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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Lucent Technologies Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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COVER ART HERE
<PAGE>
HOW TO VOTE
YOUR VOTE IS IMPORTANT. This year, most Shareowners will have a choice of
voting over the Internet, by telephone or by using a traditional proxy card.
Check your proxy card or the information forwarded by your bank, broker or
other holder of record to see which options are available to you.
REDUCE MAILINGS
If you are a Shareowner of record and have more than one account in your
name or the same address as other Shareowners of record, you may authorize the
Company to discontinue mailings of multiple Annual Reports. If you are a
Shareowner of record voting over the Internet or by telephone, follow the
instructions provided after you vote to discontinue future mailings of
duplicate Annual Reports. Most Shareowners can also view future Proxy
Statements and Annual Reports over the Internet rather than receiving paper
copies in the mail. See the Proxy Statement and your proxy card for further
information.
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LUCENT TECHNOLOGIES INC.
600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974
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NOTICE OF ANNUAL MEETING OF SHAREOWNERS
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<C> <S>
TIME............... 9:00 a.m. E.S.T., on Wednesday, February 17, 1999
PLACE.............. The Playhouse Theatre
Du Pont Building
10th & Market Streets
Wilmington, Delaware 19801
ITEMS OF BUSINESS.. (1) To elect members of the Board of Directors, whose
terms are described in the Proxy Statement.
(2) To approve an amendment to the Certificate of Incor-
poration to increase the number of authorized Common
Shares.
(3) To transact such other business, including considera-
tion of Shareowner proposals, as may properly come
before the Meeting and any adjournment thereof.
RECORD DATE........ Holders of Common Shares of record at the close of
business on December 22, 1998 are entitled to vote at the
Meeting.
ANNUAL REPORT...... The Company's 1998 Annual Report, which is not a part of
the proxy soliciting material, is enclosed.
PROXY VOTING....... It is important that your Shares be represented and voted
at the Meeting. You can vote your Shares by one of the
following methods: Vote over the Internet or by telephone
using the instructions on the enclosed proxy card (if
these options are available to you), OR mark, sign, date
and promptly return the enclosed proxy card in the
postage-paid envelope furnished for that purpose. Any
proxy may be revoked in the manner described in the
accompanying Proxy Statement at any time prior to its
exercise at the Meeting.
RICHARD J. RAWSON
Senior Vice President,
General Counsel and
December 22, 1998 Corporate Secretary
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TABLE OF CONTENTS
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<TABLE>
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PAGE
<S> <C>
PROXY STATEMENT........................................................... 1
Proxies.................................................................. 2
Shareowners Entitled to Vote............................................. 3
Required Vote............................................................ 3
Multiple Copies of Annual Report to Shareowners.......................... 4
Electronic Access to Proxy Materials and Annual Report................... 5
Cost of Proxy Solicitation............................................... 5
Advance Notice Procedures................................................ 6
Shareowner Communications................................................ 6
Shareowner Account Maintenance........................................... 6
GOVERNANCE OF THE COMPANY................................................. 7
Committees of the Board of Directors..................................... 7
Compensation of Directors................................................ 8
Compensation Committee Interlocks and Insider Participation.............. 10
Relationship with Independent Public Accountants......................... 10
Section 16(a) Beneficial Ownership Reporting Compliance.................. 10
SHARE OWNERSHIP OF MANAGEMENT AND DIRECTORS............................... 11
ELECTION OF DIRECTORS..................................................... 12
Nominees for Terms Expiring in 2002...................................... 13
Directors Whose Terms Will Expire in 2000................................ 14
Directors Whose Terms Will Expire in 2001................................ 15
DIRECTORS' PROPOSAL....................................................... 16
SHAREOWNER PROPOSALS...................................................... 18
Shareowner Proposal Number 1............................................. 18
Shareowner Proposal Number 2............................................. 20
Shareowner Proposal Number 3............................................. 21
Shareowner Proposal Number 4............................................. 24
PERFORMANCE GRAPH......................................................... 27
EXECUTIVE COMPENSATION.................................................... 28
Board Compensation Committee Report on Executive Compensation............ 28
Summary Compensation Table............................................... 35
Long-Term Incentive Plans - Awards in Last Fiscal Year................... 37
Option Grants in Last Fiscal Year........................................ 38
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Values................................................................. 39
Pension Plans............................................................ 39
Executive Employment Agreements and Other Arrangements................... 41
OTHER MATTERS............................................................. 45
</TABLE>
<PAGE>
Lucent Technologies Inc.
Executive Offices
600 Mountain Avenue
[LOGO OF LUCENT TECHNOLOGIES APPEARS HERE]
Murray Hill, New Jersey 07974
PROXY STATEMENT
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These proxy materials are furnished in connection with the solicitation by
the Board of Directors of Lucent Technologies Inc. ("Lucent" or the
"Company"), a Delaware corporation, of proxies to be voted at the Company's
1999 Annual Meeting of Shareowners (the "Annual Meeting" or "Meeting") and at
any meeting following adjournment thereof.
You are cordially invited to attend Lucent's Annual Meeting of Shareowners
on February 17, 1999, beginning at 9:00 a.m. E.S.T. Shareowners will be
admitted beginning at 8:00 a.m. The Meeting will be held in the Playhouse
Theatre located in the Du Pont Building, 10th and Market Streets, Wilmington,
Delaware 19801. The Playhouse Theatre is accessible to handicapped persons and
we will provide wireless headsets for hearing amplification.
You will need an admission ticket to enter the Meeting. For Shareowners of
record, an admission ticket is attached to the proxy card sent to you. If you
plan to attend the Meeting in person, please retain the admission ticket. A
map and directions to the Meeting can be found on the admission ticket.
If your Shares are held in the name of a bank, broker or other holder of
record and you plan to attend the Meeting in person, you may obtain an admis-
sion ticket in advance by sending a written request, along with proof of own-
ership, such as a bank or brokerage account statement, to the Company's Trans-
fer Agent, The Bank of New York, Church Street Station, P.O. Box 11009, New
York, New York 10286. Shareowners who do not have admission tickets will be
admitted following verification of ownership at the door.
The Company's 1998 fiscal year began on October 1, 1997 and ended September
30, 1998. All references in this Proxy Statement to the year 1998 or fiscal
1998 refer to the twelve-month period from October 1, 1997 through September
30, 1998.
This Proxy Statement and accompanying forms of proxy and voting instructions
are being mailed to holders of the Company's common stock ("Common Shares" or
"Shares") on the record date, which is December 22, 1998 (the "Record Date").
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
PROXIES
YOUR VOTE IS IMPORTANT. Because many Shareowners cannot attend the Meeting
in person, it is necessary that a large number be represented by proxy. Most
Shareowners have a choice of voting over the Internet, by using a toll-free
telephone number or by completing a proxy card and mailing it in the postage-
paid envelope provided. Check your proxy card or the information forwarded by
your bank, broker or other holder of record to see which options are available
to you. Please be aware that if you vote over the Internet, you may incur
costs such as telecommunication and Internet access charges for which you will
be responsible. The Internet and telephone voting facilities for Shareowners
of record will close at 8:00 a.m. on the morning of the Meeting.
You may revoke your proxy at any time before it is exercised by writing to
the Corporate Secretary, by timely delivery of a properly executed, later-
dated proxy (including an Internet or telephone vote) or by voting by ballot
at the Meeting. By providing your voting instructions promptly, you may save
the Company the expense of a second mailing.
The Internet and telephone voting procedures are designed to authenticate
Shareowners by use of a Control Number and to allow Shareowners to confirm
that their instructions have been properly recorded.
The method by which you vote will in no way limit your right to vote at the
Meeting if you later decide to attend in person. If your Shares are held in
the name of a bank, broker or other holder of record, you must obtain a proxy,
executed in your favor, from the holder of record, to be able to vote at the
Meeting.
All Shares entitled to vote and represented by properly completed proxies
received prior to the Meeting and not revoked will be voted at the Meeting in
accordance with your instructions. IF NO INSTRUCTIONS ARE INDICATED ON A PROP-
ERLY COMPLETED PROXY, THE SHARES REPRESENTED BY THAT PROXY WILL BE VOTED AS
RECOMMENDED BY THE BOARD OF DIRECTORS.
If any other matters are properly presented at the Annual Meeting for con-
sideration, including, among other things, consideration of a motion to ad-
journ the Annual Meeting to another time or place, the persons named as prox-
ies and acting thereunder will have discretion to vote on those matters ac-
cording to their best judgment to the same extent as the person delivering the
proxy would be entitled to vote. At the date this Proxy Statement went to
press, the Company did not anticipate that any other matters would be raised
at the Meeting.
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
SHAREOWNERS ENTITLED TO VOTE
Shareowners at the close of business on the Record Date are entitled to no-
tice of and to vote at the Annual Meeting.
On October 1, 1998, there were 1,316,414,445 Common Shares outstanding. Each
Common Share is entitled to one vote on each matter properly brought before
the Meeting.
For BuyDIRECT SM participants: If you are a participant in the BuyDIRECT div-
idend reinvestment and stock purchase plan ("BuyDIRECT"), Common Shares held
in your BuyDIRECT account are included on, and may be voted through, the proxy
card accompanying this mailing. This plan's administrator, as the Shareowner
of record, will vote only plan Shares for which it has received directions to
vote from plan participants.
For Lucent Plan Participants: If you are a participant in the Lucent Long
Term Savings Plan for Management Employees, Lucent Long Term Savings and Secu-
rity Plan, Lucent Retirement Savings Plan, Lucent Employee Stock Purchase Plan
("ESPP"), Lucent Long Term Savings and Security Employee Stock Ownership Trust
or the Lucent Employee Stock Ownership Plan, you will receive one proxy card
for all Shares you own through those plans or in an ESPP account. That proxy
card will serve as a voting instruction card for the trustees or administra-
tors of those plans where all accounts are registered in the same name. If you
own Shares through these plans or in an ESPP account and do not vote, the re-
spective plan trustees will vote the plan Shares in the same proportion as
Shares for which instructions were received under each plan and Shares held in
an ESPP account will be voted in accordance with normal brokerage industry
practices.
If you hold Lucent Shares through any other company's stock purchase or sav-
ings plan, you will receive voting instructions from that plan's administra-
tor. Please sign and return those instructions promptly to assure that your
Shares are represented at the Meeting.
In accordance with Delaware law, a list of Shareowners entitled to vote at
the Meeting will be available at the Playhouse Theatre on February 17, 1999,
and for 10 days prior to the Meeting, between the hours of 9 a.m. and 4 p.m.
at the offices of Corporation Service Company, 1013 Centre Street, Wilmington,
Delaware, 19805.
REQUIRED VOTE
The presence, in person or by proxy, of the holders of a majority of the
Shares entitled
SM BuyDIRECT is a service mark of The Bank of New York
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
to vote generally for the election of Directors is necessary to constitute a
quorum at the Meeting. Abstentions and broker "non-votes" are counted as pres-
ent and entitled to vote for purposes of determining a quorum. A broker "non-
vote" occurs when a nominee holding Shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received instructions from
the beneficial owner.
A plurality of the votes duly cast is required for the election of Directors
(i.e., the nominees receiving the greatest number of votes will be elected).
Abstentions and broker "non-votes" are not counted for purposes of the elec-
tion of Directors.
The affirmative vote of the holders of a majority of the outstanding Common
Shares entitled to vote is required to approve the Directors' proposal to in-
crease the number of authorized Common Shares. The affirmative vote of the
holders of a majority of the Common Shares present in person or represented by
proxy and entitled to vote is required to approve the other matters to be
acted upon at the Meeting. An abstention is counted as a vote against the Di-
rectors' proposal and such other matters. A broker "non-vote" is counted as a
vote against the Directors' proposal and is not counted for purposes of ap-
proving the other matters.
MULTIPLE COPIES OF ANNUAL
REPORT TO SHAREOWNERS
The Company's 1998 Annual Report to Shareowners has been mailed to
Shareowners. If more than one copy of the Annual Report was sent to your ad-
dress and you wish to reduce the number of reports you receive and save the
Company the cost of producing and mailing these reports, we will discontinue
the mailing of reports on the accounts you select if you mark the designated
box on the appropriate proxy card(s), or follow the instructions provided when
you vote over the Internet or by telephone.
At least one account at your address must continue to receive the Annual Re-
port, unless you elect to view future Annual Reports over the Internet. Mail-
ing of dividends, dividend reinvestment statements, proxy materials and spe-
cial notices will not be affected by your election to discontinue duplicate
mailings of the Annual Report. To discontinue or resume the mailing of an An-
nual Report to an account, call the Lucent Shareowner Services toll-free num-
ber, 1-888-LUCENT6.
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
If you own Common Shares through a bank, broker or other holder of record
and receive more than one Lucent Annual Report, contact the holder of record
to eliminate duplicate mailings.
ELECTRONIC ACCESS TO PROXY
MATERIALS AND ANNUAL REPORT
This Notice of Annual Meeting and Proxy Statement and the 1998 Annual Report
are available on Lucent's Internet site at HTTP://WWW.LUCENT.COM/
NEWS/INVESTOR/INVESTOR.SHTML. Most Shareowners can elect to view future proxy
statements and annual reports over the Internet instead of receiving paper
copies in the mail.
If you are a Shareowner of record, you can choose this option and save the
Company the cost of producing and mailing these documents by checking the ap-
propriate box on your proxy card or by following the instructions provided if
you vote over the Internet or by telephone. You can also choose between paper
documents and electronic access by calling the Lucent Shareowner Services
toll-free number, 1-888-LUCENT6. If you hold your Shares through a bank, bro-
ker or other holder of record, check the information provided by that entity
for instructions on how to elect to view future proxy statements and annual
reports over the Internet.
If you are a Shareowner of record and choose to view future proxy statements
and annual reports over the Internet, you will receive a proxy card in the
mail next year with instructions containing the Internet address of those ma-
terials.
Most Shareowners who hold their Shares through a bank, broker or other
holder of record and who elect electronic access will receive an e-mail next
year containing the Internet address to use to access Lucent's proxy statement
and annual report.
COST OF PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. Proxies may be
solicited on behalf of the Company by Directors, officers or employees of the
Company in person or by telephone, facsimile or other electronic means. The
Company has engaged the firm of Morrow & Co. to assist the Company in the dis-
tribution and solicitation of proxies. The Company has agreed to pay Morrow &
Co. a fee of $15,000 plus expenses for these services.
In accordance with the regulations of the SEC and the New York Stock Ex-
change (the "NYSE"), the Company also will reimburse brokerage firms and other
custodians, nominees and fiduciaries for their expenses incurred in sending
proxies and
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
proxy materials to beneficial owners of Common Shares.
ADVANCE NOTICE PROCEDURES
Under the Company's By-Laws, nominations for Director may be made only by the
Board or a Board committee, or by a Shareowner entitled to vote who delivered
notice to the Company between October 20 and November 19, 1998, in the case of
the 1999 Meeting, and not less than 45 days nor more than 75 days prior to the
first anniversary of the record date for the preceding year's annual meeting,
in the case of future annual meetings. For Lucent's meeting in the year 2000,
the Company must receive this notice on or after October 8, 1999, and on or
before November 7, 1999.
The By-Laws also provide that no business may be brought before an annual
meeting except as specified in the notice of the meeting or as otherwise
brought before the meeting by or at the direction of the Board or by a
Shareowner entitled to vote who has delivered notice to the Company (contain-
ing certain information specified in the By-Laws) within the time limits de-
scribed above for delivering notice of a nomination for the election of a Di-
rector. These requirements apply to any matter that a Shareowner wishes to
raise at an annual meeting other than pursuant to the procedures in SEC Rule
14a-8.
A copy of the full text of the By-Law provisions discussed above may be ob-
tained by writing to the Corporate Secretary, 600 Mountain Avenue, Room 3C-
515, Murray Hill, New Jersey 07974.
SHAREOWNER COMMUNICATIONS
Highlights of the Meeting will be included in a quarterly report to
Shareowners following the Meeting. You can obtain a transcript of the Meeting
by writing to Shareowner Meeting Transcript Requests, 600 Mountain Avenue,
Room 3C-515, Murray Hill, New Jersey 07974.
As a Shareowner, your comments pertaining to any aspect of Company business
are welcome. Space is provided for this purpose on the proxy card given to
Shareowners of record. Although Shareowner comments are not answered on an in-
dividual basis, they do assist Company management in understanding the con-
cerns of Shareowners.
SHAREOWNER ACCOUNT
MAINTENANCE
The Company's Transfer Agent is The Bank of New York. All communications
concerning accounts of Shareowners of rec-
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
ord, including address changes, name changes, inquiries as to requirements to
transfer Common Shares and similar issues can be handled by calling the Lucent
Shareowner Services toll-free number, 1-888-LUCENT6. For other Company
information, Shareowners can visit Lucent's Internet site at
HTTP://WWW.LUCENT.COM.
GOVERNANCE OF THE COMPANY
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Pursuant to the Delaware General Corporation Law and the Company's By-Laws,
the business, property and affairs of the Company are managed under the direc-
tion of the Board of Directors. Members of the Board are kept informed of the
Company's business through discussions with the Chairman and officers, by re-
viewing materials provided to them and by participating in meetings of the
Board and its committees.
During fiscal 1998, the Board held eight meetings and the committees held a
total of ten meetings. The average attendance in the aggregate of the total
number of Board and committee meetings was 99%.
COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1998, the Board of Directors had two ongoing committees: an
Audit and Finance Committee and a Corporate Governance and Compensation Com-
mittee.
The Audit and Finance Committee meets with management to consider the ade-
quacy of the Company's internal controls and the objectivity of its financial
reporting. The committee also meets with the independent auditors and with ap-
propriate Company financial personnel and internal auditors regarding these
matters. The Audit and Finance Committee recommends to the Board the appoint-
ment of the independent auditors. Both the internal auditors and the indepen-
dent auditors regularly meet privately with the committee and have unre-
stricted access to the committee. The Audit and Finance Committee reviews the
Company's financing plans and reports recommendations to the full Board for
approval and to authorize action. The Audit and Finance Committee met five
times in 1998.
The functions of the Corporate Governance and Compensation Committee (the
"Compensation Committee" or the "Committee") include: recommending to the full
Board nominees for election as Directors of the Company, making recommenda-
tions to the Board
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
from time to time as to matters of corporate governance, administering manage-
ment incentive compensation plans, establishing the compensation of officers
and reviewing the compensation of Directors. The Committee will consider qual-
ified candidates for Director suggested by Shareowners in written submissions
to the Corporate Secretary of the Company. The Corporate Governance and Com-
pensation Committee met five times in 1998.
COMPENSATION OF DIRECTORS
During 1997, the Company determined that it was appropriate to review the
Director compensation arrangements established prior to the Company's spin-off
(the "Spin-Off") from AT&T Corp. ("AT&T") in 1996. As part of this review, the
Company retained an outside consultant to prepare a study showing the director
compensation policies of a number of high-tech and other peer group companies.
Based on that study and other factors, including the amount of time spent on
Company business, the Committee determined that the Directors' compensation
should be increased.
Accordingly, with respect to fiscal 1998, all non-employee Directors
received an annual Board retainer of $100,000. The Chair of each committee
described in the previous section received an additional annual retainer of
$10,000. The annual Board retainer and the additional annual retainer for
committee Chairs were payable fifty percent (50%) in cash (the "Cash
Retainer") and fifty percent (50%) in Common Shares in accordance with the
Company's Stock Retainer Plan for Non-Employee Directors. In addition, each
non-employee Director received Common Shares having a value of $50,000.
Under the Company's Deferred Compensation Plan, non-employee Directors may
defer all or a portion of their compensation to a deferred compensation ac-
count (the "Account"). Directors may elect to defer the receipt of the Cash
Retainer into a portion of the Account, the value of which is measured from
time to time by the value of Common Shares (the "Company Shares Portion") or
into a cash portion of the Account (the "Cash Portion") and to defer the re-
ceipt of all or part of the retainer payable in Shares into the Company Shares
Portion of the Account. The Company Shares Portion is credited on each divi-
dend payment date for Common Shares with a number of units representing Common
Shares equivalent in market value to the amount of the dividend on the Common
Shares
8
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
then credited in the Account. The Cash Portion of the Account earns interest,
compounded quarterly at an annual rate equal (a) to 120% of the average inter-
est rate for 10-year U.S. Treasury notes for the previous quarter, in the case
of deferrals after October 1, 1997, and (b) to the average interest rate for
10-year U.S. Treasury notes for the previous quarter plus 5%, in the case of
deferrals on or before that date. Interest rates for deferrals to the Cash Ac-
count may be revised by the Board. All distributions from the Company Shares
Portion will be made in Shares, unless the Company decides otherwise. For fis-
cal 1998, the portion of the interest accrued on Mr. Schacht's balance in the
Cash Portion of his Account that constitutes above-market interest was
$45,749. In the event of a Potential Change in Control as defined in the plan,
the Company's Deferred Compensation Plan will be supported by a benefits pro-
tection grantor trust, the assets of which will be subject to the claims of
the Company's creditors.
Beginning in fiscal 1999, non-employee Directors will receive an annual re-
tainer of $100,000 plus an option to purchase 2,500 Shares. Directors may
elect to receive between 50% and 100% of the $100,000 in Shares or an option
to purchase Shares. Any remainder will be paid in cash. Any such option will
enable the Director to purchase a number of Shares equal to three times the
number of Shares that could be purchased with the portion of the retainer
elected to be received as an option. The exercise price per Share under such
an option will be the fair market value of a Share on the date of grant. Op-
tions will generally become exercisable on the six-month anniversary of the
date of grant and will have a ten-year term.
The Company also maintains a general insurance policy that provides non-em-
ployee Directors with travel accident insurance when on Company business. A
non-employee Director may purchase life insurance sponsored by the Company.
The Company will share the premium expense with the non-employee Director;
however, all Company contributions will be returned to the Company at the ear-
lier of (a) the non-employee Director's death or (b) the later of age 70 or
ten years from the policy's inception. This benefit will continue after the
non-employee Director's retirement from the Company's Board of Directors.
The current Directors of the Company who were formerly directors of AT&T
were entitled to an annual retirement benefit under the AT&T Pension
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
Plan for Directors (the "Pension Plan"), equal to their annual retainer at re-
tirement from the AT&T Board, provided they attained five years service. In
connection with the Spin-Off, the Company assumed AT&T's liabilities under the
Pension Plan and agreed to credit the Directors' years of service as Directors
of both AT&T and the Company in the determination of years of service. The
benefit was to begin at the later of age 70 or retirement and was payable for
life. Effective October 5, 1997, the Board terminated the Pension Plan. The
amount of each Director's accrued benefit under the Pension Plan was credited
to his or her Account under the Deferred Compensation Plan. Except as de-
scribed above, the Company does not have a retirement plan for non-employee
Directors.
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER
PARTICIPATION
During Lucent's 1998 fiscal year, all of the Company's independent Directors
served on the Compensation Committee. Franklin A. Thomas was the Chairman of
the Committee. The other Committee members were: Paul A. Allaire, Carla A.
Hills, Drew Lewis, Paul H. O'Neill, Donald S. Perkins and John A. Young. Ef-
fective October 13, 1997, Patricia F. Russo, Executive Vice President, Strate-
gy, Business Development and Corporate Operations, became a director of Xerox
Corporation, of which Mr. Allaire is Chairman and Chief Executive Officer.
During fiscal 1998, Mrs. Russo was also a member of the Executive Compensation
and Benefits Committee as well as the Nominating Committee of Xerox Corpora-
tion. In addition, Henry B. Schacht, former Chairman of the Board and Chief
Executive Officer of the Company, is a director of Aluminum Company of Ameri-
ca, of which Mr. O'Neill is Chairman of the Board and Chief Executive Officer.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit and Finance Committee, the Board has reap-
pointed PricewaterhouseCoopers LLP ("PwC") as the independent public account-
ing firm to audit the Company's financial statements for the fiscal year be-
ginning October 1, 1998.
Representatives of PwC will be present at the Meeting. They will be given
the opportunity to make a statement if they desire to do so, and they will be
available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
10
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LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
requires the Company's Directors and executive officers to file reports of
holdings and transactions in Shares with the SEC and the NYSE. Based on Com-
pany records and other information, the Company believes that all SEC filing
requirements applicable to its Directors and executive officers with respect
to the Company's 1998 fiscal year were met.
SHARE OWNERSHIP OF MANAGEMENT AND DIRECTORS
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The following table sets forth information concerning the beneficial owner-
ship of the Company's Common Shares as of October 1, 1998, for: (a) each in-
cumbent Director and each of the nominees for Director; (b) the four most
highly compensated executive officers who are not also Directors; and (c) the
Directors and executive officers as a group. Except as otherwise noted, the
named individual or family members had sole voting and investment power with
respect to such securities.
<TABLE>
<CAPTION>
NUMBER OF COMMON SHARES
--------------------------------
BENEFICIALLY DEFERRAL
NAME OWNED (1)(2) PLANS (3) TOTAL (2)
- ------------------------------------ ------------ --------- ---------
<S> <C> <C> <C>
(a)
Richard A. McGinn 231,210 0 231,210
Paul A. Allaire 23,164 0 23,164
Carla A. Hills 5,298 25,160 30,458
Drew Lewis 40,000 10,958 50,958
Paul H. O'Neill 2,000 5,419 7,419
Donald S. Perkins (4) 4,141,962 16,564 4,158,526
Henry B. Schacht 692,422 6,319 698,741
Franklin A. Thomas 730 22,337 23,071
John A. Young 0 5,777 5,777
(b)
Daniel C. Stanzione 96,179 0 96,179
Ben Verwaayen 1 0 1
Donald K. Peterson 66,572 2,946 69,518
Patricia F. Russo 166 0 166
(c)
Directors and Executive
Officers as a Group (14 persons) (4) 5,417,369 97,220 5,514,589
</TABLE>
FOOTNOTES
1. No individual Director or nominee for Director or officer identified above
beneficially owns 1% or more of the outstanding Common Shares, nor do the
Directors and executive officers as a group. The Company does not know of
any person who beneficially owns more than 5% of the outstanding Common
Shares.
2. Includes beneficial ownership of 217,292 Shares by Mr. McGinn, 690,566
Shares by Mr. Schacht, 91,200 Shares by Mr. Stanzione, 66,571 Shares by Mr.
Peterson and 1,181,833 Shares by all executive officers as a group that may
be acquired within 60 days pursuant to stock options awarded under employee
incentive compensation plans.
3. Represents amounts held in share accounts under the Company's Deferred
Compensation Plan. The value of these accounts depends directly on the
market price of Shares.
4. Mr. Perkins, as an investment company trustee, has shared voting power over
4,130,500 of the Common Shares shown.
11
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------
The Board of Directors is divided into three classes, currently consisting
of three Directors each, whose terms expire at successive annual meetings.
Three Directors will be elected at the Annual Meeting to serve for a three-
year term expiring at the Company's annual meeting in the year 2002.
The persons named in the enclosed proxy intend to vote such proxy for the
election of each of the three nominees named below, unless you indicate that
your vote should be withheld from any or all of them. Each nominee elected as
a Director will continue in office until his or her successor has been duly
elected and qualified, or until the earliest of his or her death, resignation
or retirement.
The Board of Directors has proposed the following nominees for election as
Directors at the Annual Meeting.
NOMINEES FOR TERMS EXPIRING AT THE ANNUAL MEETING TO BE HELD IN THE YEAR
2002:
PAUL A. ALLAIRE
HENRY B. SCHACHT
JOHN A. YOUNG
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE-NAMED
NOMINEES FOR ELECTION AS DIRECTORS.
The Company expects each nominee for election as a Director at the Annual
Meeting to be able to serve if elected. If any nominee is unable to serve if
elected, proxies will be voted in favor of the remainder of those
nominated.
Beginning on the next page, the principal occupation and certain other in-
formation are set forth regarding such nominees and other Directors whose
terms of office will continue after the Annual Meeting. Information about the
Share ownership of the nominees and other Directors can be found on page 11.
12
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
- -------------------------------------------------------------------------------
NOMINEES FOR TERMS EXPIRING IN 2002
- -------------------------------------------------------------------------------
[PHOTO OF PAUL A. ALLAIRE APPEARS HERE]
PAUL A. ALLAIRE, Director of Lucent since 1996. Chairman
of the Board and Chief Executive Officer of Xerox Corpora-
tion (document processing services and products) since
1991. Director of Sara Lee Corp., SmithKline Beecham
p.l.c. and J.P. Morgan & Co., Inc. Committees: Member of
the Audit and Finance and Corporate Governance and Compen-
sation Committees. Age: 60.
-----------------------------------
[PHOTO OF HENRY B. SCHACHT APPEARS HERE]
HENRY B. SCHACHT, Director of Lucent since 1996. Chairman
of the Board of Lucent from 1996 to February 1998. Chief
Executive Officer of Lucent from 1996 to October 1997.
Chairman (1977-1995) and Chief Executive Officer (1973-
1994) of Cummins Engine Company, Inc. Director of The
Chase Manhattan Corporation and The Chase Manhattan Bank,
N.A., Aluminum Company of America (Alcoa), Cummins Engine
Company, Inc. and Johnson & Johnson. Age: 64.
-----------------------------------
[PHOTO OF JOHN A. YOUNG APPEARS HERE]
JOHN A. YOUNG, Director of Lucent since 1996. Vice-Chair-
man of Novell, Inc. since 1997. Retired President and
Chief Executive Officer of Hewlett-Packard Company (manu-
facturer of measurement and computation products) (1978-
1992). Director of Wells Fargo Bank, Wells Fargo & Co.,
Chevron Corp., International Integration Incorporated,
SmithKline Beecham p.l.c., Affymetrix, Inc. and Novell,
Inc. Committees: Member of the Corporate Governance and
Compensation Committee. Age: 66.
- -------------------------------------------------------------------------------
13
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
- -------------------------------------------------------------------------------
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2000
- -------------------------------------------------------------------------------
[PHOTO OF CARLA A. HILLS APPEARS HERE]
CARLA A. HILLS, Director of Lucent since 1996. Chairman
and Chief Executive Officer of Hills & Company (interna-
tional consultants) since 1993, United States Trade Repre-
sentative (1989-1993). Director of American International
Group, Inc., Chevron Corp. and Time Warner Inc. Commit-
tees: Member of the Corporate Governance and Compensation
Committee. Age: 64.
-----------------------------------
[PHOTO OF DREW LEWIS APPEARS HERE]
DREW LEWIS, Director of Lucent since 1996. Retired Chair-
man of the Board and Chief Executive Officer of Union Pa-
cific Corporation (rail transportation and trucking)
(1987-1996). Director of American Express Company, Aegis
Communications Group, Inc., FPL Group, Inc., Gannett Co.,
Inc., Union Pacific Resources Group Inc., Millennium Bank
and Gulfstream Aerospace Corporation. Committees: Member
of the Audit and Finance and Corporate Governance and Com-
pensation Committees. Age: 67.
-----------------------------------
[PHOTO OF DONALD S. PERKINS APPEARS HERE]
DONALD S. PERKINS, Director of Lucent since 1996. Retired
Chairman of the Board and Chief Executive Officer of Jewel
Companies, Inc. (diversified retailer) (1970-1980). In
1995, Mr. Perkins served as Non-Executive Chairman of
Kmart Corp. Director of Aon Corp., Cummins Engine Company,
Inc., LaSalle Hotel Properties, Nanophase Technologies
Corporation, The Putnam Funds, Ryerson Tull Inc. and
Springs Industries, Inc. Committees: Chairman of the Audit
and Finance Committee and Member of the Corporate Gover-
nance and Compensation Committee. Age: 71.
- -------------------------------------------------------------------------------
14
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
- -------------------------------------------------------------------------------
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2001
- -------------------------------------------------------------------------------
[PHOTO OF RICHARD A. MCGINN APPEARS HERE]
RICHARD A. MCGINN, Chairman of the Board and Chief Execu-
tive Officer of Lucent since February 1998, and Chief Ex-
ecutive Officer and President of Lucent since October
1997. President and Chief Operating Officer of Lucent from
1996 to October 1997 and Director of Lucent since 1996.
Executive Vice President of AT&T and Chief Executive Offi-
cer of the AT&T Network Systems Group (1994-1996), Presi-
dent and Chief Operating Officer of the AT&T Network Sys-
tems Group (1993-1994), Senior Vice President of the AT&T
Network Systems Group (1991-1993). Director of Oracle Cor-
poration and American Express Company. Age: 52.
-----------------------------------
[PHOTO OF PAUL H. O'NEILL APPEARS HERE]
PAUL H. O'NEILL, Director of Lucent since 1996. Chairman
of the Board and Chief Executive Officer of Aluminum Com-
pany of America (Alcoa) (production of aluminum) since
1987. Chairman of the Rand Corporation. Director of East-
man Kodak Company, the National Association of Securities
Dealers, Inc., the Gerald R. Ford Foundation and Manpower
Demonstration Research Corporation. Committees: Member of
the Audit and Finance and Corporate Governance and Compen-
sation Committees. Age: 63.
-----------------------------------
[PHOTO OF FRANKLIN A. THOMAS APPEARS HERE]
FRANKLIN A. THOMAS, Director of Lucent since 1996. Consul-
tant to the TFF Study Group since 1996 (a non-profit ini-
tiative assisting development in southern Africa). Retired
President of The Ford Foundation (1979-1996). Director of
Aluminum Company of America (Alcoa), Citigroup N.A.,
Cummins Engine Company, Inc. and PepsiCo, Inc. Committees:
Chairman of the Corporate Governance and Compensation Com-
mittee and Member of the Audit and Finance Committee. Age:
64.
- -------------------------------------------------------------------------------
15
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
DIRECTORS' PROPOSAL TO APPROVE AN AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Board of Directors believes that it is in the Company's best interest to
approve a proposal to amend the Company's Certificate of Incorporation (the
"Certificate") to increase the number of Shares the Company is authorized to
issue from 3 billion to 6 billion.
As of October 1, 1998, approximately 1.3 billion of the Company's 3 billion
currently authorized Shares were issued and outstanding. Of the remaining au-
thorized Shares, approximately 400 million were reserved for issuance in con-
nection with the Company's stock-based compensation plans.
During 1998, the Company effected a 2-for-1 stock split following a signifi-
cant increase in the market price for Shares from the price at the time of the
Company's initial public offering in 1996. From the time we announced that
stock split through the date this proxy statement went to press, the market
price for Shares increased further. The current number of authorized Common
Shares that are not outstanding or reserved is not sufficient to enable the
Company to complete another 2-for-1 stock split. Although we cannot guarantee
that Lucent's stock price will continue to rise or that the Board would de-
clare a stock split at any specific price or at all, the Board believes that
the increase in the number of authorized Shares will provide the Company with
the flexibility necessary to maintain a reasonable stock price through future
stock splits (effected in the form of a stock dividend) without the expense of
a special Shareowner meeting or having to wait until the next annual meeting.
Since the Spin-Off, Lucent has acquired a number of companies as part of im-
plementing its strategy to broaden its portfolio of product offerings, to aug-
ment its technological capabilities and to expand its geographic markets and
distribution channels. The Company has stated that, as part of its strategy,
it may acquire additional companies for these and other business reasons. From
time to time, we pay for acquisitions with Lucent Shares. The Board believes
that the proposed increase in the number of authorized Shares is desirable to
maintain the Company's flexibility in choosing how to pay for acquisitions and
other corporate actions such as equity offerings to raise capital and adoption
of additional benefit plans. The Board will determine
16
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
the terms of any such issuance of additional Shares.
If this proposal is approved, all or any of the authorized Shares may be is-
sued without further action by the Shareowners (unless such approval is re-
quired by applicable law or regulatory authorities) and without first offering
such Shares to the Shareowners for subscription. The issuance of Shares other-
wise than on a pro-rata basis to all Shareowners would reduce the proportion-
ate interest in the Company of each Shareowner.
We have not proposed the increase in the authorized number of Shares with
the intention of using the additional Shares for anti-takeover purposes, al-
though the Company could theoretically use the additional Shares to make more
difficult or to discourage an attempt to acquire control of the Company.
If this proposal is approved, Section 1 of Article IV of the Certificate
will be amended to read as follows:
Section 1. The Corporation shall be authorized to issue 6,250,000,000 shares
of capital stock, of which 6,000,000,000 shares shall be shares of Common
Stock, $.01 par value ("Common Stock"), and 250,000,000 shares shall be shares
of Preferred Stock, $1.00 par value ("Preferred Stock").
The Company does not have any current plans, agreements or understandings
for stock issuances which in the aggregate would involve the use of a number
of Shares that exceeds the amount currently authorized but unissued.
The Board has unanimously adopted resolutions setting forth the proposed
amendment to the Certificate, declaring its advisability and directing that
the proposed amendment be submitted to the Shareowners for their approval at
the Annual Meeting. If adopted by the Shareowners, the amendment will become
effective upon filing of an appropriate certificate with the Secretary of
State of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREOWNERS VOTE FOR THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
SHAREOWNERS SPECIFY OTHERWISE IN THEIR PROXIES.
17
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
SHAREOWNER PROPOSALS
- -------------------------------------------------------------------------------
Lucent receives Shareowner proposals throughout the year. Some may be with-
drawn by the proponent or are otherwise excludable. In 1998, the National
Council of Churches of Christ and two co-filers submitted a proposal relating
to the publication of a diversity report. This proposal was withdrawn after
discussions with management. Lucent already has materials available that re-
late to its diversity compliance programs. Shareowners can write to the Com-
pany at 600 Mountain Avenue, Room 3C-515, Murray Hill, New Jersey 07974 for
copies of pertinent diversity materials.
Any Shareowner who intends to present a proposal at the annual meeting in
the year 2000, and who wishes to have the proposal included in the Company's
proxy statement for that meeting, must deliver the proposal to the Corporate
Secretary at the above address, not later than August 24, 1999. All proposals
must meet the requirements set forth in the rules and regulations of the SEC
in order to be eligible for inclusion in the proxy statement for that meeting.
SHAREOWNER PROPOSAL NUMBER 1
- -------------------------------------------------------------------------------
Mrs. Evelyn Y. Davis, having an office at the Watergate Office Building,
Suite 215, 2600 Virginia Avenue, N.W., Washington, D.C. 20037, beneficial
owner of 200 Common Shares, has proposed the adoption of the following resolu-
tion and has furnished the following statement in support of her proposal:
RESOLVED: "That the shareholders of Lucent Technologies recommend that the
Board of Directors take the necessary steps to reinstate the election of di-
rectors ANNUALLY, instead of the stagger system which was recently
adopted."
REASONS:
"Many New York Stock Exchange listed corporations elect all their directors
each year."
"This insures that ALL directors will be more accountable to ALL sharehold-
ers each year and to a certain extent prevents the self-perpetuation of the
Board."
"A.T.T. has annual election of ALL directors."
"We do have a good Board of Directors but they should be willing to stand
for election EVERY year."
18
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
"Last year the owners of 185,553,493 shares, representing approximately
44.5% of shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
COMPANY RESPONSE
- -------------------------------------------------------------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
When the Company was formed in 1996, it was determined that it was appropri-
ate and in the best interests of the new company's Shareowners to have a clas-
sified board. The Company operates in a highly competitive industry in which
there is significant merger and acquisition activity. In addition, there has
been considerable market volatility during the past fiscal year. The Board of
Directors continues to believe that a classified board remains, at this time,
an appropriate measure to reduce the ability of a third party to effect a sud-
den, unsolicited bid for control or other unanticipated action which the Board
determines is not in the best interests of Shareowners. The staggered board
system may place the Company in a better position to negotiate with the propo-
nent to obtain a transaction on more favorable terms for Shareowners. It may
give the Board more time to consider alternatives that might provide greater
Shareowner value.
The Board believes that directors who are elected to three-year terms are
just as accountable to Shareowners as directors who are elected on an annual
basis. We have fiduciary duties that do not depend on how often we are elect-
ed.
Approval of this proposal would require the affirmative vote of a majority
of the Shares present in person or by proxy and entitled to vote at the Annual
Meeting. However, because this proposal is only a recommendation, approval of
the proposal would not automatically repeal the classified board. Eliminating
the classified board would require Board action and a subsequent Shareowner
vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREOWNER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREOWNERS SPECIFY OTHERWISE IN THEIR PROXIES.
19
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
SHAREOWNER PROPOSAL NUMBER 2
- -------------------------------------------------------------------------------
Mr. Robert D. Morse, with an address of 212 Highland Avenue, Moorestown, NJ
08057, beneficial owner of 1,314 Common Shares, has proposed the adoption of
the following resolution and has furnished the following statement in support
of his proposal:
I propose that the Officers and Directors consider the discontinuance of all
bonuses immediately, and options, rights, SAR's, etc. after termination of any
existing programs for top management.
This does not include any programs for employees.
REASONS:
Management and Directors are compensated enough to buy on open market, just
as you and I, if they are motivated.
Management is already well paid with base pay, life insurance, retirement
plans, paid vacations, free use of vehicles, etc.
Options, rights, SAR's, etc. are available elsewhere, and a higher offer
would induce transfers, not necessarily "hold and retain" qualified persons.
Comparison with "peer groups", [other similar companies] pay is unfair, as
other management could be better or worse. Would they also accept mistakes of
others?
"Align management with shareowners" is a repeated ploy or "line" to lull us
as to continually increasing their take of our assets. Do we get any purchase
options at previous rates?
Please vote YES for this proposal.
If officers filled out a daily work sheet, what would the output show?
COMPANY RESPONSE
- -------------------------------------------------------------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
We have developed an executive compensation program that we believe encour-
ages our executives to make responsible business decisions which result in
Company performance that benefits our Shareowners. The program provides these
incentives by linking a portion of each executive's compensation to the
Company's financial performance. This is done by granting equity-based awards
such as stock options and making bonus
20
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
payments that depend on the extent to which the Company meets an objective fi-
nancial performance measure, such as an earnings per Share goal. With these
types of awards, our executives benefit when the value of your Shares increas-
es. We believe that providing these kinds of incentives will encourage actions
by executives which benefit all Shareowners in a way that base salaries and
the kinds of benefits that Mr. Morse would allow us to provide would not.
We also believe that our executive compensation program is competitive with
those of companies with which we compete for executive talent. It must remain
competitive. If it does not, we believe the Company will be less successful
attracting and retaining the executive talent it needs to be a market leader.
While a compensation package including bonuses and stock options will not al-
ways retain an executive, we believe that these types of compensation packages
are an appropriate tool to use in seeking to maximize Shareowner value.
For these reasons, we believe that it is not in the Shareowners' interest to
adopt this proposal and urge you to vote against it.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREOWNER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREOWNERS OTHERWISE SPECIFY IN THEIR PROXIES.
SHAREOWNER PROPOSAL NUMBER 3
- -------------------------------------------------------------------------------
The General Pension Board of the United Methodist Church with an address of
1201 Davis Street, Evanston, IL 60201-4118, beneficial owner of 564,641 Common
Shares, has proposed the adoption of the following resolution and has fur-
nished the following statement in support of its proposal:
RESOLVED, that the shareholders of the Corporation request that the board of
directors adopt and implement a policy requiring all proxies, ballots and vot-
ing tabulations that identify how shareholders voted be kept confidential, ex-
cept when disclosure is mandated by law, or such disclosure is expressly re-
quested by a shareholder, or during a contested election for the board of di-
rectors, and that the tabulators and the inspectors of election be independent
and not the employees of the Corporation.
21
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
STATEMENT IN SUPPORT
The confidential ballot is fundamental to the American political system. The
reason for this protection is to ensure that voters are not subjected to ac-
tual or perceived coercive pressure. We believe that this fundamental princi-
ple of the confidential ballot should be applied to public corporations. While
we make no imputation that our company's management has acted coercively, the
existence of this possibility is sufficient to justify confidentiality.
Many excellent companies, such as Coca-Cola Co., Dow Chemical, Georgia-Pa-
cific Corp., Gillette, Kimberly Clark, Louisiana Pacific, and Quaker Oats, use
confidential voting. The number of companies now using some form of confiden-
tial voting is up to 174 out of 1800 companies in, the Investor Responsibility
Research Center's (IRRC) current research universe. About 29 percent of Stan-
dard & Poor's 500 companies use some form of secret ballot. (IRRC, March 1997)
In 1997, the Investor Responsibility Research Center also reported that con-
fidential voting wins more support from institutional investors surveyed by
IRRC than any other shareholder proposal. In IRRC's 1996 survey, 42 of the 56
institutions responding to the question (or 75 percent) said they consistently
support confidential voting resolutions.
This resolution would permit shareholders to voluntarily disclose their vote
to management by expressly requesting such disclosure on their proxy cards.
Additionally, shareholders may disclose their vote to any other person they
choose. This resolution would merely restrict the ability of the corporation
to have access to the vote of its shareholders without their specific consent.
Many shareholders believe confidentiality of ownership is ensured when
shares are held in street or nominee name. This is not always the case. Man-
agement has various means of determining actual (beneficial) ownership. For
instance, proxy solicitors have elaborate databases that can match account
numbers with the identity of some owners. Moreover, why should shareholders
have to transfer their shares to nominees in an attempt to maintain confiden-
tiality? In our opinion this resolution is the only way to ensure a secret
ballot for all shareholders irrespective of how they choose to hold their
shares.
22
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
COMPANY RESPONSE
- -------------------------------------------------------------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
We believe that our current procedures serve both the Company and our
Shareowners. We believe that this proposal is not in the Shareowners' interest
for the following reasons:
LUCENT ALREADY HAS INDEPENDENT INSPECTORS OF ELECTION. When Lucent became an
independent public company in 1996, we adopted a policy to use independent,
non-employee inspectors of election, appointed annually by the Board of Direc-
tors.
WE VALUE OUR SHAREOWNERS. Proxies received for tabulation are kept at a se-
cure location at our transfer agent. While our transfer agent forwards to us
any proxy card which has been returned with written comments, we do not other-
wise request access to individual proxy cards.
MANY INDIVIDUAL SHARE-OWNERS WANT TO COMMUNICATE WITH MANAGEMENT. Approxi-
mately two million individuals are Shareowners of record or employee
Shareowners. We do not attempt to ascertain how an individual or employee
Shareowner votes, and we would not coerce or pressure them. Individual Share-
owners are candid in expressing their views to management. Shareowners fre-
quently call or write to express their views and we attempt to respond
individually. We also receive thousands of comments written on proxy cards.
While we cannot respond to all of them, we do take these comments into consid-
eration.
MOST SHAREOWNERS CAN EFFECTIVELY CHOOSE TO BE ANONYMOUS. Any Shareowner who
seeks anonymity can maintain Shares in a nominee name - such as through a bank
or broker - all of which maintain the confidentiality of the name of the
Shareowner on request. We believe it would be impossible for a proxy solicit-
ing firm to determine how an individual Shareowner holding a typical number
of Shares voted when confidentiality is so requested.
INSTITUTIONAL INVESTORS' VOTING PATTERNS ARE IMPORTANT TO LUCENT. Certain of
our institutional investors hold significant numbers of Lucent Shares. When
these institutions decide to increase or reduce their position, this can have
a significant impact on the market price of your Shares. Many of these insti-
tutions represent members of the public, or vote shares beneficially owned by
members of the public or hold Shares in a fiduciary capacity. Because corpo-
rate voting is based on
23
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
the concept of one vote per share and not one vote per person, these institu-
tions have a significantly greater ability to influence the outcome of the
vote on a matter than an individual voting in a political election. Under
these circumstances, we believe that it is appropriate for the Company to have
the ability to determine how an institution votes so that we can open a dia-
logue with the institution and seek to address their concerns as well as ours.
However, in no circumstances would Lucent coerce an institution with which it
has a commercial relationship in order to induce a particular vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREOWNER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREOWNERS OTHERWISE SPECIFY IN THEIR PROXIES.
SHAREOWNER PROPOSAL NUMBER 4
- -------------------------------------------------------------------------------
Mark Seidenberg, with an address of P.O. Box 6102, Woodland Hills, CA 91365,
beneficial owner of 32 Common Shares, has proposed the adoption of the follow-
ing resolution and has furnished the following statement in support of his
proposal:
The stockowners recommend the Board of Directors adopt these policies for
all dealings with China:
1. Goods or services produced in whole or in part by slave or forced labor
shall not be acceptable for delivery to the corporation, its subsidiaries, af-
filiates, or joint ventures. A suitable certificate of origin shall be re-
quired.
2. Goods provided by the corporation, its subsidiaries, affiliates or joint
ventures shall not be sold to or otherwise provided to any facility utilizing
slave or forced labor. A suitable certificate of use shall be required.
3. The right of on-site inspection to determine the existence of slave or
forced labor shall be vigorously pursued.
4. The corporation shall cooperate promptly, energetically, and fully with
the United States government and any international organization in their laws
or policies to discourage the use of slave or forced labor.
SUPPORTING STATEMENT
The arrest and expulsion of American Harry Wu by the Communist Chinese in
1995 was a wake-up call. He has tirelessly exposed the Chinese "laogai".
Slave and forced labor are widespread in China. China's
24
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
laogai camps and factories include about 8,000,000 forced laborers. They pro-
duce numerous products, including sophisticated machinery and electronics, and
much of it is intended for export. The State of California has passed a law
refusing to buy slave-made goods from overseas. The University of California
has adopted the same policy. The U.S. Department of Energy has done so with
regard to the National Laboratories (Los Alamos, Lawrence Livermore and Law-
rence Berkeley).
Lucent has multi-million dollar deals with China but has no comprehensive
anti-slave labor policies, as proposed by this resolution. Here's what
Lucent's current policy lacks:
- --No by-laws or corporate article includes it.
- --No board resolution includes it.
- --No agreement with joint ventures or affiliates includes it.
- --No specific written guidelines for buyers, sales personnel, or other employ-
ees or agents covers all sales or purchases.
- --No standard clause on it is in all purchase or sales contracts.
- --No specific penalty for violations by customers, suppliers, employees, or
agents exists.
- --No relevant certificates of origin (for all purchases) or use (for all
sales) are utilized.
Much of Lucent's business is conducted overseas and is beyond the reach of
U.S. law, but not beyond managerial control.
A disturbing policy is found in Lucent's publication "Business Guideposts: A
Personal Commitment": "Where local country laws contain mandatory requirements
that differ from the provision from this code of conduct, such requirements
prevail for employees working in those countries." In some countries, slave
and forced labor is the law of the land. It sounds like Lucent accepts this?
If you can imagine any convincing argument against having this proposed an-
ti-slave labor policy, I can't. But somehow Lucent's board will think of some-
thing. At the 1998 annual meeting, more than 31,800,000 shares voted for a
similar resolution. Please do your own thinking and vote your own conscience.
COMPANY RESPONSE
- -------------------------------------------------------------------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
Lucent appreciates Mr. Seidenberg's concern with hu-
25
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
man rights issues. We have attempted to engage Mr. Seidenberg in a dialogue on
his proposal to discuss our views and to articulate our policies that are re-
sponsive to his proposal. In China, Lucent offers compensation packages that
include above-market wages and generous benefits. In addition, working condi-
tions at our locations in China have been cited as superior through various
international certification processes. Further, Lucent already has guide-
lines in place that more than satisfy the policy issues raised in the propos-
al. They are:
POLICY AGAINST IMPORTATION OF GOODS PRODUCED BY SLAVE LABOR. Lucent does not
import goods produced by slave labor. In fact, most components that are used
in our manufacturing operations in China are imported from the United States.
The Tariff Act of 1930 and its related regulations, already prohibit importa-
tion of goods manufactured by convict or forced labor.
POLICY AGAINST CONDUCTING BUSINESS IN COUNTRIES WITH EXCESSIVE HUMAN RIGHTS
VIOLATIONS. Our code of conduct requires us to conduct business ethically. We
carefully consider the effect of doing business in countries where there may
be human rights issues. If these existing conditions in any country would com-
promise our ethical standards, it is unlikely that we would have a business
presence in that country.
ON-SITE INSPECTIONS. Our procurement practices already require that our sup-
pliers meet certain prequalification requirements, which include on-site in-
spections.
COMPLIANCE WITH U.S. LAWS AND COOPERATION WITH INTERNATIONAL ORGANIZATIONS.
We have subject matter experts responsible for Lucent's compliance with U.S.
laws and regulations relating to the importation of goods manufactured by con-
vict or forced labor. In addition, Lucent has received certifications from in-
ternational standards organizations for its superior factory conditions. For
example, in China, the Qingdao manufacturing facility received ISO 14001 and
9001 certifications and was designated the Advanced Environmental Protection
Enterprise for the period 1993-1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREOWNER PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREOWNERS OTHERWISE SPECIFY IN THEIR PROXIES.
26
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
PERFORMANCE GRAPH
- -------------------------------------------------------------------------------
The graph below provides an indicator of cumulative total Shareowner returns
for the Company as compared with the S&P 500 Stock Index ("S&P 500") and the
S&P Technology Sector Index ("S&P Tech Sector") weighted by market value at
each measurement point.
This graph covers the period of time beginning April 4, 1996, when Lucent's
Common Shares were first traded on the NYSE, through September 30, 1998.
<TABLE>
<CAPTION>
APRIL 4, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997 1998
-------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Lucent $100.00 $150.39 $267.74 $456.95
S&P Tech Sector $100.00 $116.92 $189.90 $214.40
S&P 500 $100.00 $105.98 $148.84 $162.31
</TABLE>
FOOTNOTES
(1) Assumes $100 invested on April 4, 1996, in Lucent Common Shares, the S&P
500 and S&P Tech Sector and reinvestment of dividends.
27
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
The following Report of the Compensation Committee on Executive Compensation
and the Performance Graph shall not be deemed incorporated by reference by any
general statement incorporating this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent the Company specifically incorporates this information by refer-
ence, and shall not otherwise be deemed filed under such Acts.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
This Report of the Compensation Committee covers the following topics:
. Role of the Corporate Governance and Compensation Committee relative to the
compensation program.
. Executive Compensation Guiding Principles
. Components of the Compensation Program
. Compensation of the Chief Executive Officer
ROLE OF THE CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE
The Committee is made up of seven members of the Board of Directors who are
not current or former employees of the Company. The Committee sets the overall
compensation principles of the Company and reviews the entire program at least
annually. This includes each element described below, the measurements used to
make payments of awards under the Company's incentive plans and the overall
effectiveness of the program. The Committee specifically reviews and estab-
lishes the individual compensation levels for the top 18 members of the senior
leadership team including the Chairman and Chief Executive Officer. The Com-
mittee has considered the advice of an independent outside consultant in de-
termining the appropriateness and the level of compensation.
EXECUTIVE COMPENSATION GUIDING PRINCIPLES
Lucent has developed a compensation program that is intended to motivate and
retain the key talent it needs to be a market leader in a highly competitive
industry. The Committee and the Company's leadership team developed this pro-
28
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
gram to support the Company's aggressive business strategy. The following
principles guided the development of the program:
. Compensation opportunity should be related to performance. That is, if
Lucent's and the individual's performance are at the median of those compa-
nies with whom we compete for talent, then pay should also be at the median.
Opportunity should increase proportionately if Lucent's or the individual's
performance is above the median. On the other hand, if performance is at
less than the median, any award payment will be at the Committee's discre-
tion.
. Ownership of the Company's shares should be pervasive throughout the Company
with each individual having a number of opportunities to own Lucent stock.
To that end, we have made stock option grants to broad segments of the em-
ployee population in October 1996 and in September 1998. We have a number of
other programs that are intended to increase ownership among employees.
These programs include stock options plans under which we make discretionary
stock option grants to employees worldwide, an employee stock purchase plan
which enables employees to purchase Lucent stock at a discount through pay-
roll deduction and 401(k) savings plans that allow employees to invest in a
company stock fund. The overall intent is to encourage each employee to be,
and to behave like, an owner of the business.
. As described later in this report, our compensation programs are designed to
balance short and long term financial objectives, build Shareowner value and
reward for individual, team and corporate performance.
. The proportion of total pay that is at risk against individual and Company
performance objectives increases with the more senior positions. For exam-
ple, in fiscal 1998, approximately 85 percent of the Chairman's total target
pay opportunity was at risk against short and long term performance goals.
Survey data is compiled by two independent outside consultants. Compensation
data from 24 companies is compiled to ensure that our total program is compet-
itive. Companies selected are those with whom we compete for executive talent.
Lucent targets the mean of the selected sample group. The Company's competi-
tors for exec-
29
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
utive talent are not necessarily the same companies that are included in the
S&P Technology Sector Index used to compare Shareowner returns (see Perfor-
mance Graph, page 27) because the Company requires skills from a more varied
set of backgrounds.
It is the Company's goal to have compensation paid to its five most highly
compensated officers qualify as performance-based compensation deductible for
federal income tax purposes under Section 162(m) of the Internal Revenue Code
of 1986. However, as a result of certain actions taken in connection with
AT&T's decision to create and spin off the Company, certain compensation paid
by the Company related to awards granted around the time of the Spin-Off did
not qualify. In addition, a portion of the cash compensation paid to Mr.
McGinn for 1998 could not so qualify.
COMPONENTS OF THE COMPENSATION PROGRAM
The four components of the total compensation program are:
. Base Salary
. Short Term Bonus
. Long Term Incentives
. Special Equity Grants
1. Base Salary
Base salaries for all officers have been set at levels that are comparable
to similar positions at other companies with whom we compare for compensation
purposes. While surveys are conducted annually, it is intended that salaries
will only be adjusted as needed based on the results of our market surveys.
This is in line with the philosophy that above median compensation opportunity
should come from the variable portion of the compensation package.
2. Short Term Incentives
The annual bonus component of incentive compensation is designed to align
executive pay with short term (annual) performance of the Company.
In 1998, one half of the annual bonus opportunity was based on corporate
earnings per share objectives that were tied to both our internal objectives
and external expectations of the investment community; other factors may be
used or added in subsequent years.
In 1998, the other half of the annual bonus opportunity was tied to individ-
ual performance and was determined by the Committee at the end of the year. We
consider factors such as leadership, customer focus, business knowledge, in-
30
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
novation, social responsibility and execution of the business strategy.
3. Long Term Incentives: Stock Options and Three-Year Performance Awards
We make regular annual grants of stock options to executives. Grants for
1998 were made October 6, 1997. These options have an exercise price equal to
the fair market value of a Share on that day. The options generally vest after
three years of service and expire ten years from the date of the grant. We
base target grants on a comparison to our selected sample group; however,
grants to individuals are adjusted based on individual performance.
We have historically also granted long term performance awards to execu-
tives. Under these awards, executives receive cash payments based on the
Company's performance over a three-year period. The awards have target dollar
payouts that we determine based on comparisons with our selected sample group
of companies. For the awards covering the period from October 1, 1997 to Sep-
tember 30, 2000, the level of the payouts will depend on the extent to which
the Company achieves an earnings per share growth objective that we estab-
lished at the time of grant. If the Company achieves the target level of earn-
ings per share growth, executives will receive the target payments. If the
Company achieves a higher or lower level of earnings per share growth, the
payments will be higher or lower.
In 1998, stock options and performance awards each made up half of our long
term incentive program. Because we feel that stock options provide a better
incentive for executives, beginning in fiscal 1999, we will be replacing the
performance award component of long term incentive compensation with stock op-
tions. For fiscal 1999, we did not grant any performance awards to those indi-
viduals listed in the Summary Compensation Table.
We did not report any long term incentive plan payouts in the Summary Com-
pensation Table for 1998 because the performance criteria in the awards
granted by AT&T in 1995 were waived in connection with the Spin-Off. Accord-
ingly, we reported these awards as restricted stock grants for 1995.
31
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
4. Special Equity Grants: Stock Options and Restricted Stock Units
As explained above, the Committee believes that ownership of Company Shares
is a key element of the compensation program and that retention of its officer
team is essential to the Company's success both short and long term. To accom-
plish these objectives, the Committee awards special equity grants from time
to time. Special grants of stock options and restricted stock units were made
to certain officers on October 6, 1997. These grants provide for vesting after
six years as compared to the normal three-year vesting for stock option grants
which are a part of the regular annual compensation program.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In fiscal 1998, the Company's most highly compensated officer was Richard A.
McGinn, Chairman of the Board and Chief Executive Officer. Assuming results at
the median of the select sample, approximately 15% of Mr. McGinn's total an-
nual compensation would have been base salary, 20% would have been short term
incentive compensation and 65% would have been long term incentive compensa-
tion. Because the Company performed significantly better than we expected and
reflecting Mr. McGinn's skillful handling of the Company's business, his in-
centive compensation for the year was a greater portion of the total. If per-
formance had been less than the median, the incentive compensation would have
been a smaller portion of the total.
Each year the Board of Directors and the Chief Executive Officer agree on a
set of multi-year objectives. The Committee reviews the Chief Executive Offi-
cer's performance against those objectives at year-end. This review includes a
detailed analysis of the short and long term financial results as well as pro-
gress towards the Company's strategic objectives. In addition, the Committee
considers individual factors such as Mr. McGinn's leadership ability, commu-
nity service activities, ability to execute the business strategy and the
Company's relationship with customers and the investment community.
Base Salary:
In fiscal 1998, the Committee increased Mr. McGinn's base salary from
$900,000 to $1,100,000. This change was made to recognize his new role as
Chairman of the Board and Chief Executive Officer and also to recognize his
contribution
32
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
towards Lucent's extraordinary business success since becoming a fully indepen-
dent company.
Short Term Incentives:
For fiscal 1998, Mr. McGinn's regular annual bonus opportunity was based on
the following:
. 50% corporate earnings per share objectives
. 50% individual objectives determined by the Committee
For fiscal 1998, the Committee considered, in assessing Mr. McGinn's perfor-
mance and determining his short-term incentive award, the following accomplish-
ments under Mr. McGinn's leadership:
. The Company's revenues from continuing operations for the fiscal year grew by
20.3%
. Net income, excluding one-time events, increased 51.8%
. Earnings per share increased 47%, also excluding one-time events
. The Company's revenues from international operations increased by 22%
. The market price for the Company's Shares (split-adjusted) increased over 70%
versus the price on September 30, 1997
. The Company's progress in implementing its strategy to grow the business at
rates greater than the market opportunity
. The acquisitions the Company has made to address opportunities in the data
networking product area, build distribution channels and expand globally
. The Company's progress against measures to assess customer satisfaction
In addition, Mr. McGinn has personally led the Company's efforts to create a
high-performance operating environment and an open, supportive and diverse
workplace. The Committee further noted Mr. McGinn's consistent high level of
performance since the Company's formation and his integral involvement in the
Company's success, including total return to Shareowners, since the Company's
initial public offering in April 1996. Based on this analysis, the Committee
awarded Mr. McGinn an annual bonus of $4,417,652, which was substantially above
the target level and a special, one-time bonus of $7,444,000.
Long Term Incentives:
In fiscal 1998, we granted Mr. McGinn an option to purchase 150,000 Shares of
Company stock vesting in three years, subject to continued employment, and a
three-year
33
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
performance award with a target value of $1,500,000, as part of the long term
component of his regular annual compensation program.
Special Equity Grant:
In order to recognize Mr. McGinn's new position as Chief Executive Officer
and also to provide him with additional incentives to improve the Company's
financial performance, we granted Mr. McGinn a special stock option in fiscal
1998 covering 400,000 Shares and vesting in six years, subject to continued
employment, and a special restricted stock unit award of 200,000 Shares also
vesting in six years.
Franklin A. Thomas (Chairman)
Paul A. Allaire
Carla A. Hills
Drew Lewis
Paul H. O'Neill
Donald S. Perkins
John A. Young
34
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION(2) LONG TERM COMPENSATION(2)
--------------------------------------------------------------------------
AWARDS(5) PAYOUTS
--------------------------------------
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARD(S) OPTIONS PAYOUTS SATION
PRINCIPAL POSITION(1) YEAR (3)($) (3)($) (4)($) (6D)($) (#) ($) (7)($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard A. McGinn 1998 1,100,000 11,861,652(8) 120,914 8,606,260(6a) 550,000(6a) -- 23,153
Chairman of the Board
and 1997 856,250 1,469,773 138,055 10,023,125(6b) 969,000(6b) 558,103 42,101
Chief Executive Officer 1996 480,733 1,455,233 67,277 782,439 -- 309,803 23,533
Henry B. Schacht(9) 1998 726,580(10) 1,221,094 72,805 -- 200,000 -- 60,861
Retired Chairman of the
Board 1997 763,666 637,038 110,022 -- 1,794,400(6b) -- 78,851
and Chief Executive
Officer 1996 600,000 -- 38,207 1,300,828 180,166 -- 2,410
Daniel C. Stanzione 1998 764,584 2,376,150 88,844 4,311,736(6a) 250,000(6a) -- 38,196
Executive Vice President
and 1997 604,167 953,388 152,013 5,009,375(6b) 614,400(6b) 178,545 34,899
Chief Operating Officer
and 1996 379,633 1,077,344 77,398 563,584 -- 173,850 18,482
President - Bell Labs
Ben Verwaayen(11) 1998 691,667 2,729,554 90,698 2,840,066(6a) 220,000(6a) -- 420,296
Executive Vice President
and 1997 50,000 390,646 -- 6,917,870(6c) 513,000 -- --
Chief Operating Officer 1996 -- -- -- -- -- -- --
Donald K. Peterson 1998 584,583 1,473,000 28,674 2,840,066(6a) 200,000(6a) -- 61,134
Executive Vice President
and 1997 408,750 452,221 55,173 4,007,500(6b) 455,800(6b) 158,731 54,651
Chief Financial Officer 1996 293,950 501,165 14,025 243,849 32,590 154,574 49,407
Patricia F. Russo 1998 514,583 1,288,875 93,976 2,840,066(6a) 200,000(6a) -- 23,978
Executive Vice
President - 1997 379,166 408,634 128,342 4,007,500(6b) 449,600(6b) 178,545 20,446
Strategy, Business 1996 257,250 440,062 63,934 229,474 -- 173,850 17,967
Development and
Corporate Operations
</TABLE>
- --------------------------------------------------------------------------------
Explanatory footnotes begin on page 36
35
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
FOOTNOTES
(1) Includes those who in fiscal 1998 were at any time the Chief Executive Of-
ficer and the four other most highly compensated executive officers as
measured by salary and bonus. In October 1997, Mr. McGinn was named Chief
Executive Officer and President while Mr. Schacht remained Chairman of the
Board of Directors. In February 1998, Mr. McGinn became Chairman of the
Board.
(2) Compensation deferred at the election of a named officer is included in
the category (e.g., bonus or LTIP payouts) and year it would have other-
wise been reported had it not been deferred. All Share amounts have been
adjusted to reflect the Company's April 1998 2-for-1 stock split.
(3) Because of the change in the Company's fiscal year in 1996, salary and bo-
nus shown for 1997 cover 12-month and nine-month periods, respectively,
and salary and bonus shown for 1996 cover nine-month and 12-month periods,
respectively.
(4) Includes (a) payments of above-market interest on deferred compensation,
(b) certain dividend equivalents, (c) tax reimbursement payments and (d)
certain fringe benefits (Mr. McGinn received a $16,800 car allowance and
had personal use of Company aircraft valued at $37,063; Mr. Verwaayen re-
ceived a $16,800 car allowance and had personal use of Company aircraft
valued at $26,934).
(5) Awards granted in fiscal 1996 were granted with respect to AT&T common
shares. The amounts shown for 1996 restricted stock awards represent the
dollar value of the awards on the dates originally granted. The amounts
shown for 1996 stock options represent the number of Common Shares result-
ing from the replacement on October 1, 1996 of outstanding AT&T awards
with Lucent awards, which replacement was intended to preserve the eco-
nomic value of the options at the time of the Spin-Off.
(6) (a) On October 6, 1997, the Compensation Committee made a special grant of
stock options and restricted stock units to Messrs. McGinn, Stanzione,
Verwaayen and Peterson and to Ms. Russo to recognize their new responsi-
bilities within the Company due to the restructuring which occurred in the
first quarter of fiscal 1998. The amounts shown include these options and
the value of the restricted stock unit awards on the grant date. Both the
restricted stock units and the options vest after six years. The number of
stock options shown for 1998 also includes the regular annual grants.
(b) In October 1996, at the time of the Spin-Off, the Compensation Commit-
tee granted a special equity award of stock options and restricted stock
units to Messrs. McGinn, Stanzione and Peterson and to Ms. Russo and a spe-
cial award of stock options to Mr. Schacht. The amounts shown include these
options and the value of the restricted stock unit awards on the grant date.
The vesting of those options has been accelerated from six years to three
years because certain stock price targets have been met. The vesting of the
restricted stock unit awards has been accelerated from six years be-cause
certain financial targets were met. One third of these awards will vest in
each of 2000, 2001 and 2002. The number of stock options shown for 1997 also
includes the regular annual grants made in January 1997.
(c) At the time he joined the Company, Mr. Verwaayen received 1,916 re-
stricted stock units ($74,604 of the amount shown) which were paid in 1998,
5,750 restricted stock units ($223,891 of the amount shown) which will vest
in 1999 and 170,000 restricted stock units ($6,619,375 of the amount shown)
which will vest in 2002.
(d) Dividend equivalents are paid in cash on all restricted stock units.
Based on the closing price of Shares on the NYSE on September 30, 1998, the
aggregate number and value of all restricted stock unit holdings on such
date were 688,158 Shares and $47,525,912 for Mr. McGinn, 49,806 Shares and
$3,439,727 for Mr. Schacht, 392,924 Shares and $27,136,314 for Mr.
Stanzione, 241,750 Shares and $16,695,859 for Mr. Verwaayen and 258,536
Shares and $17,855,143 for Mr. Peterson and 290,710 Shares and $20,077,159
for Ms. Russo.
(7) The amounts shown for 1998 include (a) Company contributions to savings
plans ($4,800 for Mr. Schacht, $6,260 for Mr. Stanzione, $4,800 for Mr.
Peterson and $7,735 for Ms. Russo); (b) the dollar value of the benefit or
premiums paid for split-dollar life insurance policies (unrelated to term
life insurance coverage) projected on an actuarial basis ($23,153 for Mr.
McGinn, $41,448 for Mr. Schacht, $13,219 for Mr. Stanzione, $63,836 for Mr.
Verwaayen, $45,667 for Mr. Peterson and $6,726 for Ms. Russo); (c) payments
equal to lost Company savings plan matching contributions result-ing from
tax code limitations ($14,613 for Mr. Schacht, $18,717 for Mr. Stanzione,
$10,667 for Mr. Peterson and $9,517 for Ms. Russo) and (d) pay-ment of
$356,460 of relocation expenses for Mr. Verwaayen.
36
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
(8) The 1998 bonus for Mr. McGinn includes a regular annual bonus of
$4,417,652, and a special one-time bonus payment of $7,444,000 in recogni-
tion of the Company's and Mr. McGinn's outstanding performance.
(9) The Board of Directors restructured Mr. Schacht's 1996 and 1997 compensa-
tion, reducing his 1996 annual bonus by $2,281,838, reducing his 1997 sal-
ary by $208,000 and reducing his 1997 annual bonus by $1,510,162 and es-
tablishing a split-dollar life insurance policy insuring him and his
spouse. Under this arrangement, the Company will utilize the savings from
the salary and bonus reduction to pay premiums. The aggregate premiums for
this policy will be $4,000,000 over a three-year period. The Company is a
beneficiary of this policy. In fiscal 1998, the annual value of the policy
to Mr. Schacht of $11,274 was imputed as income. Mr. Schacht became Chief
Executive Officer of the Company on February 1, 1996. He received $75,000
salary for the month of January 1996 as an employee of AT&T.
(10) The amount shown includes $312,500 received as salary while an employee
of the Company, $89,080 in lieu of unused vacation days, $175,000 in con-
sulting fees received under a consulting agreement that became effective
after Mr. Schacht retired as Chairman of the Board and $150,000 of Direc-
tor retainer fees.
(11) The amounts shown under "Bonus" for Mr. Verwaayen include a hiring bonus,
of which $667,354 is included in 1998 and $330,000 is included in 1997.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS
PERIOD UNTIL UNDER NON-STOCK PRICE-BASED PLANS (1)
MATURATION OR -------------------------------------
NAME PAYOUT (1) TARGET ($)
---- ------------- ----------
<S> <C> <C>
Richard A. McGinn 1998-2000 1,500,000
Henry B. Schacht 1998-2000 2,000,000
Daniel C. Stanzione 1998-2000 1,000,000
Ben Verwaayen 1998-2000 700,000
Donald K. Peterson 1998-2000 500,000
Patricia F. Russo 1998-2000 500,000
</TABLE>
FOOTNOTES
(1) The awards listed in the table relate to the performance period beginning
October 1, 1997 and ending September 30, 2000. The payout for each named
officer at the end of the cycle will be based on the level of attainment
of an earnings per share growth objective. Under the Company's 1996 Long
Term Incentive Program, the maximum award to any person is $9 million. If
Company performance is less than the target, any payments will be at the
discretion of the Committee.
37
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------
NUMBER OF
SHARES GRANT
UNDERLYING % OF TOTAL DATE
OPTIONS OPTIONS EXERCISE PRESENT
GRANTED GRANTED TO PRICE EXPIRATION VALUE (2)
NAME (#) EMPLOYEES ($/SH) DATE ($)
- ---- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Richard A. McGinn 150,000 0.4 43.3282 10/6/07 2,121,000(3)
400,000 1.1 43.3282 10/6/07 6,940,000(4)
Henry B. Schacht 200,000 0.5 43.3282 10/6/07 2,828,000(5)
Daniel C. Stanzione 100,000 0.3 43.3282 10/6/07 1,414,000(3)
150,000 0.4 43.3282 10/6/07 2,602,500(4)
Ben Verwaayen 70,000 0.2 43.3282 10/6/07 989,800(3)
150,000 0.4 43.3282 10/6/07 2,602,500(4)
Donald K. Peterson 50,000 0.1 43.3282 10/6/07 707,000(3)
150,000 0.4 43.3282 10/6/07 2,602,500(4)
Patricia F. Russo 50,000 0.1 43.3282 10/6/07 707,000(3)
150,000 0.4 43.3282 10/6/07 2,602,500(4)
</TABLE>
FOOTNOTES
(1) All Share and per Share amounts have been adjusted to reflect the
Company's April 1998 2-for-1 stock split.
(2) In accordance with SEC rules, the Black-Scholes option pricing model was
chosen to estimate the grant date present value of the options set forth
in this table. The Company's use of this model should not be construed as
an endorsement of its accuracy at valuing options. All stock option valua-
tion models, including the Black-Scholes model, require a prediction about
the future movement of the stock price. The real value of the options in
this table depends upon the actual changes in the market price of the Com-
mon Shares during the applicable period.
(3) This grant was the regular, annual option grant. The option vests after
three years. The following assumptions were made for purposes of calculat-
ing the grant date present value: the option will be exercised after five
years, volatility of 25%, annual dividend yield of .35% and an interest
rate of 5.83%.
(4) This grant was a special grant made to recognize the officer's new respon-
sibilities within the Company due to the restructuring which occurred in
the first quarter of fiscal 1998. The option vests after six years. The
following assumptions were made for purposes of calculating the grant date
present value: the option will be exercised after seven years, volatility
of 25%, annual dividend yield of .35% and an interest rate of 5.98%.
(5) The grant was the regular annual option grant. This option may be trans-
ferred to family members or certain entities in which family members have
interests. This option became exercisable in October 1997 as a result of
the appointment of Mr. McGinn as Chief Executive Officer of the Company.
The following assumptions were made for purposes of calculating the grant
date present value: the option will be exercised after five years, vola-
tility of 25%, annual dividend yield of .35% and an interest rate of
5.83%.
38
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END (#) YEAR END ($)
----------------- -----------------
SHARES
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Richard A.
McGinn 62,198 3,638,810 201,798 9,881,111
1,534,494 61,212,266
Henry B.
Schacht 1,450,000 65,016,244 690,566(1) 27,347,222
-- --
Daniel C.
Stanzione 115,846 3,344,858 72,608 3,599,450
1,378,828 58,616,659
Ben Verwaayen -- -- -- --
733,000 21,798,311
Donald K.
Peterson 35,371 1,687,805 66,571 3,152,829
666,664 27,445,192
Patricia F.
Russo 97,766 4,297,413 -- --
797,110 33,270,223
</TABLE>
FOOTNOTES
(1) Does not include an option covering 34,000 Shares that was irrevocably
transferred in 1997 to a family trust.
PENSION PLANS
The Company has a non-contributory pension plan (the "Management Pension
Plan") which covers most management employees, including its executive offi-
cers. Pensions provided under this plan are computed on an adjusted career av-
erage pay basis. For retirements on or after January 1, 1999, a participant's
adjusted career average pay is equal to 1.4% of the sum of the individual's
(a) average annual pay for the five years ending December 31, 1998 (excluding
the annual bonus award paid in December 1997), times the number of years of
service prior to January 1, 1999, plus (b) pay subsequent to December 31,
1998, plus (c) annual bonus award paid in December 1997.
Average annual pay includes base salary and annual bonus awards. However,
federal laws place limitations on compensation amounts that may be included
under this plan. In 1998, up to $160,000 in eligible base salary and annual
bonus could be included in the calculation under this plan. For Messrs. Mc-
Ginn, Stanzione,
39
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
Verwaayen and Peterson and Ms. Russo, as well as other executive officers,
only base salary is taken into account in the formula used to compute pensions
under this plan.
The normal retirement age under this plan is 65; however, employees who are
at least age 50 with at least 15 years of service can retire with reduced ben-
efits. If an employee's age (which must be at least 50) plus service, when
added together, is equal to or greater than 75, the employee may retire with
unreduced pension benefits. A reduction equal to 3% is made for each year age
plus service is less than 75.
Compensation and benefit amounts considered under the Management Pension
Plan formula which exceed the applicable federal limitations, as well as pen-
sion amounts related to annual bonus awards payable to executive officers will
be paid under the Company's Supplemental Pension Plan (the "Supplemental Pen-
sion Plan"). This plan is a noncontributory plan and uses the same adjusted
career average pay formula and eligibility rules as the Management Pension
Plan. The Company pays all benefits under this plan from its general
assets.
The Supplemental Pension Plan also provides executive officers with minimum
pensions. Eligible retired executive officers and surviving spouses may re-
ceive an annual minimum pension equal to 15% of the sum of final base salary
plus annual bonus awards. This minimum pension will be offset by pensions un-
der the Management Pension Plan and non-qualified pension plans.
In addition to the benefits under the Management Pension Plan and the Sup-
plemental Pension Plan described above, Mr. Peterson is entitled to a supple-
mental pension benefit under the Supplemental Pension Plan. This benefit is
available to certain management employees who were hired at age 35 or over at
specified levels and who terminate with at least five years service at such
level. The plan provides additional pension credits equal to the difference
between age 35 and the maximum possible years of service attainable at age 65,
but not to exceed actual net credited service, at one-half the rate in the
Management Pension Plan.
Pensions under the Management Pension Plan and the Supplemental Pension Plan
are not subject to reductions for social security benefits or other offset
amounts. If Messrs. McGinn, Stanzione and Peterson and Ms. Russo continue in
40
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
their current positions and retire at the normal retirement age of 65, the es-
timated annual pensions payable to them under the Management Pension Plan and
the Supplemental Pension Plan would be $1,660,000, $910,000, $710,000 and
$720,000, respectively. These amounts are straight-life annuity amounts al-
though other optional forms of payment, which provide for actuarially reduced
pensions, are available.
Mr. Verwaayen is entitled to a pension benefit intended to provide him, af-
ter taking into account all other pension benefits, with an annual pension
equal to one half of his average salary and annual bonus for the three years
preceding his leaving the Company. If Mr. Verwaayen leaves the Company before
reaching age 60, payments under this arrangement will not begin until Mr.
Verwaayen reaches age 60 and the amount of the payments will generally be re-
duced unless the reason is his death or disability or a Company-initiated ter-
mination other than for cause. Assuming retirement at age 60, Mr. Verwaayen
would receive an estimated annual pension (before reduction for any other pen-
sion to which he may be entitled) of $1,641,000 under this arrangement.
Mr. Schacht did not have sufficient service to vest in any of the Company's
pension plans.
Certain of the Company's non-qualified executive benefit plans will be sup-
ported by a benefits protection grantor trust, the assets of which are subject
to the claims of the Company's creditors. In the event of a "Change in Con-
trol" or "Potential Change in Control" of the Company (as such terms are de-
fined in the applicable plans), certain additional funds might be required to
be contributed to such trust to support benefits under such plans.
EXECUTIVE EMPLOYMENT
AGREEMENTS AND OTHER
ARRANGEMENTS
MR. MCGINN. During a portion of fiscal 1998, the Company had two executive,
personal loans outstanding to Mr. McGinn and guaranteed a loan made to him by
a bank. As reported in last year's proxy statement, the loans were repaid and
the guarantee terminated by November 1997. These arrangements are described
below.
The largest aggregate principal amounts of the loans from the Company since
October 1, 1997 were $800,000 and $119,402. The loans accrued interest monthly
at a rate equal to the applicable federal short term rate. In addition, Summit
Bank established a personal line of credit for Mr. McGinn that
41
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
was guaranteed by the Company. The principal amount of this credit line was
not to exceed $3.6 million. Loan amounts accrued interest at an annual rate
equal to Summit Bank's floating base rate minus one percent. No payments were
made by the Company under the guarantee.
MR. SCHACHT. Following Mr. Schacht's retirement as Chairman of the Board of
Directors of the Company in February 1998, the Company and Mr. Schacht entered
into an agreement pursuant to which Mr. Schacht serves as the chairman of the
board of a venture capital fund set up by Lucent to make investments in the
Company's field of business. In addition, Mr. Schacht provides the Company
with services relating to the development of opportunities for the Company in
India and Russia. The agreement has a term of one year and provides for a sal-
ary of $350,000 and certain benefits, including first class air travel, office
space and financial counseling.
MR. VERWAAYEN. Lucent hired Mr. Verwaayen in 1997 to lead the Company's ef-
forts to expand its business outside the United States. Before coming to Lu-
cent, Mr. Verwaayen was president of PTT Telecom, the national telecommunica-
tions carrier of the Netherlands, and chairman of Unisource, a pan-European
telecommunications company providing services to businesses and consumers.
In order to persuade Mr. Verwaayen to leave those positions and join Lucent,
the Company entered into an employment agreement with Mr. Verwaayen.
The agreement has a three year term and provides that the Company will pay
Mr. Verwaayen a salary of at least $600,000 a year and a minimum target bonus
each year (assuming the Company's bonus program for officers generally does
not change) equal to 80% of his base salary for the year. For 1997, the agree-
ment also provided for a three-year performance award for which the payout at
the target level of performance would be $450,000 and an option to purchase
63,000 Shares.
In order to encourage Mr. Verwaayen to join Lucent and to compensate him for
certain forfeitures he would experience by joining Lucent, the Company pro-
vided Mr. Verwaayen with the following (the "Hiring Bonus"):
. Lump-sum cash payments of $330,000 in fiscal 1997 and $667,354 in fiscal
1998.
. 1,916 restricted stock units that settled in cash in
42
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
January 1998 and 5,750 restricted stock units that will settle in cash in
January 1999.
. An option to purchase 450,000 Shares. One half of the option vests in
2000, an additional 25% of the option vests in each of 2001 and 2002.
. 170,000 restricted stock units that will vest in 2002.
The Company paid a total of $356,460 of costs incurred by Mr. Verwaayen in
connection with his move to the United States from the Netherlands. The Com-
pany also guaranteed a portion of a loan provided by EAB Mortgage Company,
Inc. to Mr. Verwaayen. The principal amount of the loan is due in 2027 or, if
sooner, no later than 180 days after Mr. Verwaayen's employment with the Com-
pany terminates. The largest amount guaranteed by the Company since October 1,
1997 under this arrangement was $1.5 million. Mr. Verwaayen and the Company
have entered into an indemnity agreement under which Mr. Verwaayen has agreed
to reimburse the Company for any amounts paid by the Company pursuant to the
guarantee.
The agreement also provides Mr. Verwaayen with a customized pension de-
scribed above under "Pension Plans" and a gross-up payment if he is subject to
taxes outside the U.S. at a higher rate than in the U.S.
The agreement also provides for Mr. Verwaayen to receive severance benefits
in the event that the Company terminates his employment during the term of the
agreement other than for cause or if Mr. Verwaayen resigns following certain
adverse changes in the terms of his compensation or job responsibilities.
These benefits would be calculated based on Mr. Verwaayen's then annual base
salary and target annual incentive bonus or, if greater, 80% of his annual
base salary, and include:
. If the termination occurs before September 1, 2000, the amount
Mr. Verwaayen would have received as base salary and annual incentive bo-
nus from the termination date through September 2002.
. If the termination occurs on or after September 1, 2000, and before Sep-
tember 1, 2007, an amount equal to twice Mr. Verwaayen's base salary and
annual incentive bonus.
In addition, if Mr. Verwaayen's employment with the Company terminates be-
cause of his death or disability, of if the Company terminates him other than
for cause, prior
43
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
to the tenth anniversary of the agreement, then all unexercised stock options
and unvested restricted stock units included in the Hiring Bonus and unvested
stock options granted pursuant to regular annual grants will vest, and all
undistributed performance awards that are at least six months old (and all un-
distributed performance awards in the event of Mr. Verwaayen's death or dis-
ability) will be paid out at the end of the performance period without prora-
tion. Similar provisions apply in the event Mr. Verwaayen resigns following
certain adverse changes in the terms of Mr. Verwaayen's compensation or job
responsibilities.
The agreement contains a non-competition provision under which Mr. Verwaayen
agrees not to engage in certain activities on behalf of named competitors of
the Company while he is employed by the Company and for a period of one year
following his termination of employment for any reason.
MR. PETERSON. The employment agreement entered into by Mr. Peterson and AT&T
in 1995 required the Company to establish a Special Deferred Compensation Ac-
count ("DCA") on his date of hire in the amount of $190,000. Interest is com-
pounded as of the end of each calendar quarter for as long as any sums remain
in the DCA, and the quarterly rate of interest applied at the end of any cal-
endar quarter is one-quarter of the average 30-year Treasury Note rate for the
previous quarter. The amounts credited to the DCA will vest in October 1999,
or sooner in the event of the termination of Mr. Peterson's employment as a
result of death, disability or Company initiated termination other than for
cause. Vested amounts in the DCA will be paid out following the termination of
Mr. Peterson's employment with the Company.
During part of fiscal 1998, the Company had a mortgage loan outstanding to
Mr. Peterson. The largest aggregate principal amount of such loan since Octo-
ber 1, 1997 was $217,104. Principal and interest on this loan was paid in full
during the year. The loan to Mr. Peterson was part of the compensation package
offered upon employment by AT&T to facilitate his relocation to New Jersey.
44
<PAGE>
LUCENT NOTICE OF 1999 ANNUAL MEETING AND PROXY STATEMENT
OTHER MATTERS
- -------------------------------------------------------------------------------
On the date this Proxy Statement went to press, management did not know of
any other matters to be brought before the Meeting other than those described
in this proxy statement. If any matters properly come before the Meeting that
are not specifically set forth on the proxy card and in this Proxy Statement,
the persons appointed as proxies will vote thereon in accordance with their
best judgment.
Whether or not you plan to attend the Meeting, please mark, sign, date and
promptly return the enclosed proxy in the enclosed envelope. No postage is re-
quired for mailing in the United States. If possible, vote your proxy over the
Internet or by telephone using the instructions on your proxy card.
December 22, 1998
Richard A. McGinn
Chairman of the Board and
Chief Executive Officer
45
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
[LETTERHEAD OF LUCENT TECHNOLOGIES APPEARS HERE]
[LOGO OF RECYCLABLE PRODUCTS APPEARS HERE]
LOGO OF PRINTED WITH SOY INK APPEARS HERE]
This Proxy Statement is printed entirely on recycled and recyclable paper. Soy
ink, rather than petroleum-based ink, is used throughout.
<PAGE>
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
VOTE BY INTERNET/TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK
[LOGO OF LUCENT TECHNOLOGIES APPEARS HERE]
VOTE BY INTERNET: The Web Address is: http://lucent.proxyvoting.com
Follow the instructions that appear on your computer screen. You will be asked
to enter the number located in the box marked "Control Number."
VOTE BY PHONE: Call TOLL-FREE on a Touch-Tone telephone 1-800-293-5876. There
is no charge to you for this call. You will be asked to enter
the number located in the box marked "Control Number."
OPTION A: To vote as the Board of Directors recommends on ALL
items, press 1.
OPTION B: If you choose to vote on each item separately,
press 0.
Item 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR
ALL nominees, press 9. To WITHHOLD FOR AN
INDIVIDUAL nominee, press 0 and listen to the
instructions.
Items 2-6: To vote FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0. The instructions are the same for Item 3
through Item 6.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
-------------------------------
Your Internet or telephone vote
authorizes the named proxies to
vote your Shares in the same
manner as if you marked, signed
and returned your proxy card.
THANK YOU FOR VOTING!
-------------------------------
-------------------------------
CONTROL NUMBER
FOR INTERNET/TELEPHONE VOTING
-------------------------------
IF YOU HAVE VOTED OVER THE INTERNET OR BY TELEPHONE, THERE IS NO NEED FOR YOU TO
MAIL BACK YOUR PROXY.
THE INTERNET AND TELEPHONE VOTING FACILITIES WILL CLOSE AT 8:00 A.M. ON
FEBRUARY 17, 1999.
DETACH PROXY CARD HERE IF YOU ARE NOT VOTING OVER THE INTERNET OR BY TELEPHONE
- --------------------------------------------------------------------------------
Proxy Card
The Board of Directors recommends a vote "FOR" Items 1 and 2 and a vote
"AGAINST" Items 3, 4, 5 and 6.
1. Election of Directors
The Board of Directors recommends a vote "FOR" the nominees listed below:
Nominees: 01 -- Paul A. Allaire 02 -- Henry B. Schacht
03 -- John A. Young
FOR all WITHHOLD AUTHORITY
nominees listed to vote for all nominees listed. EXCEPTIONS
[ ] [ ] [ ]
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
Exceptions:
-------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Directors' Proposal -- Approve an [ ] [ ] [ ]
Amendment to the Certificate of
Incorporation to Increase Authorized
Common Stock.
3. Shareowner Proposal Number 1 -- [ ] [ ] [ ]
Evelyn Y. Davis --
Eliminate Classified Board
4. Shareowner Proposal Number 2 -- [ ] [ ] [ ]
Robert D. Morse --
Discontinue Executive Incentive Programs
5. Shareowner Proposal Number 3 -- [ ] [ ] [ ]
General Pension Board of the United Methodist
Church - Adopt Confidential Voting
Policy/Independent Inspectors of Election
6. Shareowner Proposal Number 4 -- [ ] [ ] [ ]
Mark Seidenberg --
Adopt Anti-Slave Labor Policy
I have included comments, or have included a change of address. [ ]
I do not wish to receive an Annual Report for this account, at this
address. [ ]
I plan to attend the Annual Meeting. [ ]
I agree to access future Proxy Statements and Annual Reports
electronically. [ ]
Please sign exactly as name or names appear
on this proxy. When signing as attorney, executor,
administrator, trustee, custodian, guardian, or
corporate officer, give full title. If more than one
trustee, all should sign.
Dated: 19
------------------------------------ ------
----------------------------------------------------
Signature of Shareowner
----------------------------------------------------
Signature of Shareowner
Mark, Sign, Date and Return Votes MUST be indicated (x) in Black or
the Proxy Card Promptly Using Blue Ink.
the Enclosed Envelope.
<PAGE>
ADMISSION TICKET
Annual Meeting of Shareowners
February 17, 1999, 9:00 a.m., E.S.T.
Playhouse Theatre, Du Pont Building
Wilmington, Delaware 19801
DIRECTIONS:
1) FROM THE SOUTH: Take I-95 North to Wilmington Exit 7 marked "Route 52,
Delaware Avenue". From right lane take Exit 7 onto Adams Street. At the third
traffic light on Adams Street, turn right onto 11th Street. At Delaware
Avenue intersection stay left continuing on 11th Street. Follow 11th Street
through four traffic lights, Playhouse Theatre is on the right in the
Du Pont Building.
2) FROM THE NORTH: Follow I-95 South to Exit 7A marked "Route 52, South Delaware
Avenue" (11th Street). At Delaware Avenue intersection, stay left continuing
on 11th Street. Follow 11th Street through four traffic lights, Playhouse
Theatre is on the right in the Du Pont Building.
[MAP TO PLAYHOUSE THEATRE APPEARS HERE]
P = Public Parking
This ticket admits the named Shareowner(s) and one guest.
- --------------------------------------------------------------------------------
Proxy Card [LOGO OF LUCENT TECHNOLOGIES
APPEARS HERE]
- -------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard A. McGinn, Donald K. Peterson and
Richard J. Rawson, (the "Proxy Committee") or any of them as proxies, with full
power of substitution, to vote as directed all Shares of Lucent Technologies
Inc. the undersigned is entitled to vote at the 1999 Annual Meeting of
Shareowners of Lucent Technologies Inc. to be held at the Playhouse Theatre,
Du Pont Building, Wilmington, Delaware at 9:00 a.m., E.S.T. on February 17,
1999. This Proxy card also provides voting instructions for Shares held in
BuyDIRECT(SM) and, if registrations are identical, Shares held in the various
employee stock purchase and benefit plans as described in the Proxy Statement.
This Proxy authorize(s) each of them to vote at his or her discretion on any
other matter that may properly come before the Meeting or any adjournment
thereof. If this card contains no specific voting instructions, my (our) Shares
will be voted in accordance with the recommendation of the Board of Directors.
(Continued, and to be signed and
dated on the reverse side.)
Comments: LUCENT TECHNOLOGIES INC.
-------------------------- P.O. BOX 1182
NEWARK, N.J. 07101-9664
- ------------------------------------
- ------------------------------------
- ------------------------------------
If you have written in the above
space, please mark the comments
notification box on the reverse side.
