Sheet 2
AT&T CORP.
AND ITS CONSOLIDATED SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Millions of Dollars)
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- -------------------------------------------------------------------------------------------------------
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions(a) of Period
- -------------------------------------------------------------------------------------------------------
Year 1995
<S> <C> <C> <C> <C>
Allowances for doubtful accounts (b) ..... $ 611 $1,613 $1,392 $ 832
Reserves related to business
restructuring, including force
and facility consolidation (c) ......... $ 699 $1,712 $ 319 $2,092
Deferred tax asset valuation allowance ... $ 36 $ 109 $ 16 $ 129
- ------------
<FN>
(a) Amounts written off as uncollectible, net of recoveries.
(b) Includes allowances for doubtful accounts on long-term receivables of $49
$52 and $35 in 1997, 1996 and 1995, respectively (included in long-term
receivables in the Consolidated Balance Sheets).
(c) Included primarily in other current liabilities and in other long-term
liabilities and deferred credits in the Consolidated Balance Sheets.
</FN>
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
AT&T Corp.
By: M. J. Wasser
Vice President - Law and Secretary
March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Principal Executive Officers: #
#
C. Michael Armstrong Chairman #
of the Board and #
Chief Executive #
Officer #
#
John Zeglis President and #
Director #
#
Principal Financial Officer: #
#
Daniel E. Somers Senior Executive #
Vice President and#
Chief Financial #
Officer #
#
Principal Accounting Officer: #
#
Maureen B. Tart Vice President ## By M. J. Wasser
and Controller # (attorney-in-fact)*
#
Directors: #
# March 26, 1998
Kenneth T. Derr #
M. Kathryn Eickhoff #
Walter Y. Elisha #
George M. C. Fisher #
Donald V. Fites #
Ralph S. Larsen #
Donald F. McHenry #
Michael I. Sovern #
Thomas H. Wyman #
<PAGE>
Exhibit Index
Exhibit
Number:
(3)b By-Laws of the registrant, as amended January 15,
1997 (Exhibit (3)b to Form 10-K for 1996,
File No. 1-1105).
(4) No instrument which defines the rights of holders of
long term debt, of the registrant and all of its
consolidated subsidiaries, is filed herewith pursuant
to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant
to this regulation, the registrant hereby agrees to
furnish a copy of any such instrument to the SEC upon
request.
(10)(i)1 Form of Separation and Distribution Agreement by and
among AT&T Corp., Lucent Technologies Inc. and NCR
Corporation, dated as of February 1, 1996 and amended
and restated as of March 29, 1996 (Exhibit (10)(i)1
to Form 10-K for 1996, File No. 1-1105).
(10)(i)2 Form of Distribution Agreement, dated as of November
20, 1996, by and between AT&T Corp. and NCR
Corporation (Exhibit (10)(i)2 to Form 10-K for
1996, File No. 1-1105).
(10)(i)3 Tax Sharing Agreement by and among AT&T Corp., Lucent
Technologies Inc. and NCR Corporation, dated as of
February 1, 1996 and amended and restated as of
March 29, 1996 (Exhibit (10)(i)3 to Form 10-K
for 1996, File No. 1-1105).
(10)(i)4 Employee Benefits Agreement by and between AT&T Corp.
and Lucent Technologies Inc., dated as of February 1,
1996 and amended and restated as of March 29, 1996
(Exhibit (10)(i)4 to Form 10-K for 1996, File
No. 1-1105).
(10)(i)5 Form of Employee Benefits Agreement, dated as of
November 20, 1996, between AT&T Corp. and NCR
Corporation (Exhibit (10)(i)5 to Form 10-K for
1996, File No. 1-1105).
(10)(ii)(B)1 General Purchase Agreement between AT&T Corp. and
Lucent Technologies Inc., dated February 1, 1996 and
amended and restated as of March 29, 1996
(Exhibit (10)(ii)(B)1 to Form 10-K for 1996, File
No. 1-1105).
(10)(ii)(B)2 Form of Volume Purchase Agreement, dated as of
November 20, 1996, by and between AT&T Corp. and
NCR Corporation (Exhibit (10)(ii)(B)2 to Form 10-K
for 1996, File No. 1-1105).
(10)(iii)(A)1 AT&T Short Term Incentive Plan as amended March, 1994
(Exhibit (10)(iii)(A)1 to Form 10-K for 1994, File
No. 1-1105).
<PAGE>
(10)(iii)(A)2 AT&T 1987 Long Term Incentive Program as amended
December 17, 1997.
(10)(iii)(A)3 AT&T Senior Management Individual Life Insurance
Program as amended March 3, 1998.
(10)(iii)(A)4 AT&T Senior Management Long Term Disability and
Survivor Protection Plan, as amended and restated
effective January 1, 1995 (Exhibit (10)(iii)(A)4 to
Form 10-K for 1996, File No. 1-1105).
.
(10)(iii)(A)5 AT&T Senior Management Financial Counseling Program
dated December 29, 1994 (Exhibit (10)(iii)(A)5 to
Form 10-K for 1994, File No. 1-1105).
(10)(iii)(A)6 AT&T Deferred Compensation Plan for Non-Employee
Directors, as amended December 15, 1993 (Exhibit (10)
(iii)(A)6 to Form 10-K for 1993, File No. 1-1105).
(10)(iii)(A)7 The AT&T Directors Individual Life Insurance Program
as amended March 2, 1998.
(10)(iii)(A)8 AT&T Plan for Non-Employee Directors' Travel Accident
Insurance (Exhibit (10)(iii)(A)8 to Form 10-K for
1990, File No. 1-1105).
(10)(iii)(A)9 AT&T Excess Benefit and Compensation Plan, as amended
and restated effective October 1, 1996 (Exhibit (10)
(iii)(A)9 to Form 10-K for 1996, File No. 1-1105).
(10)(iii)(A)10 AT&T Non-Qualified Pension Plan, as amended and
restated January 1, 1995 (Exhibit (10)(iii)(A)10 to
Form 10-K for 1996, File No. 1-1105).
(10)(iii)(A)11 AT&T Senior Management Incentive Award Deferral Plan,
as amended December 17, 1997.
(10)(iii)(A)12 AT&T Mid-Career Hire Program revised effective
January 1, 1988 (Exhibit (10)(iii)(A)4 to Form SE,
dated March 25, 1988, File No. 1-1105) including
AT&T Mid-Career Pension Plan, as amended and restated
October 1, 1996 (Exhibit (10)(iii)(A)(12) to Form
10-K for 1996, File No. 1-1105).
(10)(iii)(A)13 AT&T 1997 Long Term Incentive Program as amended
December 17, 1997.
(10)(iii)(A)14 Form of Indemnification Contract for Officers and
Directors (Exhibit (10)(iii)(A)6 to Form SE, dated
March 25, 1987, File No. 1-1105).
(10)(iii)(A)15 Pension Plan for AT&T Non-Employee Directors revised
February 20, 1989 (Exhibit (10)(iii)(A)15 to Form
10-K for 1993, File No. 1-1105).
(10)(iii)(A)16 AT&T Corp. Senior Management Basic Life Insurance
Program, as amended February 27, 1998.
<PAGE>
(10)(iii)(A)17 Form of AT&T Benefits Protection Trust Agreement
(Exhibit (10)(iii)(A)17 to Form SE, dated March 25,
1992, File No. 1-1105).
(10)(iii)(A)18 AT&T Senior Officer Severance Plan effective October
9, 1997, as amended October 30, 1997.
(10)(iii)(A)19 Form of Pension Agreement between AT&T Corp. and
Frank Ianna dated October 30, 1997.
(10)(iii)(A)20 Form of Pension Agreement between AT&T Corp. and Gail
J. McGovern dated October 30, 1997.
(10)(iii)(A)21 Form of Pension Agreement between AT&T Corp. and John
C. Petrillo dated October 30, 1997.
(10)(iii)(A)22 Form of Pension Agreement between AT&T Corp. and John
Zeglis dated May 7, 1997.
(10)(iii)(A)23 Form of Employment Agreement between AT&T Corp. and
C. Michael Armstrong dated October 17, 1997.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Specified portions (pages 25 through 56) of the
Company's Annual Report to Shareholders for the year
ended December 31, 1997.
(21) List of subsidiaries of AT&T.
(23) Consent of Coopers & Lybrand L.L.P.
(24) Powers of Attorney executed by officers and directors
who signed this report.
(27) Financial Data Schedules.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<DESCRIPTION>EXHIBIT (10)(III)(A)(2)
<TEXT>
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS DOCUMENT IS
DATED NOVEMBER 22, 1991
AT&T 1987 LONG TERM INCENTIVE PROGRAM
(as amended December 17, 1997)
SECTION 1. PURPOSE. The purposes of the AT&T 1987 Long Term Incentive
Program (the "Plan") are to encourage selected key employees of American
Telephone and Telegraph Company (the "Company") and its Affiliates to acquire a
proprietary and vested interest in the growth and performance of the Company, to
generate an increased incentive to contribute to the Company's future success
and prosperity, thus enhancing the value of the Company for the benefit of share
owners, and to enhance the ability of the Company and its Affiliates to attract
and retain individuals of exceptional managerial talent upon whom, in large
measure, the sustained progress, growth and profitability of the Company
depends.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have
the meanings set forth below:
(a) "Affiliate" shall mean (i) any Person that directly, or through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Company or (ii) any entity in which the Company has a significant
equity interest, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share, Performance Unit, Dividend Equivalent, Other
Stock Unit Award, or any other right, interest, or option relating to Shares or
other securities of the Company granted pursuant to the provisions of the Plan.
(c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted by the Committee hereunder
and signed by both the Company and the Participant.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" shall mean the Compensation Committee of the Board, composed
of not less than three directors each of whom is a Disinterested Person.
(g) "Company" shall mean American Telephone and Telegraph Company.
(h) "Disinterested Person" shall have the meaning set forth in Rule
16b-3(d)(3) promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as amended, or any successor definition adopted
by the Commission.
(i) "Dividend Equivalent" shall mean any right granted pursuant to Section
13(h) hereof.
<PAGE>
(j) "Employee" shall mean any salaried employee of the Company or of any
Affiliate.
(k) "Fair Market Value" shall mean, with respect to any property, the market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(l) "Incentive Stock Option" shall mean an Option granted under Section 6
hereof that is intended to meet the requirements of Section 422A of the Code or
any successor provision thereto.
(m) "Nonstatutory Stock Option" shall mean an Option granted under Section 6
hereof that is not intended to be an Incentive Stock Option.
(n) "Option" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.
(o) "Other Stock Unit Award" shall mean any right granted to a Participant
by the Committee pursuant to Section 10 hereof.
(p) "Participant" shall mean an Employee who is selected by the Committee to
receive an award under the Plan.
(q) "Performance Award" shall mean any Award of Performance Shares or
Performance Units pursuant to Section 9 hereof.
(r) "Performance Period" shall mean that period established by the Committee
at the time any Performance Award is granted or at any time thereafter during
which any performance goals specified by the Committee with respect to such
Award are to be measured.
(s) "Performance Share" shall mean any grant pursuant to Section 9 hereof of
a unit valued by reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall
determine, including, without limitation, cash, Shares, or any combination
thereof, upon achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such grant or thereafter.
(t) "Performance Unit" shall mean any grant pursuant to Section 9 hereof of
a unit valued by reference to a designated amount of property other than Shares,
which value may be paid to the Participant by delivery of such property as the
Committee shall determine, including, without limitation, cash, Shares, or any
combination thereof, upon achievement of such performance goals during the
Performance Period as the Committee shall establish at the time of such grant or
thereafter.
(u) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(v) "Restricted Stock" shall mean any Share issued with the restriction that
the holder may not sell, transfer, pledge, or assign such Share and with such
other restrictions as the Committee, in its sole discretion, may impose
(including, without limitation, any restriction on the right to vote such Share,
and the right to receive any cash dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
<PAGE>
(w) "Restricted Stock Award" shall mean an award of Restricted Stock under
Section 8 hereof.
(x) "Senior Manager" shall mean any manager of the Company or any Affiliate
holding a position above salary grade 14 or any future salary grade that is the
equivalent thereof.
(y) "Shares" shall mean the common shares of the Company, $1.00 par value,
and such other securities of the company as the Committee may from time to time
determine.
(z) "Stock Appreciation Right" shall mean any right granted to a Participant
pursuant to Section 7 hereof to receive, upon exercise by the Participant, the
excess of (i) the Fair Market Value of one Share on the date of exercise or, if
the Committee shall so determine in the case of any such right other than one
related to any Incentive Stock Option, at any time during a specified period
before the date of exercise over (ii) the grant price of the right on the date
of grant, or if granted in connection with an outstanding Option on the date of
grant of the related Option, as specified by the Committee in its sole
discretion, which shall not be less than the Fair Market Value of one Share on
such date of grant of the right or the related Option, as the case may be. Any
payment by the Company in respect of such right may be made in cash, Shares,
other property, or any combination thereof, as the Committee, in its sole
discretion, shall determine.
SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee.
The Committee shall have full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan as may from time to
time be adopted by the Board, to: (i) select the Employees of the Company and
its Affiliates to whom Awards may from time to time be granted hereunder; (ii)
determine the type or types of Award to be granted to each Participant
hereunder; (iii) determine the number of Shares to be covered by each Award
granted hereunder; (iv) determine the terms and conditions, not inconsistent
with the provisions of the Plan, of any Award granted hereunder; (v) determine
whether, to what extent and under what circumstances Awards may be settled in
cash, Shares or other property or cancelled or suspended; (vi) determine
whether, to what extent and under what circumstances cash, Shares and other
property and other amounts payable with respect to an Award under this Plan
shall be deferred either automatically or at the election of the Participant;
(vii) interpret and administer the Plan and any instrument or agreement entered
into under the Plan; (viii) establish such rules and regulations and appoint
such agents as it shall deem appropriate for the proper administration of the
Plan; and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for administration of the Plan. Decisions
of the Committee shall be final, conclusive and binding upon all persons,
including the Company, any Participant, any shareholder, and any employee of the
Company or of any Affiliate. A majority of the members of the Committee may
determine its actions and fix the time and place of its meetings.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in Section 4(b), the total number of
Shares available for grant under the Plan in each calendar year shall be
three-fifths of one percent (0.6%) of the total outstanding Shares as of the
first day of such year for which the Plan is in effect; PROVIDED that such
number shall be increased in any year by the number of Shares available for
grant hereunder in previous years but not covered by Awards granted hereunder in
such years; and PROVIDED, FURTHER that no more than twenty million (20,000,000)
<PAGE>
Shares shall be cumulatively available for the grant of Incentive Stock Options
under the Plan. In addition, any Shares issued by the Company through the
assumption or substitution of outstanding grants from an acquired company shall
not reduce the shares available for grants under the Plan. Any Shares issued
hereunder may consist, in whole or in part, of authorized and unissued shares or
treasury shares. If any Shares subject to any Award granted hereunder are
forfeited or such Award otherwise terminates without the issuance of such Shares
or of other consideration in lieu of such Shares, the Shares subject to such
Award, to the extent of any such forfeiture or termination, shall again be
available for grant under the Plan.
(b) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Shares, such adjustment shall be made in the aggregate number and
class of Shares which may be delivered under the Plan, in the number, class and
option price of Shares subject to outstanding Options granted under the Plan,
and in the value of, or number or class of Shares subject to, Awards granted
under the Plan as may be determined to be appropriate by the Committee, in its
sole discretion, PROVIDED that the number of Shares subject to any Award shall
always be a whole number.
SECTION 5. ELIGIBILITY. Any Employee (excluding any member of the Committee)
shall be eligible to be selected as a Participant.
SECTION 6. STOCK OPTIONS. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
granted under the Plan shall be evidenced by an Award Agreement in such form as
the Committee may from time to time approve. Any such Option shall be subject to
the following terms and conditions and to such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee shall deem
desirable:
(a) OPTION PRICE. The purchase price per Share purchasable under an Option
shall be determined by the Committee in its sole discretion; PROVIDED that such
purchase price shall not be less than the Fair Market Value of the Share on the
date of the grant of the Option.
(b) OPTION PERIOD. The term of each Option shall be fixed by the Committee
in its sole discretion; PROVIDED that no Incentive Stock Option shall be
exercisable after the expiration of ten years from the date the Option is
granted.
(c) EXERCISABILITY. Options shall be exercisable at such time or times as
determined by the Committee at or subsequent to grant. Unless otherwise
determined by the Committee at or subsequent to grant, no Incentive Stock Option
shall be exercisable during the year ending on the day before the first
anniversary date of the granting of the Incentive Stock Option.
(d) METHOD OF EXERCISE. Subject to the other provisions of the Plan and any
applicable Award Agreement, any Option may be exercised by the Participant in
whole or in part at such time or times, and the Participant may make payment of
the option price in such form or forms, including, without limitation, payment
by delivery of cash, Shares or other consideration (including, where permitted
by law and the Committee, Awards) having a Fair Market Value on the exercise
date equal to the total option price, or by any combination of cash, Shares and
other consideration as the Committee may specify in the applicable Award
Agreement.
<PAGE>
(e) INCENTIVE STOCK OPTIONS. In accordance with rules and procedures
established by the Committee, the aggregate Fair Market Value (determined as of
the time of grant) of the Shares with respect to which Incentive Stock Options
held by any Participant which are granted after December 31, 1986, and
exercisable for the first time by such Participant during any calendar year
under the Plan (and under any other benefit plans of the Company or of any
parent or subsidiary corporation of the Company) shall not exceed $100,000 or,
if different, the maximum limitation in effect at the time of grant under
Section 422A of the Code, or any successor provision, and any regulations
promulgated thereunder. The terms of any Incentive Stock Option granted
hereunder shall comply in all respects with the provisions of Section 422A of
the Code, or any successor provision, and any regulations promulgated
thereunder.
(f) FORM OF SETTLEMENT. In its sole discretion, the Committee may provide,
at the time of grant, that the shares to be issued upon an Option's exercise
shall be in the form of Restricted Stock or other similar securities, or may
reserve the right so to provide after the time of grant.
SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted hereunder to Participants either alone or in addition to other Awards
granted under the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock Appreciation Rights need not be
the same with respect to each recipient. Any Stock Appreciation Right related to
a Nonstatutory Stock Option may be granted at the same time such Option is
granted or at any time thereafter before exercise or expiration of such Option.
Any Stock Appreciation Right related to an Incentive Stock Option must be
granted at the same time such Option is granted. In the case of any Stock
Appreciation Right related to any Option, the Stock Appreciation Right or
applicable portion thereof shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a Stock Appreciation
Right granted with respect to less than the full number of Shares covered by a
related Option shall not be reduced until the exercise or termination of the
related Option exceeds the number of shares not covered by the Stock
Appreciation Right. Any Option related to any Stock Appreciation Right shall no
longer be exercisable to the extent the related Stock Appreciation Right has
been exercised. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it shall deem appropriate.
SECTION 8. RESTRICTED STOCK.
(a) ISSUANCE. Restricted Stock Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The provisions of Restricted Stock Awards need not be
the same with respect to each recipient.
(b) REGISTRATION. Any Restricted Stock issued hereunder may be evidenced in
such manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of shares of Restricted Stock awarded under the Plan, such certificate
shall be registered in the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award.
<PAGE>
(c) FORFEITURE. Except as otherwise determined by the Committee at the time
of grant, upon termination of employment for any reason during the restriction
period, all shares of Restricted Stock still subject to restriction shall be
forfeited by the Participant and reacquired by the Company; PROVIDED that in the
event of a Participant's retirement, permanent disability, other termination of
employment or death, or in cases of special circumstances, the Committee may, in
its sole discretion, when it finds that a waiver would be in the best interests
of the Company, waive in whole or in part any or all remaining restrictions with
respect to such Participant's shares of Restricted Stock. Unrestricted Shares,
evidenced in such manner as the Committee shall deem appropriate, shall be
issued to the grantee promptly after the period of forfeiture, as determined or
modified by the Committee, and shall expire without forfeiture in respect of
such shares of Restricted Stock.
SECTION 9. PERFORMANCE AWARDS. Performance Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The performance criteria to be achieved during any
Performance Period and the length of the Performance Period shall be determined
by the Committee upon the grant of each Performance Award. Except as provided in
Section 11, Performance Awards will be distributed only after the end of the
relevant Performance Period. Performance Awards may be paid in cash, Shares,
other property or any combination thereof, in the sole discretion of the
Committee at the time of payment. The performance levels to be achieved for each
Performance Period and the amount of the Award to be distributed shall be
conclusively determined by the Committee. Performance Awards may be paid in a
lump sum or in installments following the close of the Performance Period or, in
accordance with procedures established by the Committee, on a deferred basis.
SECTION 10. OTHER STOCK UNIT AWARDS.
(a) STOCK AND ADMINISTRATION. Other Awards of Shares and other Awards that
are valued in whole or in part by reference to, or are otherwise based on,
Shares or other property ("Other Stock Unit Awards") may be granted hereunder to
Participants, either alone or in addition to other Awards granted under the
Plan. Other Stock Unit Awards may be paid in Shares, other securities of the
Company, cash or any other form of property as the Committee shall determine.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees of the Company and its Affiliates
to whom and the time or times at which such Awards shall be made, the number of
shares of Stock to be granted pursuant to such Awards, and all other conditions
of the Awards. The provisions of Other Stock Unit Awards need not be the same
with respect to each recipient.
(b) TERMS AND CONDITIONS. Subject to the provisions of this Plan and any
applicable Award Agreement, Shares subject to Awards made under this Section 10,
may not be sold, assigned, transferred, pledged or otherwise encumbered prior to
the date on which the Shares are issued, or, if later, the date on which any
applicable restriction, performance or deferral period lapses. Shares (including
securities convertible into Shares) granted under this Section 10 may be issued
for no cash consideration or for such minimum consideration as may be required
by applicable law; Shares (including securities convertible into Shares)
purchased pursuant to a purchase right awarded under this Section 10 shall be
purchased for such consideration as the Committee shall in its sole discretion
determine, which shall not be less than the Fair Market Value of such Shares or
other securities as of the date such purchase right is awarded.
<PAGE>
SECTION 11. CHANGE IN CONTROL.
(a) In order to maintain the Participants' rights in the event of any Change
in Control of the Company, as hereinafter defined, the Committee, as constituted
before such Change in Control, may, in its sole discretion, as to any Award,
either at the time an Award is made hereunder or any time thereafter, take any
one or more of the following actions: (i) provide for the acceleration of any
time periods relating to the exercise or realization of any such Award so that
such Award may be exercised or realized in full on or before a date fixed by the
Committee; (ii) provide for the purchase of any such Award, upon the
Participant's request, for an amount of cash equal to the amount that could have
been attained upon the exercise of such Award or realization of the
Participant's rights had such Award been currently exercisable or payable; (iii)
make such adjustment to any such Award then outstanding as the Committee deems
appropriate to reflect such Change in Control; or (iv) cause any such Award then
outstanding to be assumed, or new rights substituted therefor, by the acquiring
or surviving corporation after such Change in Control. The Committee may, in its
discretion, include such further provisions and limitations in any agreement
documenting such Awards as it may deem equitable and in the best interests of
the Company.
(b) A "Change in Control" shall be deemed to have occurred if (a) there
shall have been a change in the composition of the Board such that at any time a
majority of the Board shall have been members of the Board for less than
twenty-four months, unless the election of each new director who was not a
director at the beginning of the period was approved by at least two-thirds of
the directors then still in office who were directors at the beginning of such
period (but in no event by fewer than three such directors); or (b) any Person
acquires 30% or more of the outstanding common shares of the Company.
SECTION 12. AMENDMENTS AND TERMINATION. The Board may amend, alter or
discontinue the Plan, but no amendment, alteration, or discontinuation shall be
made that would impair the rights of an optionee or Participant under an Award
theretofore granted, without the optionee's or Participant's consent, or that
without the approval of the Stockholders would:
(a) except as is provided in Section 4(b) of the Plan, increase the total
number of shares reserved for the purpose of the Plan; or
(b) change the employees or class of employees eligible to participate in
the Plan.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without his consent. The Committee may also substitute new
Awards for previously granted Awards, including without limitation previously
granted Options having higher option prices.
SECTION 13. GENERAL PROVISIONS.
(a) Unless the Committee determines otherwise at the time the Award is
granted or thereafter: (i) no Award, and no Shares subject to Awards described
in Section 10 which have not been issued or as to which any applicable
restriction, performance or deferral period has not lapsed, may be sold,
assigned, transferred, pledged or otherwise encumbered, except by will or by the
laws of descent and distribution; provided that, if so determined by the
Committee, a Participant may, in the manner established by the Committee,
designate a beneficiary to exercise the rights of the Participant with respect
<PAGE>
to any Award upon the death of the Participant; and (ii) each Award shall be
exercisable, during the Participant's lifetime, only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative.
(b) The term of each Award shall be for such period of months or years from
the date of its grant as may be determined by the Committee; PROVIDED that in no
event shall the term of any Incentive Stock Option or any Stock Appreciation
Right related to any Incentive Stock Option exceed a period of ten (10) years
from the date of its grant.
(c) No Employee or Participant shall have any claim to be granted any Award
under the Plan and there is no obligation for uniformity of treatment of
Employees or Participants under the Plan.
(d) The prospective recipient of any Award under the Plan shall not, with
respect to such Award, be deemed to have become a Participant, or to have any
rights with respect to such Award, until and unless such recipient shall have
executed an agreement or other instrument evidencing the Award and delivered a
fully executed copy thereof to the Company, and otherwise complied with the then
applicable terms and conditions.
(e) The Committee shall be authorized to make adjustments in performance
award criteria or in the terms and conditions of other Awards in recognition of
unusual or nonrecurring events affecting the Company or its financial statements
or changes in applicable laws, regulations or accounting principles. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry it into effect. In the event the Company shall assume
outstanding employee benefit awards or the right or obligation to make future
such awards in connection with the acquisition of another corporation or
business entity, the Committee may, in its discretion, make such adjustments in
the terms of Awards under the Plan as it shall deem appropriate.
(f) The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances any Award shall be canceled or
suspended. In addition, all outstanding Awards to any Participant shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or after termination of such employment, establishes a
relationship with a competitor of the Company or engages in activity which is in
conflict with or adverse to the interest of the Company, as determined under the
AT&T Non-Competition Guideline.
(g) All certificates for Shares delivered under the Plan pursuant to any
Award shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(h) Subject to the provisions of this Plan and any Award Agreement, the
recipient of an Award (including, without limitation, any deferred Award) may,
if so determined by the Committee, be entitled to receive, currently or on a
deferred basis, interest or dividends, or interest or dividend equivalents, with
respect to the number of shares covered by the Award, as determined by the
Committee, in its sole discretion, and the Committee may provide that such
amounts (if any) shall be deemed to have been reinvested in additional Shares or
otherwise reinvested.
<PAGE>
(i) Except as otherwise required in any applicable Award Agreement or by the
terms of the Plan, recipients of Awards under the Plan shall not be required to
make any payment or provide consideration other than the rendering of services.
(j) The Committee may delegate to one or more Senior Managers or a committee
of Senior Managers the right to grant Awards to Employees who are not officers
or directors of the Company and to cancel or suspend Awards to Employees who are
not officers or directors of the Company.
(k) The Company shall be authorized to withhold from any Award granted or
payment due under the Plan the amount of withholding taxes due in respect of an
Award or payment hereunder and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes.
(l) Nothing contained in this Plan shall prevent the Board of Directors from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(m) The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of New York and applicable Federal law.
(n) If any provision of this Plan is or becomes or is deemed invalid,
illegal or unenforceable in any jurisdiction, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be stricken and the
remainder of the Plan shall remain in full force and effect.
SECTION 14. EFFECTIVE DATE OF PLAN. The Plan shall be effective as of July
15, 1987.
SECTION 15. TERM OF PLAN. No Award shall be granted pursuant to the Plan
after 10 years from the date of shareowner approval, but any Award theretofore
granted may extend beyond that date.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<DESCRIPTION>EXHIBIT (10)(III)(A)(3)
<TEXT>
AGREEMENT
SENIOR MANAGEMENT INDIVIDUAL LIFE INSURANCE PROGRAM
AND COLLATERAL ASSIGNMENT
THIS AGREEMENT is entered into this day of __________19__, by and between AT&T
Corp., a New York corporation, (hereinafter referred to as "the Employer" in
Part I or "Assignee" in Part II), and
INSTRUCTIONS -- Trustee as Policyholder: Check this box and fill in the
blanks to the right of it if the initial Policyholder will be a trustee
acting for the benefit of the Employee.
___
/__/ _____________________________________________ (hereinafter referred
(Name of Trustee)
to as the "Policyholder"), trustee for ____________________________
(Name of Employee)
(hereinafter referred to as the "Employee").
INSTRUCTIONS -- Employee as Policyholder: Check this box and fill in
the blank to the right of it if the initial Policyholder will be the
Employee.
___
/__/ _____________________________________________ (hereinafter referred
(Name of Employee)
to as either the "Policyholder" or "Employee", as applicable).
WHEREAS, the Employee is currently a valued employee and Senior Manager of the
Employer and the Employer wishes to assist the Employee with his/her personal
life insurance program; and
WHEREAS, the Employee (if also the Policyholder) or otherwise, the above-named
trustee, acting on behalf of the Employee, desires to accept such assistance;
NOW, THEREFORE, the Employer and the Policyholder agree as follows:
PART I - Individual Life Insurance Agreement
1. Description of Policy
In furtherance of the purposes of the Agreement, the Policyholder will
purchase and own a certain policy of life insurance on the life of the
Employee, being Policy No._________ issued by the Metropolitan Life
<PAGE>
Insurance Company (hereinafter referred to as "the Insurer") in an
initial face amount of $_________ with an initial annual premium of
$___________ (said policy being hereinafter referred to as "the
Policy"). The Policyholder's ownership shall be subject to all the
terms and conditions set forth in this Agreement.
2. Payment of Premiums
The Employer shall pay such part of the annual premium for such Policy
(excluding the premium for any supplemental benefits not part of the
Policy at initial issuance) as is equal to the amount of the annual
premium which is in excess of the value of the "economic benefit" of
the life insurance protection for Federal Income Tax purposes as
described in Rev. Rule 64-328, Rev. Rule 66-110, and Rev. Rule 67-154.
For purposes of this Section 2, "economic benefit" means the cost of
the pure life insurance coverage (i.e. death benefit less any cash
value) portion of the Policy. The Employer's contribution to the
premium shall be reduced by any dividend used to reduce premiums. For
the convenience of the parties, the Employer shall pay the entire
premium directly to the Insurer. The Employee shall reimburse the
Employer for that portion of the premium equal to the "economic
benefit," of the life insurance protection by withholding monthly from
the Employee's paycheck, pension check, or other post-employment
payment received from the Employer, as applicable; provided, however,
that such withholding from an Employee's pension check from the AT&T
Management Pension Plan shall not exceed 10% of the gross monthly
pension and shall be revocable at the request of the Employee. If the
Employee shall have transferred or assigned his/her interest in the
Policy to a third party, such third party (in the absence of continued
payment by the Employee) shall make payment of the appropriate portion
of the premium to the Employer. If the Employee is not receiving
sufficient amounts from which premiums can be withheld, the Employee
shall make payment of the appropriate amount directly to the Employer
or to the Insurer. While this Agreement is in effect, the Employer
shall maintain a schedule (a copy of which shall be open to inspection
by the Employee), recording annually the portion of the premium paid by
the Employer and the portion paid by the Employee.
3. Collateral Assignment and Possession of Policy
To secure repayment of premiums paid by the Employer provided for in
Section 2, Part II of this Agreement includes an assignment of the
Policy or the Policyholder's interest therein (hereinafter "Collateral
Assignment") and provides for the transfer of possession of the Policy
to the Employer during the term specified in Part II of this Agreement.
Except as provided in or as otherwise consistent with the provisions of
this Agreement, the Employer covenants that it will not exercise its
rights under the Collateral Assignment provisions of this Agreement in
such a manner as to defeat the rights of the Policyholder or the policy
beneficiary under this Agreement. Specifically, the Employer covenants
that it will not surrender the Policy unless the Policyholder has
defaulted on his/her obligations under this Agreement, or the Agreement
has terminated as provided in Section 8. The Employer shall have
possession of the Policy during the period that the Employer makes
premium payments and until all such payments are repaid. The Employer
shall make the Policy available to the Insurer in order to make any
change desired by the Policyholder as to the designation of beneficiary
or the selection of a settlement option, subject, however, to the
Collateral Assignment provisions hereof.
<PAGE>
4. Beneficiary Designation and Payment of Policy Proceeds
The Policyholder shall have the right to name the Policy beneficiary.
However, in the event of the Employee's death, the Employer shall have
an interest in the Policy proceeds equal to the value of the premiums
which the Employer has made to the extent not previously reimbursed,
less any Policy indebtedness of the Employer to the Insurer. The
balance, if any, of the proceeds of the Policy shall be paid to the
beneficiary designated in the Policy by the Policyholder.
5. Procedure at Employee's Death
Upon the death of the Employee while the Policy and this Agreement are
in force and subject to the provisions of Parts I and II hereof, the
Employer shall promptly take all necessary steps, including rendering
of such assistance as may reasonably be required by the beneficiary, to
obtain payment from the Insurer of the amounts payable under the Policy
to the respective parties, as provided under Section 4 above.
6. Disability Waiver of Premium
In the event that a supplemental agreement providing for waiver of
premium in the event of disability or any additional death benefit
becomes operational, the additional premium for such supplemental
agreement shall be paid by the Policyholder for the benefit of the
Employee. The Employer's interest in the Policy at death, under Section
4, or on surrender, under Section 9, shall be limited to total premiums
paid by the Employer and not previously reimbursed less any Policy
indebtedness of the Employer to the Insurer.
7. Choice of Dividend Option(s)
To the extent that the Insurer declares dividends on the Policy, the
Employer shall have the right to choose the option or combination of
options it desires from among those offered by the Insurer as to the
disposition of such dividends. The Employer shall notify the
Policyholder and Insurer of its choice, and the Policyholder agrees to
execute any documents necessary to choose or change the Policy's
dividend option.
8. Termination of Agreement
Part I of this Agreement shall terminate when the first of any of the
following events occurs:
(a) Termination of the Employee's employment with the Employer,
for reasons other than retirement on a disability allowance or
a minimum pension or after becoming retirement eligible. For
purposes of this Agreement, an Employee shall be considered
retirement eligible if the Employee has satisfied one of the
following minimum age and length of service (as determined
under the AT&T Management Pension Plan) combinations: (a) any
age and 30 years of service; (b) age 50 and 25 years of
service; (c) age 55 and 20 years of service; or (d) age 65 and
10 years of service;
(b) The Employee's attainment of the age 65 (in some cases later)
on or after retirement on a disability allowance or a minimum
pension or after becoming retirement eligible or, if later,
fifteen (15) years from the date of issuance of the Policy;
<PAGE>
(c) Either party's submission of written notice, to the other
party, of intent to terminate Part I of this Agreement;
(d) Performance of the Agreement's terms, following the death of
the Employee;
(e) Failure by either the Employer or the Policyholder, for any
reason to make the premium contributions required under
Section 2 of this Agreement;
(f) Demotion of the Employee to a non-Senior Manager position; or
(g) The Employee engages in any competitive activity as determined
in accordance with the provisions of the AT&T Non-Competition
Guideline (unless either (i) the Employee has obtained the
advance written consent of the Employer's Executive Vice
President-Human Resources to engage in such competitive
activity as provided in the AT&T Non-Competition Guideline; or
(ii) the Employer's Executive Vice President-Human Resources
has waived the application of the AT&T Non-Competition
Guideline to the Employee with respect to the Agreement as
provided for in the AT&T Non-Competition Guideline).
9. Disposition of Policy Upon Termination of Agreement
Upon the termination of this Agreement for any reason other than
Section 8(d) above, the Policyholder shall have a thirty (30) day
option to satisfy the Collateral Assignment regarding the Policy held
by the Employer in accordance with the terms of this Section 9. The
amount necessary to satisfy such Collateral Assignment shall be an
amount equal to the total premium payments made, from time to time, by
the Employer pursuant to Section 2 hereof, and, at the option of the
Policyholder, either shall be paid directly by the Policyholder or
through the Employer's collection from the cash value under the Policy.
If the Policy shall then be encumbered by assignment, policy loan, or
other means which have been the result of the Employer's actions, the
Employer shall either remove such encumbrance, or reduce the amount
necessary to satisfy the Collateral Assignment by the total amount of
indebtedness outstanding against the Policy. The provisions of this
Section 9 are subject to the terms of Section 6 if the Policy's
supplemental agreements have been activated. If the Policyholder
exercises his/her option to satisfy the Collateral Assignment, the
Employer shall execute all necessary documents required by the Insurer
to remove and satisfy the Collateral Assignment outstanding on the
Policy. If the Policyholder does not exercise his/her option to satisfy
the Collateral Assignment outstanding on the Policy, the Policyholder
shall execute all documents necessary to transfer ownership of the
Policy to the Employer. Such transfer shall constitute satisfaction of
any obligation the Policyholder has to the Employer with respect to
this Agreement. The Employer shall then pay to the Policyholder the
amount, if any, by which the cash surrender value of the Policy exceeds
the amount necessary to satisfy the Collateral Assignment.
10. Taxable Income
The Employee is responsible for determining the amount of taxable
income, if any, includable in his/her gross income for tax purposes as
a result of this Agreement or coverage under the Policy.
<PAGE>
11. Policyholder's Right to Assign His/Her Interest
The Policyholder shall have the right to transfer his/her entire
interest in the Policy (other than rights assigned to the Employer
pursuant to this Agreement and subject to the obligations of any
outstanding Collateral Assignment) to another person, trust or entity
(herein the "Transferee"). If the Policyholder makes such a transfer,
all his/her rights shall be vested in the Transferee and the
Policyholder shall have no further interest in the Policy and
Agreement. Any Transferee shall be subject to all obligations of the
Policyholder under both Parts I and II of this Agreement.
12. Insurer's Obligations
The Insurer is not a party to this Agreement. It is understood by the
parties hereto that in issuing such Policy of insurance, the Insurer
shall have no liability except as set forth in the Policy and except as
set forth in any assignment of the Policy filed at its Home Office.
Except as set forth in Sections 13 and 14, the Insurer shall not be
bound to inquire into, or take notice of, any of the covenants herein
contained as to the Policy of insurance or as to application
of proceeds of such Policy. Upon the death of the Employee and payment
of the proceeds in accordance with Sections 13 and 14 of this
Agreement, the Insurer shall be discharged from all liability.
13. Administrative and Fiduciary Provisions
AT&T Corp. shall be the administrator with respect to any rights or
obligations of the Employer hereunder and shall have the authority to
control and manage the operation and administration of this Agreement.
The Insurer shall be the fiduciary of the Policy solely with regard to
the review and final decision on the claim for benefits under the
Policy, as provided in the claims procedure set forth in Section 14.
14. Claims Procedure
The following claims procedure shall apply to the Policy and the Senior
Management Individual Life Insurance Program:
(a) Filing of a claim for benefits: The Policyholder or the
beneficiary of the Policy shall make a claim for the benefits
provided under the Policy in the manner provided in the
Policy.
(b) Claim denial: With respect to a claim for benefits under said
Policy, the Insurer shall be the entity which reviews and
makes decisions on claim denials according to the terms of the
Policy.
(c) Notification to claimant of decisions. If a claim is wholly or
partially denied, notice of the decision, meeting the
requirements of Section (d) following shall be furnished to
the claimant within a reasonable period of time after a claim
has been filed.
(d) Content of notice: The Insurer shall provide, to any claimant
who is denied a claim for benefits, written notice setting
forth in a manner calculated to be understood by the claimant,
the following:
<PAGE>
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent Policy provisions or
provisions of this Agreement on which the denial is
based;
(3) A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(4) An explanation of this Agreement's claim review
procedure, as set forth in Sections (e) and (f)
following.
(e) Review procedure: The purposes of the review procedure set
forth in this Section and Section (f) following is to provide
a method by which a claimant under the Policy and the Senior
Management Individual Life Insurance Program may have a
reasonable opportunity to appeal a denial of claim for a full
and fair review. To accomplish that purpose, the claimant or
his/her duly authorized representative:
(1) May request a review upon written application to the
Insurer;
(2) May review the Policy or pertinent Senior Management
Individual Life Insurance Program documents or
agreements; and
(3) May submit issues and comments in writing.
A claimant, (or his/her duly authorized representative), shall
request a review by filing a written application for review at
any time within sixty (60) days after receipt by the claimant
of written notice of the denial of the claim.
(f) Decision on review. A decision on review of a denial of a
claim shall be made in the following manner:
(1) the decision on review shall be made by the Insurer
which may, at its discretion, hold a hearing on the
denied claim. The Insurer shall make its decision
promptly, unless special circumstances (such as the
need to hold a hearing) require an extension of time
for processing, in which case a decision shall be
rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the
request for review.
(2) The decision on review shall be in writing and shall
include specific reasons for the decision, written in
a manner calculated to be understood by the claimant,
and specific references to the pertinent Policy
provision or provision of this Agreement on which the
decision is based.
Notwithstanding any provision of the Agreement or the Policy, no Employee,
Policyholder, Transferee, assignee or beneficiary may commence any action in any
court regarding the Policy or the Senior Management Individual Life Insurance
Program prior to pursuing all rights of Policyholder under this Section 14.
<PAGE>
PART II - Assignment of Life Insurance Policy as Collateral
A. For value received and in specific consideration of the premium
payments made by the Employer as set forth in Section 2 of Part I
hereof, the Policyholder hereby assigns, transfers and sets over to the
Employer (in this Part II referred to as the "Assignee"), its
successors and assigns, the Policy issued by the
Insurer upon the life of the Employee and all claims, options,
privileges, rights, title and interest therein and thereunder (except
as provided in Paragraph C hereof), subject to all the terms and
conditions of the Policy and to all superior liens, if any, which the
insurer may have against the Policy. The Policyholder by this
instrument agrees and the Assignee by the acceptance of this
assignment agrees to the conditions and provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of
the foregoing, the following specific rights are included in this
Agreement and Collateral Assignment and pass to the Assignee by virtue
hereof:
1. The sole right to collect from the Insurer the net proceeds
of the Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the
surrender value thereof at any time provided by the terms of
the Policy and at such other times as the Insurer may allow;
3. The sole right to obtain one or more loans or advances on the
Policy, either from the Insurer or, at any time, from other
persons, and to pledge or assign the Policy as security for
such loans or advances;
4. The sole right to collect and receive all distributions or
shares of surplus, dividend deposits or additions to the
Policy now or hereafter made or apportioned thereto, and to
exercise any and all options contained in the Policy with
respect thereto; provided, that unless and until the Assignee
shall notify the Insurer in writing to the contrary, the
distributions or shares of surplus, dividend deposits and
additions shall continue on the Policy in force at the time of
this assignment; and
5. The sole right to exercise all nonforfeiture rights permitted
by the terms of the Policy or allowed by the Insurer and to
receive all benefits and advantages derived therefrom.
C. It is expressly agreed that the following specific rights, so long as
the Policy has not been surrendered, are reserved and excluded from
this Agreement and Collateral Assignment and do not pass by virtue
hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of insurance
or the cash value of the Policy;
2. The right to designate any change in the beneficiary;
<PAGE>
3. The right to elect any optional mode of settlement permitted
by the Policy or allowed by the Insurer;
provided, however, that the reservation of these rights shall in no way
impair the right of the Assignee to surrender the Policy completely
with all its incidents or impair any other right of the Assignee
hereunder, and any designation or change of beneficiary or election of
a mode of settlement shall be made subject to this Agreement and
Collateral Assignment and to the rights of the Assignee hereunder.
D. This Collateral Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Policyholder to
the Assignee arising under this Agreement (all of which liabilities
secured to or to become secured are herein referred to as
"Liabilities"). It is expressly agreed that all sums received by the
Assignee hereunder whether in the event of death of the Employee, the
maturity or surrender of the Policy, the obtaining of a loan or advance
on the Policy, or otherwise, shall first be applied to the payment of
the liability for premiums paid by the Assignee on the Policy.
E. The Assignee covenants and agrees with the Policyholder as follows:
1. That any balance of sums, if any, received hereunder from the
Insurer remaining after payment of the existing Liabilities,
matured or unmatured, shall be paid by the Assignee to the
persons entitled thereto under the terms of the Policy had
this Collateral Assignment not been executed;
2. That the Assignee will not exercise either the right to
surrender the Policy or the right to obtain policy loans from
the Insurer, until there has been either default in any of the
Liabilities pursuant to this Agreement or termination of said
Agreement as therein provided; and
3. That the Assignee will, upon request, forward without
reasonable delay to the Insurer the Policy for endorsement of
any designation or change of beneficiary or any election of an
optional mode of settlement.
F. The Policyholder declares that no proceedings in bankruptcy are pending
against him/her and that his/her property is not subject to any
assignment for the benefit of creditors.
Provisions Applicable to Parts I and II
1. Amendments
Amendments may be added to this Agreement by a written agreement signed
by each of the parties and attached hereto.
2. Choice of Law
This Agreement shall be subject to, and construed according to, the
laws of the State of New Jersey.
<PAGE>
3. A Binding Agreement
This Agreement shall bind the Employer and the Employer's successors
and assigns, the Policyholder and his/her heirs, executors,
administrators, and assigns (including a Transferee), and any Policy
beneficiary.
4. Severability Provision
The Employer and the Policyholder agree that if any provision of this
Agreement is determined to be invalid or unenforceable, in whole or
part, then all remaining provisions of this Agreement and, to the
extent valid or enforceable, the provision in question shall remain
valid, binding and fully enforceable as if the invalid or unenforceable
provision, to the extent necessary, was not a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, including
the provisions regarding Collateral Assignment, on the day and year first above
written.
POLICYHOLDER
______________________________ ______________________________
Signature of Witness Signature of Policyholder
AT&T CORP.
(As Employer and Assignee)
______________________________ ______________________________
Signature of Witness H. W. Burlingame
Executive Vice President-Human Resources
<PAGE>
AT&T SENIOR MANAGEMENT INDIVIDUAL LIFE INSURANCE PROGRAM
(revised 3/3/98)
Program Overview
The Senior Management Individual Life Insurance Program (SMILIP) is an
arrangement where the Company and you purchase a permanent life insurance policy
on your life and share the premium payment. If you die while AT&T is still a
party to the policy, typically before you reach age 65, the death benefit is
also shared between the Company and your designated beneficiary. This type of
arrangement is known in the insurance industry as "Split Dollar." After
attaining age 65 or if later, 15 years from the date of issuance of this policy,
the Company will recoup its premium payments from the cash value build-up in the
policy and cease to have any interest in the policy. The remaining cash value
will be sufficient to give you a "paid-up" death benefit after attaining normal
retirement age, i.e., all premiums will cease and the death benefit of the
policy will be secured for the designated beneficiary with no further cost to
you.
At the time of enrollment your death benefit will be one-and-one-half times
annual salary. Your death benefit will increase annually at 7% to approximate
assumed growth in annual salary over an extended period of time. The premium
cost to you will also increase to reflect your increasing age as well as the
increased death benefit. The Company will pay a significant portion of the
premium. Over time, the Company portion of the premium will decrease.
Although this arrangement is primarily designed to pay a benefit upon your
death, there is also a cash value build-up occurring coincident with the premium
payments that continues after the premium payments cease. Once sufficient funds
have accumulated and the Company no longer has an interest in the policy,
because it has recouped its premiums, you have the option to use some or all of
the remaining cash in lieu of some or all of the death benefit.
Eligibility
SMILIP is available to active AT&T Senior Managers. Employees who are promoted
or hired into Senior Management are immediately eligible to enroll in this
program.
Coverage
Your death benefit will automatically increase 7% on January 1 of each year to
approximate salary increases. Periodically over the life of the policy this
amount may be adjusted by the Company to more closely approximate your actual
salary.
Insurability
If you enroll within 60 days of becoming a Senior Manager, you are guaranteed to
be insured. If you delay enrollment proof of insurability may be required at
that time before a policy can be written or coverage increased. If you are on
disability (i.e., receiving Sickness and Disability Benefits) at the time of
eligibility, enrollment must be delayed until you return to work.
<PAGE>
Premium Sharing/Benefit Sharing
SMILIP has its origin in what the insurance industry calls a "Split Dollar"
program. The term "Split Dollar" insurance comes from a concept of the Employer
and the Employee sharing the premium payment on a life insurance policy on the
employee. At age 65 or if later, 15 years from the date of issuance of the
policy, the Company's aggregate premiums are returned from a "special" cash
value built into the policy expressly for this purpose. Should you die before
the Company's aggregate premiums are returned, death benefit payments are made
to both the Company and your beneficiary. However, the benefit the Company
receives does not reduce the death benefit paid to your beneficiary. After the
Company's aggregate premiums are returned, the Company no longer has an interest
in the policy. At that time you will have a "paid up" permanent life insurance
policy with a cash value that can be made available to you at your option.
Sample Senior Manager's Program*
Current Age 50
Annual Premium
Cash Value
Attained Death Senior Senior
Age Benefit Manager Company Manager Company
- --- ------- ------- ------- ------- -------
50 $200,000 $ 880 $17,090 0 $ 14,350
55 280,500 1,740 16,232 $ 15,700 101,000
60 393,400 4,092 13,878 85,350 178,500
64 515,700 5,364 12,606 195,700 231,000
65# 515,700 0 0 203,800 0
* This example is for illustrative purposes only and assumes a 7% annual growth
in death benefit (assumed annual salary) and an 8% yield on investment for
the cash value.
The yield on investment is not guaranteed.
# At normal retirement the death benefit becomes constant, premiums cease, the
Company's aggregate premiums are returned and your cash value may continue to
grow.
Premium Period
SMILIP is designed for premiums to be extended over a period of time to ease the
impact on cash flow to both you and the Company. This period is normally from
the time of your enrollment until you reach age 65, however, premiums must be
paid for a minimum of 15 years. Therefore, if you enroll in the program after
age 50, you and the Company will continue premium contributions until the 15
year minimum is reached.
Premium Amount
You will be provided with a personal illustration which reflects the Company's
as well as your annual premiums through the life of the policy.
Premium Waivers
There are no Premium Waivers associated with this policy.
<PAGE>
Ownership
There are three options:
Senior Manager as Owner
All paperwork must be signed by Senior Manager as proposed insured and
owner.
Owner at Enrollment is not the Senior Manager
Another option is for you not to take ownership, but rather another,
i.e., individual, trust, etc., apply for ownership of the policy. It is
of particular importance that if the owner of the policy is not you,
the owner must sign the applications as the "Applicant/Owner" and you
must sign as the "Proposed Insured".
Transfer of Ownership
The owner of this policy may subsequently transfer ownership to
another, i.e., an individual, trust, etc.
Since ownership has long term and/or irrevocable implications, we urge you to
consult with an attorney and/or tax advisor before making this decision.
Cash Value
This program is designed to provide you with a pre- and post-retirement death
benefit. However, in addition to the death benefit, there is a cash value
build-up. That is, part of each premium is placed in an "investment fund" to
earn income. Investment earnings beyond the amounts necessary to increase the
death benefit (as your salary increases) build on a tax advantaged basis in the
policy.
Cash Availability
Cash Build-up
Your share of the cash build-up will not begin until several years into
the policy but will build quickly after that. As with any cash amount,
the longer it is left intact the greater the amount will be.
Loans
The cash value attributed to you may be withdrawn in the form of a loan
after the Company no longer has an interest in the policy. There are
certain restrictions and tax implications associated with a loan. We
suggest that you speak with your financial counselor/tax advisor before
taking such a step.
Income Stream or Lump Sum
It is possible, after the Company no longer has an interest in the
policy, to convert all or any portion of the policy from a death
benefit to either an income "stream" (i.e., an annuity) or a lump sum
cash payout. The extent to which you convert to income or cash will
cancel or reduce the valuable death benefit. Once you convert, it is
not possible to re-establish the original death benefit.
<PAGE>
Secured Benefit
Changes to the tax law over the years have required an increasing portion of the
Senior Management benefit programs to be paid from Company operating income.
SMILIP allows the Company to contribute towards the cost of this program on a
timely basis while securing the benefit payment from a third party (the
insurance company).
Early Retirement, Termination or Demotion
If, at retirement, you are "Pension Eligible" or "Retirement Eligible" and you
have not reached normal retirement age (65), the death benefit will continue to
increase until age 65. Both you and the Company will continue to pay premiums
until you reach age 65 or if later, 15 years from the date of issuance of the
policy. At that time the premiums will cease and the Company's aggregate
premiums will be returned to the Company.
For purposes of the SMILIP, you will be considered "Pension Eligible" if you
retire with a Disability Allowance or Minimum Retirement Benefit under the AT&T
Senior Management Long Term Disability and Survivor Protection Plan. You will be
considered "Retirement Eligible" for purposes of the SMILIP if you retire after
having satisfied one of the following minimum age and length of service (as
determined under the AT&T Management Pension Plan) combinations: (a) any age and
30 years of service; (b) age 50 and 25 years of service; (c) age 55 and 20 years
of service; or (d) age 65 and 10 years of service.
Whether or not you are Pension Eligible or Retirement Eligible, if you leave the
Company, and without the Company's consent or an appropriate waiver, establish a
relationship with a competitor of the Company or engage in activity in conflict
with or adverse to the interests of the Company under the standards of the AT&T
Non-Competition Guideline and as determined by the AT&T Executive Vice President
- - Human Resources, the process will be the same as with retirement/termination
without being Pension Eligible or Retirement Eligible.
If you separate from the Company without being Pension Eligible, Retirement
Eligible or are demoted to a non Senior Manager position, the Company's
aggregate premiums will be immediately returned to the Company. You can, at your
option, either maintain the policy by continuing to pay the total premium, i.e.,
both your amount and the amount previously paid by the Company, use the
remaining cash value (if any) to buy paid up life insurance, or withdraw any
remaining cash value and cancel the policy.
Contractual Agreement
One of the unique aspects of this insurance policy is the existence of a
contract between you and AT&T. This agreement has no relationship to employment
or any other benefit but rather defines the responsibilities of both the Company
and you in the operation of the policy. You will own the policy and determine
the beneficiary. The Company will hold the policy and have a "Collateral
Assignment" from the owner (you or another you name) entitling AT&T, as long as
it has a collateral interest in the policy, to an amount equal to its premiums
paid. This document is a legal agreement and as such includes a significant
amount of detail and warrants your careful review before signing. Although
somewhat unique to life insurance, a collateral assignment is similar in context
to an automobile loan where the car becomes "collateral" for the money lent to
buy it. In this case, a portion of the value and benefit of the policy is the
collateral the Company receives for contributing premium payments to "buy" the
life insurance policy. The agreement is satisfied when the premium paid by the
<PAGE>
Company is returned. Some of the major sections of the agreement are:
- Description of the policy
- How the premiums are paid
- How the proceeds are paid
- How the agreement terminates
- Claims procedure
- Description of the assignment
Taxes
Split Dollar life insurance policies have been in existence for decades. The IRS
has issued several rulings over this period which treat these policies favorably
from a tax perspective. However, the Company does not assure any particular tax
treatment and recommends that you review your own situation with your personal
attorney and/or tax advisor.
Enrollment
You will be provided with enrollment documents for completion. Enrollment in
SMILIP and any future changes (i.e., assignment of ownership, beneficiary
change, etc.) is processed through Executive Human Resources.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<DESCRIPTION>EXHIBIT (10)(III)(A)(7)
<TEXT>
Enrollment Package
(revised 3/2/98)
Program Overview
The Directors Individual Life Insurance Program (DILIP) is an arrangement where
the Company and you purchase a permanent life insurance policy on your life and
share the premium payment. If you die while AT&T is still a party to the policy,
typically before you reach age 70, the death benefit is also shared between the
Company and your designated beneficiary. This type of arrangement this known in
the insurance industry as "Split Dollar." After attaining age 70 or if later, 15
years from the date of issuance of this policy, the Company will recoup its
premium payments from the cash value build-up in the policy and cease to have
any interest in the policy. The remaining cash value will be sufficient to give
you a "paid-up" death benefit after attaining normal retirement age, i.e., all
premiums will cease and the death benefit of the policy will be secured for the
designated beneficiary with no further cost to you.
At the time of enrollment your death benefit will be $100,000. Your death
benefit will increase annually at 7%. The premium cost to you will also increase
to reflect your increasing age as well as the increased death benefit. The
Company will pay a significant portion of the premium (see the attached
illustration). Over time, the Company portion of the premium will decrease.
Although this arrangement is primarily designed to pay a benefit upon your
death, there is also a cash value build-up occurring coincident with the premium
payments that continues after the premium payments cease. Once sufficient funds
have accumulated and the Company no longer has an interest in the policy,
because it has recouped its premiums, you have the option to use some or all of
the remaining cash in lieu of some or all of the death benefit.
Eligibility
DILIP is for non-employee members of the AT&T Board of Directors.
Coverage
The death benefit will automatically increase 7% on January 1 of each year.
Insurability
If you enroll within 60 days of becoming a Board Member, you are guaranteed to
be insured. If you choose to delay enrollment, proof of insurability may be
required at that time before a policy can be written or coverage increased. If
you are on disability at the time of eligibility, enrollment must be delayed
until you return to work.
Premium Sharing/Benefit Sharing
DILIP has its origin in what the insurance industry calls a "Split Dollar"
program. The term "Split Dollar" insurance comes from a concept of the Employer
and the Employee sharing the premium payment on a life insurance policy on the
employee. At age 70 or if later, 15 years from the date of issuance of the
<PAGE>
policy, the Company's aggregate premiums are returned from a "special" cash
value built into the policy expressly for this purpose. Should you die before
the Company's aggregate premiums are returned, death benefit payments are made
to both the Company and your beneficiary. However, the benefit the Company
receives does not reduce the death benefit paid to your beneficiary. After the
Company's aggregate premiums are returned, the Company no longer has an interest
in the policy. At that time you will have a "paid up" permanent life insurance
policy with a cash value that can be made available to you at your option.
Example:*
Sample Director's Program
Current Age 55
Annual Premium Cash Value
Attained Death
Age Benefit Director Company Director Company
- --- ------- -------- ------- -------- -------
55 $100,000 $ 620 $10,959 0 $ 9,085
60 140,300 1,459 10,120 $ 9,362 64,447
65 196,700 3,345 8,234 52,636 112,066
69 257,900 4,384 7,195 118,594 142,495
70# 257,900 0 0 122,893 0
* This example is for illustrative purposes only and assumes a 7% annual growth
in death benefit (assumed base salary) and an 8% yield on investment for the
cash value. The yield on investment is not guaranteed.
# At normal retirement the death benefit becomes constant, premiums cease, the
Company's aggregate premiums are returned and your cash value may continue to
grow.
Premium Period
DILIP is designed for premiums to be extended over a period of time to ease the
impact on cash flow to both you and the Company. This period is normally from
the time of your enrollment until you reach age 70, however, premiums must be
paid for a minimum of 15 years. Therefore, if you enroll in the program after
age 55, you and the Company will continue premium contributions until the
minimum is reached.
Premium Amount
Included as an attachment is a personal illustrations. The illustration shows
the Company's as well as your annual premium through the life of the policy.
Premium Waivers
There are no Premium Waivers associated with this policy.
<PAGE>
Ownership
There are three options:
Board Member as Owner
---------------------
All paperwork should be signed by the Director as proposed insured and
owner.
Owner at Enrollment is not the Board Member
-------------------------------------------
Another option is for you not to take ownership, but rather another,
i.e., individual, trust, etc., apply for ownership of the policy. It is
of particular importance that if the owner of the policy is not you,
the owner must sign as the "Applicant/Owner" and you must sign the
application as the "Proposed Insured".
Transfer of Ownership
---------------------
The owner of this policy may subsequently transfer ownership to
another, i.e., an individual, trust, etc. Please contact Kathy Pruna at
908 630-2827 for the necessary forms and/or information.
Since ownership has long term and/or irrevocable implications, we urge you to
consult with an attorney and/or tax advisor before making this decision.
Cash Value
This program is designed to provide you with a pre- and post-retirement death
benefit. However, in addition to the death benefit, there is a cash value
build-up. That is, part of each premium is placed in an "investment fund" to
earn income. Investment earnings beyond the amounts necessary to increase the
death benefit, build on a tax advantaged basis in the policy.
Cash Availability
Cash Build-up
Your share of the cash build-up will not begin until several years into
the policy but will build quickly after that. As with any cash amount,
the longer it is left intact the greater the amount will be.
Loans
The cash value attributed to you may be withdrawn in the form of a loan
after the Company no longer has an interest in the policy. There are
certain restrictions and tax implications associated with a loan. We
suggest that you speak with your financial counselor/tax advisor before
taking such a step.
Income Stream or Lump Sum
It is possible, after retirement, to convert all or any portion of the
policy from a death benefit to either an income "stream" (i.e., an
annuity) or a lump sum cash payout. The extent to which you convert to
income or cash will cancel or reduce the valuable death benefit. Once
you convert, it is not possible to re-establish the original death
benefit.
<PAGE>
Early Retirement
If you retire before age 70, the death benefit will continue to increase until
age 70. Both you and the Company will continue to pay premiums until you reach
age 70 or if later, 15 years from the date of issuance of the policy. At that
time the premiums will cease and the Company's aggregate premiums will be
returned to the Company. If you leave the Company and engage in competitive
activity as determined by AT&T, the Company's aggregate premiums will be
immediately returned to the Company. You can, at your option, either maintain
the policy by continuing to pay the total premium, i.e., both your amount and
the amount previously paid by the Company, use the remaining cash value (if any)
to buy paid up life insurance, or withdraw any remaining cash value and cancel
the policy.
Contractual Agreement
One of the unique aspects of this insurance policy is the existence of a
contract between you and AT&T. This agreement has no relationship to employment
or any other benefit but rather defines the responsibilities of both the Company
and you in the operation of the policy. You will own the policy and determine
who beneficiary. The Company will hold the policy and have a "Collateral
Assignment" from the owner (you or another you name) entitling AT&T, as long as
it has a collateral interest in the policy, to an amount equal to its premiums
paid. This document is a legal agreement and as such includes a significant
amount of detail and warrants your careful review before signing. Although
somewhat unique to life insurance, a collateral assignment is similar in context
to an automobile loan where the car becomes "collateral" for the money lent to
buy it. In this case, a portion of the value and benefit of the policy is the
collateral the Company receives for contributing premium payments to "buy" the
life insurance policy. The agreement is satisfied when the premium paid by the
Company is returned. Some of the major sections of the agreement are:
- Description of the policy
- How the premiums are paid
- How the proceeds are paid
- How the agreement terminates
- Claims procedure
- Description of the assignment
The Agreement is included with this package.
Taxes
Split Dollar life insurance policies have been in existence for decades. The IRS
has issued several rulings over this period which treat these policies favorably
from a tax perspective. However, the Company does not assure any particular tax
treatment and recommends that you review your own situation with your personal
attorney and/or tax advisor.
Enrollment
Included with this package are the documents required for enrolling in the
Directors Individual Life Insurance Program. The Application Form while
appearing lengthy requires, for our purposes, just a few basic pieces of
information, as does the Beneficiary Designation form. Both of these documents
include instructions on how to complete. The Collateral Assignment requires
signatures only.
<PAGE>
AGREEMENT
DIRECTOR'S INDIVIDUAL LIFE INSURANCE PROGRAM
AND COLLATERAL ASSIGNMENT
THIS AGREEMENT is entered into this day of __________19__, by and between AT&T
Corp., a Delaware corporation, (hereinafter referred to as "the Company" in Part
I or "Assignee" in Part II), and
INSTRUCTIONS -- Trustee as Policyholder: Check this box and fill in the
blanks to the right of it if the initial Policyholder will be a trustee
acting for the benefit of the Director.
___
/__/ ______________________________________________(hereinafter referred
(Name of Trustee)
to as the "Policyholder"), trustee for ___________________________
(Name of Director)
(hereinafter referred to as the "Director").
INSTRUCTIONS -- Director as Policyholder: Check this box and fill in
the blank to the right of it if the initial Policyholder will be the
Director.
___
/__/ ______________________________________________(hereinafter referred
(Name of Director)
to as either the "Policyholder" or "Director", as applicable).
WHEREAS, the Director is currently a valued Director of the Company and the
Company wishes to assist the Director with his/her personal life insurance
program; and
WHEREAS, the Director (if also the Policyholder) or otherwise, the above-named
trustee, acting on behalf of the Director, desires to accept such assistance;
NOW, THEREFORE, the Company and the Policyholder agree as follows:
PART I - Individual Life Insurance Agreement
1. Description of Policy
In furtherance of the purposes of the Agreement, the Policyholder will
purchase and own a certain policy of life insurance on the life of the
Director, being Policy No._________ issued by the Metropolitan Life
Insurance Company (hereinafter referred to as "the Insurer") in an
initial face amount of $100,000 with an initial annual premium of
$___________ (said policy being hereinafter referred to as "the
Policy"). The Policyholder's ownership shall be subject to all the
terms and conditions set forth in this Agreement.
2. Payment of Premiums
The Company shall pay such part of the annual premium for such Policy
<PAGE>
(excluding the premium for any supplemental benefits not part of the
Policy at initial issuance) as is equal to the amount of the annual
premium which is in excess of the value of the "economic benefit" of
the life insurance protection for Federal Income Tax purposes as
described in Rev. Rule 64-328, Rev. Rule 66-110, and Rev. Rule 67-154.
For purposes of this Section 2, "economic benefit" means the cost of
the pure life insurance coverage (i.e. death benefit less any cash
value) portion of the Policy. The Company's contribution to the premium
shall be reduced by any dividend used to reduce premiums. For the
convenience of the parties, the Company shall pay the entire premium
directly to the Insurer. The Director shall reimburse the Company for
that portion of the premium equal to the "economic benefit," of the
life insurance protection. If the Director shall have transferred or
assigned his/her interest in the Policy to a third party, such third
party (in the absence of continued payment by the Director) shall make
payment of the appropriate portion of the premium to the Company. While
this Agreement is in effect, the Company shall maintain a schedule (a
copy of which shall be open to inspection by the Director), recording
annually the portion of the premium paid by the Company and the portion
paid by the Director.
3. Collateral Assignment and Possession of Policy
To secure repayment of premiums paid by the Company provided for in
Section 2, Part II of this Agreement includes an assignment of the
Policy or the Policyholder's interest therein (hereinafter "Collateral
Assignment") and provides for the transfer of possession of the Policy
to the Company during the term specified in Part II of this Agreement.
Except as provided in or as otherwise consistent with the provisions of
this Agreement, the Company covenants that it will not exercise its
rights under the Collateral Assignment provisions of this Agreement in
such a manner as to defeat the rights of the Policyholder or the policy
beneficiary under this Agreement. Specifically, the Company covenants
that it will not surrender the Policy unless the Policyholder has
defaulted on his/her obligations under this Agreement, or the Agreement
has terminated as provided in Section 8. The Company shall have
possession of the Policy during the period that the Company makes
premium payments and until all such payments are repaid. The Company
shall make the Policy available to the Insurer in order to make any
change desired by the Policyholder as to the designation of beneficiary
or the selection of a settlement option, subject, however, to the
Collateral Assignment provisions hereof.
4. Beneficiary Designation and Payment of Policy Proceeds
The Policyholder shall have the right to name the Policy beneficiary.
However, in the event of the Director's death, the Company shall have
an interest in the Policy proceeds equal to the value of the premiums
which the Company has made to the extent not previously reimbursed,
less any Policy indebtedness of the Company to the Insurer. The
balance, if any, of the proceeds of the Policy shall be paid to the
beneficiary designated in the Policy by the Policyholder.
5. Procedure at Director's Death
Upon the death of the Director while the Policy and this Agreement are
in force and subject to the provisions of Parts I and II hereof, the
Company shall promptly take all necessary steps, including rendering of
such assistance as may reasonably be required by the beneficiary, to
obtain payment from the Insurer of the amounts payable under the Policy
to the respective parties, as provided under Section 4 above.
<PAGE>
6. Disability Waiver of Premium
In the event that a supplemental agreement providing for waiver of
premium in the event of disability or any additional death benefit
becomes operational, the additional premium for such supplemental
agreement shall be paid by the Policyholder for the benefit of the
Director. The Company's interest in the Policy at death, under Section
4, or on surrender, under Section 9, shall be limited to total premiums
paid by the Company and not previously reimbursed less any Policy
indebtedness of the Company to the Insurer.
7. Choice of Dividend Option(s)
To the extent that the Insurer declares dividends on the Policy, the
Company shall have the right to choose the option or combination of
options it desires from among those offered by the Insurer as to the
disposition of such dividends. The Company shall notify the
Policyholder and Insurer of its choice, and the Policyholder agrees to
execute any documents necessary to choose or change the Policy's
dividend option.
8. Termination of agreement
Part I of this Agreement shall terminate when the first of any of the
following events occurs:
(a) Termination of the Director with the Company, for reasons
other than retirement;
(b) The Director's attainment of the age 70 (in some cases later)
on or after retirement or, if later, fifteen (15) years from
the date of issuance of the Policy;
(c) Either party's submission of written notice, to the other
party, of intent to terminate Part I of this Agreement;
(d) Performance of the Agreement's terms, following the death of
the Director;
(e) Failure by either the Company or the Policyholder, for any
reason to make the premium contributions required under
Section 2 of this Agreement; or
(f) The Director engages in any competitive activity as determined
in accordance with the provisions of the AT&T Non-Competition
Guidelines.
9. Disposition of Policy Upon Termination of Agreement
Upon the termination of this Agreement for any reason other than
Section 8(d) above, the Policyholder shall have a thirty (30) day
option to satisfy the Collateral Assignment regarding the Policy held
by the Company in accordance with the terms of this Section 9. The
amount necessary to satisfy such Collateral Assignment shall be an
amount equal to the total premium payments made, from time to time, by
the Company pursuant to Section 2 hereof, and, at the option of the
Policyholder, either shall be paid directly by the Policyholder or
through the Company's collection from the cash value under the Policy.
If the Policy shall then be encumbered by assignment, policy loan, or
other means which have been the result of the Company's actions, the
Company shall either remove such encumbrance, or reduce the amount
necessary to satisfy the Collateral Assignment by the total amount of
<PAGE>
indebtedness outstanding against the Policy. The provisions of this
Section 9 are subject to the terms of Section 6 if the Policy's
supplemental agreements have been activated. If the Policyholder
exercises his/her option to satisfy the Collateral Assignment, the
Company shall execute all necessary documents required by the Insurer
to remove and satisfy the Collateral Assignment outstanding on the
Policy. If the Policyholder does not exercise his/her option to satisfy
the Collateral Assignment outstanding on the Policy, the Policyholder
shall execute all documents necessary to transfer ownership of the
Policy to the Company. Such transfer shall constitute satisfaction of
any obligation the Policyholder has to the Company with respect to this
Agreement. The Company shall then pay to the Policyholder the amount,
if any, by which the cash surrender value of the Policy exceeds the
amount necessary to satisfy the Collateral Assignment.
10. Taxable Income
The Director is responsible for determining the amount of taxable
income, if any, includable in his/her gross income for tax purposes as
a result of this Agreement or coverage under the Policy.
11. Policyholder's Right to Assign His/Her Interest
The Policyholder shall have the right to transfer his/her entire
interest in the Policy (other than rights assigned to the Company
pursuant to this Agreement and subject to the obligations of any
outstanding Collateral Assignment) to another person, trust or entity
(herein the "Transferee"). If the Policyholder makes such a transfer,
all his/her rights shall be vested in the Transferee and the
Policyholder shall have no further interest in the Policy and
Agreement. Any Transferee shall be subject to all obligations of the
Policyholder under both Parts I and II of this Agreement.
12. Insurer's Obligations
The Insurer is not a party to this Agreement. It is understood by the
parties hereto that in issuing such Policy of insurance, the Insurer
shall have no liability except as set forth in the Policy and except as
set forth in any assignment of the Policy filed at its Home Office.
Except as set forth in sections 13 and 14, the Insurer shall not be
bound to inquire into, or take notice of, any of the covenants
herein contained as to the Policy of insurance or as to application
of proceeds of such Policy. Upon the death of the Director and
payment of the proceeds in accordance with Sections 13 and 14 of this
Agreement, the Insurer shall be discharged from all liability.
13. Administrative and Fiduciary Provisions
AT&T Corp. shall be the administrator with respect to any rights or
obligations of the Company hereunder and shall have the authority to
control and manage the operation and administration of this Agreement.
The Insurer shall be the fiduciary of the Policy solely with regard to
the review and final decision on the claim for benefits under the
Policy, as provided in the claims procedure set forth in Section 14.
<PAGE>
14. Claims Procedure
The following claims procedure shall apply to the Policy and the
Director's Individual Life Insurance Program:
(a) Filing of a claim for benefits: The Policyholder or the
beneficiary of the Policy shall make a claim for the benefits
provided under the Policy in the manner provided in the
Policy.
(b) Claim denial: With respect to a claim for benefits under said
Policy, the Insurer shall be the entity which reviews and
makes decisions on claim denials according to the terms of the
Policy.
(c) Notification to claimant of decisions: If a claim is wholly or
partially denied, notice of the decision, meeting the
requirements of Section (d) following shall be furnished to
the claimant within a reasonable period of time after a claim
has been filed.
(d) Content of notice: The Insurer shall provide, to any claimant
who is denied a claim for benefits, written notice setting
forth in a manner calculated to be understood by the claimant,
the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent Policy provisions or
provisions of this Agreement on which the denial is
based;
(3) A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(4) An explanation of this Agreement's claim review
procedure, as set forth in Sections (e) and (f)
following.
(e) Review procedure: The purposes of the review procedure set
forth in this Section and Section (f) following is to provide
a method by which a claimant under the Policy and the
Director's Individual Life Insurance Program may have a
reasonable opportunity to appeal a denial of claim for a full
and fair review. To accomplish that purpose, the claimant or
his/her duly authorized representative:
(1) May request a review upon written application to the
Insurer;
(2) May review the Policy or pertinent Director's
Individual Life Insurance Program documents or
agreements; and
(3) May submit issues and comments in writing.
<PAGE>
A claimant, (or his/her duly authorized representative), shall
request a review by filing a written application for review at
any time within sixty (60) days after receipt by the claimant
of written notice of the denial of the claim.
(f) Decision on review. A decision on review of a denial of a
claim shall be made in the following manner:
(1) the decision on review shall be made by the Insurer
which may, at its discretion, hold a hearing on the
denied claim. The Insurer shall make its decision
promptly, unless special circumstances (such as the
need to hold a hearing) require an extension of time
for processing, in which case a decision shall be
rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the
request for review.
(2) The decision on review shall be in writing and shall
include specific reasons for the decision, written in
a manner calculated to be understood by the claimant,
and specific references to the pertinent Policy
provision or provision of this Agreement on which the
decision is based.
Notwithstanding any provision of the Agreement or the Policy, no Director,
Policyholder, Transferee, assignee or beneficiary may commence any action in any
court regarding the Policy or the Director's Individual Life Insurance Program
prior to pursuing all rights of Policyholder under this Section 14.
PART II - Assignment of Life Insurance Policy as Collateral
A. For value received and in specific consideration of the premium
payments made by the Company as set forth in Section 2 of Part I
hereof, the Policyholder hereby assigns, transfers and sets over
to the Company (in this Part II referred to as the "Assignee"),
its successors and assigns, the Policy issued by the Insurer upon the
life of the Director and all claims, options, privileges, rights,
title and interest therein and thereunder (except as provided in
Paragraph C hereof), subject to all the terms and conditions of the
Policy and to all superior liens, if any, which the insurer may
have against the Policy. The Policyholder by this instrument
agrees and the Assignee by the acceptance of this assignment
agrees to the conditions and provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of
the foregoing, the following specific rights are included in this
Agreement and Collateral Assignment and pass to the Assignee by virtue
hereof:
1. The sole right to collect from the Insurer the net proceeds
of the Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the
surrender value thereof at any time provided by the terms of
the Policy and at such other times as the Insurer may allow;
<PAGE>
3. The sole right to obtain one or more loans or advances on the
Policy, either from the Insurer or, at any time, from other
persons, and to pledge or assign the Policy as security for
such loans or advances;
4. The sole right to collect and receive all distributions or
shares of surplus, dividend deposits or additions to the
Policy now or hereafter made or apportioned thereto, and to
exercise any and all options contained in the Policy with
respect thereto; provided, that unless and until the Assignee
shall notify the Insurer in writing to the contrary, the
distributions or shares of surplus, dividend deposits and
additions shall continue on the Policy in force at the time of
this assignment; and
5. The sole right to exercise all non-forfeiture rights permitted
by the terms of the Policy or allowed by the Insurer and to
receive all benefits and advantages derived therefrom.
C. It is expressly agreed that the following specific rights, so long as
the Policy has not been surrendered, are reserved and excluded from
this Agreement and Collateral Assignment and do not pass by virtue
hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of insurance
or the cash value of the Policy;
2. The right to designate any change in the beneficiary;
3. The right to elect any optional mode of settlement permitted
by the Policy or allowed by the Insurer;
provided, however, that the reservation of these rights shall in no way
impair the right of the Assignee to surrender the Policy completely
with all its incidents or impair any other right of the Assignee
hereunder, and any designation or change of beneficiary or election of
a mode of settlement shall be made subject to this Agreement and
Collateral Assignment and to the rights of the Assignee hereunder.
D. This Collateral Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Policyholder to
the Assignee arising under this Agreement (all of which liabilities
secured to or to become secured are herein referred to as
"Liabilities"). It is expressly agreed that all sums received by the
Assignee hereunder whether in the event of death of the Director, the
maturity or surrender of the Policy, the obtaining of a loan or advance
on the Policy, or otherwise, shall first be applied to the payment of
the liability for premiums paid by the Assignee on the Policy.
E. The Assignee covenants and agrees with the Policyholder as follows:
1. That any balance of sums, if any, received hereunder from the
Insurer remaining after payment of the existing Liabilities,
matured or unmatured, shall be paid by the Assignee to the
persons entitled thereto under the terms of the Policy had
this Collateral Assignment not been executed;
<PAGE>
2. That the Assignee will not exercise either the right to
surrender the Policy or the right to obtain policy loans from
the insurer, until there has been either default in any of the
Liabilities pursuant to this Agreement or termination of said
Agreement as therein provided; and
3. That the Assignee will, upon request, forward without
reasonable delay to the Insurer the Policy for endorsement of
any designation or change of beneficiary or any election of an
optional mode of settlement.
F. The Policyholder declares that no proceedings in bankruptcy are pending
against him/her and that his/her property is not subject to any
assignment for the benefit of creditors.
Provisions Applicable to Parts I and II
1. Amendments
Amendments may be added to this Agreement by a written agreement signed
by each of the parties and attached hereto.
2. Choice of Law
This Agreement shall be subject to, and construed according to, the
laws of the State of New Jersey.
3. A Binding Agreement
This Agreement shall bind the Company and the Company's successors and
assigns, the Policyholder and his/her heirs, executors, administrators,
and assigns (including a Transferee), and any Policy beneficiary.
4. Severability Provision
The Company and the Policyholder agree that if any provision of this
Agreement is determined to be invalid or unenforceable, in whole or
part, then all remaining provisions of this Agreement and, to the
extent valid or enforceable, the provision in question shall remain
valid, binding and fully enforceable as if the invalid or unenforceable
provision, to the extent necessary, was not a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, including
the provisions regarding Collateral Assignment, on the day and year first above
written.
POLICYHOLDER
_____________________________ ___________________________________
Signature of Witness Signature of Policyholder
AT&T CORP.
(As Employer and Assignee)
_____________________________ By:________________________________
Signature of Witness H. W. Burlingame
Executive Vice President-Human Resources
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<DESCRIPTION>EXHIBIT (10)(III)(A)(11)
<TEXT>
AT&T SENIOR MANAGEMENT INCENTIVE AWARD DEFERRAL PLAN
(as amended December 17, 1997)
1. ELIGIBILITY
Any Senior Manager (as defined in the AT&T 1997 Long Term Incentive
Program [the "1997 Plan"]) of AT&T Corp. ("AT&T") or an Affiliate (as defined in
the 1997 Plan) who is eligible for an award under the AT&T Short Term Incentive
Plan (the "Short Term Incentive Plan") and/or who has been granted a Performance
Award or a Stock Unit Award under the AT&T Senior Management Long Term Incentive
Plan (the "Long Term Incentive Plan") the 1987 Long Term Incentive Plan (the
"1987 Plan") or the 1997 Plan shall be eligible to participate in this AT&T
Senior Management Incentive Award Deferral Plan (the "Plan"). For purposes of
the Plan, AT&T and any Affiliate shall be referred to as a "Participating
Company". Prior to January 1, 1984, the Plan was named the Bell System Senior
Management Incentive Award Deferral Plan.
2. PARTICIPATION
(a) Prior to the beginning of any calendar year, any Senior Manager may
elect to participate in the Plan by directing that (i) all or part of an award
under the Short Term Incentive Plan, or a Performance Award or a Stock Unit
Award under the Long Term Incentive Plan, the 1987 Plan or the 1997 Plan and/or
(ii) all or part of the dividend equivalent payments under the Long Term
Incentive Plan, the 1987 Plan or the 1997 Plan, that such employee's
Participating Company would otherwise pay currently to such employee in such
calendar year, shall be credited to a deferred account subject to the terms of
the Plan. However, in no event shall the part of an award under any plan
credited during any calendar year be less than $1,000 (based on a valuation at
the time the award would otherwise be paid). There shall be no such minimum
limitation on amounts credited during any calendar year that are related to
dividend equivalent payments.
In addition, prior to the beginning of any calendar year, any Senior
Manager may elect to participate in the Plan by directing that all or part of
the compensation related to the exercise (more than six months following such
election and prior to the employee's retirement or other termination of
employment) of an Option awarded under the 1987 Plan or the 1997 Plan shall be
credited to a deferred account subject to the terms of the Plan. The exercise of
an Option shall be considered as an exercise described in the preceding sentence
only if the exercise would otherwise satisfy the requirements for a
stock-for-stock exercise under the stock option award agreement pertaining to
such Option.
In addition, prior to the beginning of any calendar year, the Chairman
of the Board and any other Senior Manager designated by the Chairman of the
Board may elect to participate in the Plan by directing that all or part of such
Senior Manager's salary that such employee's Participating Company would
otherwise pay currently to such employee in such calendar year shall be credited
to a deferred account subject to the terms of the Plan.
<PAGE>
In addition, provided such participation shall have been approved by
the Compensation and Employee Benefits Committee of the AT&T Board of Directors
(the "Committee"), prior to the beginning of any calendar year, any Senior
Manager may elect to participate in the Plan as to other awards under the 1987
Plan or 1997 Plan, or other amounts of compensation of such Senior Manager, by
directing that all or part of such awards or compensation that such Senior
Manager's Participating Company would otherwise pay currently to such Senior
Manager in such calendar year be credited to a deferred account subject to the
terms of the Plan.
(b) Such an election to participate in the Plan shall be in the form of
a document executed by the employee and filed with the employee's Participating
Company. An election related to awards, dividend equivalent payments, salary
and/ or other compensation otherwise payable currently in any calendar year
shall become irrevocable on the last day prior to the beginning of such calendar
year.
(c) Notwithstanding anything to the contrary contained in this Section
2, in the case of a Senior Manager who is newly eligible to participate in the
Plan, or in the case of any Senior Manager with respect to awards or
compensation newly eligible to be deferred under the Plan, a deferral election
may be made with respect to compensation otherwise receivable in the same
calendar year and subsequent to such election, provided such election is made
within ninety (90) days of such eligibility.
3. DEFERRED ACCOUNTS
(a) (i) Except as provided in Section 3(b)(iii), deferred amounts
related to awards, dividend equivalent payments which would otherwise have been
distributed in cash by a Participating Company and deferred amounts related to
salary and/or other cash compensation shall be credited to the employee's
account and shall bear interest from the date the awards, dividend equivalent
payments, salary and/or other cash compensation would otherwise have been paid.
The interest credited to the account will be compounded at the end of each
calendar quarter, and the annual rate of interest applied at the end of any
calendar quarter shall be determined by the Committee from time to time,
provided however, that the interest rate to be applied, for any subsequent
quarter, to an employee's (or former employee's) deferred account balance as of
December 31, 1998, plus any additions to such account after December 31, 1998
that result from deferral elections made by an employee prior to December 31,
1998, (reduced by any distributions attributable to such account balance) shall
not be less than the applicable 10 Year U.S. Treasury Note Rate for the prior
calendar quarter, plus five (5) percent.
(ii) Furthermore, if an employee made an election described in Section
2, which election was effective on December 31, 1983, then such employee's
account shall also be credited during 1984 with an amount equal to the deferred
amounts which would have been credited to the employee's account during 1984 had
the company which employed the employee on December 31, 1983 continued to be a
Participating Company during 1984, and such amount shall bear interest in
accordance with (a)(i) above from the date such amount would have been credited
had such company continued to be a Participating Company during 1984.
(b)(i) Deferred amounts related to awards that would otherwise have
been distributed in AT&T common shares by a Participating Company shall be
credited to the employee's account as deferred AT&T shares. Furthermore, if an
employee made an election described in Section 2, which election was effective
on December 31, 1983, then such employee's account shall also be credited during
<PAGE>
1984 with the deferred AT&T shares which would have been credited to the
employee's account had the company which employed the employee on December 31,
1983 continued to be a Participating Company in the Plan and in the Long Term
Incentive Plan during 1984.
(ii) Deferred amounts related to the compensation on the exercise of an
Option also shall be credited to the employee's account as deferred AT&T shares.
The number of deferred AT&T shares credited under the preceding sentence shall
equal the number of additional AT&T shares the employee would have received on
the actual stock-for-stock exercise of such Option.
(iii) Prior to the beginning of any calendar year, the Chairman of the
Board and any other Senior Manager designated by the Chairman of the Board may
elect that deferred amounts related to dividend equivalent payments, which would
otherwise have been distributed in cash by a Participating Company during such
calendar year, shall be credited to the employee's account as deferred AT&T
shares. The number of deferred AT&T shares credited, with respect to each
dividend equivalent, shall be determined in accordance with the conversion
formula set forth in the following paragraph, as if such dividend equivalent
were the amount to be converted to a number of additional deferred AT&T shares.
(iv) The employee's account shall also be credited on each dividend
payment date for AT&T shares with an amount equivalent to the dividend payable
on the number of AT&T common shares equal to the number of deferred AT&T shares
in the employee's account on the record date for such dividend. Such amount
shall then be converted to a number of additional deferred AT&T shares
determined by dividing such amount by the price of AT&T common shares, as
determined in the following sentence. The price of AT&T common shares related to
any dividend payment date shall be the average of the daily high and low sale
prices of AT&T common shares on the New York Stock Exchange ("NYSE") for the
period of five trading days ending on such dividend payment date, or the period
of five trading days immediately preceding such dividend payment date if the
NYSE is closed on the dividend payment date.
(c) In the event of any change in outstanding AT&T common shares by
reason of any stock dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares or other similar corporate change, the
Committee shall make such adjustments, if any, that it deems appropriate in the
number of deferred AT&T shares then credited to employees' accounts. Any and all
such adjustments shall be conclusive and binding upon all parties concerned.
4. DISTRIBUTION
(a) At the time an eligible employee makes an election to participate
in the Plan, the employee shall also make an election with respect to the
distribution (during the employee's lifetime or in the event of the employee's
death) of the amounts credited to the employee's deferred account. Such an
election related to the distribution during the employee's lifetime, of amounts
otherwise payable currently in any calendar year, shall become irrevocable on
the last day prior to the beginning of such calendar year.
The election related to the distribution in the event of the employee's
death, including the designation of a beneficiary or beneficiaries, may be
changed by the employee at any time by filing the appropriate document with the
Secretary of the Company.
<PAGE>
Amounts credited as cash plus accumulated interest shall be distributed
in cash; amounts credited as deferred AT&T shares shall be distributed in the
form of an equal number of AT&T shares.
(b)(i) With respect to amounts related to deferred cash credited to the
employee's account under Section 3(a), and to deferred AT&T shares credited to
the employee's account under Section 3(b)(i) or (iii), an employee may elect to
receive such amounts in one payment or in some other number of approximately
equal annual installments (not exceeding 20), provided however, that the number
of annual installments may not extend beyond the life expectancy of the
employee, determined as of the date the first installment is paid. The
employee's election shall also specify that the first installment (or the single
payment if the employee has so elected) shall be paid either (1) as soon as
practicable after the first day of the calendar quarter next following the end
of the month in which the employee attains the age specified in such election,
which age shall not be earlier than age 55 or later than age 70-1/2, or (2) as
soon as practicable after the first day of the calendar quarter next following
the end of the month in which the employee retires from a Participating Company
or otherwise terminates employment with a Participating Company (except for a
transfer to another Participating Company); provided, however, that the
Committee may, in its sole discretion, direct that the first installment (or the
single payment) shall be paid on the first day of the first calendar quarter in
the calendar year next following the year of retirement or other termination of
employment. In addition any Senior Manager eligible to defer salary may specify
that the first installment (or the single payment if the employee has so
elected) shall be paid as soon as practicable after the first day of the first
calendar quarter in the calendar year next following the calendar year in which
the employee retires from a Participating Company or otherwise terminates
employment with a Participating Company (except for a transfer to another
Participating Company).
(ii) With respect to deferred AT&T shares credited to the employee's
account under Section 3(b)(ii), an employee may elect to receive the deferred
AT&T shares in one payment or in some other number of approximately equal annual
installments (not exceeding 20), provided however, that the number of annual
installments may not extend beyond the life expectancy of the employee,
determined as of the date the first installment is paid. The employee's election
shall also specify that the first installment (or the single payment if the
employee has so elected) shall be paid as soon as practicable after the first
day of the calendar quarter next following the later of (1) the end of the month
that is five years following the month in which the related deferred AT&T shares
were initially credited, and (2)(A) the end of the month in which the employee
attains the age specified in such election, which age shall not be earlier than
age 55 or later than age 70-1/2, or (B) the end of the month in which the
employee retires from a Participating Company or otherwise terminates employment
with a Participating Company (except for a transfer to another Participating
Company); provided, however, that the Committee may, in its sole discretion,
direct that the first installment (or the single payment) shall be paid on the
first day of the first calendar quarter in the calendar year next following the
year of retirement or other termination of employment.
(c) Notwithstanding an election pursuant to Paragraph (b) of this
Section 4, the entire amount then credited to an employee's account shall be
paid immediately in a single payment (1) if the employee is discharged for cause
by his or her Participating Company, (2) if the such Participating Company
determines that the employee engaged in misconduct in connection with the
employee's employment with the Participating Company, (3) if the employee
without the consent of his or her Participating Company, while employed by such
<PAGE>
Participating Company or after the termination of such employment, establishes a
relationship with a competitor of the Company or engages in activity which is in
conflict with or adverse to the interest of the Company as determined under the
AT&T Non-Competition Guideline, or (4) the employee becomes employed by a
governmental agency having jurisdiction over the activities of a Participating
Company or any of its subsidiaries.
(d) An employee may elect that, in the event the employee should die
before full payment of all amounts credited to the employee's account, the
balance of the deferred amounts shall be distributed in one payment or in some
other number of approximately equal annual installments (not exceeding 10) to
the beneficiary or beneficiaries designated in writing by the employee, or if no
designation has been made, to the estate of the employee. The first installment
(or the single payment if the employee has so elected) shall be paid on the
first day of the calendar quarter next following the month of death; provided,
however, that the Committee may, in its sole discretion, direct that the first
installment (or the single payment) shall be paid on the first day of the first
calendar quarter in the calendar year next following the year of death.
(e) Installments subsequent to the first installment to the employee,
or to a beneficiary or to the employee's estate, shall be paid on the first day
of the applicable calendar quarter in each succeeding calendar year until the
entire amount credited to the employee's deferred account shall have been paid.
Deferred amounts held pending distribution shall continue to be credited with
interest or additional deferred AT&T shares, as applicable, determined in
accordance with Section 3(a) and (b).
(f) In the event an employee, or the employee's beneficiary after the
employee's death, incurs a severe financial hardship, the Committee, in its sole
discretion, may accelerate or otherwise revise the payment schedule from the
employee's account to the extent reasonably necessary to eliminate the severe
financial hardship. For the purpose of this subsection (f), a severe financial
hardship must have been caused by an accident, illness, or other event beyond
the control of the employee or, if applicable, the beneficiary.
(g) The obligation to make a distribution of deferred amounts credited
to an employee's account during any calendar year plus the additional amounts
credited on such deferred amounts pursuant to Section 3(a) and (b) shall be
borne by the Participating Company which otherwise would have paid the related
award or salary currently. However, the obligation to make distribution with
respect to deferred amounts which are related to amounts credited to an
employee's account under Section 3(a)(ii) and under the second sentence of
Section 3(b)(i), and with respect to which no Participating Company would
otherwise have paid the related award currently, shall be borne by the
Participating Company which employed the employee on January 1, 1984.
5. MISCELLANEOUS
(a) The deferred amounts shall be held in the general funds of the
Participating Companies. The Participating Companies shall not be required to
reserve, or otherwise set aside, funds for the payment of such amounts.
(b) The rights of an employee to any deferred amounts plus the
additional amounts credited pursuant to Section 3(a) and (b) shall not be
subject to assignment by the employee.
<PAGE>
(c) The Executive Vice President - Human Resources of AT&T shall have
the authority to administer the Plan.
(d) The Committee may at any time amend the Plan or terminate the Plan,
but such amendment or termination shall not adversely affect the rights of any
employee, without his or her consent, to any benefit under the Plan to which
such employee may have previously become entitled prior to the effective date of
such amendment or termination. The Executive Vice President - Human Resources of
AT&T with the concurrence of the General Counsel of AT&T shall be authorized to
make minor or administrative changes to the Plan, as well as amendments required
by applicable federal or state law (or authorized or made desirable by such
statutes).
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<DESCRIPTION>EXHIBIT (10)(III)(A)(13)
<TEXT>
[OBJECT OMITTED]
AT&T 1997 LONG TERM INCENTIVE PROGRAM
(as amended December 17, 1997)
SECTION 1. PURPOSE. The purposes of the AT&T 1997 Long Term Incentive
Program (the "Plan") are to encourage selected employees of AT&T Corp. (the
"Company") and its Affiliates to acquire a proprietary and vested interest in
the growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity, thus enhancing the
value of the Company for the benefit of shareholders, and to enhance the ability
of the Company and its Affiliates to attract and retain individuals of
exceptional managerial talent upon whom, in large measure, the sustained
progress, growth and profitability of the Company depends.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have
the meanings set forth below:
(a) "Affiliate" shall mean (i) any Person that directly, or through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Company or (ii) any entity in which the Company has a significant
equity interest, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share, Performance Unit, Dividend Equivalent, Other
Stock Unit Award, or any other right, interest, or option relating to Shares or
other property granted pursuant to the provisions of the Plan.
(c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted by the Committee hereunder,
which may, but need not, be executed or acknowledged by both the Company and the
Participant.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Change in Control" shall mean the happening of any of the following
events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13 (d) (3) or 14 (d) (2) of the Exchange Act) (an "Entity")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); excluding, however, the following: (1) any
acquisition directly from the Company, other than an acquisition by virtue of
the exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (4) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of subsection (iii) of this Section
2(e);
<PAGE>
(ii) A change in the composition of the Board such that the individuals
who, as of the effective date of the Plan, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, that for
purposes of this definition, any individual who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination for
election, by the Company's stockholders was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board; and provided, further however, that any such individual whose initial
assumption of office occurs as a result of or in connection with either an
actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of an Entity other than the
Board shall not be so considered as a member of the Incumbent Board;
(iii) The approval by the stockholders of the Company of a merger,
reorganization or consolidation or sale or other disposition of all or
substantially all of the assets of the Company (each, a "Corporate Transaction")
or, if consummation of such Corporate Transaction is subject, at the time of
such approval by stockholders, to the consent of any government or governmental
agency, the obtaining of such consent (either explicitly or implicitly by
consummation); excluding however, such a Corporate Transaction pursuant to which
(A) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation or
other Person which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries (a "Parent Company")) in substantially the same proportions as
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be, (B) no Entity (other than the Company, any employee benefit
plan (or related trust) of the Company, such corporation resulting from such
Corporate Transaction or, if reference was made to equity ownership of any
Parent Company for purposes of determining whether clause (A) above is satisfied
in connection with the applicable Corporate Transaction, such Parent Company)
will beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors unless such ownership resulted solely from ownership of securities of
the Company prior to the Corporate Transaction, and (C) individuals who were
members of the Incumbent Board will immediately after the consummation of the
Corporate Transaction constitute at least a majority of the members of the board
of directors of the corporation resulting from such Corporate Transaction (or,
if reference was made to equity ownership of any Parent Company for purposes of
determining whether clause (A) above is satisfied in connection with the
applicable Corporate Transaction, of the Parent Company); or
<PAGE>
(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(f) "Change in Control Price" means the higher of (A) the highest reported
sales price, regular way, of a Share in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on which Shares are
listed or on NASDAQ during the 60-day period prior to and including the date of
a Change in Control or (B) if the Change in Control is the result of a tender or
exchange offer or a Corporate Transaction, the highest price per Share paid in
such tender or exchange offer or Corporate Transaction; provided however, that
in the case of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, the Change in Control Price shall be the Fair Market
Value of a Share on the date such Incentive Stock Option or Stock Appreciation
Right is exercised or deemed exercised pursuant to Section 11(b). To the extent
that the consideration paid in any such transaction described above consists all
or in part of securities or other noncash consideration, the value of such
securities or other noncash consideration shall be determined in the sole
discretion of the Board.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(h) "Committee" shall mean the Compensation and Employee Benefits Committee
of the Board, or any successor to such committee, composed of no fewer than two
directors each of whom is a Non-Employee Director and an "outside director"
within the meaning of Section 162(m) of the Code, or any successor provision
thereto.
(i) "Company" shall mean AT&T Corp., a New York corporation.
(j) "Covered Employee" shall mean a "covered employee" within the meaning of
Section 162(m)(3) of the Code, or any successor provision thereto.
(k) "Employee" shall mean any employee of the Company or of any Affiliate.
Unless otherwise determined by the Committee in its sole discretion, for
purposes of the Plan, an employee shall be considered to have terminated
employment and to have ceased to be an Employee if his or her employer ceases to
be an Affiliate, even if he or she continues to be employed by such employer.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" shall mean, with respect to any property, the market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.
(n) "Incentive Stock Option" shall mean an Option granted under Section 6
hereof that is intended to meet the requirements of Section 422 of the Code or
any successor provision thereto.
(o) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission.
(p) "Nonstatutory Stock Option" shall mean an Option granted under Section 6
hereof that is not intended to be an Incentive Stock Option.
<PAGE>
(q) "Option" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices and during
such period or periods as the Committee shall determine.
(r) "Other Stock Unit Award" shall mean any right granted to a Participant
by the Committee pursuant to Section 10 hereof.
(s) "Participant" shall mean an Employee who is selected by the Committee to
receive an Award under the Plan.
(t) "Performance Award" shall mean any Award of Performance Shares or
Performance Units pursuant to Section 9 hereof.
(u) "Performance Period" shall mean that period established by the Committee
at the time any Performance Award is granted or at any time thereafter during
which any performance goals specified by the Committee with respect to such
Award are to be measured.
(v) "Performance Share" shall mean any grant pursuant to Section 9 hereof of
a unit valued by reference to a designated number of Shares, which value may be
paid to the Participant by delivery of such property as the Committee shall
determine, including, without limitation, cash, Shares, or any combination
thereof, upon achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such grant or thereafter.
(w) "Performance Unit" shall mean any grant pursuant to Section 9 hereof of
a unit valued by reference to a designated amount of property other than Shares,
which value may be paid to the Participant by delivery of such property as the
Committee shall determine, including, without limitation, cash, Shares, or any
combination thereof, upon achievement of such performance goals during the
Performance Period as the Committee shall establish at the time of such grant or
thereafter.
(x) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, or
government or political subdivision thereof.
(y) "Restricted Stock" shall mean any Share issued with the restriction that
the holder may not sell, transfer, pledge, or assign such Share and with such
other restrictions as the Committee, in its sole discretion, may impose
(including, without limitation, any restriction on the right to vote such Share,
and the right to receive any cash dividends), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
(z) "Restricted Stock Award" shall mean an award of Restricted Stock under
Section 8 hereof.
(Aa) "Senior Manager" shall mean any Employee of the Company or any
Affiliate holding a position above E band or any future salary band that is the
equivalent thereof.
(Bb) "Shares" shall mean the shares of common stock of the Company, $1.00
par value.
(Cc) "Stock Appreciation Right" shall mean any right granted to a
Participant pursuant to Section 7 hereof to receive, upon exercise by the
Participant, the excess of (i) the Fair Market Value of one Share on the date of
<PAGE>
exercise or, if the Committee shall so determine in the case of any such right
other than one related to any Incentive Stock Option, at any time during a
specified period before the date of exercise over (ii) the grant price of the
right on the date of grant, or if granted in connection with an outstanding
Option on the date of grant of the related Option, as specified by the Committee
in its sole discretion, which, except in the case of Substitute Awards or in
connection with an adjustment provided in Section 4(d), shall not be less than
the Fair Market Value of one Share on such date of grant of the right or the
related Option, as the case may be. Any payment by the Company in respect of
such right may be made in cash, Shares, other property, or any combination
thereof, as the Committee, in its sole discretion, shall determine.
(Dd) "Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50 percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.
(Ee) "Substitute Awards" shall mean Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for, awards previously
granted, or the right or obligation to make future awards, by a company acquired
by the Company or with which the Company combines.
SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee.
The Committee shall have full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan as may from time to
time be adopted by the Board, to: (i) select the Employees of the Company and
its Affiliates to whom Awards may from time to time be granted hereunder; (ii)
determine the type or types of Award to be granted to each Participant
hereunder; (iii) determine the number of Shares to be covered by each Award
granted hereunder; (iv) determine the terms and conditions, not inconsistent
with the provisions of the Plan, of any Award granted hereunder; (v) determine
whether, to what extent and under what circumstances Awards may be settled in
cash, Shares or other property or canceled or suspended; (vi) determine whether,
to what extent and under what circumstances cash, Shares and other property and
other amounts payable with respect to an Award under this Plan shall be deferred
either automatically or at the election of the Participant; (vii) interpret and
administer the Plan and any instrument or agreement entered into under the Plan;
(viii) establish such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (ix) make any
other determination and take any other action that the Committee deems necessary
or desirable for administration of the Plan. Decisions of the Committee shall be
final, conclusive and binding upon all persons, including the Company, any
Participant, any shareholder, and any employee of the Company or of any
Affiliate. A majority of the members of the Committee may determine its actions
and fix the time and place of its meetings.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in Section 4(d), a total of fifteen
(15) million Shares shall be available for a one time grant of Options to
substantially all Employees during 1997. Shares available for such one time
grant of Options, but not used for such Options, shall be available for other
Awards under the Plan, in 1997 or later years.
(b) In addition to the number of Shares available under Section 4(a), and
subject to adjustment as provided in Section 4(d), a total of eighty-five (85)
<PAGE>
million Shares shall be available for Awards granted under the Plan; provided
that the number of Shares available for Awards other than Options shall not
exceed fifteen (15) million; and provided, further, that if any Shares subject
to an Award or to an award under the Company's 1987 Long Term Incentive Program
or 1984 Stock Option Plan (the "Prior Plans") are forfeited or if any Award or
award under the Prior Plans based on Shares is settled for cash, or expires or
otherwise is terminated without issuance of such Shares, the Shares subject to
such Award shall to the extent of such cash settlement, forfeiture or
termination again be available for Awards under the Plan. In the event that any
Option or other Award granted hereunder is exercised through the delivery of
Shares or in the event that withholding tax liabilities arising from such Option
or other Award are satisfied by the withholding of Shares by the Company, the
number of Shares available for Awards under the Plan shall be increased by the
number of Shares so surrendered or withheld. In addition, Substitute Awards
shall not reduce the Shares available for grants under the Plan or to a
Participant in any calendar year.
(c) Any Shares issued hereunder may consist, in whole or in part, of
authorized and unissued shares, treasury shares, or shares purchased in the open
market or otherwise.
(d) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, reverse stock split, spin-off or
similar transaction or other change in corporate structure affecting the Shares,
such adjustments and other substitutions shall be made to the Plan and to Awards
as the Committee in its sole discretion deems equitable or appropriate,
including without limitation such adjustments in the aggregate number, class and
kind of securities which may be delivered under the Plan, in the aggregate or to
any one Participant, in the number, class, kind and option or exercise price of
securities subject to outstanding Options, Stock Appreciation Rights or other
Awards granted under the Plan, and in the number, class and kind of securities
subject to Awards granted under the Plan (including, if the Committee deems
appropriate, the substitution of similar options to purchase the shares of, or
other awards denominated in the shares of, another company) as the Committee may
determine to be appropriate in its sole discretion, provided that the number of
Shares subject to any Award shall always be a whole number.
SECTION 5. ELIGIBILITY. Any Employee shall be eligible to be selected as a
Participant.
SECTION 6. STOCK OPTIONS. Options may be granted hereunder to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
granted under the Plan shall be evidenced by an Award Agreement in such form as
the Committee may from time to time approve. Any such Option shall be subject to
the following terms and conditions and to such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee shall deem
desirable:
(a) OPTION PRICE. The purchase price per Share purchasable under an Option
shall be determined by the Committee in its sole discretion; provided that,
except in the case of Substitute Awards or in connection with an adjustment
provided for in Section 4(d), such purchase price shall not be less than the
Fair Market Value of the Share on the date of the grant of the Option.
(b) OPTION PERIOD. The term of each Option shall be fixed by the Committee
in its sole discretion; provided that no Incentive Stock Option shall be
exercisable after the expiration of ten years from the date the Option is
granted.
<PAGE>
(c) EXERCISABILITY. Options shall be exercisable at such time or times as
determined by the Committee at or subsequent to grant.
(d) METHOD OF EXERCISE. Subject to the other provisions of the Plan, any
Option may be exercised by the Participant in whole or in part at such time or
times, and the Participant may make payment of the option price in such form or
forms, including, without limitation, payment by delivery of cash, Shares or
other consideration (including, where permitted by law and the Committee,
Awards) having a Fair Market Value on the exercise date equal to the total
option price, or by any combination of cash, Shares and other consideration as
the Committee may specify in the applicable Award Agreement.
(e) INCENTIVE STOCK OPTIONS. In accordance with rules and procedures
established by the Committee, and except as otherwise provided in Section 11,
the aggregate Fair Market Value (determined as of the time of grant) of the
Shares with respect to which Incentive Stock Options held by any Participant
which are exercisable for the first time by such Participant during any calendar
year under the Plan (and under any other benefit plans of the Company or any
Subsidiary) shall not exceed $100,000 or, if different, the maximum limitation
in effect at the time of grant under Section 422 of the Code, or any successor
provision, and any regulations promulgated thereunder. Incentive Stock Options
shall be granted only to participants who are employees of the Company or a
Subsidiary of the Company. The terms of any Incentive Stock Option granted
hereunder shall comply in all respects with the provisions of Section 422 of the
Code, or any successor provision, and any regulations promulgated thereunder.
(f) FORM OF SETTLEMENT. In its sole discretion, the Committee may provide,
at the time of grant, that the Shares to be issued upon an Option's exercise
shall be in the form of Restricted Stock or other similar securities, or may
reserve the right so to provide after the time of grant.
SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted hereunder to Participants either alone or in addition to other Awards
granted under the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock Appreciation Rights need not be
the same with respect to each recipient. Any Stock Appreciation Right related to
a Nonstatutory Stock Option may be granted at the same time such Option is
granted or at any time thereafter before exercise or expiration of such Option.
Any Stock Appreciation Right related to an Incentive Stock Option must be
granted at the same time such Option is granted. In the case of any Stock
Appreciation Right related to any Option, the Stock Appreciation Right or
applicable portion thereof shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a Stock Appreciation
Right granted with respect to less than the full number of Shares covered by a
related Option shall not be reduced until the exercise or termination of the
related Option exceeds the number of Shares not covered by the Stock
Appreciation Right. Any Option related to any Stock Appreciation Right shall no
longer be exercisable to the extent the related Stock Appreciation Right has
been exercised. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it shall deem appropriate.
SECTION 8. RESTRICTED STOCK.
(a) ISSUANCE. A Restricted Stock Award shall be subject to restrictions
imposed by the Committee during a period of time specified by the Committee (the
"Restriction Period"). Restricted Stock Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The provisions of Restricted Stock Awards need not be
the same with respect to each recipient.
<PAGE>
(b) REGISTRATION. Any Restricted Stock issued hereunder may be evidenced in
such manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of shares of Restricted Stock awarded under the Plan, such certificate
shall be registered in the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award.
(c) FORFEITURE. Except as otherwise determined by the Committee at the time
of grant or thereafter, upon termination of employment for any reason during the
restriction period, all Shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant and reacquired by the Company.
Unrestricted Shares, evidenced in such manner as the Committee shall deem
appropriate, shall be issued to the grantee promptly after the period of
forfeiture, as determined or modified by the Committee, shall expire.
(d) MINIMUM VESTING CONDITION. The minimum Restriction Period applicable to
any Restricted Stock Award that is not subject to performance conditions
restricting transfer shall be three (3) years from the date of grant; provided,
however, that a Restriction Period of less than three (3) years may be approved
for such Awards with respect to up to five (5) million Shares under the Plan.
SECTION 9. PERFORMANCE AWARDS. Performance Awards may be issued hereunder to
Participants, for no cash consideration or for such minimum consideration as may
be required by applicable law, either alone or in addition to other Awards
granted under the Plan. The performance criteria to be achieved during any
Performance Period and the length of the Performance Period shall be determined
by the Committee upon the grant of each Performance Award. Except as provided in
Section 11, Performance Awards will be distributed only after the end of the
relevant Performance Period. Performance Awards may be paid in cash, Shares,
other property or any combination thereof, in the sole discretion of the
Committee at the time of payment. The performance levels to be achieved for each
Performance Period and the amount of the Award to be distributed shall be
conclusively determined by the Committee. Performance Awards may be paid in a
lump sum or in installments following the close of the Performance Period or, in
accordance with procedures established by the Committee, on a deferred basis.
SECTION 10. OTHER STOCK UNIT AWARDS.
(a) STOCK AND ADMINISTRATION. Other Awards of Shares and other Awards that
are valued in whole or in part by reference to, or are otherwise based on,
Shares or other property ("Other Stock Unit Awards") may be granted hereunder to
Participants, either alone or in addition to other Awards granted under the
Plan. Other Stock Unit Awards may be paid in Shares, cash or any other form of
property as the Committee shall determine. Subject to the provisions of the
Plan, the Committee shall have sole and complete authority to determine the
Employees of the Company and its Affiliates to whom and the time or times at
which such Awards shall be made, the number of Shares to be granted pursuant to
such Awards, and all other conditions of the Awards. The provisions of Other
Stock Unit Awards need not be the same with respect to each recipient.
(b) TERMS AND CONDITIONS. Subject to the provisions of this Plan and any
applicable Award Agreement, Awards and Shares subject to Awards made under this
Section 10, may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the Shares are issued, or, if later, the
date on which any applicable restriction, performance or deferral period lapses.
<PAGE>
For any Award or Shares subject to any Award made under this Section 10 the
transferability of which is conditioned only on the passage of time, such
restriction period shall be a minimum of three (3) years. Shares (including
securities convertible into Shares) subject to Awards granted under this Section
10 may be issued for no cash consideration or for such minimum consideration as
may be required by applicable law. Shares (including securities convertible into
Shares) purchased pursuant to a purchase right awarded under this Section 10
shall be purchased for such consideration as the Committee shall in its sole
discretion determine, which, except in the case of Substitute Awards, shall not
be less than the Fair Market Value of such Shares or other securities as of the
date such purchase right is awarded.
SECTION 11. CHANGE IN CONTROL PROVISIONS.
(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to the
contrary, unless the Committee shall determine otherwise at the time of grant
with respect to a particular Award, in the event of a Change in Control:
(i) any Options and Stock Appreciation Rights outstanding as of the
date such Change in Control is determined to have occurred, and which are not
then exercisable and vested, shall become fully exercisable and vested to the
full extent of the original grant;
(ii) the restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free of all
restrictions and limitations and become fully vested and transferable to the
full extent of the original grant;
(iii) all Performance Awards shall be considered to be earned and
payable in full, and any deferral or other restriction shall lapse and such
Performance Awards shall be immediately settled or distributed; and
(iv) The restrictions and deferral limitations and other conditions
applicable to any Other Stock Unit Awards or any other Awards shall lapse, and
such Other Stock Unit Awards or such other Awards hall become free of all
restrictions, limitations or conditions and become fully vested and transferable
to the full extent of the original grant.
(b) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change in Control (the "Exercise
Period"), if the Committee shall determine at, or at any time after, the time of
grant, a Participant holding an Option or Stock Appreciation Right shall have
the right, whether or not the Option or Stock Appreciation Right is fully
exercisable and in lieu of the payment of the purchase price for the Shares
being purchased under the Option or Stock Appreciation Right and by giving
notice to the Company, to elect (within the Exercise Period) to surrender all or
part of the Option or Stock Appreciation Right to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by which
the Change in Control Price per Share on the date of such election shall exceed
the purchase price per Share under the Option or Stock Appreciation Right (the
"Spread") multiplied by the number of Shares granted under the Option or Stock
Appreciation right as to which the right granted under this Section 11(b) shall
have been exercised.
(c) Notwithstanding any other provision of this Plan, if any right granted
pursuant to this Plan would make a Change in Control transaction ineligible for
pooling-of-interests accounting under APB No. 16, that (after giving effect to
any other actions taken to cause such transaction to be eligible for such
<PAGE>
pooling-of-interests accounting treatment) but for the nature of such right
would otherwise be eligible for such accounting treatment, the Committee shall
have the ability to substitute for the cash payable pursuant to such right
Shares with a Fair Market Value equal to the cash that would otherwise be
payable pursuant thereto.
SECTION 12. CODE SECTION 162(m) PROVISIONS.
(a) Notwithstanding any other provision of this Plan, if the Committee
determines at the time Restricted Stock, a Performance Award or an Other Stock
Unit Award is granted to a Participant who is then a Senior Manager or an E band
employee that such Participant is, or is likely to be as of the end of the tax
year in which the Company would claim a tax deduction in connection with such
Award, a Covered Employee, then the Committee may provide that this Section 12
is applicable to such Award.
(b) If an Award is subject to this Section 12, then the lapsing of
restrictions thereon and the distribution of cash, Shares or other property
pursuant thereto, as applicable, shall be subject to the achievement of one or
more objective performance goals established by the Committee, which shall be
based on the attainment of specified levels of one or any combination of the
following: net cash provided by operating activities, earnings per share from
continuing operations, operating income, revenues, gross margin, return on
operating assets, return on equity, economic value added, stock price
appreciation, total stockholder return, or cost control, of the Company or the
Affiliate or division of the Company for or within which the Participant is
primarily employed. Such performance goals also may be based upon the
achievement of specified levels of Company performance (or performance of
applicable Affiliate or division of the Company) under one or more of the
measures described above relative to the performance of other corporations. Such
performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section
162(m) of the Code, or any successor provision thereto, and the regulations
thereunder.
(c) Notwithstanding any provision of this Plan other than Section 11, with
respect to any Award that is subject to this Section 12, the Committee may
adjust downwards, but not upwards, the amount payable pursuant to such Award,
and the Committee may not waive the achievement of the applicable performance
goals except in the case of the death or disability of the Participant.
(d) The Committee shall have the power to impose such other restrictions on
Awards subject to this Section 12 as it may deem necessary or appropriate to
ensure that such Awards satisfy all requirements for "performance-based
compensation" within the meaning of Section 162(m) (4) (C) of the Code, or any
successor provision thereto.
(e) Notwithstanding any provision of this Plan other than Section 4(d), no
Participant may be granted Options and/or SARs in any three calendar year period
with respect to more than two million (2,000,000) Shares, and the maximum dollar
value payable with respect to Performance Units and/or Other Stock Unit Awards
that are valued with reference to property other than Shares and granted to any
Participant in any one calendar year is $10,000,000.
SECTION 13. AMENDMENTS AND TERMINATION. The Board may amend, alter, suspend,
discontinue or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without (i) shareholder approval if such approval is necessary to
<PAGE>
qualify for or comply with any tax or regulatory requirement for which or with
which the Board deems it necessary or desirable to qualify or comply or (ii) the
consent of the affected Participant, if such action would impair the rights of
such Participant under any outstanding Award. Notwithstanding anything to the
contrary herein, the Committee may amend the Plan in such manner as may be
necessary so as to have the Plan conform to local rules and regulations in any
jurisdiction outside the United States.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without his or her consent. Notwithstanding any provision of
this plan, the Committee may not amend the terms of any Option to reduce the
option price.
SECTION 14. GENERAL PROVISIONS.
(a) Unless the Committee determines otherwise at the time the Award is
granted or thereafter: (i) no Award, and no Shares subject to Awards described
in Section 10 which have not been issued or as to which any applicable
restriction, performance or deferral period has not lapsed, may be sold,
assigned, transferred, pledged or otherwise encumbered, except by will or by the
laws of descent and distribution; provided that, if so determined by the
Committee, a Participant may, in the manner established by the Committee,
designate a beneficiary to exercise the rights of the Participant with respect
to any Award upon the death of the Participant; and (ii) each Award shall be
exercisable, during the Participant's lifetime, only by the Participant or, if
permissible under applicable law, by the Participant's guardian or legal
representative.
(b) The term of each Award shall be for such period of months or years from
the date of its grant as may be determined by the Committee; provided that in no
event shall the term of any Incentive Stock Option or any Stock Appreciation
Right related to any Incentive Stock Option exceed a period of ten (10) years
from the date of its grant.
(c) No Employee or Participant shall have any claim to be granted any Award
under the Plan and there is no obligation for uniformity of treatment of
Employees or Participants under the Plan.
(d) The prospective recipient of any Award under the Plan shall not, with
respect to such Award, be deemed to have become a Participant, or to have any
rights with respect to such Award, until and unless such recipient shall have
executed an agreement or other instrument evidencing the Award and delivered a
copy thereof to the Company, and otherwise complied with the then applicable
terms and conditions.
(e) Except as provided in Section 12, the Committee shall be authorized to
make adjustments in performance award criteria or in the terms and conditions of
other Awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable laws, regulations
or accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem desirable to carry it into effect. In the event
the Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of or
combination with another corporation or business entity, the Committee may, in
its discretion, make such adjustments in the terms of Awards under the Plan as
it shall deem appropriate.
<PAGE>
(f) The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances any Award shall be canceled or
suspended. In addition, all outstanding Awards to any Participant shall be
canceled if the Participant, without the consent of the Company, while employed
by the Company or after termination of such employment, establishes a
relationship with a competitor of the Company or engages in activity which is in
conflict with or adverse to the interest of the Company, as determined under the
AT&T Non-Competition Guideline.
(g) All certificates for Shares delivered under the Plan pursuant to any
Award shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(h) No Award granted hereunder shall be construed as an offer to sell
securities of the Company, and no such offer shall be outstanding, unless and
until the Committee in its sole discretion has determined that any such offer,
if made, would be in compliance with all applicable requirements of the U.S.
federal securities laws and any other laws to which such offer, if made, would
be subject.
(i) The Committee shall be authorized to establish procedures pursuant to
which the payment of any Award may be deferred. Subject to the provisions of the
Plan and any Award Agreement, the recipient of an Award (including, without
limitation, any deferred Award) may, if so determined by the Committee, be
entitled to receive, currently or on a deferred basis, cash dividends, or cash
payments in amounts equivalent to cash dividends on Shares ("dividend
equivalents"), with respect to the number of Shares covered by the Award, as
determined by the Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have been reinvested in
additional Shares or otherwise reinvested.
(j) Except as otherwise required in any applicable Award Agreement or by the
terms of the Plan, recipients of Awards under the Plan shall not be required to
make any payment or provide consideration other than the rendering of services.
(k) The Committee may delegate to one or more Senior Managers or a committee
of Senior Managers the right to grant Awards to Employees who are not officers
or directors of the Company and to cancel or suspend Awards to Employees who are
not officers or directors of the Company.
(l) The Company shall be authorized to withhold from any Award granted or
payment due under the Plan the amount of withholding taxes due in respect of an
Award or payment hereunder and to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for the payment of such
taxes. The Committee shall be authorized to establish procedures for election by
Participants to satisfy such obligations for the payment of such taxes by
delivery of or transfer of Shares to the Company, or by directing the Company to
retain Shares otherwise deliverable in connection with the Award.
(m) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
<PAGE>
(n) The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of New York and applicable Federal law.
(o) If any provision of this Plan is or becomes or is deemed invalid,
illegal or unenforceable in any jurisdiction, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be stricken and the
remainder of the Plan shall remain in full force and effect.
(p) Awards may be granted to Employees who are foreign nationals or employed
outside the United States, or both, on such terms and conditions different from
those applicable to Awards to Employees employed in the United States as may, in
the judgment of the Committee, be necessary or desirable in order to recognize
differences in local law or tax policy. The Committee also may impose conditions
on the exercise or vesting of Awards in order to minimize the Company's
obligation with respect to tax equalization for Employees on assignments outside
their home country.
SECTION 15. EFFECTIVE DATE OF PLAN. The Plan shall be effective as of
June 1, 1997.
SECTION 16. TERM OF PLAN. No Award shall be granted pursuant to the Plan
after May 31, 2002, but any Award theretofore granted may extend beyond that
date.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<DESCRIPTION>EXHIBIT (10)(III)(A)(16)
<TEXT>
AGREEMENT
SENIOR MANAGEMENT BASIC LIFE INSURANCE PROGRAM
AND COLLATERAL ASSIGNMENT
THIS AGREEMENT is entered into this _______ day of ____________________, 19___,
by and between AT&T Corp., a New York corporation (hereinafter referred to as
the "Employer" in Part I or "Assignee" in Part II), and
INSTRUCTIONS - Trustee as Policyholder: Check this box and fill in the
blanks to the right of it if the initial Policyholder will be a trustee
acting for the benefit of the Employee.
____
/___/ __________________________________________ (hereinafter referred
(Name of Trustee)
to as the "Policyholder"), trustee for
__________________________________________ (hereinafter referred
(Name of Employee)
to as the "Employee").
INSTRUCTIONS - Employee as Policyholder: Check this box and fill in the
blank to the right of it if the initial Policyholder will be the
Employee.
____
/___/ __________________________________________ (hereinafter referred
(Name of Employee)
to as either the "Policyholder" or the "Employee", as applicable).
WHEREAS, the Employee is currently a valued employee and Senior Manager of the
Employer and the Employer wishes to assist the Employee with his/her personal
life insurance program; and
WHEREAS, the Employee (if also the Policyholder) or otherwise, the above-named
trustee, acting on behalf of the Employee, desires to accept such assistance;
NOW, THEREFORE, the Employer and the Policyholder agree as follows:
PART I - Basic Life Insurance Agreement
1. Description of Policy: In furtherance of the purposes of the Agreement,
the Policyholder will purchase and own two certain policies of life
insurance on the life of the Employee, being Policy No. ____________
issued by the Metropolitan Life Insurance Company, and Policy No.
____________ issued by the Pacific Life Insurance Company. Said
policies are hereinafter collectively referred to as the "Policy" and
said life insurance companies are hereinafter collectively referred to
as the "Insurer". The Policyholder's ownership shall be subject to all
the terms and conditions set forth in this Agreement.
<PAGE>
2. Payment of Premiums: The Employer shall pay the entire annual premium
for the Policy (excluding the premium for any supplemental benefits not
part of the Policy at initial issuance). The Employer's contribution to
the premium shall be reduced by any dividend used to reduce premiums.
The Employer shall pay the entire premium directly to the Insurer.
3. Collateral Assignment and Possession of Policy: To secure repayment of
premiums paid by the Employer provided for in Section 2, Part II of
this Agreement includes an assignment of the Policy or the
Policyholder's interest therein (hereinafter "Collateral Assignment")
and provides for the transfer of possession of the Policy to the
Employer during the term specified in Part II of this Agreement.
Except as provided in or as otherwise consistent with the provisions
of this Agreement, the Employer covenants that it will not exercise
its rights under the Collateral Assignment provisions of this
Agreement in such a manner as to defeat the rights of the Policyholder
or the policy beneficiary under this Agreement. Specifically, the
Employer covenants that it will not surrender the Policy unless the
Policyholder has defaulted on his/her obligations under this
Agreement, or the Agreement has terminated as provided in Section 8.
The Employer shall have possession of the Policy during the period
that the Employer makes premium payments and until all such payments
are repaid. The Employer shall make the Policy available to the
Insurer in order to make any change desired by the Policyholder as to
the designation of beneficiary or the selection of a settlement
option, subject, however, to the Collateral Assignment provisions
hereof.
4. Beneficiary Designation and Payment of Policy Proceeds: The
Policyholder shall have the right to name the Policy beneficiary.
However, in the event of the Employee's death, the beneficiary
designated in the Policy by the Policyholder, or the Policyholder's
Transferee, shall have an interest in the Policy proceeds limited to
an amount equal to the Employee's annual rate of salary payable by the
Employer, rounded to the next higher $1,000 (one thousand dollars),
and determined as of the date of death, or, if earlier, the date of
the Employee's retirement on a disability allowance or a minimum
pension or after becoming retirement eligible. The balance, if any, of
the proceeds of the Policy shall be paid to the Employer. For purposes
of this Agreement, an Employee shall be considered retirement eligible
if the Employee has satisfied one of the following minimum age and
length of service (as determined under the AT&T Management Pension
Plan) combinations: (a) any age and 30 years of service; (b) age 50
and 25 years of service; (c) age 55 and 20 years of service; or (d)
age 65 and 10 years of service.
5. Procedure at Employee's Death: Upon the death of the Employee while the
Policy and this Agreement are in force and subject to the provisions of
Parts I and II hereof, the Employer shall promptly take all necessary
steps, including rendering of such assistance as may reasonably be
required by the beneficiary, to obtain payment from the Insurer of the
amounts payable under the Policy to the respective parties, as provided
under Section 4 above.
6. Disability Waiver of Premium: In the event that a supplemental
agreement providing for waiver of premium in the event of disability or
any additional death benefit becomes operational, the additional
premium for such supplemental agreement shall be paid by the
<PAGE>
Policyholder for the benefit of the Employee. The Employer's interest
in the Policy at death, under Section 4, or on surrender, under Section
9, shall be limited to total premiums paid by the Employer and not
previously reimbursed less any Policy indebtedness of the Employer to
the Insurer, but in no event will the Employer's interest in the Policy
on surrender exceed the cash value under the Policy.
7. Choice of Dividend Option(s): To the extent that the Insurer declares
dividends on the Policy, the Employer shall have the right to choose
the option or combination of options it desires from among those
offered by the Insurer as to the disposition of such dividends. The
Employer shall notify the Policyholder and Insurer of its choice, and
the Policyholder agrees to execute any documents necessary to choose or
change the Policy's dividend option.
8. Termination of Agreement: Part I of this Agreement shall terminate when
the first of any of the following events occurs:
(a) Termination of the Employee's employment with the Employer,
for reasons other than retirement on a disability allowance or
a minimum pension or after becoming retirement eligible;
(b) The Employee's attainment of the age 65 (in some cases later)
on or after retirement on a disability allowance or a minimum
pension or after becoming retirement eligible or, if later,
fifteen (15) years (in some cases later) from the date of
issuance of the Policy;
(c) Either party's submission of written notice, to the other
party, of intent to terminate Part I of this Agreement;
(d) Performance of the Agreement's terms, following the death of
the Employee;
(e) Failure by either the Employer or the Policyholder, for any
reason, to make the premium contributions required under
Section 2 of this Agreement;
(f) Demotion of the Employee to a non-Senior Manager position; or
(g) The Employee engages in any competitive activity as determined
in accordance with the provisions of the AT&T Non-Competition
Guideline (unless either (i) the Employee has obtained the
advance written consent of the Employer's Executive Vice
President-Human Resources to engage in such competitive
activity as provided in the AT&T Non-Competition Guideline; or
(ii) the Employer's Executive Vice President-Human Resources
has waived the application of the AT&T Non-Competition
Guideline to the Employee with respect to the Agreement as
provided for in the AT&T Non-Competition Guideline).
9. Disposition of Policy Upon Termination of Agreement: Upon the
termination of this Agreement for any reason other than Section 8(d)
above, the Policyholder shall have a thirty (30) day option to satisfy
the Collateral Assignment regarding the Policy held by the Employer in
accordance with the terms of this Section 9. The amount necessary to
satisfy such Collateral Assignment shall be an amount equal to the
total premium payments made, from time to time, by the Employer
<PAGE>
pursuant to Section 2 hereof, and, at the option of the Policyholder,
either shall be paid directly by the Policyholder or through the
Employer's collection from the cash value under the Policy. If the
Policy shall then be encumbered by assignment, policy loan, or other
means which have been the result of the Employer's actions, the
Employer shall either remove such encumbrance, or reduce the amount
necessary to satisfy the Collateral Assignment by the total amount of
indebtedness outstanding against the Policy. The provisions of this
Section 9 are subject to the terms of Section 6 if the Policy's
supplemental agreements have been activated. If the Policyholder
exercises his/her option to satisfy the Collateral Assignment, the
Employer shall execute all necessary documents required by the Insurer
to remove and satisfy the Collateral Assignment outstanding on the
Policy. If the Policyholder does not exercise his/her option to
satisfy the Collateral Assignment outstanding on the Policy, the
Policyholder shall execute all documents necessary to transfer
ownership of the Policy to the Employer. Such transfer shall
constitute satisfaction of any obligation the Policyholder has to the
Employer with respect to this Agreement. The Employer shall then pay
to the Policyholder the amount, if any, by which the cash surrender
value of the Policy exceeds the amount necessary to satisfy the
Collateral Assignment.
10. Taxable Income: The Employee is responsible for determining the amount
of taxable income, if any, includable in his/her gross income for tax
purposes as a result of this Agreement or coverage under the Policy.
11. Policyholder's Right to Assign His/Her Interest: The Policyholder shall
have the right to transfer his/her entire interest in the Policy (other
than rights assigned to the Employer pursuant to this Agreement and
subject to the obligations of any outstanding Collateral Assignment) to
another person, trust or entity (herein the "Transferee"). If the
Policyholder makes such a transfer, all his/her rights shall be vested
in the Transferee and the Policyholder shall have no further interest
in the Policy and Agreement. Any Transferee shall be subject to all
obligations of the Policyholder under both Parts I and II of this
Agreement.
12. Insurer's Obligations: The Insurer is not a party to this Agreement.
It is understood by the parties hereto that in issuing such Policy of
insurance, the Insurer shall have no liability except as set forth in
the Policy and except as set forth in any assignment of the Policy
filed at its Home Office. Except as set forth in Sections 13 and 14,
the Insurer shall not be bound to inquire into, or take notice of, any
of the covenants herein contained as to the Policy of insurance or as
to application of proceeds of such Policy. Upon the death of
the Employee and payment of the proceeds in accordance with Sections 13
and 14 of this Agreement, the Insurer shall be discharged from
all liability.
13. Administrative and Fiduciary Provisions: AT&T Corp. shall be the
administrator with respect to any rights or obligations of the Employer
hereunder and shall have the authority to control and manage the
operation and administration of this Agreement. The Insurer shall be
the fiduciary of the Policy solely with regard to the review and final
decision on the claim for benefits under the Policy, as provided in the
claims procedure set forth in Section 14.
<PAGE>
14. Claims Procedure: The following claims procedure shall apply to the
Policy and the Senior Management Basic Life Insurance Program:
(a) Filing of a claim for benefits: The Policyholder or the
beneficiary of the Policy shall make a claim for the benefits
provided under the Policy in the manner provided in the
Policy.
(b) Claim denial: With respect to a claim for benefits under said
Policy, the Insurer shall be the entity which reviews and
makes decisions on claim denials according to the terms of the
Policy.
(c) Notification to claimant of decisions. If a claim is wholly or
partially denied, notice of the decision, meeting the
requirements of Section (d) following shall be furnished to
the claimant within a reasonable period of time after a claim
has been filed.
(d) Content of notice: The Insurer shall provide, to any claimant
who is denied a claim for benefits, written notice setting
forth, in a manner calculated to be understood by the
claimant, the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent Policy provisions or
provisions of this Agreement on which the denial is
based;
(3) A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(4) An explanation of this Agreement's claim review
procedure, as set forth in Sections (e) and (f)
following.
(e) Review procedure: The purposes of the review procedure set
forth in this Section and Section (f) following is to provide
a method by which a claimant under the Policy and the Senior
Management Basic Life Insurance Program may have a reasonable
opportunity to appeal a denial of claim for a full and fair
review. To accomplish that purpose, the claimant or his/her
duly authorized representative:
(1) May request a review upon written application to the
Insurer;
(2) May review the Policy or pertinent Senior Management
Basic Life Insurance Program documents or agreements;
and
(3) May submit issues and comments in writing.
A claimant, (or his/her duly authorized representative), shall
request a review by filing a written application for review at
any time within sixty (60) days after receipt by the claimant
of written notice of the denial of the claim.
<PAGE>
(f) Decision on review. A decision on review of a denial of a
claim shall be made in the following manner:
(1) The decision on review shall be made by the Insurer
which may, at its discretion, hold a hearing on the
denied claim. The Insurer shall make its decision
promptly, unless special circumstances (such as the
need to hold a hearing) require an extension of time
for processing, in which case a decision shall be
rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the
request for review.
(2) The decision on review shall be in writing and shall
include specific reasons for the decision, written in
a manner calculated to be understood by the claimant,
and specific references to the pertinent Policy
provision or provision of this Agreement on which the
decision is based.
Notwithstanding any provision of the Agreement or the Policy, no
Employee, Policyholder, Transferee, assignee or beneficiary may
commence any action in any court regarding the Policy or the Senior
Management Basic Life Insurance Program prior to pursuing all rights of
a Policyholder under this Section 14.
PART II - Assignment of Life Insurance Policy as Collateral
A. For value received and in specific consideration of the premium
payments made by the Employer as set forth in Section 2 of Part I
hereof, the Policyholder hereby assigns, transfers and sets over to
the Employer (in this Part II referred to as the "Assignee"), its
successors and assigns, the Policy issued by the Insurer upon
the life of the Employee and all claims, options, privileges,
rights, title and interest therein and thereunder (except as provided
in Paragraph C hereof), subject to all the terms and conditions
of the Policy and to all superior liens, if any, which the Insurer
may have against the Policy. The Policyholder by this instrument
agrees and the Assignee by the acceptance of this assignment agrees to
the conditions and provisions herein set forth.
B. It is expressly agreed that, without detracting from the generality of
the foregoing, the following specific rights are included in this
Agreement and Collateral Assignment and pass to the Assignee by virtue
hereof:
1. The sole right to collect from the Insurer the net proceeds
of the Policy when it becomes a claim by death or maturity;
2. The sole right to surrender the Policy and receive the
surrender value thereof at any time provided by the terms of
the Policy and at such other times as the Insurer may allow;
3. The sole right to obtain one or more loans or advances on the
Policy, either from the Insurer or, at any time, from other
persons, and to pledge or assign the Policy as security for
such loans or advances;
<PAGE>
4. The sole right to collect and receive all distributions or
shares of surplus, dividend deposits or additions to the
Policy, now or hereafter made or apportioned thereto, and to
exercise any and all options contained in the Policy with
respect thereto; provided, that unless and until the Assignee
shall notify the Insurer in writing to the contrary, the
distributions or shares of surplus, dividend deposits and
additions shall continue on the Policy in force at the time of
this assignment; and
5. The sole right to exercise all nonforfeiture rights permitted
by the terms of the Policy or allowed by the Insurer and to
receive all benefits and advantages derived therefrom.
C. It is expressly agreed that the following specific rights, so long as
the Policy has not been surrendered, are reserved and excluded from
this Agreement and Collateral Assignment and do not pass by virtue
hereof:
1. The right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of insurance
or the cash value of the Policy;
2. The right to designate any change in the beneficiary;
3. The right to elect any optional mode of settlement permitted
by the Policy or allowed by the Insurer;
provided, however, that the reservation of these rights shall in no way
impair the right of the Assignee to surrender the Policy completely
with all its incidents or impair any other right of the Assignee
hereunder, and any designation or change of beneficiary or election of
a mode of settlement shall be made subject to this Agreement and
Collateral Assignment and to the rights of the Assignee hereunder.
D. This Collateral Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Policyholder to
the Assignee arising under this Agreement (all of which liabilities
secured to or to become secured are herein referred to as
"Liabilities"). It is expressly agreed that all sums received by the
Assignee hereunder whether in the event of death of the Employee, the
maturity or surrender of the Policy, the obtaining of a loan or advance
on the Policy, or otherwise, shall first be applied to the payment of
the liability for premiums paid by the Assignee on the Policy.
E. The Assignee covenants and agrees with the Policyholder as follows:
1. That any balance of sums, if any, received hereunder from the
Insurer remaining after payment of the existing Liabilities,
matured or unmatured, shall be paid by the Assignee to the
persons entitled thereto under the terms of the Policy had
this Collateral Assignment not been executed;
2. That the Assignee will not exercise either the right to
surrender the Policy or the right to obtain policy loans from
the Insurer, until there has been either default in any of the
Liabilities pursuant to this Agreement or termination of said
Agreement as herein provided; and
<PAGE>
3. That the Assignee will, upon request, forward without
reasonable delay to the Insurer the Policy for endorsement of
any designation or change of beneficiary or any election of an
optional mode of settlement.
F. The Policyholder declares that no proceedings in bankruptcy are pending
against him/her and that his/her property is not subject to any
assignment for the benefit of creditors.
Provisions Applicable to Parts I and II
1. Amendments: Amendments may be added to this Agreement by a written
agreement signed by each of the parties and attached hereto.
2. Choice of Law: This Agreement shall be subject to, and construed
according to, the laws of the State of New Jersey.
3. A Binding Agreement: This Agreement shall bind the Employer and the
Employer's successors and assigns, the Policyholder and his/her heirs,
executors, administrators, and assigns (including a Transferee), and
any Policy beneficiary.
4. Severability Provision: The Employer and the Policyholder agree that if
any provision of this Agreement is determined to be invalid or
unenforceable, in whole or part, then all remaining provisions of this
Agreement and, to the extent valid or enforceable, the provision in
question shall remain valid, binding and fully enforceable as if the
invalid or unenforceable provision, to the extent necessary, was not a
part of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, including
the provisions regarding Collateral Assignment, on the day and year first above
written.
POLICYHOLDER
______________________________ ______________________________
Signature of Witness Signature of Policyholder
AT&T CORP.
(As Employer and Assignee)
______________________________ By:______________________________
Signature of Witness H. W. Burlingame
Executive Vice President-Human Resources
<PAGE>
AT&T SENIOR MANAGEMENT BASIC LIFE INSURANCE PROGRAM
(revised 2/27/98)
Program Overview
The Senior Management Basic Life Insurance Program (SMBLIP) is an arrangement
where the Company and you purchase a permanent life insurance policy on your
life. SMBLIP replaces the Executive Basic Life Insurance Program (EBLIP). There
are several advantages to this program including access to cash value prior to
age 65 and a greater accumulation cash value at age 65.
The Company will pay the entire annual premium for your SMBLIP coverage. Your
W-2 will reflect an imputed income amount associated with the insurance coverage
provided to you under the policy. In certain cases, e.g., your death before
retirement, the total benefits will be shared between the Company and your
designated beneficiary but the Company will share in the death benefit only to
the extent that the total insurance amount exceeds one times your salary rounded
to the next higher $1,000. This type of arrangement is known in the insurance
industry as "Split Dollar."
After attaining normal retirement age 65 (or 15 years of participation in the
program, if later), the Company will recoup its premium payments from the cash
value build-up and cease to have any interest in the policy. The remaining cash
value will be sufficient to maintain your death benefit without further premium
payments.
Your death benefit will change to reflect any change in your salary. At
retirement, your death benefit will become frozen at your final annual salary
rounded to the next higher $1,000. During the period in which the Company makes
premium payments, your imputed income will increase to reflect your increasing
age, as well as any increase in death benefit. After premium payments cease,
i.e., the later of your attaining age 65 or 15 years from the policy issue date,
you will have no further imputed income.
Although this arrangement is primarily designed to pay a benefit upon your
death, there is also a cash value build-up. Once sufficient funds have
accumulated and the Company no longer has an interest in the policy because it
has recouped its premiums, you have the option to use some or all of the
remaining cash in lieu of some or all of the death benefit.
AT&T has selected two insurers, Metropolitan Life Insurance Company and Pacific
Life Insurance Company, to provide the SMBLIP coverage. You will therefore have
two policies on your life; one from each insurer, and each insurer will provide
half the defined amount of death benefit.
Secured Benefit
Changes to the tax law over the years have required an increasing portion of the
Senior Management benefit programs to be paid from Company operating income.
SMBLIP allows the Company to contribute towards the cost of this program on a
timely basis while securing the benefit payment from a third party (the
insurance companies).
<PAGE>
Eligibility
SMBLIP is provided to active AT&T Senior Managers. Employees who are promoted to
or hired as Senior Managers are immediately eligible to enroll in this program.
Coverage
SMBLIP is provided as a replacement to the death benefit coverage provided under
the Executive Basic Life Insurance Plan (EBLIP). The benefit is one times annual
salary rounded to the next higher $1,000.
The death benefit will be updated to reflect changes in your salary. There may
be circumstances where a large increase in salary and, therefore, a
corresponding increase in death benefit, will require providing medical
information to the insurer. By providing this medical information, the insurer
is able to keep the premium payments at the lowest level. A medical information
waiver, signed by you, will be kept on file in the event this circumstance
occurs. This will allow the Company to release to the insurer the required
information from your Company medical records. Higher death benefit coverage
associated with salary increases is guaranteed, no matter what your health
circumstances may be at that time.
Conversion Rights
If you are a participant in the Executive Basic Life Insurance Plan at the time
you become eligible for SMBLIP, for a limited period of time you have the right
to convert your coverage under EBLIP to a separate individual policy provided by
the insurance carrier. We suggest you discuss this with your financial advisor
before exercising or declining this right. You may exercise this right by
contacting Harris, Crouch, Long, Scott & Miller, Inc., the administrator for
EBLIP, at 1-800-510-2050.
Program Illustration
You will be provided with a personal illustration based on your current salary.
This illustration reflects your costs and benefits, as well as the Company's,
over the life of the policy. It provides a picture of how the policy works and
what your tax on imputed income might be, using an assumed salary growth. The
actual ongoing life insurance amounts will be different from this illustration.
Premium Period
SMBLIP is designed for premiums to be extended over a period of time to ease the
impact on cash flow to the Company. This period is normally from the time of
your enrollment until the first policy anniversary after you reach age 65.
However, in all cases, premiums must be paid for a minimum of 15 years.
Therefore, if you enroll in the program after age 50, the Company will continue
premium payments and you will continue to recognize income until the 15 year
minimum is reached.
Imputed Income
SMBLIP offers a cost-effective life insurance program for Senior Managers. The
cost to you of the SMBLIP will be the income tax payable on the amount of your
imputed income.
<PAGE>
Cash Value
This program is designed to provide you with a pre- and post retirement death
benefit. However, in addition to the death benefit, there is a cash value
build-up. That is, part of each premium is placed in an "investment fund" to
earn income. Investment earnings beyond the amounts necessary to provide the
death benefit coverage build on a tax advantaged basis in the policy. The
policy's cash value is the basis for your subsequent "premium free" death
benefit.
Cash Availability
Under SMBLIP you have considerable flexibility. After the Company interest has
been satisfied, you may reduce your death benefit and utilize the policy cash
value in a number of ways. For example:
a) Loans
The cash value attributed to you may be withdrawn in the form of a loan.
There could be tax implications as well as death benefit diminution
associated with a loan.
b) Income Stream or Lump Sum
It is possible to convert all or any portion of the policy from a death
benefit to either an income "stream" (i.e., an annuity) or a lump sum cash
payout. The extent to which you convert to income or cash will cancel or
reduce the death benefit. Once you convert, it is not possible to
re-establish the original death benefit.
We suggest that you consult with your financial advisor before exercising these
options.
Insurability
If you enroll within 60 days of becoming a Senior Manager you will be guaranteed
to be insured. Your imputed income rate will not depend on your health or
smoking status. It will differ from others depending only on age and amount of
death benefit. Enrollment after 60 days may require a medical questionnaire or
examination.
Transfer/Assignment of Ownership
After you enroll in the program, you may transfer ownership to another, e.g., an
individual, trust, etc. Another option is for you to not take ownership, but
rather another individual or trust, etc., may apply for ownership of the policy.
It is of particular importance that if the original owner of the policy is not
you, that the owner sign the applications as the "Applicant/Policyowner" and you
sign as the "Proposed Insured". Since these transfers are generally construed to
be irrevocable, we urge you to consult with an attorney and/or tax advisor
before making this decision.
Early Retirement or Termination
If, at retirement, you are "Pension Eligible" or "Retirement Eligible" and you
have not reached normal retirement age (65), the Company will continue to pay
premiums until you reach age 65 or 15 years of participation in the program, if
later. During this period you will continue to have imputed income based on your
age and the amount of insurance in force. At the end of this period, i.e., the
later of the policy anniversary immediately following your attainment of age 65
or the 15th policy anniversary, the premiums will cease and the aggregate
Company premiums will be returned to the Company.
<PAGE>
For purposes of the SMBLIP, you will be considered "Pension Eligible" if you
retire with a Disability Allowance or Minimum Retirement Benefit under the AT&T
Senior Management Long Term Disability and Survivor Protection Plan. You will be
considered "Retirement Eligible" for purposes of the SMBLIP if you retire after
having satisfied one of the following minimum age and length of service (as
determined under the AT&T Management Pension Plan) combinations: (a) any age and
30 years of service; (b) age 50 and 25 years of service; (c) age 55 and 20 years
of service; or (d) age 65 and 10 years of service.
If you separate from the Company without being Pension Eligible or Retirement
Eligible, the aggregate amount of Company premiums paid up to that point will be
immediately returned to the Company from the cash value of the policy. You can,
at your option, either maintain the policy by paying the policy premiums, or you
may use the remaining cash value (if any) to buy other "self-supporting" life
insurance, or you may withdraw any remaining cash value and cancel the policy.
Whether or not you are Pension Eligible or Retirement Eligible, if you leave the
Company, and without the Company's consent or an appropriate waiver, establish a
relationship with a competitor of the Company or engage in activity in conflict
with or adverse to the interests of the Company under the standards of the AT&T
Non-Competition Guideline and as determined by the AT&T Executive Vice President
- - Human Resources, the process will be the same as with retirement/termination
without being Pension Eligible or Retirement Eligible.
Demotion
If you are demoted to a position which is not a Senior Manager, the effect is
the same as if terminated from the Company. You will however, automatically
become re-eligible for coverage under the Executive Basic Life Insurance Plan
(EBLIP).
Contractual Agreement
One of the unique aspects of this insurance policy is the existence of a
contract between you and AT&T. This agreement has no relationship to employment
or any other benefit but rather defines the responsibilities of both the Company
and you in the operation of the policy. You, or another, will own the policy and
determine the beneficiary. The Company will hold the policy and have a
"Collateral Assignment" from the owner entitling AT&T, as long as it has a
collateral interest in the policy, to any death benefit amounts in excess of one
times your annual salary rounded to the next higher $1,000, and all cash values
up to an amount equal to its cumulative premiums paid. This document is a legal
agreement and as such includes a significant amount of detail and warrants
careful review before signing. Although somewhat unique to life insurance, a
collateral assignment is similar in context to an automobile loan where the car
becomes "collateral" for the money lent to buy it. In this case, a portion of
the cash value and death benefit of the policy is the collateral the Company
receives for contributing premium payments to "buy" the life insurance policy.
The agreement is satisfied when the aggregate premiums paid by the Company are
returned. Some of the major sections of the agreement are:
- Description of the policy
- How the premiums are paid
- How the proceeds are paid
- How the agreement terminates
- Claims procedure
- Description of the assignment
<PAGE>
The Agreement is included with the enrollment documents and requires signature
of the owner of your policy (i.e. you, another individual, trustee, etc.).
Taxes
Split Dollar life insurance policies have been in existence for decades. The IRS
has issued several rulings over this period which treat these policies favorably
from a tax perspective. However, the Company does not assure any particular tax
treatment and recommends that you review your own situation with your personal
attorney and/or tax advisor.
Enrollment
AT&T has selected Metropolitan Life Insurance Company and Pacific Life Insurance
Company to provide the coverage. This is to provide the best combination of
premium rates and Senior Manager protection. As such, there is some duplication
of forms. Once enrollment has been completed, however, this two insurer approach
should have a minimal impact on you. Enrollment, and any future changes to your
policy (i.e., assignment of ownership, beneficiary change, etc.) is processed
through AT&T Executive Human Resources.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>8
<DESCRIPTION>EXHIBIT (10)(III)(A)(18)
<TEXT>
AT&T SENIOR OFFICER SEVERANCE PLAN
PLAN DOCUMENT
AND
SUMMARY PLAN DESCRIPTION
(Effective October 9, 1997)
(As Amended October 30, 1997)
THIS DOCUMENT, LIKE ALL COMPANY PLANS, PERSONNEL POLICIES OR PRACTICES, IS NOT A
CONTRACT OF EMPLOYMENT. IT IS NOT INTENDED TO CREATE, AND IT SHOULD NOT BE
CONSTRUED TO CREATE, ANY CONTRACTUAL RIGHTS, EITHER EXPRESS OR IMPLIED, BETWEEN
THE COMPANY AND ITS EMPLOYEES.
AT AT&T, THE EMPLOYMENT RELATIONSHIP WITH EMPLOYEES COVERED BY THIS PLAN IS
"AT-WILL". THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO QUIT THEIR EMPLOYMENT AT
ANY TIME AND FOR ANY REASON, AND THE COMPANY RESERVES THE RIGHT TO TERMINATE ANY
EMPLOYEE'S EMPLOYMENT, WITH OR WITHOUT CAUSE, AT ANY TIME FOR ANY REASON.
IN THE EVENT THERE IS A CONFLICT BETWEEN STATEMENTS IN THIS PLAN REGARDING
BENEFITS PROVIDED BY ANOTHER PLAN AND THE TERMS OF THAT OTHER BENEFIT PLAN,
POLICY, OR PRACTICE, THE APPLICABLE BENEFIT PLAN, POLICY OR PRACTICE PROVIDING
THE BENEFITS IN QUESTION WILL CONTROL. AT&T RESERVES THE RIGHT, AT ANY TIME, TO
MODIFY, SUSPEND, CHANGE, OR TERMINATE ITS EMPLOYEE BENEFIT PLANS OR SENIOR
MANAGER INCENTIVE, BENEFIT AND/OR PERQUISITE PLANS, PROGRAMS, POLICIES OR
PRACTICES.
<PAGE>
AT&T SENIOR OFFICER SEVERANCE PLAN
PLAN DOCUMENT
AND
SUMMARY PLAN DESCRIPTION
A. OVERVIEW
The AT&T Senior Officer Severance Plan ("the Plan" or "this Plan"), effective
October 9, 1997 ("Effective Date"), is designed to provide certain supplemental
payments and benefit enhancements to eligible Senior Management employees (each,
a "Participant" or collectively "Participants") of AT&T Corp. ("the Company"
and/or "AT&T") whose employment is terminated under certain circumstances set
forth in this Plan.
Benefits under this Plan shall be in place of any other current or future plan,
program, policy, or arrangement providing severance payments or post-retirement
ancillary benefits, except as provided in Section N. The other benefits provided
by this Plan, to the extent they differ from benefits provided by current AT&T
benefit plans and programs, will be in addition to the benefits provided by the
regular AT&T benefit plans and programs. See "About Your Benefits" for
descriptions of those plans and programs.
For purposes of this Plan, "Service Pension eligibility" or "Service Pension
eligible" shall have the meaning set forth in the AT&T Management Pension Plan
(AT&TMPP) prior to the amendments effective August 1, 1997.
B. TYPE OF PLAN
Under Section 3 (1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), this Plan is classified and is to be interpreted as an
employee welfare benefit plan.
C. PLAN PARTICIPATION
Participants in this Plan are certain current members of the AT&T Senior
Management Team, including all members of the AT&T Operations Team, as
identified on Exhibit A.
D. ELIGIBILITY TO RECEIVE BENEFITS
1. You will become entitled to receive the benefits described in Section F. in
the event you cease to be a Company employee:
a) by reason of Company-initiated termination for other than Cause
(as defined in Section E. below); or
b) by reason of your election to terminate your Company employment
for Good Reason (in accordance with the Notification provisions
set forth below); and
c) you execute a valid Separation Agreement and Release ("Release"),
and the time during which you may revoke the Release has expired.
<PAGE>
Any Participant who receives any payments or benefits under this Plan shall not
be entitled to receive any severance payments or severance benefits under any
other plan, program, policy, agreement or practice of the Company, except as
provided in Section N; provided, however, that agreement to participate in this
AT&T Senior Officer Severance Plan will not preclude future participation in any
similar arrangement that provides a greater level of benefits.
2. Notification of Termination for Good Reason. In the event you determine that
Good Reason exists for you to elect to terminate your employment with the
Company, you must notify the Executive Vice President - Human Resources in
writing of the specific event which you believe constitutes Good Reason within
thirty (30) days of the occurrence of such event. Upon receipt of such notice,
the Company shall have thirty (30) days in which to remedy the event specified
in your notice as constituting Good Reason, as defined below.
In the event the Company disagrees with your determination that the event
specified in your notice constitutes Good Reason, you shall be so notified
within ten (10) days of the Company's receipt of your written notice. In such
event, or in the event you determine that the actions taken by the Company fail
to adequately address your claimed event of Good Reason specified in your
notice, the procedures set forth in Sections K. and L. of this Plan shall apply.
E. DEFINITIONS
For purposes of this Plan:
a) "Cause" termination shall mean:
(i) your conviction (including a plea of guilty or nolo contendere)
of a crime involving theft, fraud, dishonesty or moral turpitude;
(ii) violation by you of the Company's Code of Conduct or
Non-Competition Guideline;
(iii) gross omission or gross dereliction of any statutory, common law
or other duty of loyalty to the Company or any of its affiliates;
or
(iv) repeated failure to carry out the duties of your position despite
specific instruction to do so.
b) "Good Reason" shall mean the occurrence without your express written
consent of any of the following events:
(i) Your demotion to a position which is not of a rank and
responsibility comparable to members of the current Senior
Management Team or those of a similar/replacing governance
body; provided, however, that the Company's decision not to
continue a Senior Management Team shall not be Good Reason, and
provided, further, that (1) changes in reporting relationships
shall not, alone, constitute Good Reason and/or (2) a reduction
in your business unit's budget or a reduction your business
unit's head count, by themselves, do not constitute Good
Reason; or
<PAGE>
(ii) a reduction in your "Total Annual Compensation" (defined as the
sum of your Annual Base Salary Rate, Target Annual Incentive
and "Target Annual Long Term Incentive Grants") for any
calendar or fiscal year, as applicable, to an amount that is
less than the Total Annual Compensation that existed in the
prior calendar or fiscal year, as applicable. For purposes of
this Paragraph E.b)(ii) the dollar value of the "Target Annual
Long Term Incentive Grants" shall exclude the value of any
special one-time or periodic long-term incentive grants, and
shall be determined by valuing Performance Shares, Stock Units,
Restricted Stock, Restricted Stock Units, etc., at the market
share price utilized in valuing the annual Senior Management
compensation structures in the materials presented to the
Compensation and Employee Benefits Committee of the Company's
Board of Directors ("the Committee") when authorizing such
grants, and assuming 100% performance achievement if such
grants include performance criteria. Stock Options and Stock
Appreciation Rights will be valued by the Black-Scholes
methodology (and related share price) as utilized in the
materials presented to the Committee when authorizing such
grants.
c) "Termination Date" shall mean the date the Participant ceases to be an
employee of the Company.
F. PLAN PAYMENTS AND BENEFITS
As a Participant who becomes eligible to receive benefits under this Plan, you
shall be entitled to the following:
1. Severance Payment
A Severance Payment under this Section F.1. that will be the greater of 1) two
hundred percent (200%) of the sum of your final annual base salary plus the
target annual incentive in effect for you at your Termination Date, or 2) two
hundred percent (200%) of the sum of your annual base salary plus the target
annual incentive in effect for you at the Effective Date.
2. Deferral Option
At your election prior to termination of employment you may defer receipt of all
or a portion of the Severance Payment under Section F.1. for up to five (5)
years from your Termination Date. Payout of the Severance Payment may be in the
form of a lump sum or up to a maximum of five approximately equal annual
installments. In the event of your death prior to either the commencement or
completion of payout of the deferred amount, the unpaid balance shall be paid to
your named beneficiary (or to your estate if no beneficiary has been named) in a
lump sum within thirty (30) business days of such death.
The interest rate on such deferred amounts will be the interest rate formula
applicable under the AT&T Senior Management Incentive Award Deferral Plan for
deferred cash amounts which otherwise would have been payable in the calendar
year which includes the Effective Date.
Your initial election to defer must be made within thirty (30) days after you
first become eligible to participate in this Plan. Thereafter, you may change
your election, provided, however, that any such change must be made prior to
your Termination Date in the event of a Company-initiated termination for other
than Cause, or at the time of or prior to your notification of termination for
Good Reason.
<PAGE>
If you elect to defer, the obligation to pay the deferred amounts will be
evidenced by the separate written agreement of AT&T to pay the amounts, together
with interest on those amounts, determined pursuant to the terms of this Plan,
which agreement will constitute the unsecured and unfunded obligation of AT&T.
3. Annual Incentive
Your award program currently is comprised of two components: APA (AT&T
Performance Award and MA (Merit Award).
You will be eligible to receive a pro-rated portion of the annual incentive (APA
and MA, or successor program) applicable to the year of your termination for
your time on the active payroll during the performance year, in an amount equal
to the amount produced by the actual achievement level for such year multiplied
by a fraction, the numerator of which is the number of complete months you were
employed during the calendar year (including the last month if your Termination
Date is on or after the 15th of the month) and the denominator of which is 12.
Such amount shall be payable during the first quarter of the following year, in
accordance with existing practices and terms of the award program.
4. Outstanding Long Term Incentives
You will be entitled to the following treatment with respect to your outstanding
long term incentive grants:
For Participants who are not Service Pension eligible, any
outstanding AT&T Performance Shares/Stock Units will continue
after your Termination Date in the same way that they would
continue if you were Service Pension eligible;
For Participants who are not Service Pension eligible, any
unexercised AT&T Stock Options, excluding any Leveraged Stock
Options, outstanding as of your Termination Date will continue in
the same way they would continue if you had been Service Pension
eligible;
Any unvested Restricted Stock Units, Leveraged Stock Options or
such other long-term incentives which are not automatically
continued by virtue of Service Pension eligibility, and which are
outstanding as of your Termination Date will continue as if you
continued to be an active employee of the Company; and
Any unvested Restricted Stock outstanding as of your Termination
Date will vest as of your Termination Date.
5. Life Insurance/Death Benefit
For Participants who are not Service Pension eligible, your AT&T Senior
Management Basic Life Insurance and AT&T Senior Management Individual (split
dollar) Life Insurance, will continue after your Termination Date in the same
way they would continue if you had been Service Pension eligible on your
Termination Date. Moreover, the one times pay (i.e. base salary plus annual
incentive) Death Benefit currently provided to Service Pension eligible Senior
Managers under the AT&TMPP (for base salary) and AT&T Non-Qualified Pension Plan
(AT&TNQPP) (for annual incentive) will be paid to your qualified survivors
provided that Service Pension eligible Senior Managers are eligible to receive
this benefit as of your Termination Date. The definition of qualified survivor
will be the same as provided for in the comparable Death Benefit provision of
<PAGE>
the AT&TMPP and AT&TNQPP provided, however, that the Death Benefit paid to
non-Service Pension eligible Participants will be paid entirely out of the
Company's operating income. Any Death Benefit paid under the AT&T Senior
Management Long Term Disability and Survivor Protection Plan ("SMLTD&SPP") will
reduce, by the amount of such SMLTD&SPP Death Benefit, any Death Benefit payable
under this Section F.5.
6. Financial Counseling
You will be entitled to financial counseling services in accordance with the
Company's then current Senior Management Financial Counseling Program for two
full years from your Termination Date, including income tax preparation during
the subsequent calendar year with respect to income tax returns for the calendar
year which includes the second anniversary of your Termination Date.
7. Outplacement Services
You will be entitled to receive services of a Company paid outplacement
consultant in accordance with the practice then current for Senior Management
employees as of your Termination Date; provided, however, that an election to
use such services must be made within one year subsequent to your Termination
Date.
8. Telephone Reimbursement
You will continue to be eligible for telephone reimbursement through the Senior
Management Telephone Reimbursement Program under the same terms and conditions
as Service Pension eligible Senior Managers as of your Termination Date.
9. Vacation
As a Participant, you should make every reasonable effort, consistent with the
needs of the business, to take all vacation, personal days, and floating
holidays to which you are entitled before your Termination Date. If you are
unable to do so, you will be paid for any unused vacation days for the calendar
year in which your Termination Date occurs and any approved carry-over days. You
will not receive pay in lieu of floating holidays and management personal days
if these days are not taken prior to your Termination Date.
10. Medical/Dental/Vision Coverage
If, at your Termination Date, you are not eligible for post-retirement
medical/dental/vision coverage provided to Service Pension eligible employees
(or replacement coverage) under the Company's plans, you may be entitled as of
your Termination Date to continuing healthcare coverage under the Consolidated
Omnibus Budget Reconciliation Act ("COBRA"). In such event, the Company will
reimburse you for the cost of such COBRA coverage for up to eighteen (18)
months, plus a tax gross-up amount to negate the effect of taxes resulting from
such reimbursement. All coverage for you and your eligible dependents will be
the same as the coverage provided as of your Termination Date, subject to the
terms of the AT&T Medical Expense Plan for Management Employees. You should
immediately notify the COBRA administrator if you become covered under another
group health plan, at which time your COBRA coverage will cease.
G. SEPARATION AGREEMENT AND RELEASE
In order to receive benefits under this Plan, you must sign a Release (a copy of
which is attached hereto as Exhibit "B") which, among other provisions, releases
<PAGE>
and discharges AT&T, its benefit committees, and all of its affiliates,
subsidiaries, and their respective successors and assigns, and the respective
shareholders, officers, directors, employees and members of all of the named
entities from all claims, demands or causes of action of any kind whatsoever
arising out of your employment and the termination of your employment.
The Release must be signed on your Termination Date and returned to the
Company's Executive Vice President-Human Resources, within seven days of your
actual Termination Date.
H. WITHHOLDINGS
The amount of the Severance Payment paid pursuant to this Plan is subject to the
withholding of federal, state and local taxes, FICA (Social Security taxes), and
FUTA and SUTA (unemployment taxes) at the time of payment and will be reported
on IRS form W-2. The Severance Payment will not be reduced for contributions to,
or be recognized under, any AT&T employee or Senior Management benefit plan or
program.
I. FORFEITURE
You will forfeit all or a portion of your benefits under this Plan (excluding
$25,000.00 deemed as consideration for signing and not revoking the Release),
under the following circumstances:
Violation of AT&T Code of Conduct or AT&T Non-Competition Guideline
Notwithstanding any other provision of this Plan, if it is determined by the
Executive Vice President - Human Resources of AT&T, in consultation with the
Company's most senior legal counsel, that you violated AT&T's Code of Conduct,
and/or violated the AT&T Non-Competition Guideline, you will be required to
repay to the Company all of the Severance Payment and an amount equal to the
economic value of the other benefits provided to you under the Plan, except
$25,000. In the event you have elected to defer receipt of your Severance
Payment in accordance with the procedures set forth in Section F.2., you shall
forfeit the right to receive any of the amounts set forth in the deferral
agreement specified in such Section.
J. PLAN TERM PLUS TERMS AND CONDITIONS OF HR PLANS AND PROGRAMS
The Initial Term ("Initial Term") of the Plan will be three years from the
Effective Date and the Plan may not be canceled during this Initial Term.
Thereafter, the Plan will automatically continue unless the Company notifies
each Participant in writing of its decision to cancel the Plan; provided,
however, that such written notification will be sent no less than one year prior
to the effective date of such cancellation. Notwithstanding the above, and
except as otherwise specifically provided for in this Plan, your rights and
benefits under any of the Company's employee or Senior Management compensation,
incentive, benefit and/or perquisite plans and programs, including annual and
long-term incentive plans, continue to be subject to the terms of those plans
and programs as they may be modified or amended from time to time or terminated
in accordance with the Company's reservation of rights to so modify, amend or
terminate. In the event there is a conflict between the material in this Plan
and the terms of the respective compensation, incentive, benefit and/or
perquisite plan documents, the benefit plan documents will control and govern
the operation of the plans.
<PAGE>
The Executive Vice President - Human Resources of AT&T (or any successor to that
officer's responsibilities) with the concurrence of the Company's most senior
legal counsel shall be authorized to make minor or administrative amendments to
the Plan, as well as amendments required by applicable federal or state law (or
authorized or made desirable by such statutes).
K. PLAN ADMINISTRATION
AT&T is the Plan Administrator and Named Fiduciary of the Plan. AT&T has
delegated administrative authority and responsibility to the Chairman -
Compensation and Employee Benefits Committee of the AT&T Board of Directors.
AT&T, 295 North Maple Avenue, Basking Ridge, New Jersey, solely administers this
Plan through the Chairman of such Committee or his delegate who makes
determinations concerning when and to what positions or groups payments should
be made and any other determinations regarding interpretation and administration
of this Plan and shall have sole and complete discretionary authority to
determine such matters.
The Chairman of such Committee is also a Named Fiduciary who shall serve as the
final review authority, under this Plan, and shall have sole and complete
discretionary authority to determine conclusively for all parties and in
accordance with the terms of the documents or instruments governing the plan,
any and all questions arising from the administration of this Plan and
interpretation of all Plan provisions, determination of all questions relating
to participation of eligible employees and eligibility for benefits,
determination of all relevant facts, the amount and type of benefits payable to
any Participant, spouse, heirs or estate, and construction of all terms of this
Plan. All determinations and decisions of the Named Fiduciary are conclusive and
binding on all parties and not subject to further review. The Named Fiduciary
under this Plan has delegated to the Executive Vice President - Human Resources
of AT&T the authority to review all initial claims for payments and benefits
under the terms of this Plan. The Chairman of the Committee shall afford a full
and fair review of any denial of a claim by the Executive Vice President - Human
Resources of AT&T for payments under the terms of this Plan. Any Named Fiduciary
or any fiduciary designated by a Named Fiduciary may delegate any
responsibilities hereunder. Moreover, in a circumstance which requires an
administrator who is also a Participant to make judgment(s) about
himself/herself, such administrator/Participant will be automatically recused
and replaced by another administrator named by the Chairman of the Committee.
How to Appeal a Plan Determination If you believe that the benefits of the Plan
have been improperly denied or the Plan's provisions incorrectly applied to your
situation, you may appeal the determination by forwarding a written request for
a review to:
Chairman of the Compensation and Employee Benefits Committee of
the Board of Directors
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ 07920
Your written appeal should state the reasons you feel your situation was
improperly handled. Be sure to include your name, Social Security number, work
location, and the specific provisions you believe were improperly handled in
your case. You may submit issues and comments in writing.
During the course of the review, you may be required to provide additional
information. This information will be requested in writing.
<PAGE>
You will be notified of a final decision within sixty (60) days following the
receipt of your claim or the date all information requested from you is
furnished, whichever is later. Notification of the result of the review will be
written in a manner calculated to be understood by you and will specify reasons
for the decision.
If there are special circumstances requiring delay, you will be notified of the
final decision no later than 120 days after your appeal is received.
Official Plan Name and Plan Number:
AT&T Senior Officer Severance Plan, Plan #_________.
Plan Sponsor and Administrator:
AT&T Corp.
295 North Maple Avenue
Basking Ridge, NJ
Employer Identification Number: ________
Type of Plan:
Welfare benefit plan.
Type of Administration and Funding:
The Severance Payment is provided through direct payments by the Company from
operating assets.
Agent for Legal Process:
The Company hopes that any disagreement you have with the application of the
provisions described in this material can be resolved without resorting to legal
process. If you wish to begin legal proceedings, however, service of legal
process may be made upon the plan administrator to the attention of the person
listed in this Section K. above.
Plan Document:
This package serves as the plan document for the AT&T Senior Officer Severance
Plan.
Effective Date:
The Effective Date of this Plan shall be October XX, 1997.
Your rights under ERISA. The AT&T Senior Officer Severance Plan is an employee
welfare benefit plan governed by the Employee Retirement Income Security Act of
1974 (ERISA). You are entitled to certain rights and protection under ERISA.
In addition to creating rights for Plan Participants, ERISA imposes duties upon
the people who are responsible for the operation of the Plan. The people who
operate the Plan, called "Fiduciaries" of the Plan, have a duty to do so
prudently, in your interest and in the interest of all members and
beneficiaries.
No one, including the Company, may terminate your employment for the purpose of
preventing you from receiving the benefits to which you are entitled, and no
one, including the Company, a union, or any other person, may discriminate
against you in any other way for that purpose or in order to keep you from
exercising your rights under ERISA.
<PAGE>
If your benefit request is denied in whole or in part, you have the right to
have the Plan Administrator review and reconsider your benefit request.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan and do not receive them within
thirty (30) days you may file suit in federal court. In such a case, the court
may require the Plan Administrator to provide the materials and pay you up to
$100 a day until you receive the materials unless they were not sent or received
because of reasons beyond the control of the Administrator.
If you have a benefit request which is denied or ignored, in whole or in part,
you may file suit in a state or federal court. If you are discriminated against
for asserting your rights, you may seek assistance from the US Department of
Labor, or you may file suit in a federal court. The court will decide who should
pay court costs and legal fees. If you are successful, the court may order the
person you have sued to pay these costs and fees. If you lose, the court may
order you to pay these costs and fees, for example, if it finds your claim is
frivolous.
If you have any questions, you should contact the Director - Executive Human
Resources.
If you have any questions about this statement on or about your rights under
ERISA, you should contact the nearest Area Office of the US Labor-Management
Services Administration, Department of Labor.
L. ARBITRATION
Any dispute, controversy, or question arising under, out of, or relating to this
Agreement or the breach thereof, remaining after a Participant has filed a claim
with the Executive Vice President - Human Resources, and the denial of that
claim has been reviewed by the Chairman of the Committee, in accordance with the
procedures set forth in or adopted pursuant to the provisions of Section K.
hereof, and been denied, shall be, at a Participant's election, referred for
arbitration in the State of New Jersey to a neutral arbitrator selected by the
Participant and the Company. The proceeding shall be governed by the Commercial
Rules of the American Arbitration Association then in effect or such rules last
in effect (in the event such Association is no longer in existence) and the
decision of the arbitrator shall be governed by the rule of law, and in
particular ERISA and its related rules and regulations and relevant case law. If
the parties are unable to agree upon a neutral arbitrator within thirty (30)
days after a Participant has given the Company written notice of the desire to
submit the dispute, controversy or question for decision as aforesaid, then
either party may apply to the American Arbitration Association for the
appointment of a neutral arbitrator, or, if such Association is not then in
existence or does not desire to act in the matter, either party may apply to the
Presiding Judge of the Superior Court of any county in New Jersey for the
appointment of a neutral arbitrator to hear the parties and settle the dispute,
controversy or question, and such right to submit a dispute arising hereunder to
arbitration and the decision of the neutral arbitrator shall be final,
conclusive and binding on all interested persons and no action at law or in
equity shall be instituted, or, if instituted, further prosecuted by either
party other than to enforce the award of the neutral arbitrator. The Participant
and the Company shall each bear all your and its own costs and attorney fees,
except that the Company shall pay the costs of any arbitrator appointed
hereunder as well as the copy of any official transcript of the proceeding.
<PAGE>
M. PLAN DOCUMENTS
This document is both the Summary Plan Description and the official Plan
document which regulates the operation of this Plan.
N. MISCELLANEOUS
Messers Zeglis, Somers and Nagel are covered by individual arrangements that
may, in certain circumstances, duplicate the Severance Payment provided for in
Section F.1. and/or certain of the post-retirement benefits provided for in
Sections F.2-F.10. In the event that such individual agreement provisions are in
effect as of the Termination Date of such individual, the Executive Vice
President - Human Resources is specifically empowered to reduce or eliminate the
duplicative benefits provided for under the Plan. In taking such action, the
Executive Vice President - Human Resources will be guided by the principles that
(1) Messers Zeglis, Somers and Nagel will be treated, for the Sections specified
above, no more or no less favorably than are other Participants not covered by
individual agreements and (2) individual agreement provisions (e.g., individual
pension/deferral accounts) which are not duplicative of the Severance Payment
provided for in Section F.1. and/or post-retirement benefits specified in
Sections F.2.- F.10. will not be considered in determining elimination and/or
reductions in Plan benefits.
O. ASSIGNMENT OR ALIENATION
No payments or benefits under this Plan or any right or interest in such
payments or benefits shall be assignable or subject in any manner to
anticipation, alienation, sale, transfer, assignment, claims of creditors,
garnishment, pledge, execution, attachment or encumbrance of any kind,
including, but not limited to, pursuant to any domestic relations order (within
the meaning of Section 206(d)(3) of ERISA and Section 414(p)(1)(B) of the
Internal Revenue Code) and any such attempted disposition shall be null and
void.
<PAGE>
AT&T Senior Officer Severance Plan
Participant List
(for 1998 10K Filing)
3/6/98
F. Ianna
G. J. McGovern
J. C. Petrillo
J. D. Zeglis
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>9
<DESCRIPTION>EXHIBIT (10)(III)(A)(19)
<TEXT>
October 30, 1997
Mr. Frank Ianna
425 Devonshire Drive
Franklin Lakes, NJ 07417
Dear Frank:
The purpose of this letter agreement (hereinafter "Agreement") is to
detail and document a special individual non-qualified supplemental retirement
arrangement we have developed for you. Under this Agreement, a deferred account
(hereinafter "Deferred Account") will be established in your name. The
maintenance, vesting, forfeiture and distribution of the Deferred Account shall
be in accordance with the following terms and conditions.
On November 1, 1997 (hereinafter the "Effective Date"), AT&T Corp.
(hereafter "the Company") shall credit the Deferred Account with an initial
balance of Eight Hundred and Twenty Eight Thousand Dollars ($828,000). The
Company shall credit interest to the Deferred Account as of the end of each
calendar quarter at a rate equal to one-quarter of the average 30 Year Treasury
Bond Rate in effect for the last previous quarter.
The Deferred Account will be maintained as a bookkeeping account on the
records of the Company and you will have no present ownership right or interest
in the Deferred Account, nor in any assets of the Company with respect thereto.
The Deferred Account may not be assigned, pledged or otherwise alienated by you
and any attempt to do so, or any garnishment, execution or levy of any kind with
respect to the Deferred Account, will not be recognized. You shall not have any
right to receive any payment with respect to the Deferred Account, except as
expressly provided below.
In the event you cease to be a Company employee prior to the sixth
anniversary of the Effective Date:
(a) by reason of death or Long-Term Disability (as
defined below), all amounts credited to the Deferred
Account through the date of such termination, shall
be paid to you [or, upon your death to
your beneficiary, as designated on a form filed
with Executive Human Resources, or to your estate
if no beneficiary has been designated, (hereinafter
your Survivors)] within the calendar quarter
immediately following the quarter which includes the
date of your termination of Company employment;
(b) by reason of Company-initiated termination for other
than Cause (as defined below), all amounts credited
to the Deferred Account through the sixth anniversary
<PAGE>
of the Effective Date shall be paid to you (or to
your Survivors) within the calendar quarter
immediately following the quarter which includes such
sixth anniversary;
(c) by reason of your election to terminate your Company
employment for Good Reason (as defined below), all
amounts credited to the Deferred Account through the
sixth anniversary of the Effective Date shall be paid
to you (or to your Survivors) within the calendar
quarter immediately following the quarter which
includes such sixth anniversary; and
(d) for any reason other than death, "Long Term
Disability," Company-initiated termination for other
than "Cause," or your election to terminate your
employment for "Good Reason," then all amounts in the
Deferred Account shall be canceled and you shall not
receive any distribution with respect to the Deferred
Account or have any further interest in the Deferred
Account.
In the event you cease to be a Company employee on or after the sixth
anniversary of the Effective Date for any reason other than your death, all
amounts credited to the Deferred Account will be paid to you in ____ (1 to 10)
_____ (initials) approximately equal annual installments commencing within the
first calendar quarter of the calendar year following the year in which your
termination of employment occurs. Unpaid Deferred Account balances after
termination continue to be credited with interest. In the event of your death
prior to either commencement or completion of Deferred Account payment(s) to
you, the unpaid balance of the Deferred Account as of your death shall be paid
to your Survivors in a lump sum within the calendar quarter immediately
following the quarter which includes the date of your death.
For purposes of this Agreement:
(a) "Long Term Disability" shall mean termination of your employment with
the Company with eligibility to receive a disability allowance
under the AT&T Senior Management Long Term Disability and
Survivor Protection Plan or a replacement plan;
(b) "Cause" shall mean:
(i) your breach of any of the terms of this Agreement;
(ii) your conviction (including a plea of guilty or nolo
contendere) of a crime involving theft, fraud, dishonesty or
moral turpitude;
(iii) gross omission or gross dereliction of any statutory, common
law or other duty of loyalty to the Company or any of its
affiliates;
(iv) violation by you of the Company's Code of Conduct or
Non-Competition Guideline; or
(v) repeated failure to carry out the duties of your position
despite specific instruction to do so.
<PAGE>
(c) "Good Reason" shall mean the occurrence without your express written
consent of any of the following events:
(i) Your demotion to a position which is not of a rank and
responsibility comparable to members of the current Senior
Management Team or those of a similar/replacing governance
body; provided, however, that the Company's decision not to
continue a Senior Management Team shall not be Good Reason,
and provided, further, that (1) changes in reporting
relationships shall not, alone, constitute Good Reason and/or
(2) a reduction in your business unit's budget or a reduction
in your business unit's head count, by themselves, do not
constitute Good Reason; or
(ii) a reduction in your "Total Annual Compensation" (defined as
the sum of your Annual Base Salary Rate, Target Annual
Incentive and "Target Annual Long Term Incentive Grants") for
any calendar or fiscal year, as applicable, to an amount that
is less than the Total Annual Compensation that existed in the
prior calendar or fiscal year, as applicable. For purposes
of this paragraph (c)(ii) the dollar value of the "Target
Annual Long Term Incentive Grants" shall exclude the value of
any special one-time or periodic long-term incentive grants,
and shall be determined by valuing Performance Shares, Stock
Units, Restricted Stock, Restricted Stock Units, etc., at the
market share price utilized in valuing the annual Senior
Management compensation structures in the materials presented
to the Compensation and Employee Benefits Committee of the
Company's Board of Directors when authorizing such grants,
and assuming 100% performance achievement if such grants
include performance criteria. Stock Options and Stock
Appreciation Rights will be valued by the Black Scholes
methodology (and related share price) as utilized in the
materials presented to such Compensation and Employee Benefits
Committee when authorizing such grants.
It is understood and agreed that you will not talk about, write about
or otherwise publicize the terms or existence of this Agreement or any fact
concerning its execution or implementation. You may, however, discuss its
contents with your spouse, legal and/or financial counselor. IN ADDITION,
DEFERRED ACCOUNT AMOUNTS PROVIDED UNDER THIS AGREEMENT ARE SUBJECT TO FORFEITURE
(OR REPAYMENT IF SUCH AMOUNTS ALREADY HAVE BEEN PAID) IF YOU VIOLATE THE AT&T
NON-COMPETITION GUIDELINE IN EFFECT AT THE TIME OF THE VIOLATION ANYTIME PRIOR
TO THE THIRD ANNIVERSARY OF YOUR TERMINATION OF COMPANY EMPLOYMENT. (THE CURRENT
GUIDELINE SUMMARY IS ATTACHED.)
THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT AND SHOULD NOT BE
CONSTRUED OR INTERPRETED AS CONTAINING ANY GUARANTEE OF CONTINUED EMPLOYMENT.
THE EMPLOYMENT RELATIONSHIP WITH THE COMPANY IS BY MUTUAL CONSENT
("EMPLOYMENT-AT-WILL"). THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO TERMINATE
THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON. LIKEWISE, THE COMPANY RESERVES
THE RIGHT TO DISCONTINUE YOUR EMPLOYMENT WITH OR WITHOUT CAUSE AT ANY TIME AND
FOR ANY REASON.
Payments from the Deferred Account are in addition to and not in lieu
of any qualified or non-qualified pension, savings, or other retirement plan,
program or arrangement covering you, nor are such payments in lieu of any
payments or other benefits which may be provided to you under the AT&T Senior
<PAGE>
Officer Severance Plan. The Deferred Account payments provided under this
Agreement are subject to payroll tax withholding and reporting, and amounts
credited to the Deferred Account are not included in the base for calculating
benefits under any employee or Senior Management benefit plan, program or
practice.
Any dispute, controversy, or question arising under, out of, or
relating to this Agreement or the breach thereof, shall be referred for
arbitration in the State of New Jersey to a neutral arbitrator selected by you
and the Company. The proceeding shall be governed by the Commercial Rules of the
American Arbitration Association then in effect or such rules last in effect (in
the event such Association is no longer in existence) and the decision of the
arbitrator shall be governed by the rule of law. If the parties are unable to
agree upon a neutral arbitrator within thirty (30) days after each party has
given the other written notice of the desire to submit the dispute, controversy
or question for decision as aforesaid, then either party may apply to the
American Arbitration Association for the appointment of a neutral arbitrator,
or, if such Association is not then in existence or does not desire to act in
the matter, either party may apply to the Presiding Judge of the Superior Court
of any county in New Jersey for the appointment of a neutral arbitrator to hear
the parties and settle the dispute, controversy or question, and such right to
submit a dispute arising hereunder to arbitration and the decision of the
neutral arbitrator shall be final, conclusive and binding on all interested
persons and no action at law or in equity shall be instituted, or, if
instituted, further prosecuted by either party other than to enforce the award
of the neutral arbitrator. You and the Company shall each bear all your and its
own costs and attorney fees, except that the Company shall pay the costs of any
arbitrator appointed hereunder as well as the copy of any official transcript of
the proceeding.
The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of New Jersey, without regard to its
conflict of laws rule.
Frank, I am happy to present this special arrangement to you. It
recognizes the extraordinary contribution you have made to our business. If you
agree with the terms and conditions detailed above, please enter your payout
election and initial in the spaces provided on page 2, sign and date this
Agreement in the spaces provided below and, prior to November 14, 1997, return
the original executed copy to me.
Sincerely,
Attachment
______________________________ ___________________________________
Acknowledged and Agreed to Date
Frank Ianna
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>10
<DESCRIPTION>EXHIBIT (10)(III)(A)(20)
<TEXT>
October 30, 1997
Ms. Gail J. McGovern
28 Mt. Pleasant Rd.
Morristown, NJ 07960
Dear Gail:
The purpose of this letter agreement (hereinafter "Agreement") is to
detail and document a special individual non-qualified supplemental retirement
arrangement we have developed for you. Under this Agreement, a deferred account
(hereinafter "Deferred Account") will be established in your name. The
maintenance, vesting, forfeiture and distribution of the Deferred Account shall
be in accordance with the following terms and conditions.
On November 1, 1997 (hereinafter the "Effective Date"), AT&T Corp.
(hereafter "the Company") shall credit the Deferred Account with an initial
balance of Eight Hundred and Twenty Thousand Dollars ($820,000). The Company
shall credit interest to the Deferred Account as of the end of each calendar
quarter at a rate equal to one-quarter of the average 30 Year Treasury Bond Rate
in effect for the last previous quarter.
The Deferred Account will be maintained as a bookkeeping account on the
records of the Company and you will have no present ownership right or interest
in the Deferred Account, nor in any assets of the Company with respect thereto.
The Deferred Account may not be assigned, pledged or otherwise alienated by you
and any attempt to do so, or any garnishment, execution or levy of any kind with
respect to the Deferred Account, will not be recognized. You shall not have any
right to receive any payment with respect to the Deferred Account, except as
expressly provided below.
In the event you cease to be a Company employee prior to the seventh
anniversary of the Effective Date:
(a) by reason of death or Long-Term Disability (as
defined below), all amounts credited to the Deferred
Account through the date of such termination, shall
be paid to you [or, upon your death to your
beneficiary, as designated on a form filed
with Executive Human Resources, or to your estate
if no beneficiary has been designated, (hereinafter
your Survivors)] within the calendar quarter
immediately following the quarter which includes
the date of your termination of Company employment;
(b) by reason of Company-initiated termination for other
than Cause (as defined below), all amounts credited
to the Deferred Account through the seventh
anniversary of the Effective Date shall be paid to
<PAGE>
you (or to your Survivors) within the calendar
quarter immediately following the quarter which
includes such seventh anniversary;
(c) by reason of your election to terminate your Company
employment for Good Reason (as defined below), all
amounts credited to the Deferred Account through the
seventh anniversary of the Effective Date shall be
paid to you (or to your Survivors) within the
calendar quarter immediately following the quarter
which includes such seventh anniversary; and
(d) for any reason other than death, "Long Term
Disability, "Company-initiated termination for other
than "Cause,"or your election to terminate your
employment for "Good Reason," then all amounts in
the Deferred Account shall be canceled and you shall
not receive any distribution with respect to the
Deferred Account or have any further interest in the
Deferred Account.
In the event you cease to be a Company employee on or after the seventh
anniversary of the Effective Date for any reason other than your death, all
amounts credited to the Deferred Account will be paid to you in ____ (1 to 10)
_____ (initials) approximately equal annual installments commencing within the
first calendar quarter of the calendar year following the year in which your
termination of employment occurs. Unpaid Deferred Account balances after
termination continue to be credited with interest. In the event of your death
prior to either commencement or completion of Deferred Account payment(s) to
you, the unpaid balance of the Deferred Account as of your death shall be paid
to your Survivors in a lump sum within the calendar quarter immediately
following the quarter which includes the date of your death.
For purposes of this Agreement:
(a) "Long Term Disability" shall mean termination of your employment with
the Company with eligibility to receive a disability allowance under
the AT&T Senior Management Long Term Disability and Survivor
Protection Plan or a replacement plan;
(b) "Cause" shall mean:
(i) your breach of any of the terms of this Agreement;
(ii) your conviction (including a plea of guilty or nolo
contendere) of a crime involving theft, fraud, dishonesty or
moral turpitude;
(iii) gross omission or gross dereliction of any statutory, common
law or other duty of loyalty to the Company or any of its
affiliates;
(iv) violation by you of the Company's Code of Conduct or
Non-Competition Guideline; or
(v) repeated failure to carry out the duties of your position
despite specific instruction to do so.
<PAGE>
(c) "Good Reason" shall mean the occurrence without your express written
consent of any of the following events:
(i) Your demotion to a position which is not of a rank and
responsibility comparable to members of the current Senior
Management Team or those of a similar/replacing governance
body; provided, however, that the Company's decision not to
continue a Senior Management Team shall not be Good Reason,
and provided, further, that (1) changes in reporting
relationships shall not, alone, constitute Good Reason and/or
(2) a reduction in your business unit's budget or a reduction
in your business unit's head count, by themselves, do not
constitute Good Reason; or
(ii) a reduction in your "Total Annual Compensation" (defined as
the sum of your Annual Base Salary Rate, Target Annual
Incentive and "Target Annual Long Term Incentive Grants")
for any calendar or fiscal year, as applicable, to an amount
that is less than the Total Annual Compensation that existed
in the prior calendar or fiscal year, as applicable. For
purposes of this paragraph (c)(ii) the dollar value of the
"Target Annual Long Term Incentive Grants" shall exclude the
value of any special one-time or periodic long-term incentive
grants, and shall be determined by valuing Performance Shares,
Stock Units, Restricted Stock, Restricted Stock Units, etc.,
at the market share price utilized in valuing the annual
Senior Management compensation structures in the materials
presented to the Compensation and Employee Benefits Committee
of the Company's Board of Directors when authorizing such
grants, and assuming 100% performance achievement if such
grants include performance criteria. Stock Options and
Stock Appreciation Rights will be valued by the Black Scholes
methodology (and related share price) as utilized in the
materials presented to such Compensation and Employee Benefits
Committee when authorizing such grants.
It is understood and agreed that you will not talk about, write about
or otherwise publicize the terms or existence of this Agreement or any fact
concerning its execution or implementation. You may, however, discuss its
contents with your spouse, legal and/or financial counselor. IN ADDITION,
DEFERRED ACCOUNT AMOUNTS PROVIDED UNDER THIS AGREEMENT ARE SUBJECT TO FORFEITURE
(OR REPAYMENT IF SUCH AMOUNTS ALREADY HAVE BEEN PAID) IF YOU VIOLATE THE AT&T
NON-COMPETITION GUIDELINE IN EFFECT AT THE TIME OF THE VIOLATION ANYTIME PRIOR
TO THE THIRD ANNIVERSARY OF YOUR TERMINATION OF COMPANY EMPLOYMENT. (THE CURRENT
GUIDELINE SUMMARY IS ATTACHED.)
THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT AND SHOULD NOT BE
CONSTRUED OR INTERPRETED AS CONTAINING ANY GUARANTEE OF CONTINUED EMPLOYMENT.
THE EMPLOYMENT RELATIONSHIP WITH THE COMPANY IS BY MUTUAL CONSENT
("EMPLOYMENT-AT-WILL"). THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO TERMINATE
THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON. LIKEWISE, THE COMPANY RESERVES
THE RIGHT TO DISCONTINUE YOUR EMPLOYMENT WITH OR WITHOUT CAUSE AT ANY TIME AND
FOR ANY REASON.
Payments from the Deferred Account are in addition to and not in lieu
of any qualified or non-qualified pension, savings, or other retirement plan,
program or arrangement covering you, nor are such payments in lieu of any
payments or other benefits which may be provided to you under the AT&T Senior
<PAGE>
Officer Severance Plan. The Deferred Account payments provided under this
Agreement are subject to payroll tax withholding and reporting, and amounts
credited to the Deferred Account are not included in the base for calculating
benefits under any employee or Senior Management benefit plan, program or
practice.
Any dispute, controversy, or question arising under, out of, or
relating to this Agreement or the breach thereof, shall be referred for
arbitration in the State of New Jersey to a neutral arbitrator selected by you
and the Company. The proceeding shall be governed by the Commercial Rules of the
American Arbitration Association then in effect or such rules last in effect (in
the event such Association is no longer in existence) and the decision of the
arbitrator shall be governed by the rule of law. If the parties are unable to
agree upon a neutral arbitrator within thirty (30) days after each party has
given the other written notice of the desire to submit the dispute, controversy
or question for decision as aforesaid, then either party may apply to the
American Arbitration Association for the appointment of a neutral arbitrator,
or, if such Association is not then in existence or does not desire to act in
the matter, either party may apply to the Presiding Judge of the Superior Court
of any county in New Jersey for the appointment of a neutral arbitrator to hear
the parties and settle the dispute, controversy or question, and such right to
submit a dispute arising hereunder to arbitration and the decision of the
neutral arbitrator shall be final, conclusive and binding on all interested
persons and no action at law or in equity shall be instituted, or, if
instituted, further prosecuted by either party other than to enforce the award
of the neutral arbitrator. You and the Company shall each bear all your and its
own costs and attorney fees, except that the Company shall pay the costs of any
arbitrator appointed hereunder as well as the copy of any official transcript of
the proceeding.
The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of New Jersey, without regard to its
conflict of laws rule.
Gail, I am happy to present this special arrangement to you. It
recognizes the extraordinary contribution you have made to our business. If you
agree with the terms and conditions detailed above, please enter your payout
election and initial in the spaces provided on page 2, sign and date this
Agreement in the spaces provided below and, prior to November 14, 1997, return
the original executed copy to me.
Sincerely,
Attachment
- ---------------------------------- -------------------------------
Acknowledged and Agreed to Date
Gail J. McGovern
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>11
<DESCRIPTION>EXHIBIT (10)(III)(A)(21)
<TEXT>
October 30, 1997
Mr. John C. Petrillo
295 No. Maple Ave., Rm 5204A2
Basking Ridge, NJ 07920
Dear John:
The purpose of this letter agreement (hereinafter "Agreement") is to
detail and document a special individual non-qualified supplemental retirement
arrangement we have developed for you. Under this Agreement, a deferred account
(hereinafter "Deferred Account") will be established in your name. The
maintenance, vesting, forfeiture and distribution of the Deferred Account shall
be in accordance with the following terms and conditions.
On November 1, 1997 (hereinafter the "Effective Date"), AT&T Corp.
(hereafter "the Company") shall credit the Deferred Account with an initial
balance of Eight Hundred and Seventy Thousand Dollars ($870,000). The Company
shall credit interest to the Deferred Account as of the end of each calendar
quarter at a rate equal to one-quarter of the average 30 Year Treasury Bond Rate
in effect for the last previous quarter.
The Deferred Account will be maintained as a bookkeeping account on the
records of the Company and you will have no present ownership right or interest
in the Deferred Account, nor in any assets of the Company with respect thereto.
The Deferred Account may not be assigned, pledged or otherwise alienated by you
and any attempt to do so, or any garnishment, execution or levy of any kind with
respect to the Deferred Account, will not be recognized. You shall not have any
right to receive any payment with respect to the Deferred Account, except as
expressly provided below.
In the event you cease to be a Company employee prior to the sixth
anniversary of the Effective Date:
(a) by reason of death or Long-Term Disability (as defined
below), all amounts credited to the Deferred Account
through the date of such termination, shall be paid to you
[or, upon your death to your beneficiary, as designated
on a form filed with Executive Human Resources, or
to your estate if no beneficiary has been designated,
(hereinafter your Survivors)] within the calendar quarter
immediately following the quarter which includes the
date of your termination of Company employment;
(b) by reason of Company-initiated termination for other than
Cause (as defined below), all amounts credited to the
Deferred Account through the sixth anniversary of the
Effective Date shall be paid to you (or to your Survivors)
within the calendar quarter immediately following the
quarter which includes such sixth anniversary;
<PAGE>
(c) by reason of your election to terminate your Company
employment for Good Reason (as defined below), all amounts
credited to the Deferred Account through the sixth
anniversary of the Effective Date shall be paid to you (or
to your Survivors) within the calendar quarter
immediately following the quarter which includes such
sixth anniversary; and
(d) for any reason other than death, "Long Term Disability,"
Company-initiated termination for other than "Cause," or
your election to terminate your employment for "Good
Reason," then all amounts in the Deferred Account shall
be canceled and you shall not receive any distribution
with respect to the Deferred Account or have any further
interest in the Deferred Account.
In the event you cease to be a Company employee on or after the sixth
anniversary of the Effective Date for any reason other than your death, all
amounts credited to the Deferred Account will be paid to you in ____ (1 to 10)
_____ (initials) approximately equal annual installments commencing within the
first calendar quarter of the calendar year following the year in which your
termination of employment occurs. Unpaid Deferred Account balances after
termination continue to be credited with interest. In the event of your death
prior to either commencement or completion of Deferred Account payment(s) to
you, the unpaid balance of the Deferred Account as of your death shall be paid
to your Survivors in a lump sum within the calendar quarter immediately
following the quarter which includes the date of your death.
For purposes of this Agreement:
(a) "Long Term Disability" shall mean termination of your employment with
the Company with eligibility to receive a disability allowance
under the AT&T Senior Management Long Term Disability and Survivor
Protection Plan or a replacement plan;
(b) "Cause" shall mean:
(i) your breach of any of the terms of this Agreement;
(ii) your conviction (including a plea of guilty or nolo
contendere) of a crime involving theft, fraud, dishonesty or
moral turpitude;
(iii) gross omission or gross dereliction of any statutory, common
law or other duty of loyalty to the Company or any of its
affiliates;
(iv) violation by you of the Company's Code of Conduct or
Non-Competition Guideline; or
(v) repeated failure to carry out the duties of your position
despite specific instruction to do so.
(c) "Good Reason" shall mean the occurrence without your express written
consent of any of the following events:
<PAGE>
(i) Your demotion to a position which is not of a rank and
responsibility comparable to members of the current Senior
Management Team or those of a similar/replacing governance
body; provided, however, that the Company's decision not to
continue a Senior Management Team shall not be Good Reason,
and provided, further, that (1) changes in reporting
relationships shall not, alone, constitute Good Reason and/or
(2) a reduction in your business unit's budget or a reduction
in your business unit's head count, by themselves, do not
constitute Good Reason; or
(ii) a reduction in your "Total Annual Compensation" (defined as
the sum of your Annual Base Salary Rate, Target Annual
Incentive and "Target Annual Long Term Incentive Grants") for
any calendar or fiscal year, as applicable, to an amount that
is less than the Total Annual Compensation that existed in the
prior calendar or fiscal year, as applicable. For purposes of
this paragraph (c)(ii) the dollar value of the "Target Annual
Long Term Incentive Grants" shall exclude the value of any
special one-time or periodic long-term incentive grants, and
shall be determined by valuing Performance Shares, Stock
Units, Restricted Stock, Restricted Stock Units, etc., at
the market share price utilized in valuing the annual
Senior Management compensation structures in the materials
presented to the Compensation and Employee Benefits Committee
of the Company's Board of Directors when authorizing such
grants, and assuming 100% performance achievement if such
grants include performance criteria. Stock Options and Stock
Appreciation Rights will be valued by the Black Scholes
methodology (and related share price) as utilized in the
materials presented to such Compensation and Employee Benefits
Committee when authorizing such grants.
It is understood and agreed that you will not talk about, write about
or otherwise publicize the terms or existence of this Agreement or any fact
concerning its execution or implementation. You may, however, discuss its
contents with your spouse, legal and/or financial counselor. IN ADDITION,
DEFERRED ACCOUNT AMOUNTS PROVIDED UNDER THIS AGREEMENT ARE SUBJECT TO FORFEITURE
(OR REPAYMENT IF SUCH AMOUNTS ALREADY HAVE BEEN PAID) IF YOU VIOLATE THE AT&T
NON-COMPETITION GUIDELINE IN EFFECT AT THE TIME OF THE VIOLATION ANYTIME PRIOR
TO THE THIRD ANNIVERSARY OF YOUR TERMINATION OF COMPANY EMPLOYMENT. (THE CURRENT
GUIDELINE SUMMARY IS ATTACHED.)
THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT AND SHOULD NOT BE
CONSTRUED OR INTERPRETED AS CONTAINING ANY GUARANTEE OF CONTINUED EMPLOYMENT.
THE EMPLOYMENT RELATIONSHIP WITH THE COMPANY IS BY MUTUAL CONSENT
("EMPLOYMENT-AT-WILL"). THIS MEANS THAT EMPLOYEES HAVE THE RIGHT TO TERMINATE
THEIR EMPLOYMENT AT ANY TIME AND FOR ANY REASON. LIKEWISE, THE COMPANY RESERVES
THE RIGHT TO DISCONTINUE YOUR EMPLOYMENT WITH OR WITHOUT CAUSE AT ANY TIME AND
FOR ANY REASON.
Payments from the Deferred Account are in addition to and not in lieu
of any qualified or non-qualified pension, savings, or other retirement plan,
program or arrangement covering you, nor are such payments in lieu of any
payments or other benefits which may be provided to you under the AT&T Senior
Officer Severance Plan. The Deferred Account payments provided under this
Agreement are subject to payroll tax withholding and reporting, and amounts
credited to the Deferred Account are not included in the base for calculating
benefits under any employee or Senior Management benefit plan, program or
practice.
<PAGE>
Any dispute, controversy, or question arising under, out of, or
relating to this Agreement or the breach thereof, shall be referred for
arbitration in the State of New Jersey to a neutral arbitrator selected by you
and the Company. The proceeding shall be governed by the Commercial Rules of the
American Arbitration Association then in effect or such rules last in effect (in
the event such Association is no longer in existence) and the decision of the
arbitrator shall be governed by the rule of law. If the parties are unable to
agree upon a neutral arbitrator within thirty (30) days after each party has
given the other written notice of the desire to submit the dispute, controversy
or question for decision as aforesaid, then either party may apply to the
American Arbitration Association for the appointment of a neutral arbitrator,
or, if such Association is not then in existence or does not desire to act in
the matter, either party may apply to the Presiding Judge of the Superior Court
of any county in New Jersey for the appointment of a neutral arbitrator to hear
the parties and settle the dispute, controversy or question, and such right to
submit a dispute arising hereunder to arbitration and the decision of the
neutral arbitrator shall be final, conclusive and binding on all interested
persons and no action at law or in equity shall be instituted, or, if
instituted, further prosecuted by either party other than to enforce the award
of the neutral arbitrator. You and the Company shall each bear all your and its
own costs and attorney fees, except that the Company shall pay the costs of any
arbitrator appointed hereunder as well as the copy of any official transcript of
the proceeding.
The construction, interpretation and performance of this Agreement
shall be governed by the laws of the State of New Jersey, without regard to its
conflict of laws rule.
John, I am happy to present this special arrangement to you. It
recognizes the extraordinary contribution you have made to our business. If you
agree with the terms and conditions detailed above, please enter your payout
election and initial in the spaces provided on page 2, sign and date this
Agreement in the spaces provided below and, prior to November 14, 1997, return
the original executed copy to me.
Sincerely,
Attachment
______________________________ ______________________________
Acknowledged and Agreed to Date
John C. Petrillo
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>12
<DESCRIPTION>EXHIBIT (10)(III)(A)(22)
<TEXT>
May 7, 1997
Mr. John D. Zeglis
1 Colonial Way
Madison, NJ 07940
Dear John:
This letter agreement (hereinafter Agreement) will establish an
individual non-qualified pension arrangement (hereinafter Individual Pension)
which, subject to the terms and conditions below, will provide you with a
pension payable upon your termination/retirement from the Company, in the same
form as applicable to the AT&T Non-Qualified Pension Plan. As part of the
Individual Pension, survivor benefits may be provided to your spouse upon your
death. Moreover, subject to the terms and conditions below, related
post-retirement/termination benefits (hereinafter Post-Retirement Benefits) will
be provided to you (hereinafter the Individual Pension and Post-Retirement
Benefits are collectively referred to as the Special Benefits).
If you terminate your Company employment prior to your age 52, the
Special Benefits provisions of this Agreement will be null and void in their
entirety, provided, however, such provisions will continue to apply in the event
of a termination for (i) "Disability" (as defined) or (ii) a Company initiated
termination for other than "Cause" (as defined), or you terminate your Company
employment for "Good Reason" (as defined) both (i) and (ii) terminations
hereinafter referred to as a "Termination".
Individual Pension:
The Individual Pension formula assumes you commenced Company employment
on January 1, 1973 and utilizes the pension/retirement benefit formulas in the
AT&T Management Pension Plan (AT&TMPP) and the AT&T Non-Qualified Pension Plan
(AT&TNQPP), and plan amendments implemented in 1997 and thereafter provided,
however, that in no event will the Individual Pension benefits be less than
those Minimum Pension Schedule detailed in Appendix A:
In addition, the Individual Pension will also provide for an Automatic
Survivor Annuity. In the event of your death as an active employee, your spouse
will receive 50% of your accrued Individual Pension benefit which you would have
received in the event a Termination had occurred on your date of death.
(Assuming the annuitant's pension was not declined.)
In the event you do not decline the post-departure/Termination
annuitant's pension, then under this Individual Pension your spouse will
receive, after your death, an annuitant's pension for her lifetime. Under this
provision, the benefit payable to you during your lifetime will be reduced for
early retirement, if applicable (i.e., for pre-age 55 retirement), and reduced
by the cost of the annuitant's pension (such annuitant's pension cost determined
<PAGE>
in accordance with the terms and conditions of the AT&TMPP and AT&TNQP at the
time of your departure or Termination). The annuitant's pension will be a
percentage of your lifetime benefit, such percentage determined in accordance
with the terms and conditions of the AT&TMPP and AT&TNQPP at the time of your
departure/Termination.
Moreover, in the event the value of the survivor benefits under the
AT&TMPP and AT&TNQPP, as amended in 1997, exceeds the value of the Automatic
Survivor Annuity or elected Survivor Annuity as described in the two prior
paragraphs, such higher amounts will be payable to your survivor.
All AT&T qualified (e.g., AT&TMPP) and non-qualified (e.g., AT&TNQPP
and AT&T Mid Career Pension Plan) pension/retirement plan benefits (except the
AT&T Long Term Savings Plan and AT&T Incentive Award Deferral Plan) are offsets
to (i.e., subtracted from) the amount of the Individual Pension (payable to
you and/or your surviving spouse). It is further understood and agreed that
any payment under the Individual Pension made as a result of a Disability will
be an offset (subtracted from) the Disability Allowance payable under the AT&T
SMLTD&SP or successor plan.
Post-Retirement Benefits:
If upon your termination of Company employment, you are eligible to
receive an Individual Pension, you shall also be eligible, except as indicated
in the following sentence, for such Post-Retirement Benefits as are then
available (i.e., at your departure/Termination date) to Service Pension eligible
Senior Managers. Any post-retirement benefit available to Service Pension
eligible Senior Mangers which the Company is legally precluded from extending to
non-Service Pensioners will not be part of your Post -Retirement Benefit
package.
Other Provisions:
"Cause" shall be defined as follows: (1) conviction (including a plea
of guilty or nolo contendere) of a felony or any crime or theft, dishonesty or
moral turpitude; or (2) gross omission or gross dereliction of any statutory or
common law duty of loyalty to the Company or (3) violation of AT&T's Code of
Conduct.
"Disability" shall be defined as being disabled after the first
fifty-two week period following the onset of a physical or mental impairment as
detailed in the AT&T Senior Management Long Term Disability and Survivor
Protection Plan
(AT&T SMLTD&SP).
"Good Reason" shall be defined as any termination of your Company
employment, initiated by you prior to reaching your 52nd birthday, resulting
from any of the following events which are not cured by the Company within 20
days of your giving the Company written notice thereof:
a) A reduction in annual total compensation (i.e., annual base
salary rate, target annual incentive, "Long Term Incentive" as
valued below) to less than $2,267,000. For purposes of the
prior sentence, the dollar value of your annual "Long Term
Incentive" grants shall be determined by valuing Performance
Shares, Performance Units, Stock Units, Restricted Stock,
Restricted Stock Units, etc., at the market price when the
Compensation Committee approves such grants, and assuming 100%
<PAGE>
performance achievement if such grants include performance
criteria, and Stock Options and SARs will be valued at 30%
of the market price of the shares or related shares when the
Compensation Committee approves such grants, as applicable.
b) The assignment to you, without your expressed written consent,
of any duties inconsistent with, or, any substantial
alteration in, your status or responsibilities as in effect as
of the date of this Agreement.
It is understood and agreed that until this Agreement becomes part of
the public record (e.g. Proxy, 10K), you will not talk about, write about or
otherwise publicize the terms or existence of this Agreement or any fact
concerning its negotiation, execution or implementation. You may, however,
discuss its contents with your spouse, legal and/or financial counselor.
This Agreement is subject to the AT&T Non-Competition Guideline
(Attachment B).
The Special Benefits provided by this Agreement are made in lieu of
all Company severance benefits and are conditioned upon you, within thirty days
of your termination of Company employment, signing and not revoking, a Release
and Agreement not to sue the Company. The form of this Release and Agreement
will be that then (i.e., upon your Termination/retirement) in use for departing
AT&T Senior Managers.)
This Agreement reflects the entire understanding regarding the terms
and conditions of the Special Benefits. Accordingly, it supersedes and
completely replaces any prior oral or written communication on this subject.
Moreover, the Agreement shall not be amended or modified without specific
written provision to that effect, signed by you and the Company. This Agreement
is not an employment contract and should not be construed or interpreted as
containing any guarantee of continued employment. The employment relationship at
AT&T is by mutual consent ("Employment-at-Will"). This means that employees have
the right to terminate their employment at any time and for any reason.
Likewise, the Company reserves the right to discontinue your employment with or
without cause at any time and for any reason. The Agreement shall be construed
and enforced in accordance with the laws of the State of New Jersey without
reference to any applicable conflict of law provisions. The incentive plans, as
well as the employee and the Senior Management benefit plans, programs and
practices (as may be mentioned in this Agreement), reflect their current
provisions. The Company reserves the right to discontinue or modify any such
plans, programs and practices at any time.
At your or the Company's option, any dispute, controversy, or question
arising under, out of or relating to this Agreement or the breach thereof, shall
be referred for decision by arbitration in the State of New Jersey by a neutral
arbitrator selected by the parties hereto. The proceeding shall be governed by
the Rules of the American Arbitration Association then in effect or such rules
last in effect (in the event such Association is no longer in existence). If the
parties are unable to agree upon such a neutral arbitrator within thirty (30)
days after one party has given the other written notice of the desire to submit
the dispute, controversy or question for decision as aforesaid, then either
party may apply to the Presiding Judge of the Superior Court of any county in
New Jersey for the appointment of a neutral arbitrator to hear the parties and
settle the dispute, controversy or question, and such Judge is hereby authorized
to make such appointment. In the event that either party exercises the right to
submit a dispute arising hereunder to arbitration, the decision of the neutral
<PAGE>
arbitrator shall be final, conclusive and binding on all interested persons and
no action at law or in equity shall be instituted or, if instituted, further
prosecuted by either party other than to enforce the award of the neutral
arbitrator. Both parties shall each bear all their own costs and attorney fees
relating to any arbitration, except that the Company shall pay the costs of any
arbitrator appointed hereunder.
John, I am happy to present this special arrangement to you. It
recognizes the extraordinary contribution you have made to our business. If you
agree with the terms and conditions detailed above, please sign this Agreement
in the space provided below and return the executed copy to me.
Sincerely,
Attachments
- ----------------------------------- ------------------------------
Acknowledged and Agreed to Date
J. D. Zeglis
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>13
<DESCRIPTION>EXHIBIT (10)(III)(A)23
<TEXT>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 17th day of October, 1997,
and herein amended and restated, by and between AT&T Corp., a New York
corporation (together with its successors and assigns permitted under this
Agreement, the "Company"), and C. Michael Armstrong (the "Executive").
W I T N E S S E T H :
WHEREAS, the Company desires to employ the Executive and to enter into
an agreement, as herein amended and restated, embodying the terms of such
employment (this "Agreement") and the Executive desires to enter into this
Agreement and to accept such employment, subject to the terms and provisions of
this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. Definitions.
(a) "Affiliate" of a person or other entity shall mean a
person or other entity that directly or indirectly controls, is controlled by,
or is under common control with the person or other entity specified.
(b) "Base Salary" shall mean the salary provided for
in Section 4 below or any increased salary granted to the Executive pursuant
to Section 4.
(c) "Board" shall mean the Board of Directors of the
Company.
(d) "Cause" shall mean:
(i) the Executive is convicted of a felony
involving moral turpitude; or
(ii) the Executive is guilty of willful gross
neglect or willful gross misconduct in carrying out his duties under this
Agreement, resulting, in either case, in material economic harm to the Company,
unless the Executive believed in good faith that such act or nonact was in the
best interests of the Company.
(e) "Change in Control" shall mean the occurrence of any
of the following events:
(i) An acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act") (an "Entity") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then outstanding shares of Stock of the Company (the
<PAGE>
"Outstanding Company Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
excluding, however, the following: (1) any acquisition directly from the
Company, other than an acquisition by virtue of the exercise of a conversion
privilege unless the security being so converted was itself acquired directly
from the Company, (2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B) and
(C) of subsection (iii) of this Section 1(e);
(ii) A change in the composition of the Board such
that the individuals who, as of the effective date of this Agreement, constitute
the Board (such Board shall be hereinafter referred to as the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board; provided,
however, that for purposes of this definition, any individual who becomes a
member of the Board subsequent to the effective date of this Agreement, whose
election, or nomination for election, by the Company's stockholders was approved
by a vote of at least a two-thirds majority of those individuals who are members
of the Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be considered as though such individual
were a member of the Incumbent Board; and provided, further however, that any
such individual whose initial assumption of office occurs as a result of or in
connection with either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
or other actual or threatened solicitation of proxies or consents by or on
behalf of an Entity other than the Board shall not be so considered as a member
of the Incumbent Board;
(iii) A merger, reorganization or consolidation to
which the Company is a party or a sale or other disposition of all or
substantially all of the assets of the Company (each, a "Corporate
Transaction"); excluding however, such a Corporate Transaction pursuant to which
(A) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation or
other person which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries (a "Parent Company")) in substantially the same proportions as
their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Stock and Outstanding Company Voting Securities, as the case
may be, (B) no Entity (other than the Company, any employee benefit plan (or
related trust) of the Company, such corporation resulting from such Corporate
Transaction (or, if reference was made to equity ownership of any Parent Company
for purposes of determining whether clause (A) above is satisfied in connection
with the applicable Corporate Transaction, such Parent Company) will
beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction (or, if reference was made to equity ownership of any
Parent Company for purposes of determining whether clause (A) above is satisfied
in connection with the applicable Corporate Transaction, such Parent Company) or
the combined voting power of the outstanding voting securities of such
<PAGE>
corporation entitled to vote generally in the election of directors unless such
ownership resulted solely from ownership of securities of the Company prior to
the Corporate Transaction, and (C) individuals who were members of the Incumbent
Board will immediately after the consummation of the Corporate Transaction
constitute at least a two-thirds majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction (or, if
reference was made to equity ownership of any Parent Company for purposes of
determining whether clause (A) above is satisfied in connection the applicable
Corporate Transaction, of the Parent Company); or
(iv) The approval by the stockholders of the
Company of a plan of complete liquidation or dissolution of the Company.
(f) "Constructive Termination Without Cause" shall mean
termination by the Executive of his employment at his initiative following the
occurrence of any of the following events without his consent:
(i) a reduction in the Executive's then current
Base Salary or target bonus opportunity as a percentage of Base Salary or
long-term performance incentive or the termination or material reduction of any
employee benefit or perquisite enjoyed by him (other than as part of an
across-the-board reduction applicable to all executive officers of the Company);
(ii) the failure to elect or reelect the Executive
to any of the positions described in Section 3 or the removal of him from any
such position;
(iii) a material diminution in the Executive's
duties or the assignment to the Executive of duties which are materially
inconsistent with his duties or which materially impair the Executive's ability
to function as the Chairman and Chief Executive Officer of the Company;
(iv) the relocation of the Company's principal
office, or the Executive's own office location, as assigned to him by the
Company to a location more than 50 miles from Basking Ridge, New Jersey; or
(v) the failure of the Company to obtain the
assumption in writing of its obligation to perform this Agreement by any
successor to all or substantially all of the assets of the Company within 15
calendar days after a merger, consolidation, sale or similar transaction.
Following written notice from the Executive, as described above, the Company
shall have 15 calendar days in which to cure. If the Company fails to cure, the
Executive's termination shall become effective on the 16th calendar day
following the written notice.
(g) "Disability" shall mean the Executive's inability, due
to physical or mental incapacity, to substantially perform his duties and
responsibilities under this Agreement as determined by a medical doctor selected
by the Company and the Executive. If the Parties cannot agree on a medical
doctor, each Party shall select a medical doctor and the two doctors shall
select a third who shall be the approved medical doctor for this purpose.
(h) "Effective Date" shall mean the date as of which this
Agreement was entered into.
(i) "Fair Market Value" shall mean the value of a share
of Stock as traded on the New York Stock Exchange on the date in question, based
on the mean of the high and low reported prices.
<PAGE>
(j) "Pro Rata" shall mean a fraction, the numerator of
which is the number of days that the Executive was employed in the applicable
performance period (a calendar year in the case of an annual bonus and a
performance cycle in the case of an award under the Long-Term Incentive Plan)
and the denominator of which shall be the number of days in the applicable
performance period.
(k) "Stock" shall mean the Common Stock of the Company.
(l) "Term of Employment" shall mean the period specified
in Section 2 below (including any extension as provided therein).
2. Term of Employment.
The Term of Employment shall begin on the Effective Date, and
shall extend until October 31, 2003. Notwithstanding the foregoing, the Term of
Employment may be earlier terminated by either Party in accordance with the
provisions of Section 12.
3. Position, Duties and Responsibilities.
(a) Commencing on the Effective Date and continuing for
the remainder of the Term of Employment, the Executive shall be employed as the
Chairman of the Board and Chief Executive Officer of the Company and be
responsible for the general management of the affairs of the Company. The
Executive has also been elected by the Board as a member of the Board, effective
October 20, 1997. The Executive, in carrying out his duties under this
Agreement, shall report to the Board. During the Term of this Agreement, the
Executive shall devote his full business time and attention to the business and
affairs of the Company and shall use his best efforts, skills and abilities to
promote its interests.
(b) Nothing herein shall preclude the Executive from
(i) serving on the boards of directors of a reasonable number of other
corporations subject to the approval of the Board in each case (which approval
has been given as to the boards listed in Exhibit A attached), (ii) serving on
the boards of a reasonable number of trade associations and/or charitable
organizations, (iii) engaging in charitable activities and community affairs,
and (iv) managing his personal investments and affairs, provided that such
activities set forth in this Section 3(b) do not materially interfere with the
proper performance of his duties and responsibilities under Section 3(a).
4. Base Salary.
The Executive shall be paid an annualized Base Salary, payable
in accordance with the regular payroll practices of the Company, of $1,400,000.
The Base Salary shall be reviewed annually for increase in the discretion of the
Board.
5. Annual Incentive Award.
During the Term of Employment, commencing in 1998 the
Executive shall participate in the AT&T Short Term Incentive Award Plan or any
successor annual incentive award plan of the Company. Under such plan, the
Executive shall have a target bonus opportunity each year equal to 100% of his
then Base Salary, payable in that amount if the performance goals established
for the relevant year are met. If such performance goals are not met, the
Executive shall receive a lesser amount (or nothing) as determined in accordance
<PAGE>
with applicable plan guidelines. If such performance goals are exceeded, the
Executive may receive a greater amount as determined in accordance with
applicable plan guidelines. For 1998 the Executive shall be paid a guaranteed
annual incentive award of no less than 100% of his target bonus (whether or not
performance goals have been met in such year). The Executive shall be paid his
annual incentive awards no later than other senior executives of the Company are
paid their annual incentive awards.
6. Cash Award.
In order to address certain forfeitures experienced when the
Executive left his previous employer, the Company shall pay a premium of
$2,050,000 to purchase a split-dollar survivorship insurance policy under an
Estate Enhancement Program insuring the Executive and his spouse. Such policy
shall, upon the death of the last surviving insured, provide insurance proceeds
equal to the sum of the face amount of the policy and the policy's cash value.
An amount equal to the policy face amount shall be payable to the Executive's
beneficiaries or to a trust which may be established to own the Executive's
interest in such policy. The balance of the proceeds shall be paid to the
Company, and from its share of the death benefit, the Company will pay a
Company-paid death benefit to the Executive's beneficiaries equal to the death
benefit received by the Company, minus the Company-paid premium. It is agreed
and understood that the face amount of such split-dollar survivorship insurance
policy will be determined in accordance with the underwriting requirements of
the insurance company providing such coverage, based on the Company's premium
payment of $2,050,000, pursuant to this Section 6 and any additional premium
payments, if any, that the Executive may become eligible for under any similar
program adopted by the Company for its senior executives and in which the
Executive elects to participate.
Prior to the Company purchasing insurance under this paragraph,
Executive will make a reasonable effort (but not including litigation) to obtain
all or a portion of his 1997 annual bonus and his long-term incentive bonus for
the 1995-1997 performance cycle from his current employer, and he will notify
the Company, in writing, of the outcome of such efforts.
7. Stock Awards.
(a) General. On the Effective Date, the Company shall
grant the Executive restricted stock, restricted stock units and stock option
awards described in this Section 7. The Executive also shall be eligible to
participate in the Company's 1997 Long-Term Incentive Plan ("LTIP") as provided
in Section 8 below.
(b) Restricted Stock Award. As of the Effective Date, the
Company shall grant the Executive an award of 105,330 shares of restricted Stock
("Restricted Stock") substantially in the form attached to this Agreement as
Exhibit C, vesting as follows:
(i) 19,072 shares shall vest on January 1, 1999;
(ii) 18,294 shares shall vest on January 1, 2000;
(iii) 8,022 shares shall vest at the rate of 25%,
2006 shares on each of May 1, 1998 and May 1, 1999 and 2005 shares on each of
May 1, 2000 and May 1, 2001;
<PAGE>
(iv) 26,815 shares shall vest as follows: 8,939
shares on May 1, 1998, and 8,938 shares on each of May 1, 1999 and May 1, 2000;
and
(v) 33,127 shares shall vest at the rate of 25%,
8282 shares on each of the first three anniversaries of the Effective Date
and 8281 shares on the fourth anniversary of the Effective Date.
(c) Restricted Stock Unit Award. As of the Effective Date,
the Company shall grant the Executive an award of 224,561 shares of restricted
stock units (the "Restricted Stock Units") substantially in the form attached to
this Agreement as Exhibit D, vesting as provided in and subject to the
provisions of Exhibit D.
(d) Stock Option Award. As of the Effective Date, the
Company shall grant the Executive a ten-year stock option award, substantially
in the form attached to this Agreement as Exhibit E, to purchase 750,000 shares
of Stock. The exercise price shall be the Fair Market Value on the Effective
Date which the Board has fixed as the date of grant, which is $44.53125 per
share. The award shall vest as provided in Exhibit E.
(e) Anything herein to the contrary notwithstanding, the
numbers of shares of restricted stock and restricted stock units referred to in
Section 7(b) and (c) above shall be reduced to the extent the Executive's
similarly related awards from his prior employer (to which such awards under
Section 7(b) and (c) relate) are not in fact forfeited.
8. Long-Term Incentive Awards.
(a) Performance Awards. The Executive shall be eligible
to participate in the LTIP, commencing with the 1998-2000 cycle. The Executive
shall not be eligible to participate in any prior LTIP performance cycles
including the 1996-1998 and the 1997-1999 LTIP performance cycles. The Executive
shall receive a target award under each of the 1998-2000 and 1999-2001
performance cycles that shall be no less than 100% of his then Base Salary
(target amount).
(b) Stock Option Awards. The Executive shall be eligible
for stock option awards commencing with awards in 1998 in accordance with
Company practices applicable to an executive in his position.
9. Supplemental Pension.
(a) The Executive shall be entitled to a pension benefit
in the form of a single life annuity commencing upon retirement at or after age
65 (subject to earlier commencement as provided in Section 9(e) below) equal to
50% of his Final Average Compensation offset by certain amounts as provided in
Section 9(b) below. For purposes of this Section 9, Final Average Compensation
shall mean the sum of the base salary and annual incentive award payments paid
in respect of the three calendar years of the Executive's employment by the
Company during the last five calendar years of such employment during which he
received the highest level of such payments, divided by three. If the
Executive's employment with the Company terminates prior to his completion of
three calendar years of employment, his Final Average Compensation shall be
based on the average of his complete calendar years of employment with the
Company. If the Executive does not complete one calendar year of employment, his
Final Average Compensation shall be calculated by deeming his Base Salary for
<PAGE>
the year to be his Base Salary at the annualized rate in effect immediately
prior to his termination of employment and by deeming his Annual Incentive Award
for that year to be the original target Annual Incentive Award for that year.
(b) The annual annuity payment determined under Section
9(a) for any year shall be offset by (i) the greater of (A) $655,642 and (B) the
actual pension benefits to be paid to the Executive with respect to that year by
the Executive's prior employers under their respective tax-qualified and
non-tax-qualified defined benefit pension plans, (ii) any other pension benefits
provided to the Executive under any other pension plan or pension arrangement
except the AT&T Long-Term Savings Plan for Management Employees and the AT&T
Senior Management Incentive Award Deferral Plan of the Company and (iii) any
government-sponsored pension including Social Security retirement benefits. The
supplemental pension benefits payable under this Section 9 shall be afforded the
same post-employment "ad hoc" inflation adjustments, if any, as may from time to
time be given to comparable former senior executives of the Company receiving
benefits under the Company's Management Pension Plan. Payment of the pension
benefit provided under this Section 9 shall be conditioned upon the Executive
furnishing the Company promptly following retirement with written information
regarding offsetting payments from prior employers and any government-sponsored
pension and shall continue to be conditioned upon his promptly furnishing the
Company with written information as to any changes in such offsetting payments.
(c) In determining the amount of any offset under Section
9(b), such amount shall be calculated on an actuarially equivalent basis
assuming the same frequency of payment and the same form of annuity as the
pension benefit to be paid under this Section 9.
(d) Except as otherwise provided in Section 12, the
Executive's entitlement to the pension benefit under this Section 9 shall vest
at the rate of 20% on each of the first five anniversaries of the Effective
Date, with the entitlement fully vested on the fifth anniversary.
(e) Except as otherwise provided in this Section 9, the
Executive's entitlements to the pension benefit under this Section 9, including
without limitation methods of payment, rights to elect lump sum payment or joint
and survivor benefits, rights of survivors, claims procedures, actuarial
assumptions, etc., shall be determined in accordance with the provisions and
practices of the Company's Management Pension Plan as then in effect; provided,
however, that the Executive shall be deemed to have satisfied any service-period
requirement for eligibility for pre-retirement survivor annuity benefits and all
other Plan purposes except for vesting and the determination of the amount of
any early retirement benefit. In the event the Executive terminates employment
so as to be entitled to a pension benefit under this Section 9(a) prior to age
65, the actual pension benefit payable to him under this Section 9 shall be
adjusted for early commencement in accordance with the actuarial assumptions
then in effect under the Company's Management Pension Plan.
10. Employee Benefit Programs.
During the Term of Employment, the Executive shall be entitled
to participate in all employee pension and welfare benefit plans and programs
made available to the Company's senior level executives or to its employees
generally, as such plans or programs may be in effect from time to time,
including, without limitation, pension, profit sharing, savings and other
retirement plans or programs, 401(k), medical, dental, hospitalization,
short-term and long-term disability and life insurance plans, accidental death
and dismemberment protection, travel accident insurance, and any other pension
<PAGE>
or retirement plans or programs and any other employee welfare benefit plans or
programs that may be sponsored by the Company from time to time, including any
plans that supplement the above-listed types of plans or programs, whether
funded or unfunded. The Executive's participation shall be based on, and the
calculation of all benefits shall be based on, the assumptions that the
Executive has met all service-period or other requirements for such
participation provided that no such assumptions shall be made as to a
tax-qualified plan if such assumption would jeopardize the tax-qualified status
of such plan.
11. Reimbursement of Business and Other Expenses;
Perquisites; Vacations.
(a) The Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement
and the Company shall promptly reimburse him for all business expenses incurred
in connection with carrying out the business of the Company, subject to
documentation in accordance with the Company's policy. The Company shall pay all
reasonable financial consultant and legal fees and expenses incurred by the
Executive in connection with the negotiation of the Executive's employment
arrangements with the Company.
(b) During the Term of Employment, the Executive shall
be entitled to participate in each of the Company's perquisites in accordance
with the terms and conditions of such arrangements as they are in effect from
time to time for the Company's chief executive officer, including without
limitation security protection, automobile, club dues, tax preparation and
financial counseling, use of corporate aircraft and limousine services.
(c) The Executive shall be entitled to reimbursement of
his relocation expenses in accordance with the Company's Management Relocation
Plan. In connection with establishing a new principal residence in the
Morristown, New Jersey area, the Executive shall in all events be entitled to
reimbursement of expenses incurred in moving his family and personal belongings
to that area. The Executive shall be entitled to reimbursement for reasonable
expenses in the form of real estate listings, commissions, legal costs and
similar expenses in disposing of his residence in the Manhattan Beach,
California area as well as any similar expenses incurred in acquiring a
residence in the Morristown, New Jersey area. The Executive shall also be
entitled to protection against any loss on the Manhattan Beach residence, which
will be based on his cost (acquisition cost plus costs of improvement) less (i)
market appraisal (as described below) or, if greater, (ii) the actual sale
price. The Company's obligation to protect the Executive against loss as
described above is subject to the following condition: The Executive shall have
15 calendar days following receipt of an appraisal as described in the following
sentence to sell the Manhattan Beach residence to the Company. The appraisal
shall be based on an appraisal by a nationally recognized appraiser agreed upon
by the Parties, the cost of the appraisal to be paid by the Company. If the
Parties do not agree upon an appraiser, each shall designate an appraiser and
the two appraisers shall select from among nationally recognized appraisers a
third appraiser who shall make the appraisal. If the Executive does not agree to
sell the residence to the Company based on the appraisal, the Company shall have
no further obligation except to pay the Executive the difference between the
cost of the residence as described above and the appraisal, assuming that this
results in a loss to the Executive. The Company also shall pay the Executive's
temporary living expenses in New Jersey and provide assistance in connection
with financing the purchase of a new home there in accordance with its regular
practices. To the extent the Company's reimbursement of the Executive's
<PAGE>
relocation expenses results in taxable income to the Executive, the Company
shall gross up such expenses so that the Executive is not out of pocket for any
Federal, state or local income, employment, excise or other taxes on such
reimbursement including the gross-up amounts.
(d) The Executive shall be entitled to five weeks paid
vacation per year of employment, which shall accrue and otherwise be subject to
the Company's vacation policy for senior executives.
12. Termination of Employment.
(a) Termination Due to Death. In the event that the
Executive's employment is terminated due to his death, his estate or his
beneficiaries, as the case may be, shall be entitled to the following benefits:
(i) Base Salary through the end of the month in
which death occurs;
(ii) annual incentive award for the year in which
the Executive's death occurs, based on the original target award performance for
such year, payable in a single installment promptly after his death;
(iii) all outstanding options, whether or not then
exercisable, shall become exercisable and shall remain exercisable until the end
of their originally scheduled terms;
(iv) the restrictions on restricted stock shall
lapse;
(v) payment of Restricted Stock Units in
accordance with Section 7(c) and Exhibit D;
(vi) payout for each LTIP performance cycle in
which the Executive was participating at the time of his death, based on the
original target performance under the plan, payable in a single installment
promptly after his death; and
(vii) the supplemental pension benefit provided in
Section 9 shall fully vest.
(b) Termination Due to Disability. In the event that the
Executive's employment is terminated due to his Disability, he shall be entitled
to the following benefits:
(i) disability benefits in accordance with the
long-term disability program then in effect for senior executives of the
Company;
(ii) Base Salary through the end of the month in
which disability benefits commence;
(iii) annual incentive award for the year in which
the Executive's termination occurs, based on the original target award for such
year, payable in a single installment promptly after his termination;
(iv) all outstanding options, whether or not then
exercisable, shall become exercisable and shall remain exercisable until the end
of their originally scheduled terms;
<PAGE>
(v) the restrictions on any restricted stock shall
lapse;
(vi) payment of Restricted Stock Units in
accordance with Section 7(c) and Exhibit D;
(vii) a payout for each LTIP performance cycle in
which the Executive was participating at the time of his termination, based on
the original target performance under the plan, payable in accordance with the
plan; and
(viii) the supplemental pension benefit provided in
Section 9 shall fully vest with offset for any Company-provided disability
benefits.
In no event shall a termination of the Executive's employment
for Disability occur until the Party terminating his employment gives written
notice to the other Party in accordance with Section 25 below.
(c) Termination by the Company for Cause.
(i) A termination for Cause shall not take effect
unless the provisions of this paragraph (i) are complied with. The Executive
shall be given written notice by the Board of the intention to terminate him for
Cause, such notice (A) to state in detail the particular act or acts or failure
or failures to act that constitute the grounds on which the proposed termination
for Cause is based and (B) to be given within six months of the Board learning
of such act or acts or failure or failures to act. The Executive shall have ten
calendar days after the date that such written notice has been given to the
Executive in which to cure such conduct, to the extent such cure is possible. If
he fails to cure such conduct, the Executive shall then be entitled to a hearing
before the Board. Such hearing shall be held within 15 calendar days of such
notice to the Executive, provided he requests such hearing within ten calendar
days of the written notice from the Board of the intention to terminate him for
Cause. If, within five calendar days following such hearing, the Executive is
furnished written notice by the Board confirming that, in its judgment, grounds
for Cause on the basis of the original notice exist, he shall thereupon be
terminated for Cause.
(ii) In the event the Company terminates the
Executive's employment for Cause:
(A) he shall be entitled to Base Salary
through the date of the termination;
(B) all outstanding options which are not
exercisable shall be forfeited; exercisable options shall remain exercisable
until the earlier of the ninetieth day after the date of termination or the
originally scheduled expiration date of the options unless the Compensation and
Employee Benefits Committee determines otherwise;
(C) all restricted stock as to which
restrictions have not lapsed shall be forfeited;
(D) Restricted Stock Units shall be
forfeited in accordance with Exhibit D;
<PAGE>
(E) all LTIP awards with respect to
performance cycles which have not yet been completed shall be forfeited; and
(F) any unvested supplemental pension
benefit to which the Executive would otherwise be entitled under Section 9 shall
be forfeited.
(d) Termination without Cause or Constructive Termination
without Cause. In the event the Executive's employment is terminated by the
Company without Cause, other than due to Disability or death, or in the event
there is a Constructive Termination without Cause, the Executive shall be
entitled to the following benefits:
(i) Base Salary through the date of termination;
(ii) Base Salary, at the annualized rate in effect
on the date of termination, for a period of 24 months following such
termination, provided that, at the Executive's option, the Company shall pay him
the present value of such salary continuation payments in a lump sum (using as
the discount rate the applicable Federal rate specified under Section 1274 of
the Internal Revenue Code of 1986, as amended (the "Code"), for short-term
Treasury obligations as published by the Internal Revenue Service for the month
in which such termination occurs);
(iii) a Pro Rata annual incentive award for the year
in which termination occurs, based on his original target award for such year,
payable when annual incentive awards are paid to other senior executives (or in
a lump sum in accordance with the proviso in Section 12(d)(ii));
(iv) an annual incentive award for a period of 24
months following the date of termination, based on his original target award for
the year in which termination occurs and payable in equal monthly installments
over the 24-month period of Base Salary continuation payments pursuant to
Section 12(d)(ii) (or in a lump sum in accordance with the proviso in Section
12(d)(ii));
(v) all outstanding options, whether or not then
exercisable, shall become exercisable and shall remain exercisable until the end
of their originally scheduled terms;
(vi) the restrictions on restricted stock shall
lapse;
(vii) payment of Restricted Stock Units in
accordance with Section 7(c) and Exhibit D;
(viii) payout for each LTIP performance cycle in
which the Executive was then participating, based on the original target
performance, payable in accordance with the plan (or in a lump sum in accordance
with the proviso in Section 12(d)(ii));
(ix) the supplemental pension benefit provided in
Section 9 shall fully vest; and
(x) the Executive shall be entitled to continued
participation in all medical, dental, vision and hospitalization insurance
coverage and in other employee benefit plans or programs in which he was
participating on the date of his termination until the earlier of:
<PAGE>
(A) 24 months following the date of
termination and
(B) the date, or dates, he receives
equivalent coverage and benefits under the plans and programs of a subsequent
employer. The Executive shall promptly advise the Company of any such subsequent
employment and the benefits he receives in connection therewith.
(e) Voluntary Termination; Retirement.
(i) A termination of employment by the Executive
on his own initiative, other than a termination due to death or Disability or a
Constructive Termination without Cause or retirement following the end of the
Term of Employment, shall have the same consequences as provided in Section
12(c)(ii) for a termination for Cause. A voluntary termination under this
Section 12(e) shall be effective 30 calendar days after prior written notice is
received by the Company.
(ii) The Executive may retire at any time following
the end of the Term of Employment and thereupon commence receiving payments of
his supplemental pension as provided in Section 9 and any other benefits to
which he is entitled as a retired senior executive in accordance with the
Company's then existing plans and practices. Upon such retirement all
restrictions on restricted stock which have not already lapsed will thereupon
lapse, payment of all Restricted Stock Units will be made in accordance with
their terms and all stock options will continue to be exercisable for the
remainder of their respective terms.
(f) Consequences of a Change in Control.
(i) If, following a Change in Control, the
Executive's employment is terminated by the Company without Cause, other than
due to Disability or death, or there is a Constructive Termination without
Cause, the Executive shall be entitled to the benefits provided in Section 12(d)
above, except that the period for which salary, annual incentive and benefits
are provided in Sections 12(d)(ii), 12(d)(iv) and 12(d)(x) (except that the
Executive may in his discretion, to the extent the plans permit, elect to
continue his benefits under Section 12(d)(x) in lieu of the lump sum payment
therefor) shall be 48 months, and all payments to be made pursuant to those
Sections and the payments to be made pursuant to Sections 12(d)(iii) and
12(d)(viii) shall be paid to the Executive in a lump sum promptly following the
date of termination.
(ii) Immediately following a Change in Control, all
amounts and benefits to which the Executive is entitled but not yet vested,
whether under this Agreement or otherwise, and except as provided in Exhibit D
with respect to Restricted Stock Units, shall become fully vested.
(iii) If, following a Change in Control, the
aggregate of all payments or benefits made or provided to the Executive under
Section 12(f)(i) and under all other plans and programs of the Company (the
"Aggregate Payment") is determined to constitute a Parachute Payment within the
meaning of Section 280G(b)(2) of the Code, the Company shall pay to the
Executive, prior to the time any excise tax imposed by Section 4999 of the Code
("Excise Tax") is payable with respect to such Aggregate Payment, an additional
amount (the "Gross-Up Payment") which, after the imposition of all income,
employment, excise and other taxes thereon, is equal to the Excise Tax on the
Aggregate Payment. The determination of whether the Aggregate Payment
constitutes a Parachute Payment and, if so, the amount to be paid to the
<PAGE>
Executive and the time of payment pursuant to this Section 12(f)(iii) shall be
made by an independent auditor (the "Auditor") selected by the Parties and paid
by the Company. The Auditor shall be a nationally recognized United States
public accounting firm which has not, during the two years preceding the date of
its selection, acted in any way on behalf of the Company or any Affiliate
thereof. If the Executive and the Company cannot agree on the firm to serve as
the Auditor, then the Executive and the Company shall each designate one
accounting firm and those two firms shall jointly select the accounting firm to
serve as the Auditor. All fees and expenses of the Auditor shall be borne solely
by the Company. Any Gross-Up Payment shall be paid by the Company to the
Executive within five calendar days of the receipt of the Auditor's
determination. Any determination by the Auditor shall be binding upon the
Company and the Executive.
As a result of uncertainty in the application of Sections 280G
and 4999 of the Code at the time of the initial determination by the Auditor
hereunder, it is possible that the Gross-Up Payment made will have been an
amount more than the Company should have paid pursuant to this Section
12(f)(iii) (the "Overpayment") or that the Gross-Up Payment made will have been
an amount less than the Company should have paid pursuant to this Section
12(f)(iii) (the "Underpayment"). In the event that there is a final
determination by the Internal Revenue Service, or a final determination by a
court of competent jurisdiction, that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Executive which
the Executive shall repay to the Company together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code. In the
event that there is a final determination by the Internal Revenue Service, a
final determination by a court of competent jurisdiction or a change in the
provisions of the Code or regulations pursuant to which an Underpayment arises
under this Agreement, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code.
The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would result in an
Underpayment and would require the payment by the Company of an additional
Gross-Up Payment. Such notification shall be given as soon as practicable but no
later than 10 business days after the Executive is informed in writing of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30 calendar day period following the date on
which the Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(A) give the Company any information
reasonably requested by the Company relating to such claim,
(B) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(C) cooperate with the Company in good
faith in order effectively to contest such claim, and
<PAGE>
(D) permit the Company to participate in
any proceeding relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income or employment tax (including
interest and penalties with respect thereto) imposed as a result of such
proceeding and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 12(f)(iii), the Company shall control all
proceedings taken in connection with such contest, provided that the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(g) Other Termination Benefits. In the case of any of the
foregoing terminations, the Executive or his estate shall also be entitled to:
(i) the balance of any incentive awards due for
performance periods which have been completed, but which have not yet been paid;
(ii) the entire amount of all amounts owing under
Section 6, including all deferrals pursuant to Section 6 (if any such amounts
have been deferred);
(iii) any expense reimbursements due the Executive;
and
(iv) other benefits, if any, in accordance with
applicable plans and programs of the Company.
(h) No Mitigation; No Offset. In the event of any
termination of employment under this Section 12, the Executive shall be under no
obligation to seek other employment and there shall be no offset against amounts
due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment that he may obtain.
(i) Nature of Payments. Any amounts due under this Section
12 are in the nature of severance payments considered to be reasonable by the
Company and are not in the nature of a penalty.
13. Confidentiality.
(a) The Executive agrees that he will not, at any time
during the Term of Employment or thereafter, disclose or use any trade secret,
proprietary or confidential information of the Company or any subsidiary or
affiliate of the Company, obtained during the course of his employment, except
as required in the course of such employment or with the written permission of
the Company or, as applicable, any subsidiary or affiliate of the Company or as
may be required by law, provided that, if the Executive receives legal process
with regard to disclosure of such information, he shall promptly notify the
Company and cooperate with the Company in seeking a protective order.
(b) The Executive agrees that at the time of the
termination of his employment with the Company, whether at the instance of the
Executive or the Company, and regardless of the reasons therefor, he will
deliver to the Company, and not keep or deliver to anyone else, any and all
notes, files, memoranda, papers and, in general, any and all physical matter
<PAGE>
containing information, including any and all documents significant to the
conduct of the business of the Company or any subsidiary or Affiliate of the
Company which are in his possession, except for any documents for which the
Company or any subsidiary or Affiliate of the Company has given written consent
to removal at the time of the termination of the Executive's employment and his
personal rolodex, phone book and similar items.
(c) The Executive agrees that the Company's remedies at
law would be inadequate in the event of a breach or threatened breach of this
Section 13; accordingly, the Company shall be entitled, in addition to its
rights at law, to an injunction and other equitable relief without the need to
post a bond.
14. Noncompetition.
(a) Subject to the provisions of Section 14(b) below
and notwithstanding any other provisions of this Agreement, any and all payments
(except those made from Company-sponsored tax-qualified pension or welfare
plans), benefits or other entitlements to which the Executive may be eligible in
accordance with the terms hereof, may be forfeited, whether or not in pay
status, at the discretion of the Company, if the Executive at any time without
the consent of the Company "establishes a relationship with a competitor" or
"engages in an activity" which is in conflict with or adverse to the interest of
the Company, all within the meaning of the Non-Competition Guideline referred to
below (a "Competitive Activity"). The payments, benefits and other entitlements
hereunder are being made in part in consideration of the obligations of this
Section 14 and in particular the post-employment payments, benefits and other
entitlements are being made in consideration of, and dependent upon, compliance
with this Section 14(a) and, to the extent set forth in Section 14(e), the
Release and Agreement referred to in Section 14(e). Exhibit F is a copy of the
Non-Competition Guideline.
(b) Anything in Section 14(a) to the contrary
notwithstanding, no forfeiture or cancellation shall take place with respect to
any payments, benefits or entitlements hereunder or under any other award
agreement, plan or practice unless the Company shall have first given the
Executive written notice of its intent to so forfeit, or cancel or pay out and
Executive has not, within 30 calendar days of giving such notice, ceased such
unpermitted Competitive Activity, provided that the foregoing prior notice
procedure shall not be required with respect to (x) a Competitive Activity which
the Executive initiated after the Company had informed the Executive in writing
that it believed such Competitive Activity violated Section 14(a) or the AT&T
Non-Competition Guideline, (y) any Competitive Activity regarding local,
regional or long distance telephone services or other products or services which
are part of a line of business which represents more than 5% percent of the
Company's consolidated gross revenues for its most recent completed fiscal year
at the time the Competitive Activity commences.
(c) Nothing in this Section 14 shall prohibit the
Executive from being a passive owner of not more than one percent of the
outstanding common stock, capital stock and equity of any firm, corporation or
enterprise so long as the Executive has no active participation in the
management of business of such firm, corporation or enterprise.
(d) If the restrictions stated herein are found by a court
to be unreasonable, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall revise the
restrictions contained herein to cover the maximum period, scope and area
permitted by law.
<PAGE>
(e) Any payments or benefits made pursuant to Section 12
are: (1) subject to the provisions, restrictions and limitations of Section 14
above, but not otherwise subject to offset or mitigation, (2) subject to the
Executive's signing a Release and Agreement not to sue the company in the form
of Exhibit G hereto with such changes therein or additions thereto as needed
under then applicable law to give effect to the intent of the Release and
Agreement and (3) receipt of Executive's resignation from all offices,
directorships and fiduciary positions with the Company, its Affiliates and their
respective benefit plans. Notwithstanding the due date of any post-employment
payment, any amounts due under Section 12 shall not be due until after the end
of any applicable revocation period with regard to the Release and Agreement.
(f) In no event shall the Executive be required to repay
to the Company any amount previously received by the Executive from the Company,
except to the extent required by the AT&T Non-Competition Guideline.
15. Resolution of Disputes.
Any disputes arising under or in connection with this
Agreement shall be resolved by third party mediation of the dispute and, failing
that, by binding arbitration, to be held in New Jersey, in accordance with the
rules and procedures of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Each Party shall bear his or its own costs of the
mediation, arbitration or litigation, except that the Company shall bear all
such costs if the Executive prevails in such mediation, arbitration or
litigation on any material issue.
16. Indemnification.
(a) The Company agrees that if the Executive is made a
party, or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer or employee of the
Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is the Executive's
alleged action in an official capacity while serving as a director, officer,
member, employee or agent, the Executive shall be indemnified and held harmless
by the Company to the fullest extent legally permitted or authorized by the
Company's certificate of incorporation or bylaws or resolutions of the Company's
Board of Directors or, if greater, by the laws of the State of New Jersey,
against all cost, expense, liability and loss (including, without limitation,
attorney's fees, judgments, fines, ERISA excise taxes or other liabilities or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by the Executive in connection therewith, and such indemnification
shall continue as to the Executive even if he has ceased to be a director,
member, employee or agent of the Company or other entity and shall inure to the
benefit of the Executive's heirs, executors and administrators. The Company
shall advance to the Executive all reasonable costs and expenses incurred by him
in connection with a Proceeding within 20 calendar days after receipt by the
Company of a written request for such advance. Such request shall include an
undertaking by the Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses.
<PAGE>
(b) Neither the failure of the Company (including its
board of directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 16(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption that the Executive
has not met the applicable standard of conduct.
(c) The Company agrees to continue and maintain a
directors' and officers' liability insurance policy covering the Executive to
the extent the Company provides such coverage for its other executive officers.
17. Assignability; Binding Nature.
This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors, heirs (in the case of the
Executive) and assigns. Rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation of all or substantially all of the assets of the Company, provided
that the assignee or transferee is the successor to all or substantially all of
the assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it shall take whatever action it reasonably can in order to
cause such assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his rights to compensation and benefits, which may be transferred
only by will or operation of law.
18. Representation.
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that the performance
of its obligations under this Agreement will not violate any agreement between
it and any other person, firm or organization. The Executive represents that the
performance of his obligations under this Agreement will not violate any
agreement between him and any other person, firm or organization that would be
violated by the performance of his obligations under this Agreement.
19. Entire Agreement.
This Agreement contains the entire understanding and agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
20. Amendment or Waiver.
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by the Executive and an authorized
officer of the Company. No waiver by either Party of any breach by the other
Party of any condition or provision contained in this Agreement to be performed
by such other Party shall be deemed a waiver of a similar or dissimilar
<PAGE>
condition or provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by the Executive or an authorized officer of the
Company, as the case may be.
21. Severability.
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by law
so as to achieve the purposes of this Agreement.
22. Survivorship.
Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive's employment. This Agreement itself (as
distinguished from the Executive's employment) may not be terminated by either
Party without the written consent of the other Party.
23. References.
In the event of the Executive's death or a judicial
determination of his incompetence, reference in this Agreement to the Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative.
24. Governing Law/Jurisdiction.
This Agreement shall be governed in accordance with the laws
of New Jersey without reference to principles of conflict of laws.
25. Notices.
All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when (a) delivered
personally, (b) sent by certified or registered mail, postage prepaid, return
receipt requested or (c) delivered by overnight courier (provided that a written
acknowledgment of receipt is obtained by the overnight courier) to the Party
concerned at the address indicated below or to such changed address as such
Party may subsequently give such notice of:
If to the Company: AT&T
295 North Maple Avenue
Basking Ridge, NJ 07920
Attention: Executive Vice President
Human Resources
If to the Executive: Mr. C. Michael Armstrong
c/o AT&T
295 North Maple Avenue
Basking Ridge, NJ 07920
26. Headings.
The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
<PAGE>
27. Counterparts.
This Agreement may be executed in two or more counterparts.
28. Conditions.
The effectiveness of this Agreement is conditioned upon the
following:
(i) there being no agreement between the Executive
and any prior employer that interferes or could interfere with his employment
with the Company unless such agreement is to the satisfaction of the Company
waived by such prior employer; and
(ii) the Executive passes a physical examination to
the satisfaction of the Company in accordance with its policy on pre-employment
physical examinations.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Agreement on March __, 1998 as of the date first written above.
AT&T Corp.
By:______________________________
H. W. Burlingame
------------------------------
C. Michael Armstrong
<PAGE>
EXHIBITS
[To be supplied]
A. DIRECTORSHIPS
B. DEFERRED ACCOUNT AGREEMENT
C. RESTRICTED STOCK AWARD
D. RESTRICTED STOCK UNIT AWARD
E. STOCK OPTION AGREEMENT
F. A CO. NON-COMPETITION GUIDELINES
G. RELEASE AND AGREEMENT
<PAGE>
EXHIBIT A
DIRECTORSHIPS
The Times Mirror Company
Travelers Group Inc.
TBG (private company, Supervisory Board)
<PAGE>
EXHIBIT B
AT&T SENIOR MANAGEMENT INCENTIVE AWARD DEFERRAL PLAN
DEFERRAL ELECTION
Pursuant to the terms of the AT&T Senior Management Incentive Award Deferral
Plan (the "Plan"), I hereby elect to defer receipt of the amounts and/or shares
which would otherwise be payable to me during the calendar year ____ and each
calendar year thereafter, to the extent indicated on LINE 1 below. This election
shall continue until I terminate or modify such election by written notice. Any
such termination or modification shall become effective as of the end of the
calendar year in which such notice is given with respect to all awards which
would otherwise be payable to me in subsequent calendar years.
I also hereby elect:
(A) that all amounts and/or shares deferred pursuant to this election
together with accumulated interest and/or additional shares shall be
distributed to me in the number of annual installment(s) indicated on
LINE 2 below, or the number of annual installments which do not extend
beyond my life expectancy at the time the installments begin, if less.
The first installment (or single payment if I have so elected) shall be
paid as soon as practicable:
I. after the first day of the calendar quarter following the end
of the month in which I retire or otherwise terminate
employment with a Company participating in the Plan (other
than a transfer to another such Company).
II. after the first day of the calendar quarter following the end
of the month in which I attain the age indicated on LINE 3
below.
Indicate Option I or II on LINE 3 below: (Retirees may only elect Option II)
(B) in the event I should die before full payment of the amounts deferred
plus accumulated interest, the balance shall be distributed to my
beneficiary or beneficiaries in the number of annual installments
indicated on LINE 4 below of which the first installment (or single
payment if I have so elected) shall be paid as soon as practicable
after the first day of the calendar quarter following the month of
death.
<PAGE>
LONG TERM LONG TERM DIVIDEND SHORT TERM
LINE ELECTION SHARE CASH EQUIVALENTS AWARD
1 % Deferred See % from See % from
Summary Summary __________% _________%
Request Request
2 # Payments to
Self (not to
exceed 20) __________ __________ __________ __________
3 Indicate Option
I or II __________ __________ __________ __________
If Option II,
indicate age
(not less than
55 nor greater
than 70.5
years) __________ __________ __________ __________
4 # Payments to
(not to exceed
10) __________ __________ __________ __________
The elections made herein, as they relate to amounts and/or shares otherwise
payable in any calendar year, shall become IRREVOCABLE on the last day prior to
the beginning of such calendar year. The only exception is that the number of
installments elected for your beneficiary (LINE 4) may be changed at any time.
___________________________________ ___________________________________
Print Name Social Security Number
___________________________________ ___________________________________
Signature Date
<PAGE>
EXHIBIT C
AT&T 1997 Long Term Incentive Program
Restricted Stock Award Agreement
- --------------------------------------------------------------------------------
Name of Participant Social Security Number Date of Grant
- --------------------------------------------------------------------------------
Capitalized terms not otherwise defined herein shall have the same meanings as
in the Plan.
- --------------------------------------------------------------------------------
Pursuant to the AT&T 1997 Long Term Incentive Program of AT&T Corp. (the
"Plan"), a copy of which has been delivered to you, and in accordance with the
terms and conditions of the Plan and your agreement to the further terms,
conditions and restrictions set forth below, you have been granted as of the
date hereof 00,000 common shares of the Company (the "Restricted Shares").
1. The Restricted Shares shall vest and become nonforfeitable in accordance
with paragraphs 2 and 3 hereof. the period beginning on the date hereof and
ending on the day prior to the date on which any Restricted Share becomes
nonforfeitable in accordance with paragraphs 2 and 3 (the "Vesting Date") is
herein referred to as the "Restriction Period" with respect to any such
Restricted Share.
2. (a) A number of the Restricted Shares shall vest and become
nonforfeitable on the following schedule:
Number of Shares Vesting Date
---------------- ------------
00,000 00-00-0000
(b) Unless the Committee shall otherwise determine, any
Restricted Shares that are not vested upon termination of employment for any
reason shall be forfeited, except as set forth in paragraph 3.
3. (a) If your employment with the Company terminates during the
Restriction Period by reason of your death, Disability (as defined in Section
1(g) of the Employment Agreement between AT&T and you dated as of October 17,
1997 (the "Employment Agreement")), a Termination without Cause (as provided in
Section 12(d) of the Employment Agreement) or a Constructive Termination without
Cause (as defined in Section 1(f) of the Employment Agreement), all Restricted
Shares shall vest upon such termination.
(b) Upon termination of your employment for any reason other than as
described in Paragraph 3(a) above, any Restricted Shares which have not then
vested shall be forfeited.
4. Certificates evidencing the Restricted Shares shall be issued by the
Company and registered in your name on the stock transfer books of the Company
promptly after the date hereof, but shall remain in the physical custody of the
Company or its designee at all times during the respective Restriction Period.
As a condition to the receipt of this Restricted Stock Award, you shall deliver
to the Company a stock power, duly endorsed in blank, relating to the Restricted
Shares.
<PAGE>
5. You shall be the record owner of the Restricted Shares until or unless
such Shares are forfeited pursuant to paragraphs 2 and 3 hereof, and as the
record owner you shall be entitled to all rights of a common shareholder of the
Company, including, without limitation, voting rights and rights to cash and
in-kind dividends, if any, on the Restricted Shares. As soon as practicable
after termination of the respective Restriction Period, certificates for the
Restricted Shares then vesting shall be delivered to you or to your legal
representative along with the stock powers relating thereto.
6. At all times during the respective Restriction Period, the Restricted
Shares shall be nontransferable, and may not be pledged, assigned or alienated
in any way.
7. Notwithstanding any other provision of this Agreement, in the event of
a Change in Control, as defined in the Employment Agreement, the respective
Restriction Periods shall terminate and all Restricted Shares shall vest and
become 100% nonforfeitable, and such termination and vesting shall be deemed to
occur immediately prior to such Change in Control.
8. Neither the Plan nor this Restricted Share Award shall be construed as
giving you the right to be retained in the employ of the Company or any
Affiliate.
9. The Company shall have the right to deduct or cause to be deducted from
or collect or cause to be collected with respect to, any distribution hereunder
any federal, state, or local taxes required by law to be withheld or paid with
respect to such distribution, and you or your legal representative or
beneficiary shall be required to pay any such amounts. The Company shall have
the right to take such action as may be necessary, in the Company's opinion, to
satisfy such obligations.
10. You may, in accordance with procedures established by the Committee,
designate one or more beneficiaries to receive all or part of any Restricted
Shares to be distributed to you hereunder in case of your death, and you may
change or revoke such designation at any time. In the event of your death, any
Restricted Shares distributable to you hereunder that are subject to such a
designation (to the extent such designation is valid and enforceable under
applicable law) shall be distributed to such beneficiary or beneficiaries in
accordance with this Agreement. Any other Restricted Shares distributable to you
hereunder shall be distributable to your estate. If there shall be any question
as to the legal right of any beneficiary to receive a distribution hereunder,
the amount in question may be paid to your estate, in which event neither the
Company nor any Affiliate shall have any further liability to anyone with
respect to such amount.
11. Notwithstanding any provision of this Agreement to the contrary, this
Award may be canceled, and the Restricted Shares forfeited, if you, without the
Company's consent, become associated with, employed by or render services to, or
own a interest in (other than as a shareholder with a nonsubstantial interest in
such business), any business that is in competition with the Company or in
competition with any business in which the Company has a substantial interest.
The provisions of this paragraph 12 will be interpreted by the AT&T Management
Committee in accordance with the AT&T Non-Competition Guideline (the
"Guideline"), a summary of which has been given to you, and shall be effective
to the extent not prohibited by applicable law.
12. The validity, construction and effect of this Agreement shall be
determined in accordance with the laws of the State of New York and applicable
Federal Law.
<PAGE>
Please indicate your acceptance of the terms hereof, and acknowledge that you
have received copies of the Plan and the Guideline summary, in each case as
currently in effect, by signing at the place provided and returning the original
of this Agreement.
Accepted and Agreed: AT&T Corp.
By:
- ----------------------------------- -----------------------------------
<PAGE>
EXHIBIT D
AT&T 1997 Long Term Incentive Program
Restricted Stock Unit Award Agreement
- --------------------------------------------------------------------------------
Name of Participant Social Security No. Date of Grant
- --------------------------------------------------------------------------------
Capitalized terms not otherwise defined herein shall have the same meanings as
in the Plan.
- --------------------------------------------------------------------------------
Pursuant to the Employment Agreement, dated October 17, 1997, between AT&T Corp.
("AT&T") and yourself (the "Employment Agreement") and to the AT&T 1997 Long
Term Incentive Program (the "Plan"), a copy of which has been delivered to you,
and in accordance with the terms and conditions of the Plan and the Employment
Agreement and your agreement to the further terms, conditions and restrictions
set forth below, you have been granted as of the date hereof 224,561 restricted
stock units ("Restricted Stock Units" or "Units").
1. The Restricted Stock Units shall vest and become payable in accordance
with sections 2 and 3 hereof. The period beginning on the date hereof and ending
on the day prior to the date on which any Unit becomes vested and payable in
accordance with sections 2 and 3 (the "Vesting Date") is herein referred to as
the "Restriction Period" with respect to any such Restricted Stock Unit.
2. The Restricted Stock Units shall vest and become nonforfeitable (subject
to section 12) on October 1, 2003, provided that you are employed with AT&T on
that date, and AT&T shall distribute to you (or your legal representative) a
certificate representing 224,561 common shares of AT&T ("Shares") as soon as
practicable thereafter. In the event that, on October 1, 2003, the Fair Market
Value of such Shares is less than $10,000,000, you shall be entitled to a cash
payment equal to the shortfall.
3. (a) In the event that, on or before April 1, 2002, a Change in
Control occurs that is followed within three years thereafter by a "Second
Trigger Event" (as defined below), then you shall be entitled (subject to
section 12 and in lieu of any other benefit under this grant) to a cash payment
as follows:
(i) If such Second Trigger Event occurs on or after April 1,
1998 but before April 1, 1999, a cash payment equal to the greater of (a) the
Fair Market Value, on the date of such Second Trigger Event, of 25% of the
224,561 Shares that underlie this grant and (b) $2,500,000.
(ii) If such Second Trigger Event occurs on or after April 1,
1999 but before April 1, 2000, a cash payment equal to the greater of (a) the
Fair Market Value, on the date of such Second Trigger Event, of 50% of the
224,561 Shares that underlie this grant and (b) $5,000,000.
(iii) If such Second Trigger Event occurs on or after April 1,
2000 but before April 1, 2001, a cash payment equal to the greater of (a) the
Fair Market Value, on the date of such Second Trigger Event, of 75% of the
224,561 Shares that underlie this grant and (b) $7,500,000.
<PAGE>
(iv) If such Second Trigger Event occurs on or after April 1,
2001, but before April 1, 2002, a cash payment equal to the greater of (a) the
Fair Market Value, on the date of such Second Trigger Event, of 100% of the
224,561 Shares that underlie this grant and (b) $10,000,000.
(b) In the event that you die while employed by the Company, unless a
Second Trigger Event under section 3(a) has occurred, your beneficiaries or
estate shall be entitled (subject to section 12 and in lieu of any other benefit
under this grant) to a cash payment as follows:
(i) If such death occurs before October 1, 1998, a cash
payment equal to the greater of (a) the Fair Market Value, on the date of your
death, of 20% of the 224,561 Shares that underlie this grant and (b) $2,000,000.
(ii) If such death occurs on or after October 1, 1998 but
before October 1, 1999, a cash payment equal to the greater of (a) the Fair
Market Value, on the date of your death, of 40% of the 224,561 Shares that
underlie this grant and (b) $4,000,000.
(iii) If such death occurs on or after October 1, 1999 but
before October 1, 2000, a cash payment equal to the greater of (a) the Fair
Market Value, on the date of your death, of 60% of the 224,561 Shares that
underlie this grant and (b) $6,000,000.
(iv) If such death occurs on or after October 1, 2000 but
before October 1, 2001, a cash payment equal to the greater of (a) the Fair
Market Value, on the date of your death, of 80% of the 224,561 Shares that
underlie this grant and (b) $8,000,000.
(v) If such death occurs on or after October 1, 2001 but
before October 1, 2003, a cash payment equal to the greater of (a) the Fair
Market Value, on the date of your death, of 100% of the 224,561 Shares that
underlie this grant and (b) $10,000,000.
(c) For purposes of this section 3, "Second Trigger Event" shall mean
any termination of your employment with AT&T without "Cause" (other than due to
"Disability" or death), and any "Constructive Termination Without Cause," with
the quoted terms having the meaning ascribed to them in the Employment
Agreement. For purposes of this Award, termination of your employment with AT&T
due to Disability shall be treated the same as for death under section 3(b) and
any other provision of this Award.
(d) Notwithstanding anything to the contrary in the Employment
Agreement or the Plan, the Restricted Stock Units that are the subject of this
grant shall vest and become nonforfeitable in connection with a Change in
Control only to the extent provided in section 3(a).
(e) If you retire on or after attaining age 62 at the request of
AT&T, or voluntarily at any time with the consent of AT&T, you shall be treated
as employed by AT&T on October 1, 2003, for purposes of section 2.
(f) Upon termination of your employment for any reason other than as
described above in this section 3 (including, without limitation, termination as
a result of your employer ceasing to be either AT&T or an Affiliate), any
Restricted Stock Units that are not vested shall be forfeited, unless the
Committee shall otherwise determine in its sole discretion.
<PAGE>
4. A cash payment in an amount equal to the dividend payable on one Share
will be made to you for each Restricted Stock Unit held by you on the record
date for such dividend that has not been forfeited, canceled or converted to a
Share and distributed.
5. You may elect, in accordance with policies adopted by the Committee,
to receive any payment to which you are entitled under this Agreement in the
form of Shares rather than cash, such Shares to have a Fair Market Value on the
date of distribution equivalent to the cash payment forgone.
6. You may irrevocably elect, in accordance with policies adopted by
the Committee, to defer the distribution of all or any portion of any cash
payment or Shares that you otherwise would have become entitled to receive
pursuant to the terms of this Agreement.
7. At all times during the Restriction Period and any elected deferral
period, the Units awarded hereunder shall be nontransferable, and may not be
pledged, assigned or alienated in any way.
8. Transfer to or from AT&T and any Affiliate shall not be considered
a termination of employment for purposes of this Agreement. Nor shall it be
considered a termination of employment for purposes of this Agreement if you are
placed on a military leave or other approved leave of absence, unless the
Committee shall otherwise determine.
9. Neither the Plan nor this Restricted Stock Unit Award shall be construed
as giving you the right to be retained in the employ of AT&T or any Affiliate.
10. AT&T shall have the right to deduct, to cause to be deducted from, or to
collect with respect to, any distribution hereunder any federal, state, or local
taxes required by law to be withheld or paid with respect to such distribution,
and as may be necessary, in AT&T's opinion, to satisfy such obligations.
11. You may, in accordance with procedures established by the Committee,
designate one or more beneficiaries to receive all or part of any distribution
to be made hereunder in case of your death, and you may change or revoke such
designation at any time. In the event of your death, any distribution hereunder
that is subject to such a designation (to the extent such designation is valid
and enforceable under applicable law) shall be made to such beneficiary or
beneficiaries in accordance with this Agreement. Any other distribution
hereunder shall be made to your estate. If there shall be any question as to the
legal right of any beneficiary to receive a distribution hereunder, the amount
in question may be paid to your estate, in which event neither AT&T nor any
Affiliate shall have any further liability to anyone with respect to such
amount.
12. (a) You recognize and acknowledge that you have had access to highly
confidential and proprietary Company information and trade secrets; that the
use, misappropriation or disclosure of such confidential information would
constitute a breach of trust and could cause irreparable injury to AT&T; and
that it is essential to the protection of AT&T's good will and to the
maintenance of AT&T's competitive position that such confidential information be
kept secret and that you not disclose such confidential information to others or
use such confidential information to your own advantage or the advantage of
others. You further recognize and acknowledge that it is essential for the
proper protection of the business of AT&T that you be restrained (i) from
soliciting or inducing any employee of AT&T to leave the employ of AT&T, (ii)
from hiring or attempting to hire any employee of AT&T, (iii) from soliciting
<PAGE>
the trade of or trading with the customers and suppliers of AT&T for any
business purpose, and (iv) from competing against AT&T following the termination
of your employment with AT&T. You therefore agree that this grant will be
forfeited and canceled immediately in its entirety (and that any benefit already
paid out within 18 months prior to AT&T's notice of violation shall, at the
discretion of AT&T, be repaid by you to AT&T within 10 business days of AT&T's
written request) if you, during your employment or thereafter, engage in
activity, which, in the sole discretion of AT&T, is deemed to be in conflict
with or adverse to the interests of AT&T. Such adverse activity by you shall
include, but is not limited to, the following: (i) becoming associated with,
becoming employed by, rendering services to, or owning an interest in (other
than as a shareholder with a nonsubstantial interest in such business) any
business or enterprise that is engaged in competition with AT&T; (ii)
recruiting, soliciting or inducing, any employee or employees of AT&T or of any
affiliate of AT&T to terminate their employment with, or otherwise cease their
relationship with, AT&T or any affiliate of AT&T; (iii) soliciting, diverting or
taking away, or attempting to divert or to take away, the business or patronage
of any of the clients, customers or accounts, or prospective clients, customers
or accounts, which were contacted, solicited or served by those segments of AT&T
that fell within, or related to, the scope of your responsibilities in Company
positions you held during your employment with AT&T; (iv) using or disclosing
the confidential information of AT&T; (v) initiating litigation against AT&T;
(vi) criticizing, denigrating or otherwise speaking adversely against AT&T; and
(vii) violating AT&T's Code of Conduct.
(b) If any restriction set forth in this section 12 is found by any
arbitrator or court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic areas as to which it
may be enforceable.
(c) The restrictions contained in this section 12 are necessary for
the protection of the business and goodwill of AT&T and are considered by you to
be reasonable for such purpose. Further, the restrictions set forth in this
section 12 are of the essence of this grant, and shall be construed as
independent of any other provision in this grant; and the existence of any claim
or cause of action by you against AT&T, whether predicated on this grant or not,
shall not constitute a defense to the enforcement by AT&T of these restrictions.
(d) The terms and provisions in this section 12 shall be administered
in accordance with the AT&T Non-Competition Guideline (the "Guideline").
13. The validity, construction and effect of this Agreement shall be
determined in accordance with the laws of the State of New York and applicable
Federal law.
- --------------------------------------------------------------------------------
Please indicate your acceptance of the terms in sections 1-13, and in particular
the restrictions contained in section 12, hereof, and acknowledge that you have
received copies of the Plan and the Guideline summary, in each case as currently
in effect, by signing at the place provided and returning the original of this
Agreement.
ACCEPTED AND AGREED:
- --------------------------------------------------------------------------------
SIGNATURE BY (AT&T Corp.)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT E
AT&T 1997 LONG TERM INCENTIVE PROGRAM
NONSTATUTORY STOCK OPTION
- --------------------------------------------------------------------------------
Name of Optionee Social Security No. Date of Grant
- --------------------------------------------------------------------------------
Capitalized terms not otherwise defined herein shall have the same meanings as
in the Plan.
- --------------------------------------------------------------------------------
Pursuant to the AT&T 1997 LONG TERM INCENTIVE PROGRAM (the "Plan") of AT&T Corp.
("AT&T"), a copy of which has been delivered to you, you have been granted as of
the date hereof an option (the "Option") to purchase from AT&T 750,000 common
shares of AT&T ("Shares") at the price of $44.53125 per Share, subject to the
terms and conditions of the Plan and to your agreement to the additional terms
and conditions set forth herein.
1. (a) Your right to exercise this Option shall expire ten (10) years
from the date hereof, unless sooner terminated upon certain terminations of your
employment as provided in (b) or (c) below or canceled as provided in (e) or
section 2 below.
(b) Upon your termination of employment by reason of death,
Disability (as defined in section 1(g) of the Employment Agreement between you
and AT&T dated as of October 17, 1997, (the "Employment Agreement")),
Termination without Cause (as defined in section 12(d) of the Employment
Agreement, a Constructive Termination without Cause (as defined in section 1(f)
of the Employment Agreement) or on or after your retirement after reaching age
65, then you or your legal representative shall have the right to exercise any
portion of this Option that is then outstanding, and any unvested portion of
this Option shall immediately become exercisable, and remain exercisable, until
the earlier of five years after the date of such termination of employment or
the expiration of this Option.
(c) Upon your termination of employment for any reason other than as
described in (b) above (including your employer ceasing to be either an
Affiliate or AT&T), any portion of this Option then outstanding which is
unexercisable shall be cancelled and any portion which is then exercisable shall
remain exercisable until the earlier of the ninetieth day after the date of
termination or the originally scheduled expiration date of this Option unless
the Committee determines otherwise.
2. (a) You recognize and acknowledge that you have had access to
highly confidential and proprietary Company information and trade secrets and
the use, misappropriation or disclosure of the confidential information would
constitute a breach of trust and could cause irreparable injury to AT&T; and it
is essential to the protection of AT&T's good will and to the maintenance of
AT&T's competitive position that the confidential information be kept secret and
that you not disclose the confidential information to others or use the
confidential information to your own advantage or the advantage of others. You
further recognize and acknowledge that it is essential for the proper protection
of the business of AT&T that you be restrained (i) from soliciting or inducing
any employee of AT&T to leave the employ of AT&T, (ii) from hiring or attempting
to hire any employee of AT&T, (iii) from soliciting the trade of or trading with
<PAGE>
the customers and suppliers of AT&T for any business purpose, and (iv) from
competing against AT&T following the termination of your employment with AT&T
and therefore you agree that this Option will be forfeited and canceled
immediately in its entirety (and any benefit already paid out within 18 months
prior to AT&T's notice of violation shall, at the discretion of AT&T be required
to be repaid to AT&T by you within 10 business days of AT&T's request in
writing) if you, during your employment or thereafter, engage in activity,
which, in the sole discretion of AT&T, is deemed to be in conflict with or
adverse to the interests of AT&T. Such adverse activity by you shall include,
but is not limited to, or own an interest in (other than as a shareholder with a
nonsubstantial interest in such business) any business or enterprise that is
engaged in competition with AT&T; or (ii) recruit, solicit or induce, or attempt
to induce, any employee or employees of AT&T or any affiliate of AT&T to
terminate their employment with, or otherwise cease their relationship with,
AT&T or any affiliate of AT&T; or (iii) solicit, divert or take away, or attempt
to divert or to take away, the business or patronage of any of the clients,
customers or accounts, or prospective clients, customers or accounts, which were
contacted, solicited or served by those segments of AT&T that fall within or
relate to your scope of responsibilities in Company positions you held during
your employment with AT&T; or (iv) use or disclose the confidential information;
or (v) initiate litigation against AT&T; or (vi) criticize, denigrate or
otherwise speak adversely against AT&T; or (vii) violate AT&T's Code of Conduct.
(b) If any restriction set forth in this section 2 is found by any
arbitrator or court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic areas as to which it
may be enforceable.
(c) The restrictions contained in this section 2 are necessary for
the protection of the business and goodwill of AT&T and are considered by you to
be reasonable for such purpose. Further, the restrictions set forth in this
section 2 are of the essence of this Option, they shall be construed as
independent of any other provision in this Option; and the existence of any
claim or cause of action by you against AT&T, whether predicated on this Option
or not, shall not constitute a defense to the enforcement by AT&T of these
restrictions.
(d) The terms and provisions in this section 2 shall be administered
in accordance with the AT&T Non-Competition Guideline (the "Guideline").
3. Except as provided in section 1 hereof, this Option may be exercised at
any time prior to its expiration or cancellation as follows: one-third of the
Shares may be purchased under the Option on the third anniversary of the date of
grant; one-third of such Shares on or after the fourth anniversary of the date
of grant; and the remaining one-third of such Shares on after the fifth
anniversary of the date of grant.
4. This Option shall be exercised by delivering to AT&T written notice on a
form to be provided for this purpose. The notice shall specify the number of
Shares as to which the Option is being exercised (which number shall be at least
fifty or the number of Shares that may then be exercised under this Option,
whichever is less). The Option or any portion thereof may be exercised only upon
payment of the exercise price thereof in full, and in accordance with procedures
established by AT&T Board of Directors or the Committee. Payment shall be made
in cash or in AT&T common shares or a combination of cash and AT&T common shares
such that the total of the cash plus the Fair Market Value, as determined in
<PAGE>
accordance with procedures established by the Committee, of the AT&T common
shares on the date of exercise at least equals the aggregate exercise price of
the Shares as to which the Option is being exercised; provided, however, that
any AT&T common shares surrendered as payment must have been owned by you at
least six months prior to the date of exercise. Exercise of the Option shall
take effect on the date the notice of exercise, in good order, is actually
received at the address specified thereon, such date to be acknowledged to you
in writing.
5. Within a reasonable period after the Option is exercised, AT&T will
deliver to you or your legal representative a statement reflecting ownership of
Shares in the form of book entry or certificates for the number of Shares with
respect to which you exercised the Option. Neither you nor your legal
representative shall be, or have any of the rights and privileges of, a
shareowner of AT&T in respect of any shares purchasable upon the exercise of
this Option, in whole or in part, unless and until certificates for such Shares
shall have been issued.
6. (a) This Option is not transferable by you otherwise than by will or
the laws of descent and distribution, and during your lifetime the Option may be
exercised only by you or your guardian or legal representative if permitted by
Section 422 and related sections of the Internal Revenue Code and any
regulations promulgated thereunder.
(b) You may, in accordance with procedures established by the
Committee, designate one or more beneficiaries to receive all or part of the
Option in case of your death, and you may change or revoke such designation at
any time. In the event of your death, any portion of this Option that is subject
to such a designation (to the extent such designation is valid and enforceable
under applicable law) shall be distributed to such beneficiary or beneficiaries
in accordance with this Agreement. Any other portion of this Option shall be
distributable to your estate. If there shall be any question as to the legal
right of any beneficiary to receive a distribution hereunder, the Shares in
question may be purchased by and distributed to your estate, in which event
neither AT&T nor any Affiliate shall have any further liability to anyone with
respect to such Shares.
7. Notwithstanding any other provision of this Agreement, in the event of
Change in Control, as defined in the Employment Agreement, any unvested portion
of the Option shall immediately become exercisable.
8. Neither the Plan nor this Agreement shall be construed as giving you the
right to be retained in the employ of AT&T nor any Affiliate.
9. If the Company shall determine, on advise of counsel, that the listing,
registration or qualification of the Shares upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
or regulatory agency or authority, is necessary or desirable as a condition of,
or in connection with , the exercise of the Option, no portion of the Option may
be exercised until or unless such listing, registration, qualification, consent
or approval shall have been effected or obtained.
10. Any determinations or decisions made or actions taken arising out of or
in connection with the interpretation and administration of this Agreement and
the Plan by the AT&T Board of Directors of the Committee shall be final and
conclusive.
<PAGE>
11. This Agreement may be amended by the AT&T Board of Directors or the
Committee provided that no such amendment shall impair your rights hereunder
without your consent.
12. AT&T may withhold or require you to pay any applicable withholding or
other employment taxes due upon the exercise of this Option. You may elect to
satisfy such withholding tax obligations by requesting that AT&T withhold Shares
with a value equal to such tax obligations from the Shares otherwise deliverable
upon the exercise of this Option.
13. The validity, construction and effect of this Agreement shall be
determined in accordance with the laws of the State of New York and applicable
Federal Law.
- --------------------------------------------------------------------------------
Please indicate your acceptance of terms 1-13, and in particular the
restrictions contained in section 2, hereof, and acknowledge that you have
received copies of the Plan and the Guideline summary, in each case as currently
in effect, by signing at the place provided and returning the original of this
Agreement.
ACCEPTED AND AGREED:
- --------------------------------------------------------------------------------
SIGNATURE BY (AT&T Corp.)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT F
AT&T NON-COMPETITION GUIDELINE
As approved effective
August 1, 1986
<PAGE>
AT&T NON-COMPETITION GUIDELINE
TABLE OF CONTENTS
SECTION 1. STATEMENT OF PURPOSE 1
SECTION 2. DEFINITIONS 1
SECTION 3. MANAGEMENT COMMITTEE 3
1. Membership 3
2. Responsibility and Authority 4
3. Conflict of Interest 5
SECTION 4. COMPETITIVE ACTIVITY 5
1. Limitation 5
2. Definition 6
SECTION 5. EVALUATION AND DETERMINATION OF COMPETITIVE ACTIVITY 7
1. Request for a Determination 7
2. Company's Right to Initiate an Evaluation 8
3. Evaluation 9
4. Conflict of Interest 10
5. Determination 10
6. Notice of Forfeiture 11
7. Opportunity to Withdraw 12
8. Reevaluation and Determination 13
9. Subsequent Competitive Activity 13
10. Consent to Compete 15
SECTION 6. GENERAL PROVISIONS 16
1. Guideline Modifications 16
2. Severability 16
3. No Intent to Prejudice Employees' Rights 16
SECTION 1. STATEMENT OF PURPOSE
The purpose of this AT&T Non-Competition Guideline is to set
uniform standards and establish administrative responsibilities and procedures
for evaluating activity in possible violation of the non-competition clauses
contained in various AT&T incentive and benefit plans.
<PAGE>
SECTION 2. DEFINITIONS
1. The word "Guideline" shall mean this AT&T Non-Competition
Guideline.
2. The words "AT&T" or "Company" shall mean collectively the American
Telephone and Telegraph Company, a New York corporation, all of its
subsidiaries, related entities, lines of business and corporate successors and
all business enterprises, including joint ventures, in which it is a partner or
has a substantial ownership interest.
3. The term "Board of Directors" or "Board" shall mean the Board of
Directors of the American Telephone and Telegraph Company.
4. The word "Committee" shall mean the AT&T Management Committee
established and authorized by the Board to interpret and implement the standards
and procedures of the Guideline.
5. The word "Plans" shall mean the AT&T Senior Management Long Term
Incentive Plan, AT&T Senior Management Short Term Incentive Plan, AT&T 1984
Stock Option Plan, AT&T Non-Qualified Pension Plan, AT&T Senior Management Life
Insurance Program, AT&T Senior Management Long Term Disability and Survivor
Protection Plan, the AT&T Mid-Career Pension Plan, and any such other plans that
my from time to time contain non-competition clauses or that the Board shall
deem appropriate to make subject to the standards of this Guideline.
6. The word "benefit" shall mean any payment or entitlement to payment
conferred pursuant to the terms of any or all of the Plans, regardless of how,
when or in what form it is made or intended to be made.
7. The term "affected employee" shall mean an individual who, as a
former or present employee, has received, is receiving or would be eligible to
receive benefits under any of the Plans by virtue of his currently holding or,
if a former employee, by virtue of his having held at the time of his
termination of employment with the Company (i) a level higher than Division
Level or equivalent fourth level or (ii) a position that the Board of Directors
designates to be within the Senior Management Group.
8. The term "Senior Officer" shall mean an employee who has attained a
level higher than Corporate Vice President or equivalent.
9. The phrase "non-competition clauses" shall mean those provisions,
paragraphs, divisions or portions of the Plans which state in words or substance
that an affected employee will forfeit and relinquish all entitlement to
benefits if he engages in activity deemed to be in competition with the Company.
10. The use in this Guideline of personal pronouns of the masculine
gender is intended to include both the masculine and feminine genders.
11. The use in this Guideline of singular or plural nouns is intended
to have individual or collective meaning as applicable to the context as used
therein and is in no way to be construed narrowly or such as to limit the scope
of this Guideline or any of its provisions.
SECTION 3. MANAGEMENT COMMITTEE
1. Membership. The Management Committee shall consist of the Senior
Vice President-Personnel (or the corporate successor to that officer's
<PAGE>
responsibilities) and up to four other, but at no time less than two other,
Senior Officers of the Company, such other Senior Officers to serve on a
rotating basis terms of not less than one year. The Senior Vice
President-Personnel shall serve as Chairman and Secretary of the Committee and
shall have full authority to select and designate other Senior Officers to serve
on the Committee, including the authority to select and designate Senior
Officers to serve on an interim basis when regular Committee members are
unavailable or are recused as described in Paragraph 3 of this Section 3.
2. Responsibility and Authority. Responsibility for interpreting and
implementing the standards and provisions of this Guideline is vested solely and
exclusively in the Committee, which is empowered to perform or to delegate,
through and by its Chairman acting on its behalf, performance of all function
necessary to fulfill its responsibilities in connection with the forfeiture of
benefits, such functions explicitly to include, but which are not limited to,
the following: seeking the advice and counsel and directing the participation of
the heads of the Company's lines of business and any such other individuals as
it deems necessary, at whatever intervals and for whatever function it deems
appropriate ; making final determination that certain activity is or is not
competitive activity and that the benefits of the affected employee who engages
in such activity are or are not forfeited by such activity, respectively;
directing or delegating the directing of whatever such Payroll, Benefit and
other organizations of the Company as are affected to suspend or terminate
payment of benefits or to refrain from initiating payments of benefits under any
or all of the Plans to an affected employee who is found to be engaging in
competitive activity or whose activity, in the case of the suspension of
payment, is under evaluation; taking or delegating the taking of such legal
steps as are necessary to recover benefits paid to an affected employee since
the date on which he commenced engaging in activity deemed to be competitive
activity; making such minor changes to this Guideline as may be required by law,
by administrative efficiency or by changes in the Company structure; and acting
on the Company's behalf and in its best interests in all matters relating to the
issues covered by this Guideline.
3. Conflict of Interest. When a Senior Officer serving on the
Committee is unable, for personal or professional reasons, to make a fair and
objective determination of an affected employee's activity, then he shall recuse
himself and shall not participate in the discussions concerning or in the final
determination of appropriate action, in which case the Chairman of the Committee
shall nominate and appoint another Senior Officer to substitute for the Senior
Officer who has been recused, which substitute shall serve as a full member of
the Committee and shall have all authority and responsibility thereto until full
resolution off the matter has been accomplished.
SECTION 4. COMPETITIVE ACTIVITY
1. Limitation. Notwithstanding the definitions and procedures
contained in this Guideline, in all questions relating to whether certain
activity of any affected employee or any business or any product or service of
any business is or would be competitive with AT&T or whether such affected
employee's activity is grounds for the Company's invoking any non-competition
clause in any of the Plans and for terminating or preventing payment of benefits
or recovering benefits already paid to such affected employee, the Committee, in
its discretion and judgment, has sole authority to interpret the spirit and
intent of the Guideline and of the non-competition clauses, and each and every
decision of the Committee shall, with respect to all questions and matters
relative to the subjects of forfeiture and competition, be final.
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2. Definition. For purposes of the non-competition clauses as
contained in the Company's Plans and subject to the limitation contained in
Paragraph 1 of this Section 4, an affected employee's activity is competitive
activity and any or all of his benefits under the Plans are subject to
forfeiture to the fullest extent allowable by law if such affected employee
either (A), as more fully described below, establishes a relationship with a
competitor of the Company or (B) engages in activity which, in the Committee's
discretion or judgment, is in conflict with or adverse to the interests of the
Company.
a. As used above in Paragraph 2 of this Section 4, the phrase
"establishes a relationship with" shall mean, but shall not be limited to,
founding, organizing, establishing, becoming associated with, becoming employed
by, rendering services to, consulting or acting as consultant to, serving as
director for, being a partner in or owning a substantial interest in, as
shareholder or otherwise, such an interest to include, but not be limited to,
for example, an interest subject to the reporting requirements of Section 13(d)
of the Securities Exchange Act of 1934.
b. As used above in Paragraph 2 of this Section 4, a "competitor
of the Company" is a business, entity or enterprise which either (A) designs,
develops, manufactures, produces, offers for sale or sells a product or service
which can be used as a substitute for, performs substantially the same function
as, is a practical alternative for or is generally intended to satisfy the same
customer or client needs for any product or service designed, developed,
manufactured, produced, offered for sale or sold by the Company, or (B) is a
business or activity which the Committee, based upon review of the individual
facts and circumstances and in its discretion and judgment, determines, in order
to protect the best interests of the Company, to be a competitor within the
spirit and intent of the Guideline and the non-competition clauses.
SECTION 5. EVALUATION AND DETERMINATION OF COMPETITIVE ACTIVITY
1. Request for a Determination. An affected employee who is
considering engaging in an activity which an individual would reasonably believe
to be competitive activity as that term is used and defined in this Guideline
and which thus may be grounds for the Company's invoking the non-competition
clauses of the Plans should request, prior to engaging in such activity, that it
be evaluated as described in this Section 5 of the Guideline and that a
determination be made and an opinion rendered as to whether such activity is
deemed to violate such non-competition clauses. Such affected employee's request
may be made to the Director, Executive Personnel Matters, who, as the
Committee's delegate in correspondence and administrative functions, will
coordinate evaluation of the activity. To insure that the valuation and
determination are based on all relevant facts and circumstances and thus are
consistent with the spirit and intent of this Guideline, such affected employee
should accompany his request with a full explanation in writing of whatever
information he deems pertinent as well as of a description of the contemplated
activity, such explanation to include, but not to be limited to, (A) his
contemplated relationship, including, as applicable, his proposed position,
title, responsibilities and the nature and extent of his ownership interest, (B)
the nature of the business, including, for example, all products and/or services
currently being or expected to be designed, developed, manufacturing, produced,
offered for sale and sold by the business and (C) the most recently available
financial information on the business.
2. Company's Right to Initiate an Evaluation. The Company reserves
the right to initiate an evaluation of any activity of an affected employee
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which may be competitive activity as that phrase is used and defined in this
Guideline. Upon receipt of a request from or on behalf of the head of any of the
Company's lines of business, from the Board, from the Committee or from any
Senior Officer, the Director, Executive Personnel Matters, shall notify the
affected employee in writing that such an evaluation has been initiated and that
he has the opportunity to submit in writing for consideration by the Committee
whatever information he deems pertinent to its determination, including, but not
limited to, a full explanation of the activity as described above in Divisions
(A) through (C), inclusive, of Paragraph 1 of this Section 5.
3. Evaluation. Whether an affected employee's contemplated or
actual activity is or is not competitive activity within the scope and intent of
the non-competition clauses shall be separately evaluated by the head and by an
attorney serving as counsel to the head of each of the Company's lines of
business responsible for the design, development, manufacture, production, offer
for sale or sale of the product or service with which such activity is suspected
to be in competition, by the head of each entity responsible for paying benefits
under any of the affected Plans or his delegate, by a Corporate Vice
President-Law of the Company and, in addition, by such other individuals as the
Committee may designate as appropriate. Such evaluations are to be based upon
information submitted by the affected employee (including his position and
responsibilities), the financial state of the line of business, the competitive
marketplace, the extent to which the activity is adverse to the Company, the
impact on the affected employee's line of business and any other facts and
circumstances deemed relevant under the standards of this Guideline. After such
evaluations, each head and his counsel of each such line of business, each head
of each such entity or his delegate, the Corporate Vice President-Law and each
of any such other specially-designated individuals as described above shall
provide to the Committee in writing his independent recommendation as to its
determination, which recommendation shall identify, if applicable, any fact or
circumstance not readily apparent from the affected employee's submittal or not
generally known but upon which fact or circumstance the recommendation was
based.
4. Conflict of Interest. When an individual who, under the standards
of this Guideline, is to evaluate an affected employee's activity but is unable,
for personal or professional reasons, to make in that instance a fair and
objective evaluation, then he shall recuse himself and shall not evaluate the
activity nor make a recommendation to the Committee nor participate in any way
in the resolution of the matter; provided, however, that at the express
direction of the Chairman he can participate, in which case, the conflict of
interest shall be duly noted and taken into consideration when weighing his
involvement. An individual who recuses himself from evaluating activity shall
designate the individual in his line of business, entity or another Corporate
Vice President-Law, as appropriate, who shall evaluate the activity and make a
recommendation as his delegate.
5. Determination. Final determination of whether an affected
employee's activity is or is not competitive activity and thus whether his
benefits are or are not, respectively, subject to forfeiture shall be made by
the Committee and the Committee alone, and such final determination shall be
based on the recommendations as described above in Paragraphs 3 and 4 of this
Section 5 as well as on such other facts and circumstances as the Committee
deems pertinent. No single recommendation nor any or all of the recommendations
in the agg