<PAGE>
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
GTE Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
GTE Corporation
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[GTE LOGO]
GTE CORPORATION
One Stamford Forum
Stamford, Connecticut 06904
Telephone: 203-965-2000
CHARLES R. LEE
Chairman and Chief Executive Officer March 3, 1997
To Our Shareholders:
On behalf of the Board of Directors, I cordially invite you to attend the
1997 Annual Meeting of Shareholders of GTE Corporation. The Annual Meeting
will start at 2:00 P.M. and end no later than 4:00 P.M., Local Time, on
Wednesday, April 16, 1997, in the Ballroom of the Hyatt Regency Tampa, Two
Tampa City Center, Tampa, Florida. The formal Notice of Annual Meeting appears
on the next page and directions to the Annual Meeting are printed on the back
cover.
The attached Proxy Statement describes the matters that we expect to act
upon at the Annual Meeting. Shareholders who are present at the Annual Meeting
will also have the opportunity to ask questions of broad interest to GTE's
shareholders. You will need a ticket if you plan to attend the Annual Meeting.
More specific information about obtaining your ticket can be found in the
Notice of Annual Meeting and on page 42.
It is important that your views be represented whether or not you are able
to be present at the Annual Meeting. Please sign and date the enclosed proxy
card and promptly return it in the postage prepaid envelope. The Board of
Directors recommends that shareholders vote FOR Items 1 through 4, and AGAINST
Items 5 through 8, as listed on the proxy card.
We are gratified by our shareholders' continued interest in GTE and pleased
that in the past so many of you have voted your shares either in person or by
proxy. We hope that you will continue to do so and urge you to return your
proxy card as soon as possible.
Sincerely,
/s/ Charles R. Lee
<PAGE>
[GTE LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 16, 1997
Stamford, Connecticut
March 3, 1997
The Annual Meeting of Shareholders of GTE Corporation will be held in the
Ballroom of the Hyatt Regency Tampa, Two Tampa City Center, Tampa, Florida, on
Wednesday, April 16, 1997, at 2:00 P.M., Local Time, for the following
purposes:
1. To elect four Class II directors to the Board of Directors;
2. To ratify the appointment of auditors;
3. To consider and act upon a proposal to adopt the GTE Corporation
1997 Executive Incentive Plan;
4. To consider and act upon a proposal to adopt the GTE Corporation
1997 Long-Term Incentive Plan;
5. To consider and act upon the following four shareholder proposals
described in the accompanying Proxy Statement:
(a) eliminate the staggered election of directors,
(b) establish a policy of reporting on GTE's foreign military sales,
(c) redeem the Rights issued under GTE's Rights Plan or submit the
Rights Plan to a shareholder vote, and
(d) establish criteria to limit executive officers' compensation so
that it does not exceed 75 times the wages of the average hourly
employee and to more closely link executive wages and
compensation to company profits; and
6. To act upon any other matters properly coming before the Annual
Meeting and any adjournment thereof.
Only shareholders of record at the close of business on February 25, 1997
will be entitled to vote at the Annual Meeting.
You will need a ticket if you plan to attend the Annual Meeting. If your
shares are registered in your name and not in the name of a bank, broker or
other third party, an admission ticket is attached to your proxy card. Please
detach and save the ticket. You will need to present it in order to be
admitted to the Annual Meeting. Also, to help us in finalizing arrangements,
please check the box on the proxy card if you intend to be present at the
Annual Meeting.
However, if your shares are not registered in your own name, please advise
the shareholder of record (your bank, broker or other institution holding your
shares) that you wish to attend. That firm must provide you with documentation
showing that you owned your GTE shares as of the record date, February 25,
1997. You must bring that documentation to the Annual Meeting in order to gain
admittance.
By order of the Board of Directors,
Marianne Drost
Secretary
PLEASE SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE.
<PAGE>
[GTE LOGO]
ONE STAMFORD FORUM, STAMFORD, CONNECTICUT 06904
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 16, 1997
This Proxy Statement is furnished to shareholders of GTE Corporation ("GTE"
or the "Corporation") in connection with GTE's Annual Meeting of Shareholders
(the "Annual Meeting"). The Annual Meeting will start at 2:00 P.M. and end no
later than 4:00 P.M., Local Time, on Wednesday, April 16, 1997, at the Hyatt
Regency Tampa, Two Tampa City Center, Tampa, Florida, and at any adjournment
thereof. The board of directors of GTE (the "Board of Directors" or the
"Board") is soliciting proxies to be voted at the Annual Meeting.
This Proxy Statement and Notice of Annual Meeting, the proxy card and GTE's
Annual Report to shareholders were mailed to shareholders beginning March 3,
1997.
RECORD DATE
Only shareholders of record at the close of business on February 25, 1997
are entitled to vote in person or by proxy at the Annual Meeting.
PROXY PROCEDURE
The Board of Directors solicits proxies so that each shareholder has the
opportunity to vote on the proposals to be considered at the Annual Meeting.
When a proxy card is returned properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a shareholder attends the Annual Meeting, he or she may vote by
ballot.
If the registered owner of shares does not return a signed proxy card or
does not attend the Annual Meeting and vote in person, his or her shares will
not be voted.
If a shareholder returns a signed proxy card but does not mark the boxes,
the shares represented by that proxy card will be voted as recommended by the
Board of Directors. Otherwise, the shares will be voted as indicated on the
card. The proxy card also gives the individuals named as proxies discretionary
authority to vote the shares represented on any other matter that is properly
presented for action at the Annual Meeting. A shareholder may revoke his or
her proxy at any time before it is voted by: (i) giving notice in writing to
the Secretary of GTE (the "Secretary"); (ii) granting a subsequent proxy; or
(iii) appearing in person and voting at the Annual Meeting.
If a shareholder participates in the GTE Shareholder Systematic Investment
Plan (the "SSIP"), his or her proxy card represents both the number of shares
registered in that shareholder's name and the number of full shares credited
to his or her SSIP account. All such shares will be voted in accordance with
the instructions on the shareholder's proxy card.
Participants in the GTE Savings Plan, the GTE Hourly Savings Plan, the AGCS
Savings Plan and the AGCS Hourly Savings Plan (collectively, the "Savings
Plans") who are also holders of additional shares of the Corporation's common
stock (the "GTE Common Stock") will receive one proxy card representing all
holdings registered in a similar manner. Accordingly, the executed proxy card
also will provide instructions to the trustee of the Savings Plans for the
voting of shares held in those plans. If their accounts are not registered in
a similar manner, shareholders will receive a separate proxy card
1
<PAGE>
for their individual and plan holdings. Unvoted shares of the Savings Plans
are voted by the trustee in the same proportion as shares for which the
trustee has received voting instructions.
COST OF SOLICITATION
GTE is responsible for the cost of soliciting proxies. Proxies may be
solicited by directors, officers or regular employees of GTE in person or by
telephone, or by other means. In addition, GTE has retained D.F. King & Co.,
Inc., New York, New York, to assist in the solicitation of proxies, and it is
estimated their fee will not exceed $30,000. GTE also will reimburse brokerage
houses and other custodians, nominees and fiduciaries for their expenses in
accordance with the regulations of the Securities and Exchange Commission (the
"SEC") and the New York Stock Exchange, Inc. (the "NYSE") concerning the
sending of proxies and proxy material to the beneficial owners of stock.
VOTING
Shares Outstanding
As of January 31, 1997, the outstanding voting stock of GTE consisted of
962,083,159 shares of GTE Common Stock. Each share of GTE Common Stock is
entitled to one vote.
It is GTE's policy that all proxies, ballots and tabulations that identify
the vote of individual shareholders are kept confidential. These items are not
seen by nor reported to the Corporation, except where shareholders write
comments on their proxy cards, as necessary to meet legal requirements or in a
contested proxy solicitation.
Vote Required
The nominees for directors who receive a plurality of the votes cast by the
holders of the outstanding GTE Common Stock entitled to vote at the Annual
Meeting will be elected. An affirmative majority of the votes cast is required
to ratify the appointment of auditors and to approve the GTE Corporation 1997
Executive Incentive Plan (the "1997 EIP") and each of the shareholder
proposals. An affirmative majority of all outstanding shares entitled to vote
is required to approve the GTE Corporation 1997 Long-Term Incentive Plan (the
"1997 LTIP"). Abstentions and broker non-votes are not counted in determining
the number of shares voted for or against any nominee for director or any
proposal. Abstentions are counted toward determining whether a quorum has been
obtained. However, shares represented by broker non-votes are not considered
present at the meeting and, accordingly, are not counted towards quorum.
PROXY STATEMENT PROPOSALS
At the Annual Meeting each year, the Board of Directors submits to
shareholders its nominees for election as directors. The shareholders also
vote to ratify or reject the auditors selected by the Audit Committee and
approved by the Board of Directors. In addition, the Board of Directors may
submit other matters to the shareholders for action at the Annual Meeting.
Shareholders of GTE also may submit proposals for inclusion in the proxy
material. These proposals must meet the shareholder eligibility and other
requirements of the SEC. In order to be included in GTE's 1998 proxy material,
a shareholder's proposal must be received no later than November 3, 1997 at
GTE's Corporate Headquarters, One Stamford Forum, Stamford, Connecticut 06904,
Attention: Secretary.
In addition, GTE's By-Laws (the "By-Laws") provide that in order for
business to be brought before the Annual Meeting, a shareholder must deliver
written notice to the Secretary not less than 30 nor more than 60 days prior
to the date of the Annual Meeting. The notice must state the shareholder's
2
<PAGE>
name, address and number of shares of GTE Common Stock held, and briefly
describe the business to be brought before the Annual Meeting, the reasons for
conducting such business at the Annual Meeting and any material interest of
the shareholder in the proposal.
The By-Laws also provide that if a shareholder intends to nominate a
candidate for election as a director, the shareholder must deliver written
notice of his or her intention to the Secretary. The notice must be delivered
not less than 30 nor more than 60 days before the date of a meeting of
shareholders. The notice must set forth the following: the name and address of
and number of shares of GTE Common Stock owned by the shareholder (and that of
any other shareholders known to be supporting said nominee) and the nominee
for election as a director; the age of the nominee; the nominee's business
address and experience during the past five years; any other directorships
held by the nominee; the nominee's involvement in certain legal proceedings
during the past five years; and such other information concerning the nominee
as would be required to be included in a proxy statement soliciting proxies
for the election of the nominee. In addition, the notice must include the
nominee's consent to serve as a director of GTE if elected.
BOARD OF DIRECTORS
The Board of Directors manages the business of GTE. It establishes the
overall policies and standards for GTE and reviews the performance of
management. The directors are kept informed of GTE's operations at meetings of
the Board and committees of the Board (the "Board Committees") and through
reports and analyses and discussions with management.
The Board of Directors meets on a regularly scheduled basis and, during
1996, met on nine occasions. In addition, significant communications between
the directors and the Corporation occur apart from regularly scheduled
meetings of the Board and the Board Committees. Accordingly, management does
not regard attendance at meetings to be the primary criterion in evaluating
the contributions a director makes to GTE. For the Board of Directors as a
whole, average attendance at meetings of the Board and the Board Committees
(the aggregate of the total number of meetings of the Board of Directors and
the total number of meetings of all Board Committees on which each director
served) during 1996 was 96.5%. During 1996, none of the incumbent directors
attended less than 75% of the aggregate of the total number of Board meetings
and the total number of meetings of all Board Committees on which he or she
served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established six standing Board Committees and has
assigned certain responsibilities to each of those Board Committees.
Audit Committee
The Audit Committee had four meetings in 1996. The Audit Committee
recommends the appointment of independent public accountants for GTE, reviews
the scope of audits proposed by the independent public accountants, reviews
internal audit reports on various aspects of corporate operations and
periodically consults with the independent public accountants on matters
relating to internal financial controls and procedures.
Executive Compensation and Organizational Structure Committee
The Executive Compensation and Organizational Structure Committee (the
"Committee") had eight meetings during 1996. The functions of the Committee
include the review and approval of compensation of employees above a certain
salary level, the review of management recommendations relating to executive
incentive compensation plans, the administration of GTE's executive incentive
compensation plans, the review of and recommendations concerning directors'
compensation, and
3
<PAGE>
consultation on senior executive continuity and matters of organizational
structure. Assuming the shareholders approve the 1997 EIP and the 1997 LTIP as
described in Items 3 and 4, respectively, the functions of the Committee will
also include the administration of those plans.
Nominating Committee
The Nominating Committee had three meetings during 1996. The functions of
this Board Committee include the consideration of the size and composition of
the Board, review and recommendation of individuals for election as directors
or officers of GTE, review of criteria for selecting directors, evaluation of
directors, as appropriate, and consideration of policies and practices with
respect to the functioning of the Board. In carrying out its responsibilities
for recommending candidates to fill vacancies on the Board and in recommending
a slate of directors for election by the shareholders at the Annual Meeting,
this Board Committee will consider candidates suggested by other directors,
employees and shareholders. Suggestions for candidates, accompanied by
biographical material for evaluation, may be sent to the Secretary at GTE's
Corporate Headquarters. Individuals suggested as candidates should have high
level management experience in a large, relatively complex organization or
have experience dealing with complex problems. A candidate also must indicate
a willingness to attend scheduled meetings of the Board and the Board
Committees.
Pension Trust Coordinating Committee
The Pension Trust Coordinating Committee is responsible for reviewing the
performance of the portfolios of and investment advisors to GTE's pension
plans, approving overall investment policy relating to the assets of the
pension plans and monitoring the actuarial soundness of those plans. This
Board Committee had two meetings during 1996.
Public Policy Committee
The Public Policy Committee, which had two meetings during 1996, reviews the
policies and practices of GTE as to corporate contributions, employee safety
and health and other matters and assumes such other duties as the Board may
from time to time delegate.
Strategic Issues, Planning and Technology Committee
The Strategic Issues, Planning and Technology Committee is responsible for
reviewing the long-term strategic objectives and goals of the Corporation and
the external and internal issues related to those goals and to technology.
This Board Committee had three meetings during 1996.
DIRECTORS' COMPENSATION
Retainer and Meeting Fees
During 1996, each non-employee director received an annual retainer of
$30,000 plus 200 shares of GTE Common Stock awarded annually pursuant to the
GTE Corporation 1991 Long-Term Incentive Plan ("1991 LTIP"). Each non-employee
director also received an annual retainer of $1,500 for each Board Committee
on which the director served. A non-employee director who chaired a Board
Committee received an annual retainer of $2,500. In addition, each non-
employee director received $1,200 for each Board or Board Committee meeting he
or she attended during the calendar year. Non-employee directors are those
directors who are not employees of GTE or its related companies. Directors who
are also employees of GTE are not paid any fees or other remuneration, as
such, for service on the Board or any of the Board Committees.
4
<PAGE>
Under the Phantom Stock Plan for Non-Employee Members of the Board of
Directors of GTE Corporation (the "PSP"), each non-employee director was
awarded 300 hypothetical shares of GTE Common Stock ("Deferred Stock Units")
in 1996. Deferred Stock Units increase or decrease in value based on the
market value of an equivalent number of shares of GTE Common Stock. The
Deferred Stock Units are held in a hypothetical account for the non-employee
director. Each time a dividend is paid on GTE Common Stock, an equivalent
amount is converted to Deferred Stock Units and credited to the non-employee
director's individual account based on the number of Deferred Stock Units held
as of the dividend date. Effective January 1, 1997, the PSP was renamed the
Deferred Stock Unit Plan for Non-Employee Members of the Board of Directors of
GTE Corporation (hereinafter, the "Deferred Stock Unit Plan") and was amended
to permit participating non-employee directors to elect to receive
distributions in shares of GTE Common Stock, as well as cash, and to commence
payments as soon as the non-employee director ceases to be an officer or
director of GTE. There are no voting rights attached to Deferred Stock Units.
Effective January 1, 1997, the GTE Board of Directors adopted a simplified
compensation plan for non-employee directors. The new compensation program has
both an equity-based and a cash-based component. With respect to the equity-
based component, the Board authorized an annual award to each non-employee
director of 1,000 Deferred Stock Units under the Deferred Stock Unit Plan.
These awards are not payable until the non-employee director terminates
service as a director or officer of GTE. The Board also discontinued the
annual awards of 200 shares of Common Stock under the 1991 LTIP and 300
Deferred Stock Units under the PSP. With respect to the cash-based component,
each non-employee director now receives an annual retainer in the amount of
$60,000, and any non-employee director who chairs a Board Committee receives
an additional annual retainer of $2,500. No other meeting or retainer fees are
paid.
This new compensation program is designed to ensure that a significant
portion of a non-employee director's compensation is equity-based and,
therefore, highly dependent on the long-term performance of GTE Common Stock.
Thus, the program is designed to align the interests of GTE's non-employee
directors and its shareholders. The new compensation program is not intended
to increase the total compensation received by a typical non-employee
director.
Retirement Benefits
Effective January 1, 1997, the Board of Directors discontinued the
Retirement Plan for Non-Employee Members of the Board of Directors of GTE
Corporation (the "Directors' Retirement Plan"). The Directors' Retirement Plan
was designed to provide competitive compensation arrangements for GTE's non-
employee directors. A non-employee director who joins the Board on or after
January 1, 1997 will not be eligible to participate in the Directors'
Retirement Plan. Directors who were employees of GTE did not participate in
this plan.
Under the terms of the Directors' Retirement Plan, upon retirement, a person
who was a non-employee director prior to January 1, 1997 was eligible to
receive annual payments equal to the value of the annual cash retainer in
effect on the date of his or her retirement (excluding Board Committee and
chair annual retainers) plus the value of the most recent award of Deferred
Stock Units under the PSP prior to the non-employee director's retirement and
the cash equivalent of the most recent award of GTE Common Stock under the
1991 LTIP prior to the non-employee director's retirement. Payments were to be
made to the non-employee director for a period equal to the lesser of the
length of the non-employee director's Board service or the remainder of the
non-employee director's life. If a non-employee director retired from the
Board before reaching age 65, the annual payment would be reduced by 5% for
each year the non-employee director's age was below age 65 up to a maximum of
50%.
5
<PAGE>
If a non-employee director died before retirement, his or her spouse would
have received the non-employee director's benefit, unreduced on account of
age, for the lesser of a period equal to the length of the non-employee
director's Board service or the remainder of the spouse's life. If a non-
employee director died after retirement, the spouse would have continued to
receive the benefit being received by the non-employee director at the time of
his or her death for the lesser of a period equal to the length of the non-
employee director's Board service or the remainder of the spouse's life.
Each non-employee director who was in office on December 31, 1996 elected to
convert the present value of his or her accrued benefit under the Directors'
Retirement Plan into either a Deferred Stock Unit account or a hypothetical
interest-bearing cash deferral account (a "Cash Account"), or both. These
accounts were established pursuant to, and will be governed by the terms of,
the Deferred Compensation Plan (as defined and described below).
Non-employee directors who retired prior to January 1, 1997 will continue to
receive their benefits in accordance with the terms of the Directors'
Retirement Plan.
Other Compensation
Under the Deferred Compensation Plan for Non-Employee Members of the Board
of Directors of GTE Corporation (the "Deferred Compensation Plan"), any non-
employee director may elect annually to defer all or any part of the cash
portion of his or her director's compensation and receive future payments, in
one or more installments. Amounts deferred under the Deferred Compensation
Plan are held in Deferred Stock Units or in a Cash Account, or both, at the
election of the non-employee director. The number of Deferred Stock Units will
be calculated by dividing the amount deferred for a calendar month by the
average closing price of GTE Common Stock, as reported on the composite tape
of NYSE issues, for the most recent 20 business days ending on or before the
last day of such month. Deferred Stock Units increase or decrease in value
based on the value of an equivalent number of shares of GTE Common Stock. Each
time a dividend is paid on GTE Common Stock, an equivalent amount is converted
into Deferred Stock Units, and credited to the non-employee director's account
based on the number of Deferred Stock Units held as of the dividend date.
Payments of amounts deferred and held in Deferred Stock Units under the
Deferred Compensation Plan may be made in cash or shares of GTE Common Stock,
at the election of the non-employee director, beginning after the non-employee
director's service as an officer or director of GTE ends. Payments under the
Deferred Compensation Plan pertaining to the amounts deferred in a Cash
Account shall be made in cash and, at the election of the non-employee
director, may begin before or after his or her service as an officer or
director ends. After a non-employee director completes his or her Board
service, the non-employee director may also elect to invest the balance of his
or her Deferred Compensation Plan account in a variety of investment options.
CHARITABLE AWARDS PROGRAM
Non-employee directors and designated senior executives of GTE, including
the individuals named in the Summary Compensation Table on page 13,
participate in a charitable awards program. Under this program, the
Corporation will donate an aggregate of $1 million to up to four tax-exempt
educational institutions or public charities designated by the participant.
The donations will be made in five equal annual installments after a
participant's death. Generally, the donations will be made only if: (1) the
participant dies while a director or a designated senior officer; or (2) the
participant was either (a) a director who separated from service with GTE
after completing five or more years of service as a director or (b) a
designated senior officer who separated from service after attaining age 65
and
6
<PAGE>
completing five or more years of service as an employee of GTE and who was not
involuntarily separated from service for cause; or (3) a change in control
occurs while the participant is a director or designated senior executive of
GTE. The program is financed through the purchase of life insurance by GTE.
Participants derive no financial benefit from this program since all
charitable deductions accrue solely to GTE.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT
As members of the Executive Compensation and Organizational Structure
Committee (the "Committee"), we review and approve annual salary range
adjustments for GTE's executive employee group and administer GTE's executive
short-term and long-term incentive plans including approving grant and payout
targets and awards under those plans. The Committee also evaluates the
performance of senior management, including the Chief Executive Officer, and
reviews and approves changes to the base salaries of senior management of GTE
and its related companies. The Committee periodically reports to the Board on
its activities.
Compensation Philosophy
The Committee is responsible for GTE's executive compensation philosophy and
policies, which form the basis for the Committee's decisions. GTE's executive
compensation philosophy relates the level of compensation to GTE's success in
meeting its annual and long-term performance goals and achieving long-term
returns for shareholders, rewards individual achievement, and seeks to attract
and retain executives of the highest caliber. GTE's philosophy is to pay
average compensation (including base, bonus and long-term incentives) for
average results and above-average compensation for above-average results. GTE
benchmarks its compensation (including base salary and incentive pay) by
comparing its practices with those of the other companies in its comparator
group. The Corporation's comparator group for benchmarking competitiveness
includes other major companies, both in telecommunications and general
industry. The companies used as comparators have a reputation for excellence
and are comparable to GTE in terms of such quantitative measures as revenues,
net income, assets and market value and are viewed as direct competitors for
executive talent in the overall labor market. Compensation data for the
comparator companies are obtained from benchmarking surveys conducted by
nationally recognized independent compensation consultants. These surveys also
encompass companies not included in the peer group performance comparison
shown in the Performance Graph on page 18. In reviewing the survey data, GTE
takes into account how its compensation policies and overall performance
compare to similar indices for the comparator group.
GTE has compared its ratio of base salary to total executive compensation to
the practices of the comparator companies. Under GTE's compensation
philosophy, base salary is intended to represent less than 40% of top
executive compensation. The remaining compensation is paid under incentive
plans. Payments under these incentive plans are based upon the achievement of
annual and long-term performance goals and, accordingly, are "at risk".
The passage of The Telecommunications Act of 1996, along with regulatory
reforms in a number of key international markets, has provided GTE with an
unprecedented window of opportunity with respect to profitable long-term
growth. To help capitalize on these opportunities and to provide incentives to
employees that encourage efforts to increase shareholder value, during 1996,
the Committee authorized a number of changes to GTE's compensation program as
described in this report. The Committee also approved adoption of the GTE
Corporation 1997 Executive Incentive Plan ("1997 EIP") and the GTE Corporation
1997 Long-Term Incentive Plan ("1997 LTIP"). The plans are being submitted for
shareholder approval and are more fully described in Items 3 and 4 of the
Proxy Statement.
7
<PAGE>
Executive Compensation
Based on GTE's stated compensation philosophy, the Committee compares GTE's
compensation to that of its comparator group and, if advisable, approves
adjustments in salary ranges and incentive opportunity values for executives.
In determining whether to adjust an executive's base salary, including the
salary of the Chief Executive Officer, the Committee takes into account the
executive's performance, the performance of the operations directed by that
executive, and the position of the executive's compensation in relation to the
established salary range for that position. In evaluating whether an
executive's total compensation package (base salary plus incentive
compensation) should be adjusted, the Committee also takes into account
changes in the executive's responsibilities and GTE's compensation philosophy.
During 1996, the Committee reviewed the current position of GTE's targeted
base salary and the annual and long-term performance-based compensation
components and compared similar factors for the comparator group. The
Committee determined that GTE's salary ranges and the value of annual
incentive opportunities for executives were appropriately positioned for 1997
and did not make an adjustment.
To continue to re-enforce the common interest of executives and shareholders
and to underscore the emphasis on at-risk compensation, the Committee
determined that it was more appropriate to increase Mr. Lee's long-term
incentive opportunities rather than to provide an increase in salary in 1996.
Incentive Compensation
Selected employees are eligible to receive awards under two incentive plans
in addition to their base salary.
Under the GTE Corporation Executive Incentive Plan, in the form previously
approved by GTE's shareholders, (the "Current EIP" and, collectively with the
1997 EIP if approved by the Corporation's shareholders, the "EIP"), awards are
made based upon GTE's performance during the prior fiscal year and upon the
individual participants' achievement of certain goals for their business unit
and other individual objectives. At the conclusion of each plan year, the
Committee compares GTE's performance and that of its business units to
established objectives. The Committee then arrives at an overall rating of the
Corporation and the business units to determine the percentage payout of
incentive awards for each unit and the individual awards for certain senior
executives.
Based on requirements imposed by Section 162(m) of the Internal Revenue Code
of 1986 (the "Code"), the Committee approved new standards for determining EIP
awards. For years beginning with 1996, the Committee established a limitation
on the aggregate amount available for EIP awards. If GTE's Return on Equity
("ROE") exceeds 8%, then an amount equal to 5% of GTE's Consolidated Net
Income ("CNI") is available for awards to participants (the "EIP Award Pool").
In calculating the CNI under the terms of the EIP, the Committee shall exclude
unusual or extraordinary items such as the impact of accounting changes or
unusual charges relating to business combinations or discontinued operations.
In addition, the Committee established individual award limits with respect to
the EIP awards. Each individual award limit is a percentage of the EIP Award
Pool. The applicable percentage depends on the individual's base salary at the
end of the calendar year and, in all cases, may not exceed 3.5% of the EIP
Award Pool. GTE's 1996 ROE exceeded 8%, and awards under the EIP were made for
1996.
Mr. Lee's EIP award for 1996 is based upon the performance of GTE as a whole
and Mr. Lee's individual performance with respect to critical qualitative and
quantitative objectives approved by the Committee. Although GTE does not
specifically weight the factors comprising the performance measures, the
Committee considered the Corporation's financial and operational performance
in 1996, and Mr. Lee's achievement of other non-quantitative objectives.
Specifically, Mr. Lee's 1996 objectives
8
<PAGE>
included quantitative goals related to: revenues; operating and net income;
earnings per share; earnings before interest, taxes, depreciation, and
amortization ("EBITDA"); ROE; return on investment; operating cash flow; and
total return to shareholders. Mr. Lee's goals also included significant
qualitative objectives such as securing favorable national telecommunication
legislation and regulatory reforms aimed at providing the necessary
operational flexibility for the Corporation; the aggressive roll-out of new
"bundled" services, including long distance, internet access and other
wireline, wireless and video services; continuing re-engineering efforts in
all operating units to streamline processes and improve quality; effecting
improvements at GTE's international operations, including implementing stock
offerings where desirable, and developing and evaluating opportunities for
market entry either directly or through partnerships or alliances; improving
certain qualitative financial results relating to the capital structure;
updating and implementing plans relating to GTE's investment in its human
resources, including continuing to enhance the linkage between the performance
rewards and shareholder value, strengthening staffing and succession planning
programs, increasing training efforts, and continuing aggressive healthcare
cost containment; and other goals related to the advancement of technology.
The Committee reviewed the financial and operational performance of the
Corporation and Mr. Lee's individual performance and, in the Committee's
assessment, Mr. Lee's goals were exceeded and a bonus award was made.
The cash portion of current EIP awards paid to the five most highly
compensated executives of GTE is included in the "Bonus" column of the Summary
Compensation Table on page 13.
Selected GTE employees also have an opportunity to earn incentive payments
under GTE's 1991 Long-Term Incentive Plan (the "1991 LTIP" and, collectively
with the 1997 LTIP if approved by the Corporation's shareholders, the "LTIP").
The primary purpose of the LTIP is to help assure superior financial and
operating performance by offering participants an incentive to cause GTE to
achieve those results. Under the provisions of the LTIP, two types of grants
are currently used: performance bonuses and stock options (which may include
tandem stock appreciation rights).
Senior executives of GTE, including the five executives named in the Summary
Compensation Table, are eligible to receive annual grants of performance
bonuses which are earned during a performance cycle that is typically three
years in duration (a "Cycle"). Awards for the 3-year performance Cycle ending
in 1996 were based on GTE's actual financial performance during the relevant
Cycle as measured by GTE's average ROE, and operating cash flow margin
("OCFM") in comparison with pre-established target levels.
In recognition of the rapidly changing nature of the telecommunications
industry and the manner in which the investment community increasingly
evaluates corporate financial performance, together with requirements imposed
by Section 162(m) of the Code, the Committee approved in 1996 new standards
for determining the amount of long-term performance bonuses. Under the new
standards, no awards are made for any Cycle in which GTE's cumulative
consolidated net income ("CCNI") for the Cycle does not exceed $5 billion. In
calculating CCNI under the terms of the LTIP, the Committee shall exclude
unusual or extraordinary items such as the impact of accounting changes or
unusual charges relating to business combinations or discontinued operations.
For the Cycles beginning in 1996 and later, the Committee established a
limitation on the aggregate amount available for performance bonus awards. If
CCNI exceeds $5 billion, then an amount equal to 3% of the CCNI is available
for awards to participants (the "LTIP Award Pool"). Amounts of CCNI in excess
of $15 billion are not counted in determining the size of the LTIP Award Pool.
In addition, the Committee established individual award limits with respect to
the award of the performance bonuses. For Cycles beginning in 1996 and later,
the individual award limit is a percentage of the LTIP Award Pool. The
applicable percentage depends on the individual's base salary at the end of
the Cycle, and, in all cases, may not exceed 3.5% of the LTIP Award Pool.
9
<PAGE>
In connection with the new standards for performance bonuses as described
above, the Committee also approved the adoption of key measures of financial
performance ("Guideline Factors"). For the 3-year Cycle beginning in 1996, the
Committee approved five Guideline Factors: revenue growth, EPS growth, growth
in EBITDA, relative total return to shareholders ("TSR") and return on
investment ("ROI").
In establishing the targeted performance levels for the five Guideline
Factors, the Committee considered GTE's past performance, the performance of
its principal competitors, its strategic goals, and its plans for implementing
those goals. The targets established by the Committee with respect to the
Guideline Factors are designed to facilitate implementing GTE's strategic
plans and to improve GTE's performance relative to its peers.
At the time the targeted performance bonus levels for each Cycle under the
1991 LTIP were established, a common stock equivalent unit ("Equivalent Unit")
account was set up for each participant in the 1991 LTIP. An initial dollar
amount for each account ("Target Award") was determined based on the
competitive performance bonus grant practices of the market comparator group.
To determine the number of Equivalent Units in the account, the dollar balance
was then divided by the average market price for GTE Common Stock for the
calendar week preceding the day the account was established. The value of the
account was increased or decreased based on the market price of the GTE Common
Stock. Each time a dividend was paid on GTE Common Stock, an amount equal to
the dividends paid on an equivalent number of shares of GTE Common Stock was
added to the account. This amount was then converted into a number of
Equivalent Units, obtained by dividing the amount of the dividend by the
average price of the GTE Common Stock on the composite tape of the NYSE on the
dividend payment date. The resulting number of Equivalent Units was then
credited to the account.
The value of the Equivalent Unit account is then adjusted by the Guideline
Performance Percentage (as defined below). Under the performance criteria
approved for the 1996-1998 Cycle, the Committee established the minimum
acceptable level of attainment with respect to each of the Guideline Factors
(the "Threshold"). If this Threshold is not attained for a particular
Guideline Factor, no award is paid for that specific factor. If the Threshold
for the Factor is achieved, participants receive a payment of 20% of the Award
for that Guideline Factor. However, if GTE attains the Threshold for the TSR
Guideline Factor, a payment of 50% of the award is made due to the
exceptionally demanding goal for TSR. If the target for the Guideline Factor
is attained, participants will receive the full value associated with that
Guideline Factor. If GTE's performance exceeds the target, the award for that
Guideline Factor will exceed the performance target, resulting in a payment in
excess of 100% of the Target Award, based upon the formula explained in
footnote 4 under the Long-Term Incentive Plan Awards table on page 17. The
formula is applied separately for each Guideline Factor. The Committee
anticipates that performance bonus awards will be based in equal proportion on
the attainment of the target established for each of the five Guideline
Factors. The cumulative attainment level is called the "Guideline Performance
Percentage".
Payouts to the named executives for the 1994-1996 Cycle, were based on the
previously applied ROE and OCFM measures and are shown in the Summary
Compensation Table on page 13. The awards for the 1994-1996 Cycle included in
the table reflect the following combinations of performance measures: the ROE
goal was surpassed by a significant margin, and the OCFM goal was also
exceeded.
Grants for the 1996-1998 Cycle are shown in the Long-Term Incentive Plan
Awards table on page 16.
Under the LTIP, the Committee normally approves grants of stock options,
which may include tandem stock appreciation rights ("SARs"). These options are
granted to a substantially larger group
10
<PAGE>
of executives, including the five executives named in the Summary Compensation
Table, than those who are eligible to receive performance bonuses under the
LTIP.
In approving the number of executive options and SARs awarded under the
LTIP, the Committee compares GTE's grant levels to competitive practices in
the comparator group. GTE's philosophy is to be at or near a median grant
posture of the comparator group of companies. The Committee did not take into
account the number of options currently held by any individual participant in
determining individual grants for 1996. Mr. Lee and the other four most highly
compensated officers received the grants shown in the Summary Compensation
Table on page 13. Mr. Lee's grant level was tied to competitive long-term
compensation practices for companies in GTE's comparator group. Mr. White and
Mr. Barr also received additional options under a special grant as detailed in
footnote 2 under the Options/SAR Grant table on page 15.
In 1996, the Committee also approved an "introductory" grant of stock
options covering over 84,000 U.S.-based employees who do not otherwise
participate in the 1991 LTIP. Subject to shareholder approval of the 1997
LTIP, this initial grant may be followed by additional periodic grants. These
broad-based grants, referred to as "Partnership Shares," are intended to give
the workforce a stake in the future success of GTE's business, and to
encourage all employees to think and act as owners. Options granted under the
"Partnership Shares" program will have an exercise price set at fair market
value on the date of the grant, vest in equal proportions over three years,
and be exercisable for ten years from the grant date. Employees may pay for
the stock in cash, by delivery of previously owned shares, or through a
"cashless" exercise arranged through a broker.
In addition to the changes to GTE's compensation program discussed above,
the Committee approved several other features designed to increase
management's equity holdings and more closely link executive pay with the
creation of shareholder value. The Committee adopted stock ownership
guidelines for all executives who are eligible under the LTIP to receive
performance bonuses. Under the guidelines, the Chief Executive Officer is
encouraged to have an ownership interest in GTE Common Stock with a value at
least six (6) times his or her annual base salary. Other executives identified
by the Committee are encouraged to maintain stock holdings with a value
ranging from one (1) to four (4) times their annual base salaries. Compliance
with the stock ownership guidelines will be monitored annually.
The Committee also approved the adoption of the Equity Participation Program
("EPP"). Under the EPP, a portion of certain executives' cash bonuses under
the LTIP and EIP must be deferred and held in restricted stock units ("RSUs")
for a minimum of three years, and then will be payable in GTE Common Stock.
EPP participants may also irrevocably elect to voluntarily defer an additional
percentage of their LTIP and EIP cash bonuses into RSUs, provided that their
mandatory and voluntary deferrals do not exceed 25% of the LTIP and EIP
awards. GTE will provide a matching contribution in RSUs in the amount of one
unit for every four units deferred by the participant. These matching RSUs
were designed as an inducement to encourage full participation in the EPP and
to compensate the executives for their agreement not to realize the economic
value associated with the RSUs for a minimum of three years.
Internal Revenue Service Rules Relating to Deductibility of Compensation
In late December 1995, the Internal Revenue Service ("IRS") issued final
regulations that apply to the provision in Section 162(m) of the Code limiting
the tax deduction a publicly held corporation may take for compensation paid
to its chief executive officer and its four other most highly compensated
employees ("Covered Executives"). The IRS regulations limit the annual amount
that a company may deduct to $1,000,000 per Covered Executive unless the
compensation constitutes "performance-based" compensation. The regulations
contain transition rules that companies generally may rely on until the first
shareholder meeting in 1997.
11
<PAGE>
In order to comply with the IRS regulations, the Committee has adopted
certain procedures to provide for the deductibility of future amounts received
under the Current EIP for 1996, and for Cycles under the 1991 LTIP commencing
in 1994. The provisions include, but are not limited to, limiting positive
discretion and establishing the maximum award payable to Covered Executives
under the Current EIP and 1991 LTIP. In addition, the Committee has endorsed
the provisions relating to Section 162(m) contained in the 1997 EIP and the
1997 LTIP for shareholder approval as proposed in Items 3 and 4 of the Proxy
Statement. These provisions include limitations on the number of options that
may be granted to any one individual and limitations on the maximum awards
that may be paid to Covered Executives.
Other Compensation Plans
GTE also has various broad-based employee benefit plans. Executives
participate in these plans on the same terms as eligible, non-executive
employees, subject to any legal limits on the amounts that may be contributed
or paid to executives under the plans. The GTE Savings Plan and the GTE Hourly
Savings Plan (the "Savings Plans"), pursuant to the provisions of Section
401(k) of the Code, permit employees to invest in a variety of funds on a pre-
tax or after-tax basis. Matching contributions under the Savings Plans are
made in GTE Common Stock. GTE has discontinued offerings of GTE Common Stock
under the GTE Employees' Stock Plan, which allowed employees to purchase GTE
Common Stock at a discount.
GTE also maintains pension, insurance and other benefit plans for its
employees.
Russell E. Palmer, Chairman Edward H. Budd
James R. Barker James L. Ketelsen
March 3, 1997
12
<PAGE>
EXECUTIVE COMPENSATION TABLES
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation of the
Chief Executive Officer and each of the other four most highly compensated
executive officers of GTE for services in all capacities to GTE and its
subsidiaries.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ --------------------- ---------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
POSITION YEAR ($) (1) ($) (2) ($) ($) (3) (#) ($) ($) (4)
------------------ ---- ------- --------- ------------ ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles R. Lee.......... 1996 975,000 1,553,100 0 252,210 248,600 2,481,800 10,613
Chairman & Chief 1995 897,500 1,403,600 0 0 247,100 1,347,500 10,613
Executive Officer(5) 1994 784,615 1,219,500 0 0 182,300 698,100 7,075
Kent B. Foster.......... 1996 784,000 1,041,300 0 176,243 182,800 1,778,800 10,613
President (6) 1995 762,604 953,200 0 0 187,900 848,300 10,613
1994 687,608 837,900 0 0 138,100 397,800 7,075
Michael T. Masin........ 1996 679,466 868,000 0 147,952 155,400 1,499,200 6,490
Vice Chairman and 1995 633,230 797,400 0 0 163,100 683,200 10,613
President -- 1994 564,577 706,500 0 0 117,800 364,600 5,690
International (7)
Thomas W. White......... 1996 463,115 533,700 0 81,511 183,400 770,000 10,613
President -- GTE 1995 418,884 443,800 0 0 98,800 331,800 10,613
Telephone
Operations Group (8)
William P. Barr......... 1996 407,500 343,200 0 26,349 101,600 499,800 10,613
Senior Vice President 1995 382,500 316,400 0 0 47,600 255,100 10,613
and 1994 183,577 149,400 0 0 60,000 140,100 0
General Counsel (9)
</TABLE>
- --------
(1) The data in the salary column of the table include fees received by
various executives for serving as directors of BC TEL, a Canadian company
in which GTE has a 50.7% ownership interest. Included in Mr. Foster's
salary for 1995 and 1994 are fees of $20,604 and $22,896, respectively.
Mr. Masin's salary for 1996 and 1995 includes fees of $18,466 and $6,730,
respectively. Mr. White's salary includes fees of $15,692 and $16,607 for
1996 and 1995, respectively.
(2) The data in this column represent the annual bonus received by each of the
named executive officers under the GTE Corporation Executive Incentive
Plan (the "EIP") in 1996. In connection with GTE's Equity Participation
Program ("EPP") described in more detail on page 11, a portion of this
amount has been deferred into restricted stock units payable at maturity
(generally, a minimum of three years) in GTE Common Stock ("Restricted
Stock Units"). The number of Restricted Stock Units received was
calculated by dividing the amount of the annual bonus deferred by the
average closing price of GTE Common Stock on the NYSE composite tape for
the 20 consecutive trading days following the release to the public of
GTE's financial results for the fiscal year in which the bonus was earned
(the "Average Closing Price"). Additional Restricted Stock Units are
received on each dividend payment date based upon the amount of the
dividend paid and the closing price of GTE Common Stock on the composite
tape of NYSE issues on the dividend declaration date.
(3) The data in this column represent the dollar value of the matching
Restricted Stock Units based upon the Average Closing Price. Matching
Restricted Stock Units are received on the basis of one additional
Restricted Stock Unit for every four Restricted Stock Units deferred
through annual bonus deferrals described in footnote 2 above. The matching
Restricted Stock Units were designed as an inducement to encourage full
participation in the EPP and to compensate the executives for their
agreement not to realize the economic value associated with the Restricted
13
<PAGE>
Stock Units representing deferred annual bonus for a minimum of three
years. Additional Restricted Stock Units are received on each dividend
payment date based upon the amount of the dividend paid and the closing
price of GTE Common Stock on the composite tape of NYSE issues on the
dividend declaration date. Messrs. Lee, Foster, Masin, White and Barr each
hold a total of 26,608, 18,596, 15,610, 8,598 and 2,780 Restricted Stock
Units, respectively, which had a dollar value of $1,207,338, $843,794,
$708,304, $390,134 and $126,143, respectively, based solely upon the
closing price of GTE Common Stock on December 31, 1996.
(4) The column "All Other Compensation" includes, for 1996, contributions by
GTE and its related companies to the GTE Savings Plan of $6,750 for each
of Messrs. Lee, Foster, White and Barr and $6,490 for Mr. Masin, and
contributions by GTE and its related companies to the GTE Executive Salary
Deferral Plan of $3,863 for each of Messrs. Lee, Foster, White and Barr.
(5) Mr. Lee's last salary increase was in July 1995.
(6) Mr. Foster was elected President in June 1995. He served as Vice Chairman
and President --GTE Telephone Operations Group from October 1993 until
June 1995. He had been President --GTE Telephone Operations Group since
1989.
(7) Mr. Masin joined GTE as Vice Chairman effective October 1993. He was
elected President --International in June 1995. Prior to joining GTE he
was a partner with the law firm of O'Melveny & Myers.
(8) Mr. White was elected President -- GTE Telephone Operations Group in July
1995. He served as an Executive Vice President of GTE Telephone Operations
Group since 1991.
(9) Mr. Barr was elected Senior Vice President and General Counsel effective
July 1994. Prior to joining GTE, he was a partner in the Washington, D.C.
office of the law firm of Shaw, Pittman, Potts & Trowbridge since 1993. He
served as Attorney General of the United States from 1991 to 1993.
14
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options and tandem stock
appreciation rights ("SARs") to the named executive officers of GTE in 1996.
The options and SARs were granted under the 1991 LTIP. Pursuant to SEC rules,
the table also shows the value of the options granted at the end of the option
terms (ten years) if the stock price were to appreciate annually by 5% and
10%, respectively. There is no assurance that the stock price will appreciate
at the rates shown in the table. The table also indicates that if the stock
price does not appreciate, there will be no increase in the potential
realizable value of the options granted.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
---------------------------------------------- ----------------------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS /SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
---- ------------- ------------ -------- ---------- -------------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles R. Lee.......... 248,600(1) 1.88% 43.75 2/20/06 0 $ 6,837,647 $ 17,326,576
Kent B. Foster.......... 182,800(1) 1.38% 43.75 2/20/06 0 5,027,843 12,740,539
Michael T. Masin........ 155,400(1) 1.18% 43.75 2/20/06 0 4,274,217 10,830,852
Thomas W. White......... 91,700(1) .69% 43.75 2/20/06 0 2,522,173 6,391,179
91,700(2) .69% 43.06 6/05/06 0 2,482,539 6,290,746
William P. Barr......... 50,800(1) .38% 43.75 2/20/06 0 1,397,234 3,540,588
50,800(2) .38% 43.06 6/05/06 0 1,375,277 3,484,950
</TABLE>
- --------
(1) Each option was granted in tandem with a SAR, which will expire upon
exercise of the option. Under the 1991 LTIP, each option granted may be
exercised with respect to one-third of the aggregate number of shares
subject to the grant each year, commencing one year after the date of
grant.
(2) Mr. White and Mr. Barr also received a special "performance-based" stock
option grant during 1996. The options were granted in tandem with SARs at
a price equal to the fair market value on the date of grant. They are
intended both to motivate the executives to remain with GTE during a
period of unprecedented opportunities and challenges, and to give them an
opportunity to accelerate the enhancement of their equity position in GTE,
but only if specific and aggressive shareholder returns are met. Unlike
the three-year graduated vesting schedule that applies to the other
options reflected in the table, each performance-based option grant will
vest in three stages according to the following schedule: (i) each option
may be exercised with respect to one-third of the aggregate number of
shares represented by the grant if the closing price of GTE Common Stock
on the NYSE is $60 or more per share for 20 consecutive days (or, if
earlier, on the fifth anniversary of the grant date); (ii) each option may
be exercised with respect to an additional one-third of the aggregate
number of shares represented by the grant if the closing price of GTE
Common Stock on the NYSE is $70 or more per share for 20 consecutive days
(or, if earlier, on the sixth anniversary of the grant date); and (iii)
each option may be exercised with respect to the final one-third of the
aggregate number of shares represented by the grant if the closing price
of GTE Common Stock on the NYSE is $80 or more per share for
20 consecutive days (or, if earlier, on the seventh anniversary of the
grant date).
If the price of GTE Common Stock appreciates, the value of GTE Common Stock
held by the shareholders will also increase. For example, the aggregate market
value of GTE Common Stock on February 21, 1996 was approximately $42.92
billion based upon the market price on that date. If the share price of GTE
Common Stock increases by 5% per year, the aggregate market value on
February 21, 2006 of the same number of shares would be approximately $69.91
billion. If the price of GTE Common Stock increases by 10% per year, the
aggregate market value on February 21, 2006 would be approximately $111.32
billion.
15
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table provides information as to options and SARs exercised by
each of the named executive officers of GTE during 1996. The table sets forth
the value of options and SARs held by such officers at year end measured in
terms of the closing price of GTE Common Stock on December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT FY-END AT FY-END($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Lee.......... 19,500 557,600 705,698 474,102 10,222,391 3,034,459
Kent B. Foster.......... 0 0 379,598 354,102 4,770,026 2,398,623
Michael T. Masin........ 0 0 232,898 303,402 2,400,001 2,065,911
Thomas W. White......... 43,800 697,575 120,132 267,168 1,474,402 1,377,266
William P. Barr......... 10,000 179,375 45,866 153,334 635,866 900,833
</TABLE>
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
The 1991 LTIP provides for awards, currently in the form of stock options
with tandem SARs, other stock-based awards and dollar-denominated awards, to
participating employees. The stock options and tandem SARs awarded under the
1991 LTIP to the five most highly compensated individuals in 1996 are shown in
the table on page 15. The 1991 LTIP, including limitations on individual and
overall awards, is described in more detail on pages 9 and 10.
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF OR OTHER NON-STOCK PRICE-BASED PLAN(1)
SHARES, UNITS PERIOD UNTIL ------------------------------------
OR OTHER MATURATION OR THRESHOLD(2) TARGET(3)
NAME RIGHTS PAYOUT (# OF UNITS) (# OF UNITS) MAXIMUM(4)
---- ------------- ------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Charles R. Lee.......... 29,300 3 Years 8,505 32,712
Kent B. Foster.......... 21,500 3 Years 6,241 24,004
Michael T. Masin........ 18,300 3 Years 5,312 20,431
Thomas W. White......... 10,900 3 Years 3,164 12,169
William P. Barr......... 6,000 3 Years 1,742 6,699
</TABLE>
- --------
(1) An individual's award may not exceed the applicable individual award
limit, which is expressed as a percentage of the LTIP Award Pool described
on page 9 (the "Award Limit"). The Award Limit depends on the individual's
base salary at the end of the cycle, and may not exceed 3.5% of the LTIP
Award Pool. The amounts described in footnotes 2 through 4 below are
subject to and cannot exceed the Award Limit. An individual is initially
granted a specified number of GTE Common Stock equivalent units
("Equivalent Units") at the beginning of an award cycle. During the award
cycle, additional Equivalent Units are added based upon the price of GTE
Common Stock and the amount of the per share dividend paid on each
dividend payment date. It is not possible to predict future dividends and,
accordingly, estimated Equivalent Unit accruals in this table are
calculated for illustrative purposes only and are based upon the dividend
rate and price of GTE Common Stock at the close of business on December
31, 1996. The Target future payout or award is the dollar amount derived
by multiplying the Equivalent Unit balance credited to the participant at
the end of the award cycle by the price of GTE Common Stock. The Target
award measures performance attainment as described in footnote 3.
(2) The Threshold represents attainment of minimum acceptable levels of
performance (the "Threshold Levels") with respect to the five Long-Term
Performance Bonus measures (the "Measures") adopted for the 1996-1998
Performance Bonus award cycle -- revenue growth;
16
<PAGE>
earnings per share ("EPS") growth; earnings before interest, taxes,
depreciation and amortization ("EBITDA") growth; average return on
investment ("ROI"); and relative total shareholder return ("TSR"). If the
Threshold Level is attained with respect to each of the Measures, the award
will be equal to approximately 25% of the combined Target award (the TSR
Threshold is set at 50%, while the Threshold for the other four Measures is
set at 20%). Because performance is measured separately for each Measure, it
is possible to receive an award if the Threshold Level is achieved with
respect to at least one but not all of the Measures. If the actual results
for all Measures are below the Threshold Levels, no award will be paid.
(3) The Target represents attainment of levels of three-year revenue growth,
EPS growth, EBITDA growth, ROI and TSR established at the beginning of a
cycle (the "Target Levels"). If GTE's actual results for each of the
Measures are equivalent to the Target Levels, this would represent
outstanding performance, and the award will be equal to 100% of the
combined Target award. GTE's performance is measured separately for each
Measure. Accordingly, if the actual result for any Measure is at the
applicable Target Level, the portion of the award determined by that
Measure will be at 100% of the Target award for that Measure. Similarly,
the portion of the award determined by any Measure performing at less than
the applicable Target Level, but above the Threshold, will be less than
the Target award for that Measure.
(4) This column has intentionally been left blank because it is not possible
to determine the maximum number of Equivalent Units until the award cycle
has been completed. Subject to the Award Limit discussed in footnote 1
above, the maximum amount of the award is limited by the extent to which
GTE's actual results for the five Measures exceed the Target Levels. If
GTE's actual results during the cycle for the five Measures exceed the
respective Target Levels, additional awards may be paid, based on a linear
interpolation. For example, for revenue growth, the schedule is as
follows:
<TABLE>
<CAPTION>
PERFORMANCE INCREMENT
ABOVE REVENUE ADDED PERCENTAGE
PERFORMANCE TARGET TO COMBINED AWARDS
--------------------- ------------------
<S> <C> <C>
Each 0.1% improvement in
cumulative revenue growth +2%
</TABLE>
Thus, if the revenue growth Measure exceeds its Target Level by .5% while
the remaining four Measures are precisely at their respective Target
Levels, then the performance bonus will equal 110% of the combined Target
award.
17
<PAGE>
PERFORMANCE GRAPH
The following table shows a comparison of five year cumulative total return
to shareholders for GTE Common Stock, Standard & Poor's ("S&P") 500 Index, and
S&P Telephone Index.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement period GTE S&P 500 S&P TELEPHONE
(Fiscal year Covered) COMMON STOCK INDEX INDEX
<S> <C> <C> <C>
12/31/91 $ 100 $ 100 $ 100
12/31/92 $ 105 $ 106 $ 105
12/31/93 $ 112 $ 118 $ 127
12/30/94 $ 103 $ 120 $ 121
12/29/95 $ 157 $ 165 $ 183
12/31/96 $ 170 $ 203 $ 185
</TABLE>
- - Assumes $100 invested on December 31, 1991.
- - S&P Telephone Index is comprised of the Regional Bell Holding Companies plus
GTE, Alltel Corporation and Frontier Corportaion.
EXECUTIVE AGREEMENTS
GTE has entered into agreements (the "Agreements") with Messrs. Lee, Foster,
Masin, White and Barr regarding benefits to be paid in the event of a change
in control of GTE (a "Change in Control").
A Change in Control is deemed to have occurred if (a) any person or group of
persons acquires, other than from GTE or as described below, 20% (or under
certain circumstances, a lower percentage, not less than 10%) of GTE's voting
power, (b) three or more directors are elected in any twelve-month period
without the approval of a majority of the members of GTE's Incumbent Board (as
defined in the Agreements) then serving as members of the Board, (c) the
members of the Incumbent Board no longer constitute a majority of the Board of
Directors or (d) GTE's shareholders approve (i) a merger, consolidation or
reorganization involving GTE, (ii) a complete liquidation or dissolution of
GTE or (iii) an agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any person other than a
subsidiary of GTE. An individual whose initial assumption of office occurred
pursuant to an agreement to avoid or settle a proxy or other election contest
is not considered a member of the Incumbent Board. In addition, a director who
is elected pursuant to such a settlement agreement will not be deemed a
director who is elected or nominated by the Incumbent Board for purposes of
determining whether a Change in Control has occurred. Notwithstanding the
foregoing, a Change in Control will not occur in the following situations: (1)
certain merger transactions in which there is at least 50% GTE shareholder
continuity in the surviving corporation, at least a majority of the members of
the board of directors of the surviving corporation consist of members of the
Board and
18
<PAGE>
no person owns more than 20% (or under certain circumstances, a lower
percentage, not less than 10%) of the voting power of the surviving
corporation following the transaction, and (2) transactions in which GTE's
securities are acquired directly from GTE.
The Agreements provide for benefits to be paid in the event these
individuals separate from service and have a "good reason" for leaving or are
terminated without "cause" within two years after a Change in Control of GTE.
Good reason for leaving includes but is not limited to the following events:
demotion, relocation or a reduction in total compensation or benefits, or the
new entity's failure to expressly assume obligations under the Agreements.
Termination for cause includes certain unlawful acts on the part of the
executive or a material violation of his or her responsibilities to the
Corporation resulting in material injury to the Corporation.
An executive who experiences a qualifying separation from service will be
entitled to receive up to two times the sum of (i) base salary and (ii) the
average of his percentage awards under the EIP for the previous three years.
The executive will also continue to receive medical and life insurance
coverage for up to two years and will be provided with financial and
outplacement counseling.
In addition, any member of the Office of the Chairman with less than 10
years of service with GTE will receive the following special service credit in
the following amounts: two times years of service otherwise credited if the
executive has five or fewer years of credited service; 10 years if credited
service is more than five and not more than 10 years; and, if the executive's
credited service exceeds 10 years, the actual number of credited years of
service. These additional years of service will apply towards vesting,
retirement eligibility, benefit accrual and all other purposes under the
Supplemental Executive Retirement Plan (the "SERP") and the Executive Retired
Life Insurance Plan. In addition, each executive covered under an Agreement
will be considered to have not less than 76 points and 15 years of accredited
service for the purpose of determining his eligibility for early retirement
benefits. The Agreements provide that there will be no duplication of
benefits.
In order to replace certain pension entitlements that would have been
payable to Mr. Masin had he remained with his former employer, he will also
receive a single life annuity pension of $200,000 per year (the "Special
Pension") with an unreduced surviving spouse benefit when he leaves GTE. He
will only be eligible to receive the Special Pension if he meets certain
eligibility criteria when he separates from GTE. If he is separated
involuntarily after age 60 or a Change in Control occurs at any age and Mr.
Masin separates for "good reason" or is terminated without "cause," he will be
eligible for postretirement medical benefits and the early retirement benefit
described in the preceding paragraph.
Each of the Agreements remains in effect until July 1, 1999 unless
terminated earlier pursuant to its terms. The Agreements will be automatically
renewed on each successive July 1 unless, not later than December 31 of the
preceding year, one of the parties notifies the other that he does not wish to
extend his respective Agreement. If a Change in Control occurs, the Agreements
will remain in effect until the obligations of GTE (or its successor) under
the Agreements have been satisfied.
19
<PAGE>
RETIREMENT PROGRAMS
Pension Plans
The estimated annual benefits payable, calculated on a single life annuity
basis, under GTE's defined benefit pension plans at normal retirement at age
65, based upon final average earnings (integrated with social security as
described below) and years of service, is illustrated in the following table:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ----------------------------------------------------
EARNINGS 15 20 25 30 35
- ------------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 500,000 $107,513 $ 143,350 $ 179,188 $ 215,025 $ 250,863
600,000 129,263 172,350 215,438 258,525 301,613
700,000 151,013 201,350 251,688 302,025 352,363
800,000 172,763 230,350 287,938 345,525 403,113
900,000 194,513 259,350 324,188 389,025 453,863
1,000,000 216,263 288,350 360,438 432,525 504,613
1,200,000 259,763 346,350 432,938 519,525 606,113
1,500,000 325,013 433,350 541,688 650,025 758,363
2,000,000 433,763 578,350 722,938 867,525 1,012,113
2,500,000 542,513 723,350 904,188 1,085,025 1,265,863
2,750,000 596,888 795,850 994,813 1,193,775 1,392,738
3,000,000 651,263 868,350 1,085,438 1,302,525 1,519,613
3,500,000 760,013 1,013,350 1,266,688 1,520,025 1,773,363
</TABLE>
All executive officers of GTE are employees of GTE Service Corporation, a
wholly-owned subsidiary, which maintains the GTE Service Corporation Plan for
Employees' Pensions (the "Service Corporation Plan"), a noncontributory
pension plan for the benefit of all employees of GTE Service Corporation and
participating affiliates who are not covered by collective bargaining
agreements and which provides a benefit based on years of service and
earnings. Pension benefits provided by GTE Service Corporation and
contributions to the Service Corporation Plan are related to basic salary
exclusive of overtime, differentials, incentive compensation (except as
otherwise described) and other similar types of payments. Under the Service
Corporation Plan, pensions are computed on a two-rate formula basis of 1.15%
and 1.45% for each year of service, with the 1.15% service credit being
applied to that portion of the average annual salary for the five highest
consecutive years that does not exceed the Social Security Integration Level
(the portion of salary subject to the Federal Social Security Act), and the
1.45% service credit being applied to that portion of the average annual
salary for the five highest consecutive years that exceeds said level up to
the statutory limit on compensation. As of February 26, 1997, the credited
years of service under the Service Corporation Plan for Messrs. Lee, Foster,
Masin, White and Barr are 13, 26, 3, 28, and 2, respectively.
Under federal law, an employee's benefits under a qualified pension plan,
such as the Service Corporation Plan, are limited to certain maximum amounts.
GTE maintains the SERP, which supplements the benefits of any participant in
the Service Corporation Plan in an amount by which any participant's benefits
under the Service Corporation Plan are limited by law. In addition, the SERP
includes a provision permitting the payment of additional retirement benefits
determined in a similar manner as under the Service Corporation Plan on
remuneration accrued under management incentive plans as determined by the
Executive Compensation and Organizational Structure Committee. SERP benefits
are payable in a lump sum or an annuity.
20
<PAGE>
Executive Retired Life Insurance Plan
The GTE Corporation Executive Retired Life Insurance Plan ("ERLIP") provides
Messrs. Lee, Foster, Masin, White and Barr a postretirement life insurance
benefit of three times final base salary. Upon retirement, ERLIP benefits may
be paid as life insurance or, alternatively, an equivalent amount equal to the
present value of the life insurance amount (based on actuarial factors and the
interest rate then in effect), may be paid as a lump sum payment, as an
annuity or as installment payments.
CERTAIN TRANSACTIONS
During 1996, The Boston Consulting Group, Inc. received fees from GTE's
subsidiaries of approximately $155,000 for consulting services. Dr. Sandra O.
Moose is a director of GTE and a Senior Vice President, Chair of the East
Coast Practice and Director of The Boston Consulting Group, Inc.
GTE's subsidiaries utilized the services of Thompson, Hine & Flory LLP
during 1996. Mr. Robert D. Storey is a director of GTE and a partner in that
law firm.
The investment banking firm of PaineWebber Incorporated received
underwriting commissions and fees from GTE and its subsidiaries on the sale of
securities during 1996. It is possible that PaineWebber Incorporated may have
received additional brokerage commissions from trustees of the various
pension, retirement, savings or similar plans of GTE and its subsidiaries.
However, any such commissions would not have been as a result of direction by
GTE or its subsidiaries with regard to such orders. Mr. Richard W. Jones is a
director of GTE and a business consultant for PaineWebber Incorporated.
OWNERSHIP OF STOCK BY DIRECTORS, NOMINEES FOR DIRECTORS AND EXECUTIVE OFFICERS
Voting Stock and Stock-Based Holdings
The table below sets forth (a) the shares of GTE Common Stock beneficially
owned by each director, nominee for director, the Chief Executive Officer and
the other four most highly compensated executive officers, and by all
directors and executive officers as a group; and (b) the total GTE stock-based
holdings of the named individuals and the group. No director, nominee for
director or executive officer owns as much as one-tenth of one percent of the
total outstanding shares of GTE Common Stock, and all directors and executive
officers as a group own less than one-half of one percent of the total
outstanding shares of GTE Common Stock. Unless otherwise indicated, all
persons named in the table have sole voting and investment power with respect
to the shares shown.
The last column of the table combines beneficial ownership of shares of GTE
Common Stock (including shares which may be acquired within 60 days pursuant
to the exercise of stock options) with holdings of (i) Deferred Stock Units by
non-employee directors (which are payable in cash or shares of GTE Common
Stock, at the election of the director, and are accrued under the Deferred
Stock Unit Plan and under the Deferred Compensation Plan) and by executive
officers (which are payable in cash pursuant to deferrals under the GTE
Executive Salary Deferral Plan, the EIP and the 1991 LTIP); and (ii)
Restricted Stock Units by executive officers (which are payable in shares of
GTE Common Stock under the EPP). This column indicates the alignment of the
named individuals and group with the interests of GTE's shareholders because
the value of their total holdings will increase or decrease in line with the
price of GTE Common Stock.
21
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY GTE STOCK-BASED
OWNED AS OF HOLDINGS AS OF
NAME OF DIRECTOR OR NOMINEE FEBRUARY 26, 1997 FEBRUARY 26, 1997
- --------------------------- ------------------- -----------------
<S> <C> <C>
Edwin L. Artzt........................... 2,611 12,502
James R. Barker.......................... 4,200 88,691
Edward H. Budd........................... 4,359 22,917
Robert F. Daniell........................ 2,764 5,755
Kent B. Foster(1)(2)..................... 596,616 654,240
James L. Johnson(2)...................... 452,343 459,571
Richard W. Jones......................... 12,288 164,900
James L. Ketelsen........................ 1,800 10,864
Charles R. Lee(1)(2)..................... 1,023,588 1,083,597
Michael T. Masin(1)(2)(3)................ 374,683 404,597
Sandra O. Moose.......................... 1,800 7,855
Russell E. Palmer........................ 2,200 7,775
Robert D. Storey......................... 700 8,241
--------- ---------
2,479,952 2,931,505
========= =========
<CAPTION>
EXECUTIVE OFFICERS(1)(2)
- ------------------------
<S> <C> <C>
Charles R. Lee........................... 1,023,588 1,083,597
Kent B. Foster........................... 596,616 654,240
Michael T. Masin(3)...................... 374,683 404,597
Thomas W. White.......................... 201,787 210,656
William P. Barr.......................... 61,924 64,893
--------- ---------
2,258,598 2,417,983
========= =========
All directors and executive officers as a
group(1)(2)............................. 3,505,527 4,014,964
========= =========
</TABLE>
- --------
(1) Includes shares acquired through participation in the GTE Savings Plan.
(2) Included in the number of shares beneficially owned by Messrs. Lee,
Foster, Masin, White, Barr and Johnson and all directors and executive
officers as a group are 900,565, 540,932, 370,299, 189,765, 58,666,
375,700, and 3,111,467, respectively, which such persons have the right to
acquire within 60 days pursuant to the exercise of stock options.
(3) Mr. Masin participated in the Deferred Compensation Plan and the PSP while
he was a non-employee director of GTE. In October 1993, Mr. Masin became
an employee of GTE. He is no longer eligible to receive or defer
additional compensation under the Deferred Compensation Plan or to receive
new grants under any plans for non-employee directors of GTE.
CANTV Stock
The following table indicates the number of shares of Class D Common Shares
of Compania Anonima Nacional Telefonos de Venezuela ("CANTV") beneficially
owned by each GTE director or nominee, the Chief Executive Officer and each of
the other four most highly compensated executive officers who beneficially own
such shares, and by all directors and executive officers of GTE as a group as
of February 26, 1997. A subsidiary of GTE owns approximately 16% of the Class
D shares of CANTV and the remaining shares are owned by the public. GTE also
indirectly owns 51% of the Class A Common Shares of CANTV through a
consortium, and the other consortium partners indirectly own the remaining
Class A Common Shares. Only directors of GTE who own shares of CANTV Class D
Common Shares are named in the table.
22
<PAGE>
<TABLE>
<CAPTION>
SHARES OF CANTV
CLASS D COMMON SHARES
NAME BENEFICIALLY OWNED (1) (2)
- ---- --------------------------
<S> <C>
James R. Barker.................................... 56,700
Kent B. Foster..................................... 7,000
Charles R. Lee..................................... 77,000
Michael T. Masin................................... 30,450
Russell E. Palmer.................................. 7,000
-------
178,150
=======
All GTE directors and executive officers as a
group............................................. 216,650
=======
</TABLE>
- --------
(1) Each of these amounts, and all of them in the aggregate, represented less
than 1% of the outstanding shares of CANTV Class D Common Shares as of
February 26, 1997.
(2) All of the above Class D Common Shares of CANTV are owned in the form of
American Depositary Shares, each representing seven Class D Common Shares.
ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes. Each class of
directors is elected for a three-year term. Messrs. Barker, Daniell, Jones and
Masin are nominated for election by GTE's shareholders as Class II directors.
All nominees for Class II directors are currently directors and were
previously elected by the shareholders. The Class II directors elected in 1997
will serve for a term of three years which expires at the Annual Meeting of
Shareholders in 2000 or when their successors are elected and qualified. Each
nominee is at present available for election.
If all the nominees for directors are elected by GTE's shareholders at the
Annual Meeting, the Board of Directors will consist of 13 directors, 10
directors whose principal occupations are outside GTE and 3 directors who are
presently employees of GTE. The following provides information about the
nominees for directors and the continuing directors.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES.
23
<PAGE>
BIOGRAPHICAL INFORMATION
NOMINEE,
AGE AND
YEAR
ELECTED A
DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- -------------------------------------------------------------------------------
NOMINEES FOR CLASS II DIRECTORS
TERM EXPIRING AT 2000 ANNUAL MEETING
- -------------------------------------------------------------------------------
JAMES R. BARKER Chairman of The Interlake Steamship Co. and Vice Chairman
61 1976 of Mormac Marine Group, Inc. and the Moran Towing
Company. Mr. Barker is also a Director and a principal
owner of Meridian Aggregates, Inc., a producer of
aggregate products for the construction and railroad
[PHOTO] industries. Mr. Barker was formerly Chairman of the Board
of Moore McCormack Resources, Inc. and Chairman of that
company's operating subsidiaries since April 1971. He was
also Chief Executive Officer of Moore McCormack
Resources, Inc. from 1971 to January 1987. In 1969, Mr.
Barker co-founded a management consulting firm, Temple,
Barker & Sloane, Inc., and served in the capacity of
Executive Vice President. He is a Director of The
Pittston Company and Eastern Enterprises, is Vice
Chairman of the Board of Trustees of Stamford Hospital,
and is President of the Committee of SKULD (an Oslo,
Norway based marine insurance company). Mr. Barker is
Chairman of the Nominating Committee and a member of the
Executive Compensation and Organizational Structure
Committee and the Strategic Issues, Planning and
Technology Committee of GTE.
ROBERT F. DANIELL Chairman, United Technologies Corporation. Mr. Daniell
63 1996 was elected Chairman, United Technologies Corporation,
effective January 1, 1987. He relinquished the offices of
President and Chief Operating Officer in February 1992
and the office of Chief Executive Officer in April 1994.
[PHOTO] Mr. Daniell was elected President and Chief Operating
Officer in 1984 and named to the additional post of Chief
Executive Officer, effective January 1, 1986. He was
elected Senior Vice President -- Defense Systems in 1983
and had served as Vice President of United Technologies
from 1982 to 1983 and President of Sikorsky Aircraft from
1981 to 1983. He is a director of Shell Oil Co. and the
Travelers Group Inc. Mr. Daniell is a member of the Audit
Committee, the Pension Trust Coordinating Committee and
the Public Policy Committee of GTE.
RICHARD W. JONES Business Consultant, PaineWebber Incorporated. From 1977
71 1966-1974 to 1988 he was Managing Director and Executive Vice
JANUARY 1975 President of the investment banking firm of E.F. Hutton &
Company, Inc. Prior to assuming that position, Mr. Jones
was associated with Paine, Webber, Jackson & Curtis
Incorporated, investment bankers, having served as Senior
[PHOTO] Vice President and a Director of that firm from 1973 to
1977. Mr. Jones was also associated with Mitchum, Jones &
Templeton Incorporated, investment bankers, having served
as President of that firm from 1961 through 1970 and
Chairman of the Board from 1970 through 1973. He is a
member of the Audit Committee, the Pension Trust
Coordinating Committee and the Public Policy Committee of
GTE.
24
<PAGE>
BIOGRAPHICAL INFORMATION
NOMINEE,
AGE AND
YEAR
ELECTED A
DIRECTOR PRINCIPAL OCCUPATION AND OTHER INFORMATION
- -------------------------------------------------------------------------------
NOMINEES FOR CLASS II DIRECTORS
TERM EXPIRING AT 2000 ANNUAL MEETING
- -------------------------------------------------------------------------------
MICHAEL T. MASIN Vice Chairman of the Board and President --
52 1989 International. Mr. Masin was elected Vice Chairman in
October 1993 and President -- International in June 1995.
Prior to that, he was Managing Partner of the New York
office of the law firm of O'Melveny & Myers and Co-chair
[PHOTO] of the firm's International Practice Group. Mr. Masin
joined the firm in 1969 and became a partner in 1977. He
is a Director of BC Telecom Inc., BC TEL, Compania
Anonima Nacional Telefonos de Venezuela (CANTV) and
VenWorld. Mr. Masin is a member of the Board of Trustees
of Carnegie Hall, the Board of Directors of the China
America Society, the Dean's Advisory Council of Dartmouth
College, the US-Canada Private Sector Advisory Council of
the Inter-American Development Board, the Business
Committee of the Board of Trustees of the Museum of
Modern Art, the Council on Foreign Relations, and a
Personal Trustee of the GTE Foundation.
The following provides information about the members of the Board of
Directors who are continuing in office.
DIRECTOR, AGE
AND YEAR ELECTED PRINCIPAL OCCUPATION AND OTHER INFORMATION
- -------------------------------------------------------------------------------
CLASS III DIRECTORS
TERM EXPIRING AT 1998 ANNUAL MEETING
- -------------------------------------------------------------------------------
EDWIN L. ARTZT Chairman of the Executive Committee and Director of The
66 1984 Procter & Gamble Company. Mr. Artzt was Chairman of the
Board and Chief Executive Officer from January 1990 until
July 1995. Mr. Artzt had served
as Vice Chairman of the Board of The Procter & Gamble Company and President of
Procter & Gamble International since 1984. Prior to that, he was an Executive
Vice President since 1980 and had served as Group Vice President for European
operations. Mr. Artzt is a Director of Teradyne, Inc., Delta Air Lines, Inc.,
American Express Company, Barilla S.p.A. and a member of the Business Council.
Mr. Artzt is Chairman of the Strategic Issues, Planning and Technology
Committee and a member of the Nominating Committee and the Pension Trust
Coordinating Committee of GTE.
KENT B. FOSTER President. Mr. Foster served as Vice Chairman of the
53 1992 Board of Directors from October 1993 until June 1995 and
President of GTE Telephone Operations Group from January
1989 until June 1995. Since joining GTE in
1970, Mr. Foster served in a number of positions of increasing responsibility
throughout the GTE system. Mr. Foster serves on the Board of Directors of
Campbell Soup Company, New York Life Insurance Company and the Dallas Symphony
Orchestra. He is a Trustee of The Dallas Museum of Art and a member of the
Dallas Opera Executive Board. Mr. Foster is also a Personal Trustee of the GTE
Foundation.
25
<PAGE>
BIOGRAPHICAL INFORMATION
DIRECTOR, AGE
AND YEAR ELECTED PRINCIPAL OCCUPATION AND OTHER INFORMATION
- -------------------------------------------------------------------------------
CLASS III DIRECTORS
TERM EXPIRING AT 1998 ANNUAL MEETING
- -------------------------------------------------------------------------------
SANDRA O. MOOSE Senior Vice President, Director and Chair of the East
55 1978 Coast Practice, The Boston Consulting Group, Inc. She is
a Director of Rohm and Haas Company and twenty-seven
investment companies sponsored by The New
England Funds, an Overseer of the Beth Israel Deaconess Medical Center, a
Trustee of the Boston Public Library and a Director of the Harvard University
Graduate School Alumni Association. She is Chairperson of the Public Policy
Committee and a member of the Audit Committee and the Strategic Issues,
Planning and Technology Committee of GTE.
RUSSELL E. PALMER Chairman and Chief Executive Officer, The Palmer Group.
62 1984 Mr. Palmer was formerly Dean, The Wharton School,
University of Pennsylvania from 1983 until June 1990.
Prior to that, he was Managing Director and Chief
Executive Officer of Touche Ross International (now Deloitte and Touche), a
worldwide accounting firm. Mr. Palmer joined Touche Ross in 1956 and was
elected Managing Director of Touche Ross International in 1974. Mr. Palmer is
a Director of Bankers Trust New York Corporation and its subsidiary, Bankers
Trust Company, May Department Stores Company, Allied-Signal, Inc., Safeguard
Scientifics, Inc. and Federal Home Loan Mortgage Corporation. He has been
President of the Financial Accounting Foundation and a member of the Board of
Directors of the American Institute of Certified Public Accountants. Mr.
Palmer is a former member of the Presidential Commission on Management
Improvement and serves on the boards of a number of charitable and civic
organizations. He is Chairman of the Executive Compensation and Organizational
Structure Committee and a member of the Nominating Committee and the Strategic
Issues, Planning and Technology Committee of GTE.
ROBERT D. STOREY Partner with the Cleveland law firm of Thompson, Hine &
60 1985 Flory LLP. Mr. Storey previously was a partner with the
Cleveland law firm of McDonald, Hopkins, Burke & Haber
Co., L.P.A. Mr. Storey joined its predecessor firm
in 1967 and became a partner in 1971. In 1964 he began his career as an
attorney with The East Ohio Gas Company and in 1966 he became Assistant
Director of The Legal Aid Society of Cleveland. He is a Director of Bank One,
Cleveland, The Procter & Gamble Company and May Department Stores Company. Mr.
Storey is a Trustee of Case Western Reserve University, the Kresge Foundation
and the George Gund Foundation and a former Trustee of Phillips Exeter
Academy, Cleveland State University and Overseer of Harvard University. He is
a member of the Audit Committee, the Nominating Committee and the Public
Policy Committee of GTE.
DIRECTOR, AGE
AND YEAR ELECTED PRINCIPAL OCCUPATION AND OTHER INFORMATION
- -------------------------------------------------------------------------------
CLASS I DIRECTORS
TERM EXPIRING AT 1999 ANNUAL MEETING
- -------------------------------------------------------------------------------
EDWARD H. BUDD Retired Chairman of the Board of The Travelers
63 1985 Corporation. From January 1994 to September 1994, Mr.
Budd was Chairman of Travelers Insurance Group, Inc. Mr.
Budd was elected President and Chief Operating Officer of
The Travelers Corporation in 1976, Chief Executive Officer in 1981 and
Chairman in 1982. He is a Director of the Travelers Group Inc., Delta Air
Lines, Inc. and a member of The Business Council. He is Chairman of the Audit
Committee and a member of the Nominating Committee and the Executive
Compensation and Organizational Structure Committee of GTE.
26
<PAGE>
BIOGRAPHICAL INFORMATION
DIRECTOR, AGE
AND YEAR ELECTED PRINCIPAL OCCUPATION AND OTHER INFORMATION
- -------------------------------------------------------------------------------
CLASS I DIRECTORS
TERM EXPIRING AT 1999 ANNUAL MEETING
- -------------------------------------------------------------------------------
JAMES L. JOHNSON Retired Chairman and Chief Executive Officer. Mr.
69 1985 Johnson, who retired in 1992, has been designated
Chairman Emeritus by the Board. He joined GTE in 1949 and
held a variety of management positions within the
Telephone Operations Group. He was elected President of the GTE Telephone
Operations Group in 1981, Senior Vice President of GTE and President and Chief
Operating Officer of its Telephone Operations Group in December 1983,
President and Chief Operating Officer of GTE in March 1986 and became Chairman
and Chief Executive Officer in May 1988. Mr. Johnson is a Director of MONY
(The Mutual Life Insurance Company of New York), Valero Energy Corporation,
Harte-Hanks Communications, Inc., The Finover Group, Walter Industries, Inc.
and CellStar Corporation. He is also a Trustee of the Joint Council on
Economic Education. Mr. Johnson is a member of the Audit Committee, the
Pension Trust Coordinating Committee and the Strategic Issues, Planning and
Technology Committee of GTE.
JAMES L. KETELSEN Retired Chairman of Tenneco Inc. Mr. Ketelsen retired as
66 1986 Chairman of Tenneco in 1992. He was elected Executive
Vice President -- Finance of Tenneco Inc. in 1972 and was
appointed Chairman and Chief Executive
Officer in 1978. He is a Director of J.P. Morgan & Co. Incorporated and its
principal subsidiary, Morgan Guaranty Trust Company of New York, and of Sara
Lee Corporation and a Trustee of Northwestern University. Mr. Ketelsen is
Chairman of the Pension Trust Coordinating Committee and a member of the
Executive Compensation and Organizational Structure Committee and the Public
Policy Committee of GTE.
CHARLES R. LEE Chairman and Chief Executive Officer. Mr. Lee joined GTE
57 1989 in 1983 as Senior Vice President -- Finance and in 1986
he was named Senior Vice President -- Finance and
Planning. He was elected President and Chief
Operating Officer, effective January 1, 1989, and became Chairman and Chief
Executive Officer in 1992. Prior to joining GTE, he held various financial and
management positions in the steel, transportation and entertainment
industries. Mr. Lee is a Director of United Technologies Corporation, USX
Corporation and The Procter & Gamble Company. He is a member of the Business
Roundtable, a Trustee of the Board of Trustees of Cornell University, a
Trustee of the National Planning Association, a member of the New American
Realities Committee of the National Planning Association, a member of The
Conference Board, Harvard Business School's Board of Directors of the
Associates, and a Director of the Stamford Hospital Foundation. Mr. Lee is a
Personal Trustee of the GTE Foundation and a member of the Strategic Issues,
Planning and Technology Committee of GTE.
ITEM 2.
The following resolution will be offered by the Board of Directors at the
meeting:
RESOLVED: That the appointment of Arthur Andersen LLP by the Board of
Directors of the Corporation to conduct the annual audit of the financial
statements of GTE Corporation and its subsidiary companies for the year ending
December 31, 1997 is ratified, confirmed and approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING PROPOSAL FOR THE
FOLLOWING REASONS:
The Board of Directors first appointed Arthur Andersen LLP ("Arthur
Andersen"), independent public accountants, as its auditors in 1935 and has
reappointed the firm as auditors each succeeding
27
<PAGE>
year to date. As a result of Arthur Andersen's reputation in the auditing
field and its knowledge of GTE's operations, the Board of Directors is
convinced that the firm has the necessary personnel, professional
qualifications and independence to act as GTE's auditors. Accordingly, the
Board has again selected Arthur Andersen as GTE's auditors for the year 1997
and recommends that the shareholders ratify and approve the selection. Arthur
Andersen's fees for recurring auditing and tax services for GTE and all of its
subsidiaries for the year ended December 31, 1996 are estimated at $10
million.
In the event this resolution does not receive the necessary vote for
adoption, or if for any reason Arthur Andersen ceases to act as auditors for
GTE, the Board of Directors will appoint other independent public accountants
as auditors. Representatives of Arthur Andersen will attend the Annual
Meeting. They will have the opportunity to make a statement and also will be
available to respond to appropriate questions from shareholders at the Annual
Meeting.
ITEM 3.
GTE CORPORATION 1997 EXECUTIVE INCENTIVE PLAN
The Board of Directors of the Corporation recommends approval of the GTE
Corporation 1997 Executive Incentive Plan ("1997 EIP"). The primary purposes
for seeking shareholder approval of the changes incorporated in the 1997 EIP
are to comply with the provisions of the performance-based compensation
exemption from the tax deduction limit imposed by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and to obtain approval
for the issuance of the shares of GTE Common Stock under the 1997 EIP. The
1997 EIP is designed to replace the EIP originally approved by shareholders in
1978.
The complete text of the 1997 EIP appears as Exhibit A to this Proxy
Statement. The main features of the 1997 EIP are outlined below, but the
outline is qualified by reference to the complete text of the plan.
Purpose
The primary purpose of the 1997 EIP is to facilitate the Corporation's
ability to achieve its short-term financial and operating goals by offering
key employees annual incentive opportunities. Under the 1997 EIP, awards will
be made based on the achievement of key goals at the corporate, business unit,
and/or individual level.
The Executive Compensation and Organizational Structure Committee (the
"Committee") and the Board have assessed the results of the predecessor to the
1997 EIP and believe that the 1997 EIP represents an important motivational
tool to facilitate the Corporation's ability to achieve short-term financial
goals. They further believe that the 1997 EIP supports the Corporation's
philosophy of rewarding individual achievement and linking compensation with
results: i.e., paying average compensation for average results and above-
average compensation for above-average results. Accordingly, the 1997 EIP
offers compensation that is "at risk".
In addition, by enabling the Corporation to retain and attract the highest
level of qualified executives, the 1997 EIP will be a key factor in the
Corporation's continued success.
Administration and Participation
The Committee is responsible for administering the 1997 EIP and for
selecting as participants those officers and key employees of GTE and related
companies who are able to affect GTE's results. Approximately 1,300 officers
and key employees of GTE will be eligible for selection as participants in the
1997 EIP. The Committee may delegate its authority to persons other than its
members. Any person to whom the Committee delegates its authority may receive
awards under the 1997 EIP only if the awards are granted directly by the
Committee without delegation.
28
<PAGE>
Limitation on Awards
Under the 1997 EIP, no awards may be made for any plan year in which GTE's
return on equity ("ROE") does not exceed 8%. The 1997 EIP also limits the
aggregate amount that may be awarded in any plan year. If ROE exceeds 8%, the
Committee may establish an award pool equal to 5% of GTE's consolidated net
income ("CNI"), representing the maximum amount available to pay awards
(the "EIP Award Pool"). In determining the amount of the EIP Award Pool, the
Committee will not consider CNI in excess of $5 billion. However, the
Committee may reduce CNI for the purpose of calculating the EIP Award Pool.
The Committee may also authorize awards that total less than the EIP Award
Pool.
The 1997 EIP also establishes a restriction on the maximum award a
participant may receive. The maximum award is determined by the participant's
annual base salary on the last day of the plan year in accordance with the
following table:
<TABLE>
<CAPTION>
PERCENTAGE OF EIP
SALARY POSITION AWARD POOL
--------------- -----------------
<S> <C>
Highest paid............................................. 3.50%
2nd & 3rd highest paid................................... 2.50%
4th & 5th highest paid................................... 1.25%
6th through 25th highest paid............................ .85%
</TABLE>
Each other participant shall be limited to a maximum award that is less than
.50% of the EIP Award Pool, as determined by the Committee. The Committee may
reduce the maximum award for any participant. Moreover, the total of the
maximum awards for any plan year cannot exceed 100% of the EIP Award Pool for
that plan year. The Committee may also grant dividend equivalents in respect
of awards that are denominated in stock units.
Payment of Awards
In determining the awards to be paid to participants, the Committee
considers GTE's financial and operating performance for the plan year, the
performance of the participant's business unit and the participant's
achievement in relation to established goals.
The Committee may authorize payment to a participant of less than the
participant's maximum award and may provide that a participant will not
receive any award payment.
The Committee will determine the date on which awards are payable and
whether awards will be paid wholly in cash, wholly in shares of GTE Common
Stock or partly in cash and partly in shares. The Committee may permit and/or
require that a participant defer payment of all or a portion of his or her
award subject to any conditions prescribed by the Committee. If awards are
paid in shares, the Committee shall determine whether the shares will be
subject to restrictions on transfer and/or provisions regarding forfeiture.
No awards have been granted under the 1997 EIP. It is not possible to
determine the awards which would have been made to any individual or group in
addition to or in substitution for those granted under the EIP if the 1997 EIP
had been in effect for 1996.
Limitation on Number of Shares
To provide for the potential that awards under the 1997 EIP may be paid in
shares of GTE Common Stock, if shareholders approve the 1997 EIP, GTE will be
authorized to issue up to 3,000,000 shares under the 1997 EIP. In addition,
under the 1997 EIP, any shares tendered or withheld in satisfaction of
withholding tax obligations, any shares forfeited or cancelled in accordance
with the terms of an award and any shares repurchased by the Corporation for
issuance by employee plans and allocated to the 1997 EIP, will be available
for issuance under the 1997 EIP.
Shares of GTE Common Stock will be considered to be issued under the 1997
EIP only when the shares are actually issued to a participant.
29
<PAGE>
Amendment or Termination of the Plan
Unless it is terminated earlier, the 1997 EIP will remain in effect until
the close of business on the date of GTE's annual meeting of shareholders in
the year 2007. Prior to that date, the Board may, from time to time, alter,
amend, suspend or terminate the 1997 EIP, subject to the 1997 EIP's Change in
Control provisions discussed below. Termination of the 1997 EIP will not cause
any previously granted awards to terminate. These awards will continue to be
governed by the terms of the 1997 EIP and the specific provisions pertaining
to the awards. However, the Board may not, without approval of GTE's
shareholders, amend the 1997 EIP to increase the number of shares that may be
issued under the 1997 EIP.
If certain events occur, the Committee may adjust previously granted awards
and the number and type of securities that may subsequently be issued under
the 1997 EIP to prevent dilution or enlargement of the benefits available
under the 1997 EIP. These events include, but are not limited to, a dividend
or other distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares or other securities, the exercisability of
stock purchase rights under the Rights Agreement dated December 7, 1989
between GTE and The First National Bank of Boston, as successor Rights Agent
(the "Rights Plan"), the issuance of warrants or other purchase rights, and
other similar events.
Change in Control
In order to protect the rights of participants, the 1997 EIP provides that,
in the event of a Change in Control of GTE as described on pages 18 and 19,
all then-outstanding awards will immediately become nonforfeitable and payable
unless the participant elects to defer receipt of the award under the deferral
regulations applicable to the 1997 EIP. The amount of the award will be equal
to the average percentage of the normal payment under the 1997 EIP or the EIP
that the participant earned for the three years prior to the Change in Control
(or, if less, the number of such years the employee participated in the 1997
EIP) multiplied by the normal payment for the year in which the Change in
Control occurs for the participant's salary level in effect at the time of the
Change in Control.
Moreover, after the date of a Change in Control, a participant, former
participant or beneficiary may apply to the trustee of the GTE Service
Corporation Benefits Protection Trust for assistance in enforcing his or her
rights and pursuing any claims he or she may have under the terms of the 1997
EIP.
These Change in Control provisions are automatically renewed for a one-year
period on each successive July 1 unless by December 31 of the preceding year
the Board adopts a resolution terminating renewal of the provisions. However,
if a Change in Control occurs while the Change in Control provisions are in
effect, these provisions will remain in effect until all rights of the
participants and obligations of GTE (or its successor) have been satisfied.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
FOREGOING PROPOSAL.
ITEM 4.
GTE CORPORATION 1997 LONG-TERM INCENTIVE PLAN
The Board of Directors of the Corporation recommends approval of the GTE
Corporation 1997 Long-Term Incentive Plan (the "1997 LTIP"). The shareholders
last approved a long-term incentive plan in 1991, the 1991 LTIP. The 1997
LTIP's provisions permit participation by GTE's broad employee population
(including employees covered by collective bargaining agreements), define an
award pool and introduce individual award limits, and eliminate the ability to
grant stock options at a discount to fair market value. The primary purposes
for seeking shareholder approval of the 1997 LTIP are to comply with the
provisions of the performance-based compensation exemption from the tax
deduction
30
<PAGE>
limit imposed by Section 162(m) of the Code, and to obtain approval for the
issuance of additional shares of GTE Common Stock in connection with grants of
stock options to all eligible employees of GTE under the 1997 LTIP. The 1997
LTIP is designed to replace the 1991 LTIP.
The complete text of the 1997 LTIP appears as Exhibit B to this Proxy
Statement. The main features of the 1997 LTIP are outlined below, but the
outline is qualified by reference to the complete text of the plan.
Purpose
The primary purpose of the 1997 LTIP is to enhance the Corporation's ability
to achieve superior financial performance by offering participants incentives
to bring about such results.
As discussed under Item 3, the Committee and the Board of Directors have
determined that a portion of compensation should have a direct link to the
success of the Corporation, thus aligning the interests of the Corporation's
employees with those of the Corporation's shareholders. They also have
determined that, as an employee's ability to influence financial results
increases, a greater portion of the employee's compensation should be subject
to risks that are similar to those that apply to shareholder investments.
Accordingly, compensation under the 1997 LTIP supports the Corporation's
philosophy of linking compensation to results and paying average compensation
for average results and above-average compensation for above-average results.
Administration and Participation
The Committee is responsible for administering the 1997 LTIP and for
selecting as participants individuals who are officers and other employees of
the Corporation and related companies. All of the approximately 102,000
employees of GTE will be eligible for selection as participants in the 1997
LTIP. The Committee may delegate its authority to persons other than its
members. Any person to whom the Committee delegates its authority may receive
awards under the 1997 LTIP only if the awards are granted directly by the
Committee without delegation.
Awards
The Committee has the authority to grant various types of awards under the
1997 LTIP. These types of awards include:
. Stock Options -- Each stock option represents the right to purchase a
specified number of shares of GTE Common Stock at a fixed grant price
that cannot be less than the fair market value of the shares on the grant
date. The maximum term of a stock option is 10 years from the date of
grant.
The 1997 LTIP authorizes the Committee to grant non-qualified stock options.
In addition, the Committee may grant incentive stock options that comply
with the requirements of Section 422(b) of the Code. The Committee is
authorized under the 1997 LTIP to grant incentive stock options with respect
to up to 15,000,000 shares. Additionally, the Committee may grant a right to
purchase additional shares upon the surrender of shares previously held by
the participant.
. Stock Appreciation Rights -- The Committee may grant stock appreciation
rights ("SARs") which represent the right to receive upon the surrender
of the right an amount that does not exceed the excess of the market
price, on date of surrender, over the grant price for the number of
shares for which the SAR is exercised. The grant price may not be less
than the fair market value of the shares covered by the SAR on the date
the SAR was granted. The maximum term of a SAR is 10 years from the date
of grant.
. Performance Bonuses -- The Committee may grant performance bonuses linked
to the performance of GTE over a multi-year performance cycle. Each
performance cycle typically has a duration of 3 years and may overlap
with other cycles.
31
<PAGE>
. Other Stock-Based Awards -- The Committee has the authority to grant
other stock-based awards that are denominated, payable in, valued in
whole or in part by reference to, or otherwise related to shares of GTE
Common Stock. The Committee may determine that stock-based awards may not
require the payment of any additional consideration by the participant
(other than the participant's services).
An award may be accompanied by an award agreement that sets forth particular
terms relating to the award.
Payment of Awards
The Committee will determine the date on which awards are payable and
whether awards will be paid wholly in cash, wholly in shares of GTE Common
Stock or partly in cash and partly in shares. The Committee may permit and/or
require a participant to defer payment of all or a portion of his or her award
subject to any conditions prescribed by the Committee. If awards are paid in
shares, the Committee shall determine whether the shares will be subject to
restrictions on transfer and/or provisions regarding forfeiture of the shares.
No awards have been granted under the 1997 LTIP. It is not possible to
determine the awards which would have been made to any individual or group in
addition to or in substitution for those granted under the 1991 LTIP if the
1997 LTIP had been in effect for 1996.
Limitation on Number of Shares
If the shareholders approve the 1997 LTIP, GTE will be authorized to issue
up to 43,000,000 shares of GTE Common Stock under the 1997 LTIP. Shares will
be considered to be issued under the 1997 LTIP only when the shares are
actually issued to a participant. Additionally, any shares tendered or
withheld in payment of all or part of a stock option granted under the 1997
LTIP or the 1991 LTIP or in satisfaction of withholding tax obligations, any
shares forfeited or canceled in accordance with the terms of an award under
the 1997 LTIP or the 1991 LTIP and any shares repurchased by the Corporation
for issuance by employee plans and allocated to the 1997 LTIP, will be
available for issuance under the 1997 LTIP. Shares that were authorized under
the 1991 LTIP and not issued or covered by awards under the 1991 LTIP are not
available for issuance under the 1997 LTIP.
The Committee cannot grant awards that require GTE to issue more than
5,000,000 shares with respect to awards other than stock options and SARs.
No individual may receive stock options and SARs in any 5-year period that
relate to more than 5% of the 43,000,000 shares authorized for use under the
1997 LTIP.
Limitation on Awards
No performance bonus awards will be made unless the Corporation's cumulative
consolidated net income ("CCNI") for a 3-year performance cycle exceeds $5
billion. The 1997 LTIP also establishes a limit on the amount of cash awards
that may be made with respect to any 3-year cycle. The limitation is equal to
3% of CCNI, taking into consideration only up to $15 billion of CCNI (the
"LTIP Award Pool"). These $5 billion and $15 billion amounts will be
proportionately increased (or reduced) to reflect performance cycles longer
(or shorter) than three years. In addition, the Committee has the discretion
to reduce the size of the LTIP Award Pool.
The maximum award that an individual participant may receive is determined
by the participant's annual base salary on the last day of the performance
cycle in accordance with the following table:
<TABLE>
<CAPTION>
SALARY POSITION PERCENTAGE OF LTIP AWARD POOL
--------------- -----------------------------
<S> <C>
Highest paid................................. 3.50%
2nd & 3rd highest paid....................... 2.50%
4th & 5th highest paid....................... 1.25%
6th through 25th highest paid................ .85%
</TABLE>
32
<PAGE>
Each other participant shall be limited to a maximum award that is less than
.50% of the LTIP Award Pool, as determined by the Committee. Moreover, the
total of the maximum awards for any performance cycle cannot exceed 100% of
the LTIP Award Pool for that performance cycle.
The Committee may reduce the maximum performance bonus for any participant.
Additionally, the Committee may reduce the amount of an individual's
performance bonus award or pay no bonus at all.
In determining the final value of awards to be paid to participants, the
Committee may consider such criteria as it deems appropriate, including, for
example, financial performance for the performance cycle as determined by such
measures as EPS growth, revenue growth, average ROI, EBITDA growth,
shareholder return either in absolute terms or in relation to a peer group of
companies and such other factors as the Committee deems relevant to determine
the Corporation's performance.
Approval of the 1997 LTIP shall constitute approval of the performance
bonuses for the 1995-1997 and 1996-1998 performance cycles, which were granted
subject to shareholder approval and which will be governed by the 1997 LTIP
following its approval by shareholders.
Amendment or Termination of the Plan
Unless it is terminated earlier, the 1997 LTIP will remain in effect until
the close of business on the date of GTE's annual meeting of shareholders in
the year 2007. Prior to that date, the Board may from time to time, alter,
amend, suspend or terminate the 1997 LTIP, subject to the Change in Control
provisions discussed below. However, the Board may not, without approval of
shareholders, amend the 1997 LTIP to increase the number of shares that may be
issued under the 1997 LTIP, reduce the minimum grant price, or increase the
maximum permissible term of any award. If the Board terminates the 1997 LTIP,
any previously granted awards shall remain in effect and continue to be
governed by the terms of the 1997 LTIP and any applicable award agreements.
If certain events occur, the Committee may adjust previously granted awards
and the number and type of securities that may subsequently be issued under
the 1997 LTIP to prevent dilution or enlargement of the benefits available
under the 1997 LTIP. These events include, but are not limited to, a dividend
or other distribution, recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares or other securities, the exercisability of
stock purchase rights under the Rights Plan, the issuance of warrants or other
purchase rights, and other similar events.
Change in Control
In order to protect the rights of participants, the 1997 LTIP provides that
in the event of a Change in Control of GTE as described on pages 18 and 19,
all then-outstanding stock options and SARs will immediately become
exercisable in full and all then-outstanding awards will immediately become
nonforfeitable and payable. The amount of any then outstanding performance
bonus awards will be calculated as though the relevant performance targets
have been achieved and as though the target award will be paid, and the total
of all projected dividend equivalents on such then-outstanding awards, shall
immediately become nonforfeitable and payable unless the participant elects to
defer receipt of the award under the deferral regulations applicable to the
1997 LTIP.
Moreover, after the date of a Change in Control, a participant, former
participant or beneficiary may apply to the trustee of the GTE Service
Corporation Benefits Protection Trust for assistance in enforcing his or her
rights and pursuing any claims he or she may have under the terms of the 1997
LTIP.
These provisions are automatically renewed for a one-year period on each
successive July 1 unless by December 31 of the preceding year the Board adopts
a resolution terminating renewal of the provisions. However, if a Change in
Control occurs while the Change in Control provisions are in
33
<PAGE>
effect, these provisions will remain in effect until all rights of the
participants and obligations of GTE (or its successor) have been satisfied.
Federal Income Tax Consequences
No income is recognized by a participant or GTE upon the grant of a non-
qualified stock option, an incentive stock option or a SAR under the 1997
LTIP.
Under current tax law, if a participant exercises a non-qualified stock
option or, alternatively, the SARs related to that option, he or she will
recognize income on the difference between the fair market value of GTE Common
Stock on the date of exercise and the grant price. GTE will be entitled to a
tax deduction equal in amount to the income recognized by the participant.
Income taxes and other payroll taxes are required to be withheld by GTE from
the income recognized.
No income is recognized by a participant upon the exercise of an incentive
stock option. However, the difference between the fair market value of GTE
Common Stock on the date of exercise and the grant price is a tax preference
item that must be considered in determining whether the participant is subject
to the alternative minimum tax. If the participant does not dispose of the
shares acquired through the exercise of an incentive stock option within two
years after the date of grant or one year after the exercise date, the income
recognized on the date of sale will be subject to tax as a capital gain
(presently a 28% tax rate). If the above holding period requirements are not
met, part or all of the income recognized on the date of sale will be subject
to tax as ordinary income (presently a 39.6% maximum marginal tax rate) and
GTE will be entitled to a tax deduction of equal amount.
An incentive stock option becomes a non-qualified stock option if it is
exercised more than three months after the participant has terminated his or
her employment with GTE (twelve months if termination is due to disability).
The SARs related to incentive stock options are taxed in the same way as the
SARs related to non-qualified stock options. The participant is responsible
for the payment of income taxes that result from the sale of GTE Common Stock
purchased with incentive stock options.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
FOREGOING PROPOSAL.
ITEM 5.
Mr. John J. Gilbert, representing 300 shares of GTE Common Stock and/or
Margaret R. Gilbert, representing 300 shares of GTE Common Stock and Margaret
R. Gilbert and John J. Gilbert representing Corporate Democracy, Inc. (a not-
for-profit-corporation), 29 East 64th Street, New York, New York 10021-7043,
for 300 shares of GTE Common Stock; and Margaret R. and/or John J. Gilbert
trustees under the will of Samuel Rosenthal for 1,400 shares of GTE Common
Stock; and M Allan Frank, 6882 East Center Avenue, Denver, Colorado 80224-
1503, representing 100 shares of GTE Common Stock; and Edward and/or Edith
Rudy, Box 7077, Yorkville Station, New York, New York 10128-7077, who state
that they are the beneficial owners of 519.262 shares of GTE Common Stock,
have informed GTE that they intend to propose the following resolution at the
Annual Meeting. The proposed resolution and supporting statement, for which
the Board of Directors and GTE accept no responsibility, are as follows:
"RESOLVED: That the stockholders of GTE Corporation, assembled in annual
meeting in person and by proxy, hereby request that the Board of Directors
take the needed steps to provide that at future elections of directors new
directors be elected annually and not by classes as is now provided and that
on expiration of present terms of directors their subsequent election shall
also be on an annual basis."
34
<PAGE>
The following is the statement submitted in support of this proposal:
"Continued, very strong support along the lines we suggest were shown at the
last annual meeting when 38.48%, an increase over the previous year, 40,988
owners of 251,681,811 shares, were cast in favor of this proposal. The vote
against included 41,186 unmarked proxies.
ARCO to its credit, voluntarily ended theirs stating that when a very high
percentage (34.6%) desired it to be changed to an annual election it was
reason enough for them to change it. Several other companies have also
followed suit such as: Pacific Enterprises, Katy Industries, Hanover Direct
and others. A few years ago my resolution on the subject was withdrawn when
the Westinghouse directors agreed to end their stagger system. At the
Lockheed-Martin merger the stagger system was ended and also at a special
meeting of First Commerce Corporation in 1995. Further, Alleghany Power System
tried to put in a stagger system, as well as take away cumulative voting, and
the stockholders defeated it, showing stockholders are interested in their
rights. Ameritech is one of the latest to end their stagger system.
Because of the normal need to find new directors and because of
environmental problems and the avalanche of derivative losses and many groups
desiring to have directors who are qualified on the subjects, we think that
ending the stagger system of electing directors is the answer. In addition,
some recommendations have been made to carry out the CERES 10 points. The
11th, in our opinion, should be to end the stagger system of electing
directors and to have cumulative voting.
Equitable Life Insurance Company, which is now called Equitable Companies,
converted from a policy owned company to a public stockholder meeting. Thanks
to AXA, the comptrolling French insurance company not wanting it they now do
not have a staggered board.
Orange and Rockland Utility Company had a terrible time with the stagger
system and its 80% clause to recall a director. The chairman was involved in a
scandal effecting the company. Not having enough votes the meeting to get rid
of the chairman had to be adjourned. Finally, at the adjourned meeting enough
votes were counted to recall him.
If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Board of Directors continues to believe that a staggered board where
approximately one-third of the directors are elected annually is in the best
interests of the Corporation and its shareholders. Unlike companies that have
had a staggered board since their incorporation, GTE submitted the creation of
a staggered board to the vote of its shareholders at a special meeting in
1986. Approximately 75.6% of the Corporation's shares voted at that meeting
voted to approve the creation of a staggered board. This proposal seeks to
reverse that action.
GTE believes that this system helps provide continuity and stability of
GTE's management and policies. It also contributes to more effective long-term
strategic planning because it ensures that at least two-thirds of the
directors at any one time will have prior experience as directors of GTE and
in-depth knowledge of the Corporation and its business. In an industry like
telecommunications that is facing an era of unprecedented changes, including
increased competition and rapidly evolving technologies, GTE feels strongly
that such continuity and stability will serve it well. In addition, this
system permits directors to effectively represent the interests of all
shareholders in a variety of circumstances, including those created by a
minority shareholder.
35
<PAGE>
ITEM 6.
GTE has been notified by the Ursuline Provincialate Eastern Province of the
United States, Inc., St. Mary's Hall, 323 East 198th Street, Bronx, New York
10458-3105, which states that it is the owner of 100 shares of GTE Common
Stock; the Congregation of the Sisters of Charity of the Incarnate Word, 6510
Lawndale, Houston, Texas 77223-0969, which states that it is the owner of
1,400 shares of GTE Common Stock; the Sisters of Charity of Saint Vincent de
Paul, Mount St. Vincent Motherhouse, 150 Bedford Highway, Halifax, Nova Scotia
B3M3J5, Canada, which states that it is the owner of 6,000 shares of Common
Stock; the General Board of Pension and Health Benefits of the United
Methodist Church, 1201 Davis Street, Evanston, Illinois 60201, which states
that it is the owner of 227,210 shares of GTE Common Stock; the Sisters of
Charity of Saint Elizabeth, P.O. Box 476, Convent Station, New Jersey 07961-
0476, which states that it is the owner of 2,069 shares of GTE Common Stock;
Servants of Mary, 1000 College Avenue West, Ladysmith, Wisconsin 54848 which
states that it is the owner of 7,000 shares of GTE Common Stock; and Delcy L.
Steffy, 54 Plachman Lane, Woodstock, New York 12498, who states that she is
the owner of 25 shares of GTE Common Stock; that they intend to propose the
following resolution at the Annual Meeting. The proposed resolution and
supporting statement, for which the Board of Directors and GTE accept no
responsibility, are as follows:
"WHEREAS in fiscal year 1995 the United States supplied $9.930 billion worth
of weapons in actual deliveries of arms sales abroad.
WHEREAS the last three times the U.S. sent troops into combat in significant
numbers (Panama, Iraq, and Somalia), they faced adversaries that received U.S.
weapons or military technology in the period leading to the conflict.
WHEREAS U.S. weapons supplied to anti-Communist rebels in Angola and
Afghanistan under the Reagan Doctrine have been used for devastating civil
war; in the Afghan case, U.S.-supplied Stinger missiles turned up on the
international black market as prized items sought by all manner of rebel
groups and terrorist organizations ("Sale of the Century', Commonweal, William
D. Hartung, 5/20/94). "U.S. Weapons at War: United States Arms Deliveries to
Regions in Conflict' (World Policy Institute, 1995) shows that the U.S. was a
major arms supplier in one-third of the 50 ethnic and territorial conflicts
currently raging. The study says that some 45 parties involved in the
conflicts purchased over $42 billion in U.S. arms in the last ten years.
WHEREAS our company ranked 20 among Department of Defense-leading
corporations with contracts in excess of $633.1 million.
WHEREAS this resolution received nearly 22% of the vote last year.
RESOLVED the shareholders request the Board of Directors to provide a
comprehensive report on GTE's foreign military sales. The report, prepared at
reasonable cost, should be available to all shareholders by December 1997, and
may omit classified and proprietary information."
The following is the statement submitted in support of this proposal:
"Global security is security of people. The cold-war notion of using arms
sales to maintain balances of power or to support allies has been discredited
by 1990's experience, when alliances, governments and boundaries in large
parts of the world are in flux.
We are disturbed at industry's claims and lobbying efforts asserting that
the only way to keep jobs is to promote foreign military sales. We believe
such statements are inconsistent with co-production agreements and transfers
of technology to foreign companies. Offset arrangements on major sales often
give business to overseas suppliers. Such contracts with foreign
companies/governments have harsh repercussions on U.S. workers during this
time of accelerated down-sizing of our workforce.
36
<PAGE>
Therefore, it is reasonable for shareholders to ask:
1. Criteria used to promote foreign military sales.
2. Procedures used to negotiate sales directly with foreign governments or
through the U.S. government. For example, what determines which weapons are
direct commercial arms sales and what must be negotiated through the Pentagon?
What percentage is commercial arms sales and what is foreign military sales?
3. Categories of military equipment exported for the past three years, with
as much statistical information as is permissible, contracts for
servicing/maintaining equipment; offset agreements; and licensing and/or co-
production with foreign governments.
4. Analysis of legislation establishing a code for U.S. arms transfers
(e.g., no sales to governments that violate human rights of their own
citizens, engage in aggression against neighbors, come to power through
undemocratic means or ignore international arms-control arrangements)."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
GTE is a telecommunications company that offers a wide variety of products
and services including local and long distance telephone service, wireless
communications service, air to ground communications and telecommunications
systems and design services. GTE does not manufacture or sell weapons to any
government in the United States or abroad. As of December 31, 1996, GTE's
total assets were approximately $38 billion, its total revenues and sales were
approximately $21.3 billion and its net income was approximately $2.8 billion.
For the year 1996, GTE's sales of products and services that GTE believes
could possibly be characterized as foreign military sales within the scope of
the foregoing proposal amounted to considerably less than one half of one
percent of each of GTE's total assets and total revenues and sales, and less
than 2% of its net income. Again, none of those sales involved weapons.
GTE has acted and will continue to act as a socially responsible and ethical
corporate citizen not only in its military contracting but in all its business
activities. GTE has in place a comprehensive ethics program which requires
compliance with applicable laws. These laws include stringent federal
regulations governing contracts with foreign governmental and military
entities, as well as laws of any foreign country with which it does or
proposes to do business. GTE also conducts ongoing training programs to ensure
that its employees understand and are aware of the requirements under this
program.
GTE believes that the defense needs and foreign policy of the United States
are properly the responsibility of our government and our duly elected public
officials. As a responsible corporate citizen, however, GTE is proud to be
able to supply communications and electronic systems which help to protect the
United States, its military forces and our allies and expects to continue to
support the U.S. Government and to offer its products and services in defense
of the United States, the American people and their interests. For the reasons
cited above, GTE does not believe that the kind of reporting proposed is
warranted, or that it would provide significant, relevant information to
shareholders in any case. Accordingly, GTE recommends a vote against this
proposal.
37
<PAGE>
ITEM 7.
GTE has been notified by the International Brotherhood of Electrical Workers
Telephone Coordinating Counsel No. 2, c/o Schuchat, Cook & Werner, The Shell
Building, Second Floor, 1221 Locust Street, Saint Louis, Missouri 63103-2364,
representing 60 shares of GTE Common Stock, that it intends to propose the
following resolution at the Annual Meeting. The proposed resolution and
supporting statement, for which the Board of Directors and GTE accept no
responsibility, are as follows:
"BE IT RESOLVED: That the shareholders of GTE Corporation (Company) urge the
Board of Directors to redeem the stockholder rights issued pursuant to the
"Shareholder Rights Plan' unilaterally adopted by the Board of Directors,
unless the Shareholder Rights Plan is approved by a majority of the voting
shares at a meeting of the Shareholders held as soon as practical."
The following is the statement submitted in support of this proposal:
"We strongly believe that our Company's financial performance is closely
linked to its corporate policies and procedures, and the level of
accountability they impose. We believe our Company's Shareholder Rights Plan,
commonly called a "poison pill,' is contrary to good corporate governance
policy.
Our Company's poison pill is an extremely powerful anti-takeover device. It
effectively prevents a change in control of our Company, without the approval
of the board of directors. We believe such a measure injures stockholders, by
reducing management accountability. This can adversely affect shareholder
value.
GTE's poison pill effectively prevents a change in control of our Company,
unless endorsed by the board of directors. It does so by allowing the board of
directors to unilaterally cut the value of company stock, when any of the
following actions is taken without management approval. (1) Any person or
group acquires or commences a tender or exchange offer for 20% or more of the
GTE common stock. (2) Any person or group acquires 10% or more of GTE common
stock and executes an agreement with GTE relating to a merger or other
business combination. This threat of dilution forces investors to negotiate a
potential acquisition with management, instead of making their offer directly
to the stockholders. We believe poison pills can pose such an obstacle to a
takeover that management becomes entrenched. We believe that entrenchment of
management and the lack of accountability that results can adversely affect
shareholder value.
In the past five years, shareholder proposals to redeem or allow shareholder
votes on poison pills have received majority support at 32 U.S. publicly
traded companies. The following is a list of some of those companies that
received a majority vote in 1994 and 1995 alone; Advanced Micro Devices, Baker
Hughes, Community Psychiatric Center, Consolidated Natural Gas, Fleming,
Intel, Rite Aid, Rowan, Ryder, Super Value, Wellman and Weyerhaeuser.
Furthermore, since 1990, Philip Morris, Time Warner, United Technologies,
Lockheed and La Quinta Inns have voluntarily redeemed their poison pills. None
of these companies have experienced abusive takeover tactics after doing away
with their poison pills.
We strongly believe that it is the shareholders (who are the owners of the
company), not the directors and managers who should have the right to decide
what is or is not a fair price for their shareholdings. Poisons pills take
this decision away from the shareholders by forcing potential buyers to
negotiate with management through the threat of severe dilution.
WE URGE YOU TO VOTE FOR THIS PROPOSAL."
38
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Board of Directors entered into the Rights Agreement in 1989 (the
"Rights Plan") to protect all of the Corporation's shareholders from abusive
takeover practices and unfair treatment of minority shareholders. The Rights
Plan encourages a potential bidder for the Corporation to negotiate with the
Board in order to avoid triggering the provisions of the Rights Plan. This
feature helps ensure that the Board will have adequate time to evaluate any
unsolicited offer and to ensure that all shareholders are treated fairly.
The existence of the Rights Plan will not prevent an offer to acquire the
Corporation at a fair price. A number of companies with rights plans have
received unsolicited offers and have redeemed their rights after they have
been satisfied that the offer, as negotiated by their board of directors,
adequately reflected the underlying value of the company and provided that
value fairly and equitably to all shareholders. This empirical evidence
emphasizes that the existence of the Rights Plan simply enhances a board's
ability to negotiate effectively with a potential acquiror in order to
maximize the long-term value of the corporation for its shareholders and
insure that they are all treated equally and fairly in any acquisition.
A substantial number of U.S. corporations of all sizes have determined that,
in the event of an unsolicited offer to acquire the company, a rights plan
helps discourage abusive conduct and assists directors in fulfilling their
fiduciary responsibilities to all shareholders. In adopting the Rights Plan,
the Board sought, received and carefully evaluated the advice of experienced
independent legal and financial advisors. The Board also drew upon its
collective experiences with other corporations and situations and its in-depth
knowledge of GTE's business, prospects and circumstances. The Board has drawn
upon those same resources and, in addition, the actual experiences of other
large publicly-held corporations in determining to support recommending the
continued existence of the Rights Plan.
The Board strongly disagrees with the proponent's assertion in its
supporting statement that the Rights Plan reduces the accountability of
management to the shareholders or relieves management from the task of seeking
maximum shareholder value. The Board recognizes its fiduciary duty to GTE's
shareholders to evaluate the merits of any acquisition proposal and believes
that the proper time to consider redemption of the rights issuable under the
Rights Plan is when a specific offer is made to acquire the Corporation. To
eliminate the Rights Plan at this time would unnecessarily remove an important
tool of the Board in fulfilling its fiduciary duty and thereby diminish
protection for GTE's shareholders.
Moreover, the Board believes that there is no convincing evidence that the
adoption of a rights plan has a negative effect on the market value of a
company's stock. Rather, the Board believes there is strong empirical evidence
that such plans better position directors to negotiate the most attractive and
fairest price for all shareholders.
The Board of Directors continues to consider the Rights Plan to be in the
best interests of all shareholders. The Board believes that the Rights Plan
represents a sound and reasonable means of protecting both a shareholder's
right to retain an equity investment in GTE and full value of that investment,
while not preventing an offer to acquire the Corporation at a fair price and
upon terms that treat all shareholders fairly and equitably.
39
<PAGE>
ITEM 8.
GTE has been notified by Local Union 824, International Brotherhood of
Electrical Workers (the owner of record of at least 100 shares of GTE Common
Stock), 6603 East Chelsea Street, Tampa, Florida 33610, and sponsors Guy A.
Langlais, 5158 Lancewood Drive, Sarasota, Florida 34232, Harrison L.
Thornhill, 3200 Lucerne Park Road, Winter Haven, Florida, 33880, Richard
O'Lone, 1833 Oakdale Lane S., Clearwater, Florida 34624, and Linda K. Shirley,
3605 W. Reynolds, Plant City, Florida, 33567, that they intend to propose the
following resolution at the Annual Meeting. The proposed resolution and
supporting statement, for which the Board of Directors and GTE accept no
responsibility, are as follows:
"WHEREAS, in 1994 Mr. Lee, C.E.O. of G.T.E., did in fact enjoy an increase
in total compensation of approximately $1,465,114 (55.0%) (including the
difference in the value of options granted in 1993 and 1994 as determined
using a Black-Scholes model);
WHEREAS, in 1994 Mr. Foster, President of G.T.E.'s Telops Group, did in fact
enjoy an increase in total compensation of approximately $1,253,262 (72.0%)
(including the difference in the value of options granted in 1993 and 1994 as
determined using a Black-Scholes model);
WHEREAS, in 1995 Mr. Lee enjoyed a 13% increase in post-retirement life
insurance, from $2.3 million to $2.6 million, while the hourly employee
suffered a 50% reduction in post-retirement life insurance, from $10,000 to
$5,000;
WHEREAS, we believe that the top executives are not sharing in cost cutting
measures and in fact are enhancing their pay with business efficiencies which
adversely affect rank and file employees;
WHEREAS, we believe the employees feel that all business efficiencies are
not being shared equally;
RESOLVED, that the shareholders request the board of directors:
Take all necessary steps to establish criteria to guide management in
setting fair executive compensation levels whereby (a) any individual
executive officer's compensation (wages, bonuses, and stock grants, options
and rights) would not exceed 75 times the wages of G.T.E.'s average hourly
employee and (b) that executive wages and compensation be more closely linked
to company profits."
The following is the statement submitted in support of this proposal:
"This proposal is submitted by members and/or officers of Local 824,
International Brotherhood of Electrical Workers.
1. The economic health and viability of G.T.E. and its shareholders is
intrinsically linked to the economic health and viability of the United States
economy.
G.T.E.'s success is, in large part, dependent on the corporation's ability
to sell its goods and services to an affluent society. Year after year,
G.T.E.'s hourly employees have had an adjusted-for-inflation wage decrease. In
effect G.T.E.'s corporate strategy is denying G.T.E. itself a segment of
affluent society necessary for G.T.E.'s future success.
The huge disparity in the compensation of the Board of Directors and
G.T.E.'s hourly employees is counter-productive in establishing a team
approach to the competitive and technological challenges G.T.E. faces now and
in the future. By establishing a link between the Board of Directors
compensation and the hourly employees compensation, all G.T.E. employees and
shareholders will share equitably in the fruits of G.T.E.'s labors and in the
promise of a prosperous future.
40
<PAGE>
2. In order to remain competitive in a world market and limit demands on the
resources of the company, top executives must become "lean and mean' in a like
manner with their employees.
The 1992 10-K report states "access lines increased by approximately 4%,
these lines were serviced by 5% fewer employees.' The 1993 10-K report states
that access lines increased by 15% from 1988 to 1992 while G.T.E.'s United
States employment has decreased 27% in the same time period. As
shareholder/employees we witness daily that "increased productivity' has come
at the expense of G.T.E.'s customers.
The years 1993, 1994 saw dramatic fluctuation in executive compensation
levels without any appreciable increases in G.T.E.'s executive's productivity.
It is in the best interest of G.T.E. and its' shareholders to establish
criteria to insure all compensation is earned not granted."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOREGOING PROPOSAL FOR
THE FOLLOWING REASONS:
The Executive Compensation and Organizational Structure Committee (the
"Committee") has adopted a compensation philosophy that relates the level of
executive compensation to GTE's success in meeting annual and long-term goals,
rewards individual achievement and is competitive with other major companies
in the telecommunications field, as well as other industries. The objectives
of this compensation philosophy are accomplished through an appropriate mix of
base salary, annual bonus and long-term compensation, a portion of which is
allocated to life insurance. The resulting mix places in excess of 80% of Mr.
Lee's target compensation at risk. The at risk portion fluctuates based on
GTE's performance and can significantly affect cash compensation. For example,
between 1992 and 1993 Mr. Lee experienced nearly a 10% reduction in cash
compensation. GTE and the Committee believe that this philosophy and mix of
compensation enable GTE to appropriately reward superior performance and
facilitate GTE's ability to attract and retain the most qualified individuals
to lead its business undertakings. Reducing executive compensation and not
maintaining competitive pay practices may result in a short-term savings for
GTE. However, over the long-term GTE would experience an erosion of management
talent as other companies continue to pay competitively and attract our
highest caliber executives. GTE recognizes that in a rapidly changing industry
like telecommunications this cannot be permitted to happen.
In determining executives' compensation, the Committee reviews and relies
heavily on competitive data on executive compensation and then carefully
assesses both GTE's overall performance and the individual achievement of each
executive. Indeed, the 1994 increase specifically reflected the narrowing of a
significant competitive gap which GTE executives were experiencing in long-
term compensation opportunities.
The compensation for each of Messrs. Lee and Foster is set in accordance
with these principles. The data presented in the text of the proposal do not
accurately reflect Mr. Lee's actual compensation. As shown in the Summary
Compensation Table on page 13, the cash compensation for Messrs. Lee and
Foster increased in 1994 by approximately 38.4% and 53.6%, respectively. The
text of the proposal specifies increases in total compensation which are
significantly higher than these figures, because the proponents have included
values assigned to the stock options awarded to Messrs. Lee and Foster. Since
options can be valued by using a number of methods, each of which can yield
very different results, GTE does not agree with those figures. Moreover, an
individual does not derive value from an option unless the price of GTE Common
Stock increases. If an individual does receive value from an option, GTE's
shareholders also receive value and a strong link between executive
achievement and GTE's performance is attained.
Additionally, Mr. Lee participates in the GTE Corporation Executive Retired
Life Insurance Plan. This plan provides for amounts of post-retirement life
insurance based on a multiple of base salary. These multiples have been
established based on practices among GTE's peer companies. As stated
41
<PAGE>
above, GTE must remain competitive in order to retain executive talent. Most
other companies similar to GTE in size and philosophy provide supplemental
executive retirement benefits.
Accordingly, the Board of Directors believes that criteria are already in
place to ensure that the compensation of GTE's executives is competitive and
closely linked to GTE's performance.
For these reasons, the Board of Directors recommends a vote against the
proposal establishing a limit on compensation based upon a stated multiple of
other employee compensation.
INFORMATION ABOUT ATTENDING THE MEETING
The Annual Meeting of Shareholders will be held this year in the Ballroom of
the Hyatt Regency Tampa, Two Tampa City Center, Tampa, Florida. Maps showing
the location of the Annual Meeting and directions to the Annual Meeting are
printed on the back cover of this Proxy Statement. Directions to the Annual
Meeting are also printed on the admission ticket.
Each shareholder will need a ticket to attend the Annual Meeting. If a
shareholder's stock is registered in his or her name and not in the name of a
bank, broker or other third party, the shareholder will receive an admission
ticket attached to his or her proxy card. This ticket must be presented in
order to be admitted to the Annual Meeting.
However, if a shareholder's stock is not registered in his or her name, the
shareholder must advise the firm that is the holder of record of those shares
(bank, broker or other institution holding such shares) that he or she wishes
to attend the Annual Meeting. That firm must provide the shareholder with
documentation showing his or her ownership of shares of GTE Common Stock as of
the record date, February 25, 1997. The shareholder must bring that
documentation to the Annual Meeting in order to gain admittance to the Annual
Meeting.
Shareholders whose shares are not registered in their own name should plan
on arriving early to allow adequate time to have their proof of ownership
reviewed prior to the start of the Annual Meeting.
GTE will establish reasonable rules and procedures for the conduct of the
Annual Meeting to ensure that there is sufficient time to address all of the
items on the agenda and to facilitate an orderly meeting. Attendance at the
Annual Meeting is limited to GTE's shareholders. These rules will be
distributed at the Annual Meeting and will include an agenda for the Annual
Meeting, procedures for maintaining order and the safety of those present and
limitations on the time allotted to questions or comments by shareholders.
OTHER MATTERS
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than those specifically set forth in the notice of the
Annual Meeting and knows of no matters to be brought before the Annual Meeting
by others. If any other matters properly come before the Annual Meeting, it is
the intention of the persons named in the accompanying proxy to vote such
proxy or proxies in accordance with the judgment of the Board of Directors.
Financial statements for GTE and its consolidated subsidiaries are included
in GTE's Annual Report to shareholders for the year 1996 which was mailed to
shareholders beginning March 3, 1997.
42
<PAGE>
A COPY OF GTE'S 1996 ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION WILL BE AVAILABLE AFTER MARCH 31, 1997 WITHOUT CHARGE
TO THOSE SHAREHOLDERS WHO WOULD LIKE MORE DETAILED INFORMATION CONCERNING GTE.
TO OBTAIN A COPY, PLEASE WRITE TO: MARIANNE DROST, SECRETARY, GTE CORPORATION,
ONE STAMFORD FORUM, STAMFORD, CONNECTICUT 06904.
By order of the Board of Directors,
Marianne Drost
Secretary
Dated: March 3, 1997
43
<PAGE>
EXHIBIT A
GTE CORPORATION
1997 EXECUTIVE INCENTIVE PLAN
1. INTRODUCTION AND PURPOSE
The primary purpose of the Plan is to facilitate the Corporation's ability
to achieve its short-term financial and operating goals by offering key
Employees annual incentives. Under the Plan, Awards are made based on
Participants' achievement of key goals at the corporate, business unit, and/or
individual level.
The Plan shall become effective upon the approval of the Plan by the
Corporation's shareholders at the Corporation's 1997 annual meeting of
shareholders. Unless the Plan is terminated earlier in accordance with Section
8 hereof, the Plan shall remain in full force and effect until the close of
business on the date of the Corporation's annual meeting of shareholders in
the year 2007, at which time the right to grant Awards under the Plan shall
terminate automatically unless the shareholders of the Corporation approve an
extension or renewal of the Plan.
The Plan includes Appendix A hereto, which includes provisions governing the
Plan in the event of a Change in Control and which is hereby incorporated
herein by reference.
2. DEFINITIONS
Except where otherwise indicated, the following terms shall have the
definitions set forth below for purposes of the Plan:
"Average Common Shareholders' Equity" means the sum of month-end common
shareholders' equity determined in accordance with generally accepted
accounting principles for the period from December 31 of the preceding Plan
Year to December 31 of the current Plan Year, divided by 13. Common
shareholders' equity shall be adjusted to exclude the after-tax effect of (a)
losses from business combinations, (b) losses from discontinued operations
(including loss on disposal of a line of business or class of customer), (c)
losses from changes in accounting principles, (d) extraordinary losses, (e)
restructuring charges, and (f) losses from changes in tax law. Items (a)
through (f) shall be determined in accordance with generally accepted
accounting principles and as disclosed in the Corporation's annual
consolidated financial statements.
"Award" means any award described in Section 5 hereof.
"Award Pool" means, with respect to a Plan Year, 5% of CNI for the Plan
Year, disregarding any CNI in excess of $5 billion.
"Board" means the Board of Directors of the Corporation.
"Change in Control" is defined in Appendix A to the Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"Committee" means the Executive Compensation and Organizational Structure
Committee of the Board or any other committee designated by the Board to
administer the Plan.
"Common Stock" means the common stock of the Corporation, including both
treasury shares and authorized but unissued shares, or any security of the
Corporation issued in substitution or exchange therefor or in lieu thereof.
A-1
<PAGE>
"Consolidated Net Income" or "CNI" means the Corporation's net income
reported in the Corporation's annual consolidated financial statements for the
Plan Year, adjusted to exclude the after-tax effect of (a) losses from
business combinations, (b) losses from discontinued operations (including loss
on disposal of a line of business or class of customer), (c) losses from
changes in accounting principles, (d) extraordinary losses, (e) restructuring
charges, and (f) losses from changes in tax law. Items (a) through (f) shall
be determined in accordance with generally accepted accounting principles and
as disclosed in the Corporation's annual consolidated financial statements.
"Corporation" means GTE Corporation.
"Employee" means an individual who is employed by the Corporation or a
Related Company.
"Participant" means an Employee who has been granted an Award pursuant to
the Plan.
"Plan" means the GTE Corporation 1997 Executive Incentive Plan, as set forth
herein and as it may be amended from time to time.
"Plan Year" means the calendar year.
"Prior Plan" means the GTE Corporation Executive Incentive Plan approved by
the shareholders at the Corporation's 1993 annual meeting of shareholders.
"Related Company" means a corporation, partnership, joint venture or other
entity in which the Corporation has an ownership or other proprietary interest
of at least ten percent.
"Return on Equity" or "ROE" means CNI divided by Average Common
Shareholders' Equity for the Corporation.
"Rights Plan" means the Rights Agreement, dated as of December 7, 1989,
between the Corporation and The First National Bank of Boston (as successor
Rights Agent to State Street Bank and Trust Company), as it may be amended
from time to time, or any successor thereto.
"Shares" means shares of Common Stock.
3. PARTICIPATION
Only those Employees designated from time to time by the Committee shall
participate in the Plan and receive Awards hereunder.
4. ADMINISTRATION
(a) The Plan and all Awards granted pursuant thereto shall be administered
by the Committee. The Committee shall periodically determine, in its sole
discretion, the Employees who shall participate in the Plan and the terms of
the Awards to be granted to Participants. All questions of interpretation and
administration with respect to the Plan and the Awards thereunder shall be
determined by the Committee in its sole and absolute discretion, and its
determinations shall be final and binding upon all parties.
(b) The Committee may delegate its authority under subsection (a), above, to
persons other than its members to the extent it deems such action advisable.
Any person to whom the Committee has delegated authority under subsection (a),
above, may receive Awards only if the Awards are granted directly by the
Committee without delegation.
A-2
<PAGE>
(c) The Committee may, in its sole discretion, promulgate general
regulations and guidelines governing the administration of the Plan and Awards
granted hereunder. The Committee also may establish regulations governing the
deferred payment of Awards and may determine that deferred payments shall
accrue interest at a rate or rates determined by the Committee and/or that
deferred payments shall be deemed to be invested in Share equivalents or other
hypothetical investments.
5. AWARDS
(a) All Awards under the Plan shall be granted upon terms approved by the
Committee. However, no Award shall be inconsistent with the terms of the Plan
or fail to satisfy the requirements of applicable law.
(b) Each Award shall relate to a designated Plan Year.
(c) A payment shall be made with respect to an Award for a Plan Year only if
the ROE for the Plan Year exceeds 8%.
(d) The sum of the Awards for a single Plan Year shall not exceed the amount
in the Award Pool for that Plan Year.
(e) A Participant's maximum Award for a Plan Year shall depend on the
Participant's annual base salary on the last day of the Plan Year in relation
to the annual base salary of the other employees of the Corporation and the
Related Companies, as determined in accordance with the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF
SALARY POSITION AWARD POOL
--------------- -------------
<S> <C>
Highest paid............................................... 3.50%
2d & 3d highest paid....................................... 2.50%
4th & 5th highest paid..................................... 1.25%
6th through 25th paid...................................... .85%
</TABLE>
If two Participants have the same annual base salary, the Participant with the
greater seniority shall be deemed to have the higher annual base salary. If a
Participant's base salary does not fall within one of the categories described
in the foregoing table, the Participant's maximum Award for the Plan Year
shall be less than .50% of the Award Pool, as determined by the Committee. The
total amount of the maximum Awards for any Plan Year shall not exceed 100% of
the Award Pool for that Plan Year.
(f) The Committee may reduce, but may not increase, any of the following:
(i) the maximum Award for any Participant,
(ii) the size of the Award Pool, and
(iii) the CNI for a Plan Year.
(g) The Committee may, from time to time, grant dividend equivalents in
respect of Awards.
6. PAYMENT OF AWARDS
(a) Unless otherwise determined by the Committee, in its sole discretion, a
Participant shall have no right to receive a payment under an Award for a Plan
Year unless the Participant is employed by the Corporation or a Related
Company at all times during the Plan Year.
(b) The Committee may, in its discretion, authorize payment to a Participant
of less than the Participant's maximum Award and may provide that a
Participant will not receive any payment with
A-3
<PAGE>
respect to an Award. In exercising its discretion, the Committee shall
consider such factors as it considers appropriate. The Committee's decision
shall be final and binding upon any person claiming a right to a payment under
the Plan.
(c) Subject to the provisions of Section 5 hereof, payments of Awards shall
be wholly in cash, wholly in Shares, or partly in cash and partly in Shares,
as determined by the Committee in its sole discretion. In the case of Shares,
the Committee, in its sole discretion, shall determine whether the Shares
shall be subject to restrictions on transfer and/or provisions regarding
forfeiture of said Shares.
(d) All payments of Awards shall be made on a date prescribed by the
Committee, unless the Participant has elected to defer payment in accordance
with the rules and regulations established by the Committee.
(e) No fractional Shares shall be issued in connection with Awards under the
Plan. The Committee shall determine whether any cash, other securities, or
other property shall be paid or transferred in lieu of fractional Shares, or
whether fractional Shares or any rights thereto shall be canceled, terminated
or otherwise eliminated.
7. LIMITATION ON NUMBER OF SHARES
(a) Subject to the adjustment provisions of Section 9 hereof and the
provisions of subsections (b) and (c) of this Section 7, up to 3,000,000
Shares may be issued under the Plan.
(b) In addition to the Shares authorized by Section 7(a) hereof, the
following Shares may be issued under the Plan:
(i) If a Participant tenders, or has withheld, Shares in satisfaction of
withholding tax obligations under the Plan, the Shares tendered by the
Participant or so withheld shall become available for issuance under the
Plan.
(ii) If Shares that are the subject of Awards under the Plan are
subsequently forfeited in accordance with the terms of the Award, the
forfeited Shares shall immediately become again available for issuance in
connection with Awards under the Plan.
(iii) If the Corporation repurchases any Shares and, in connection
therewith, the Board designates that any or all of the repurchased Shares
shall be available for issuance under the Plan, those repurchased Shares
allocated to the Plan shall become available for issuance in connection
with Awards under the Plan.
(c) Subject to the foregoing provisions of this Section 7, if an Award may
be paid only in Shares or in either cash or Shares, Shares shall be deemed to
be issued hereunder only when and to the extent that payment is actually made
in Shares. However, the Committee may authorize a cash payment under an Award
in lieu of Shares if there are insufficient Shares available for issuance
under the Plan.
8. AMENDMENT OR TERMINATION OF THE PLAN
The Board may, from time to time, alter, amend, suspend or terminate the
Plan as it shall deem advisable, subject to the provisions of Appendix A
hereto and also subject to any requirement for shareholder approval imposed by
applicable law. However, the Board may not, without the approval of the
Corporation's shareholders, amend the Plan to increase the number of Shares
that may be issued under the Plan (except for adjustments pursuant to Section
9 hereof).
The termination of the Plan shall not cause any previously granted Awards to
terminate. After the termination of the Plan, any previously granted Awards
shall remain in effect and shall continue to be governed by the terms of the
Plan and the Awards. This paragraph applies regardless of whether the
termination of the Plan occurs pursuant to Section 1 hereof or pursuant to
this Section 8.
A-4
<PAGE>
9. ADJUSTMENT PROVISIONS
If the Committee determines that any dividend or other distribution (whether
in the form of cash, Shares, other securities, or other property),
extraordinary cash dividend, recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities, the exercisability of
stock purchase rights received under the Rights Plan, the issuance of warrants
or other rights to purchase Shares or other securities, or other similar
corporate transaction or event affects the Shares with respect to which Awards
have been or may be issued under the Plan and that an adjustment is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in a manner that the Committee deems appropriate to prevent
such dilution or enlargement, adjust any or all of
(a) the number and type of securities that thereafter may be issued under
the Plan, and
(b) the number and type of securities subject to outstanding Awards.
However, the number of securities subject to any Award denominated in Shares
shall always be a whole number.
10. TERMINATION OF AWARDS UNDER THE PRIOR PLAN
Effective upon the approval of this Plan by the Corporation's shareholders,
no further grants of awards are permitted under the Prior Plan. Awards for the
1997 and subsequent Plan Years shall be governed by this Plan. Shares paid out
pursuant to deferrals under the Prior Plan shall be governed by the terms of
this Plan.
11. NO REQUIRED SEGREGATION OF ASSETS
Neither the Corporation nor any Related Company shall be required to
segregate any assets that may at any time be represented by Awards made
pursuant to the Plan.
12. COSTS
The Committee may require a Participant or beneficiary to bear all or part
of the cost of issuing Shares under the Plan.
13. RIGHT OF DISCHARGE RESERVED
Neither the Plan nor any Award shall guarantee any Employee continued
employment with the Corporation or a Related Company or guarantee the grant of
future Awards.
14. NATURE OF PAYMENTS
All Awards made pursuant to the Plan are in consideration of services for
the Corporation or the Related Companies. Any gain realized pursuant to Awards
under the Plan constitutes a special incentive payment to the Participant and
shall not be taken into account as compensation for purposes of any of the
employee benefit plans of the Corporation or any Related Company except as may
be determined by the Board or by the board of directors of the applicable
Related Company.
15. MISCELLANEOUS
The Committee shall determine the extent (if any) to which an Award may be
assigned or transferred and shall adopt such rules as it deems necessary
regarding tax withholding.
A-5
<PAGE>
16. SEVERABILITY
If any provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part, the unlawfulness, invalidity or
unenforceability shall not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect.
17. GOVERNING LAW
The Plan and all determinations made and actions taken thereunder, to the
extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of New York and construed accordingly.
A-6
<PAGE>
APPENDIX A
TO GTE CORPORATION
1997 EXECUTIVE INCENTIVE PLAN
CHANGE IN CONTROL
1. INTRODUCTION
This Appendix A is a part of and governs the Plan in the event of a Change
in Control, and supersedes any conflicting provision in the Plan or an Award.
2. DEFINITIONS
The definitions set forth in Section 2 of the Plan apply to this Appendix A.
In addition, except where otherwise indicated, the following terms shall have
the definitions set forth below for purposes of this Appendix A:
"Acquiring Person" means any Person who or which, together with all
Affiliates and Associates of such Person, without the prior approval of the
Corporation, shall be the Beneficial Owner of securities representing 20% or
more of the Voting Power or who or which was such a Beneficial Owner at any
time after the date of the Rights Plan, whether or not such Person continues
to be the Beneficial Owner of securities representing 20% or more of the
Voting Power, but shall not mean
(i) the Corporation,
(ii) any Subsidiary,
(iii) any employee benefit plan of the Corporation or any of its
Subsidiaries, or
(iv) any entity holding securities of the Corporation organized,
appointed or established by the Corporation or any of its Subsidiaries for
or pursuant to the terms of any such plan;
provided, however, that if
(a) any New York State law shall be hereinafter promulgated or amended
(whether by amendment to the definition of "interested shareholder" as used in
Section 505(a)(2)(i) of the New York Business Corporation Law ("NYBCL") or
otherwise) to provide that a New York corporation may issue rights or options
which include restrictions or conditions of the type set forth in Section
505(a)(2)(i) of the NYBCL relating either
(1) to a Person holding a percentage (the "Lower Percentage") of the
outstanding voting stock of a New York corporation which is lower than 20%
or
(2) to any Person without regard to the percentage of the outstanding
voting stock of a New York corporation held by such Person, and
(b) such law or amendment is applicable to the Corporation,
then an "Acquiring Person" shall be deemed to mean, for all purposes under the
Plan as of the effective date of such law or amendment, the Beneficial Owner
of securities representing the greater of
(I) 10% of the Voting Power or
(II) the Lower Percentage of the Voting Power.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
A-7
<PAGE>
"Annual Percentage" means, with respect to a Determination Year, a fraction
(expressed as a percentage), the numerator of which is the Award earned by a
Participant for such Determination Year, and the denominator of which is the
annual value of the normal payment under the Plan or the Prior Plan for the
Participant's salary level (such annual value and normal payment being those
that were in effect under the Plan or the Prior Plan for such Determination
Year for the Participant's salary level for such Determination Year).
"Average Percentage" means the average of a Participant's Annual Percentages
for the Determination Years.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own," any securities:
(a) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(b) which such Person or any of such Person's Affiliates or Associates
has (i) the right or obligation to acquire (whether such right or
obligation is exercisable or effective immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or upon the exercise of conversion rights,
exchange rights, rights (other than the rights granted pursuant to the
Rights Plan), warrants or options, or otherwise; provided that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (ii) the right to vote
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this clause (ii) if the
agreement, arrangement or understanding to vote such security (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (B) is not also
then reportable by such person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing), or with which
such Person or any of such Person's Affiliates have otherwise formed a
group for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in clause (ii)(A) of subparagraph (b), above)
or disposing of any securities of the Corporation.
"Change in Control" shall occur when and only when the first of the
following events occurs-
(a) an acquisition (other than directly from the Corporation) of
securities of the Corporation by any Person, immediately after which such
Person, together with all Affiliates and Associates of such Person, shall
be the Beneficial Owner of securities of the Corporation representing 20%
or more of the Voting Power or such lower percentage of the Voting Power
that, from time to time, would cause the Person to constitute an Acquiring
Person; provided that in determining whether a Change in Control has
occurred, the acquisition of securities of the Corporation in a Non-Control
Acquisition shall not constitute an acquisition that would cause a Change
in Control; or
(b) three or more directors, whose election or nomination for election is
not approved by a majority of the members of the "Incumbent Board" (as
defined below) then serving as members of the Board, are elected within any
single 12-month period to serve on the Board; provided that an individual
whose election or nomination for election is approved as a result of either
an actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person
A-8
<PAGE>
other than the Board (a "Proxy Contest"), including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest, shall be deemed not to have been approved by a majority of the
Incumbent Board for purposes hereof; or
(c) members of the Incumbent Board cease for any reason to constitute at
least a majority of the Board; "Incumbent Board" means individuals who, as
of January 16, 1997, are members of the Board, provided that if the
election, or nomination for election by the Corporation's shareholders, of
any new director was approved by a vote of at least three-quarters of the
Incumbent Board, such new director shall, for purposes of the Plan, be
considered as a member of the Incumbent Board; provided further that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened Election Contest or other actual or threatened Proxy Contest,
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(d) approval by shareholders of the Corporation of:
(i) a merger, consolidation or reorganization involving the
Corporation, unless
(A) the shareholders of the Corporation, immediately before the
merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization,
at least 50% of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger,
consolidation or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting
securities immediately before such merger, consolidation or
reorganization,
(B) individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least a
majority of the board of directors of the Surviving Corporation, and
(C) no Person (other than the Corporation or any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Corporation, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of
securities representing 20% (or such lower percentage the
acquisition of which would cause a Change in Control pursuant to
subparagraph (a) of this definition of "Change in Control") or more
of the Voting Power) has Beneficial Ownership of securities
representing 20% (or such lower percentage the acquisition of which
would cause a Change in Control pursuant to subparagraph (a) of this
definition of "Change in Control") or more of the combined voting
power of the Surviving Corporation's then outstanding voting
securities;
(ii) a complete liquidation or dissolution of the Corporation; or
(iii) an agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person (other
than a transfer to a Subsidiary).
"Change in Control Provisions" means the provisions of this Appendix A and
the provisions of any Award or deferral regulation under the Plan that refer
to, or become effective upon, a Change in Control and any rule, regulation,
procedure, provision, or determination made or adopted pursuant to the Plan
that becomes effective upon the occurrence of a Change in Control.
"Determination Year" means each of the last three Plan Years under the Plan
or the Prior Plan ending before the date on which a Change in Control occurs
(or, if less, the number of those three Plan Years during which an Employee
was a Participant in the Plan).
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor thereto.
A-9
<PAGE>
"Non-Control Acquisition" means an acquisition by (1) an employee benefit
plan (or a trust forming a part thereof) maintained by (a) the Corporation or
(b) any of its Subsidiaries, (2) the Corporation or any of its Subsidiaries or
(3) any Person in connection with a "Non-Control Transaction."
"Non-Control Transaction" means a transaction described in clauses (A)
through (C) of subparagraph (d)(i) of the definition of "Change in Control" in
this Appendix A.
"Person" shall mean any individual, firm, corporation, partnership, joint
venture, association, trust or other entity.
"Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations under
Exchange Act, as it may be amended from time to time.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or voting
interests is owned, directly or indirectly, by such Person, or which is
otherwise controlled by such Person.
"Voting Power" means the voting power of all securities of the Corporation
then outstanding generally entitled to vote for the election of directors of
the Corporation.
3. EFFECT OF A CHANGE IN CONTROL
(a) Notwithstanding any contrary terms, conditions or provisions of the Plan
or any Award, upon a Change in Control, all then-outstanding Awards
(determined on the basis of the assumption that the relevant performance
targets have been achieved) shall immediately become nonforfeitable and
payable unless otherwise elected by the Participant in accordance with the
deferral regulations under the Plan. The amount of the Award to which a
Participant shall become entitled upon a Change in Control shall be equal to
the Participant's Average Percentage of the annual value (i.e., the dollar
amount) of the normal payment under the Plan for the Participant's salary
level (such annual value and normal payment being those that are in effect
under the Plan immediately before the date on which the Change in Control
occurs for the Participant's salary level immediately before the date on which
the Change in Control occurs).
(b) Upon or after a Change in Control, the Committee may not under any
circumstances change any determination of the basis on which any previously
granted Awards shall be measured or paid or change any other terms, conditions
or provisions affecting any previously granted Awards, if the change would
reduce or adversely affect the Award or the Target Award or the Participant's
rights thereto. This subsection (b) also shall apply before a Change in
Control occurs if the change is made at the direct or indirect request or
suggestion of a Person who effectuates the Change in Control.
(c) Without limiting the provisions of Section 3(a) of this Appendix A, the
Committee may, in its absolute discretion, include in an Award provisions that
the Committee considers to be appropriate to assure fair and equitable
treatment of the Participant or a beneficiary in the event of a Change in
Control, including, but not limited to, provisions that:
(i) accelerate time periods for purposes of vesting in, or realizing gain
from, any Award, and
(ii) make adjustments or modifications to an Award that the Committee
deems appropriate to maintain and protect the rights and interests of the
Participant or a beneficiary following a Change in Control.
Any such action by the Committee shall be conclusive and binding on the
Corporation, Participants, beneficiaries and all other parties.
A-10
<PAGE>
(d) Notwithstanding the provisions of Section 6 of this Appendix A and
Section 8 of the Plan, upon or after a Change in Control, no direct or
indirect alteration, amendment, suspension, termination or discontinuance of
the Plan, no establishment or modification of rules, regulations or procedures
under the Plan, no interpretation of the Plan or determination under the Plan,
and no exercise of authority or discretion vested in the Committee pursuant to
the Plan, under any provision of the Plan (collectively or individually, a
"Change") shall be made if the Change
(i) is not required by applicable law or required to preserve an
exemption under Rule 16b-3, and
(ii) would have the effect of:
(A) eliminating, reducing or otherwise adversely affecting a
Participant's, former Participant's or beneficiary's rights with
respect to any Award, including without limitation any Award previously
deferred and unpaid (including any appreciation thereon or dividend
equivalents, interest, or other earnings thereon) in accordance with a
deferral election made prior to the Change and in accordance with any
investment or payment option permitted (irrespective of any requirement
for approval) pursuant to rules, regulations or procedures in effect on
the date immediately preceding the date on which the Change in Control
occurs,
(B) altering the meaning or operation of the Change in Control
Provisions, or
(C) undermining or frustrating the intent of the Change in Control
Provisions to secure for Participants, former Participants and
beneficiaries the maximum rights and benefits that can be provided
under the Plan.
This subsection (d) also shall apply before a Change in Control occurs if the
Change is made at the direct or indirect request or suggestion of a Person who
effectuates the Change in Control.
(e) Upon and after a Change in Control, all rights of all Participants,
former Participants and beneficiaries under the Plan (including without
limitation any rules, regulations or procedures promulgated under the Plan)
shall be contractual rights enforceable against the Corporation and any
successor to all or substantially all of the Corporation's business or assets.
4. ENFORCEMENT OF RIGHTS AND CLAIMS
After the date on which a Change in Control occurs, any Participant, former
Participant or beneficiary may apply to the trustee of the GTE Service
Corporation Benefits Protection Trust for assistance (which may include
without limitation legal counsel and the institution of litigation) in
enforcing his rights and pursuing any claims he might have under the terms of
the Plan, under any rules, regulations or procedures promulgated thereunder or
under an Award. However, any Participant, former Participant or beneficiary
who applies for assistance shall be subject to and bound by any limitations
and conditions that said trustee may impose.
No Participant, former Participant or beneficiary shall be required to
notify or to seek the assistance of said trustee as a condition of or
prerequisite to any other action that might be taken by or on behalf of the
Participant, former Participant or beneficiary in order to enforce his rights
to pursue his claims under the Plan. The fees, expenses and costs that he may
incur in connection with any other action shall not be the responsibility of
the GTE Service Corporation Benefits Protection Trust or the trustee thereof.
5. DURATION
The Change in Control Provisions shall cease to be effective on July 1,
1998. However, the Change in Control Provisions shall automatically become
effective for an additional one-year period beginning on July 1, 1998, and on
each anniversary of that date (a "Renewal Date"), unless
A-11
<PAGE>
(a) not later than the December 31 immediately preceding any such Renewal
Date, the Board adopts a resolution providing that the Change in Control
Provisions shall not be renewed upon the next succeeding Renewal Date and
(b) a Change in Control does not occur prior to such next succeeding
Renewal Date.
Notwithstanding any provision hereof to the contrary, if while the Change in
Control Provisions are in effect, a Change in Control occurs, the Change in
Control Provisions shall be extended so as to remain in effect after the date
on which the Change in Control occurs, until such time, if any, as the Plan is
terminated in accordance with Section 8 of the Plan.
6. AMENDMENT
Notwithstanding any provision of the Plan to the contrary,
(a) the Change in Control Provisions may be amended, modified or
suspended at any time prior to the date on which a Change in Control
occurs, but
(b) except as may be required by law, and except pursuant to the
termination of the Plan in accordance with the provisions of Section 8 of
the Plan and subject to the provisions of this Appendix A, during the
effectiveness of the Change in Control Provisions, the Change in Control
Provisions may not in any way be amended, modified, or suspended, directly
or indirectly, and
(i) no other provision of the Plan or the regulations thereunder may
be amended, modified, or suspended, directly or indirectly,
(ii) no rules, regulations or procedures under the Plan may be
established or modified,
(iii) no interpretation of the Plan may be adopted,
(iv) no determination under the Plan may be made, and
(v) no authority or discretion vested in the Committee (whether
pursuant to the Plan or otherwise) may be exercised,
in a manner that would alter the meaning or operation of the Change in
Control Provisions or that would undermine or frustrate their purposes.
A-12
<PAGE>
EXHIBIT B
GTE CORPORATION
1997 LONG-TERM INCENTIVE PLAN
1. INTRODUCTION AND PURPOSE
The primary purpose of the Plan is to enable the Corporation to achieve
superior financial performance as reflected in the performance of Common Stock
and/or other key financial or operating indicators by offering Participants
incentives to effect such results.
The Plan shall become effective upon the approval of the Plan by the
Corporation's shareholders at the Corporation's 1997 annual meeting of
shareholders. Unless the Plan is terminated earlier in accordance with Section
9 hereof, the Plan shall remain in full force and effect until the close of
business on the date of the Corporation's annual meeting of shareholders in
the year 2007, at which time the right to grant Awards under the Plan shall
terminate automatically unless the shareholders of the Corporation approve an
extension or renewal of the Plan.
Approval of the Plan by the Corporation's shareholders at the Corporation's
1997 annual meeting also shall constitute approval by the shareholders of the
Performance Bonuses for the 1995-1997 and 1996-1998 Performance Cycles which
were granted effective January 1, 1995, and January 1, 1996 respectively, each
of which shall be governed by the Plan following the approval of the Plan by
the Corporation's shareholders. Shareholder approval of these Performance
Bonuses is designed to allow these Performance Bonuses to qualify for an
exemption from the deduction limit imposed by Section 162(m) of the Code.
The Plan includes Appendix A hereto, which sets forth provisions governing
the Plan in the event of a Change in Control and which is hereby incorporated
herein by reference.
2. DEFINITIONS
Except where otherwise indicated, the following terms shall have the
definitions set forth below for purposes of the Plan:
"Award" means any award described in Section 5 hereof.
"Award Agreement" means an agreement entered into between the Corporation
and a Participant, in a form determined by the Committee in its sole
discretion, setting forth the terms and conditions applicable to the Award
granted to the Participant.
"Board" means the Board of Directors of the Corporation.
"Change in Control" is defined in Appendix A to the Plan.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"Committee" means the Executive Compensation and Organizational Structure
Committee of the Board or any other committee designated by the Board to
administer the Plan.
"Common Stock" means the common stock of the Corporation, including both
treasury shares and authorized but unissued shares, or any security of the
Corporation issued in substitution or exchange therefor or in lieu thereof.
B-1
<PAGE>
"Corporation" means GTE Corporation.
"Cumulative Consolidated Net Income" or "CCNI" means the aggregate of net
income reported in the Corporation's annual consolidated financial statements
for each of the fiscal years in a Performance Cycle, adjusted to exclude the
after-tax effect of (a) losses from business combinations, (b) losses from
discontinued operations (including loss on disposal of a line of business or
class of customer), (c) losses from changes in accounting principles, (d)
extraordinary losses, (e) restructuring charges, and (f) losses from changes
in tax law. Items (a) through (f) shall be determined in accordance with
generally accepted accounting principles and as disclosed in the Corporation's
annual consolidated financial statements.
"Employee" means an individual who is employed by the Corporation or a
Related Company.
"Fair Market Value" means the average of the high and low sales prices of
the Shares, as reported on the composite tape of New York Stock Exchange
issues (or any other reporting system selected by the Committee) on the
relevant date, or if no sale of Shares is reported for that date, on the date
or dates that the Committee determines, in its sole discretion, to be
appropriate for purposes of the valuation.
"Grant Price" means the price per Share at which Shares may be purchased
under a stock option and the price per Share used as the base price for
measuring the appreciation, if any, under a stock appreciation right. The
Grant Price shall not be less than the Fair Market Value of the Shares covered
by the stock option or stock appreciation right on the date the option or
right is granted.
"Market Price" means the price at which a Share could be sold on the New
York Stock Exchange at the time a stock option or stock appreciation right is
exercised.
"Participant" means an Employee who has been granted an Award pursuant to
the Plan.
"Performance Bonus" means an Award described in Section 5(c) hereof.
"Performance Cycle" means a period of three consecutive fiscal years of the
Corporation or such other period as the Committee may specify. The first
Performance Cycle under the Plan shall begin on January 1, 1997. However,
performance bonuses granted for the 1995-1997 Performance Cycle and the 1996-
1998 Performance Cycle under the Prior Plan shall be administered in
accordance with the terms of this Plan. Performance Cycles may overlap with
one another.
"Plan" means the GTE Corporation 1997 Long-Term Incentive Plan, on the date
of adoption hereof and as it may be amended from time to time.
"Prior Plan" means the GTE Corporation 1991 Long-Term Incentive Plan.
"Related Company" means a corporation, partnership, joint venture or other
entity in which the Corporation has an ownership or other proprietary interest
of at least ten percent.
"Rights Plan" means the Rights Agreement, dated as of December 7, 1989,
between the Corporation and The First National Bank of Boston (as successor
Rights Agent to State Street Bank and Trust Company), as it may be amended
from time to time, or any successor thereto.
"Shares" means shares of Common Stock.
3. PARTICIPATION
Only those Employees designated from time to time by the Committee shall
participate in the Plan and receive Awards hereunder.
B-2
<PAGE>
4. ADMINISTRATION
(a) The Plan and all Awards granted pursuant thereto shall be administered
by the Committee. The Committee shall periodically determine, in its sole
discretion, the Employees who shall participate in the Plan and the terms of
the Awards to be granted to Participants. All questions of interpretation and
administration with respect to the Plan, Awards, and Award Agreements shall be
determined by the Committee in its sole and absolute discretion, and its
determinations shall be final and binding upon all parties.
(b) The Committee may delegate its authority under subsection (a), above, to
persons other than its members to the extent it deems such action advisable.
Any person to whom the Committee has delegated authority under subsection (a),
above, may receive Awards only if the Awards are granted directly by the
Committee without delegation.
(c) The Committee may, in its sole discretion, promulgate general
regulations and guidelines governing the administration of the Plan and the
Awards granted hereunder. The Committee also may establish regulations
governing the deferred payment of Awards and may determine that deferred
payments shall accrue interest at a rate or rates determined by the Committee
and/or that deferred payments shall be deemed to be invested in Share
equivalents or other hypothetical investments.
5. AWARDS
The types of Awards described in subsections (a) through (d), below, may be
granted or payable under the Plan, singly or in combination or in tandem with
other Awards (or with awards under other plans of the Corporation or a Related
Company), as the Committee may determine. All Awards shall be in a form
determined by the Committee. No Award shall be inconsistent with the terms of
the Plan or fail to satisfy the requirements of applicable law.
The Committee may, from time to time, grant dividend equivalents in respect
of Awards.
(a) Stock Options
A stock option represents the right to purchase a specified number of
Shares, at a fixed Grant Price, during a specified term as the Committee may
determine. The term of a stock option shall not exceed ten years from the date
as of which the Grant Price is determined.
The Grant Price shall be payable, at the discretion of the Committee, by the
payment of cash, the delivery of Shares, and/or any other means that the
Committee determines to be consistent with the Plan's purposes and applicable
law.
The stock options that may be granted under the Plan include (but are not
limited to) incentive stock options that comply with the requirements of
Section 422(b) of the Code. Incentive stock options may not be granted under
the Plan after December 31, 2006. Incentive stock options may be granted only
to Employees who are employed by the Corporation or by a subsidiary
corporation (within the meaning of Section 424(f) of the Code), including a
subsidiary corporation that becomes such after the adoption of the Plan.
The Committee also may grant a right to purchase additional Shares to a
Participant contingent upon the surrender of Shares owned by the Participant
in payment of the Grant Price of a stock option granted under the Plan or upon
the surrender of Shares by the Participant in payment of withholding tax
liability with respect to such a stock option.
B-3
<PAGE>
(b) Stock Appreciation Rights
A stock appreciation right represents the right, denominated in Shares, to
receive, upon surrender of the right (or of both the right and a related
option in the case of a tandem right), in whole or in part, but without
payment, an amount (payable in Shares, in cash, or a combination thereof as
the Committee shall determine) that does not exceed the excess of the Market
Price over the Grant Price for the number of Shares for which the stock
appreciation right is exercised. The term of a stock appreciation right shall
not exceed ten years from the date as of which the Grant Price is determined.
(c) Performance Bonuses
The Committee may, from time to time, grant Performance Bonuses to
Participants in accordance with the following terms and conditions:
(i) Each Performance Bonus shall relate to a designated Performance
Cycle.
(ii) A Performance Bonus for a Corporation Performance Cycle shall be
payable only if the CCNI for the Performance Cycle exceeds $5 billion.
(iii) The sum of the Performance Bonuses for a single Performance Cycle
shall not exceed 3% of the CCNI for the Performance Cycle, disregarding any
CCNI in excess of $15 billion (the "Award Pool").
(iv) Notwithstanding the foregoing, if a Performance Cycle is longer (or
shorter) than three years at its inception, the $5 billion and $15 billion
amounts in paragraphs (ii) and (iii), above, shall be proportionately
increased (or reduced) to reflect the length of the Performance Cycle.
(v) A Participant's maximum Performance Bonus for a Performance Cycle
shall depend on the Participant's annual base salary on the last day of the
Performance Cycle in relation to the annual base salary of the other
employees of the Corporation and the Related Companies, as determined in
accordance with the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF
SALARY POSITION AWARD POOL
--------------- -------------
<S> <C>
Highest paid................................................ 3.50%
2d & 3d highest paid........................................ 2.50%
4th & 5th highest paid...................................... 1.25%
6th through 25th highest paid............................... .85%
</TABLE>
If two Participants have the same annual base salary, the Participant with
the greater seniority shall be deemed to have the higher annual base
salary. If a Participant's base salary does not fall within one of the
categories described in the foregoing table, the Participant's maximum
Performance Bonus for the Performance Cycle shall be less than .50% of the
Award Pool, as determined by the Committee. The total amount of the maximum
Performance Bonuses granted for any Award Cycle shall not exceed 100% of
the Award Pool for that Performance Cycle.
(vi) The Committee may reduce, but may not increase, any of the
following:
(A) the maximum Performance Bonus for any Participant, and
(B) the size of the Award Pool.
The Committee may authorize payment to a Participant of less than the
Participant's maximum Performance Bonus or no bonus at all.
(vii) Except as provided in paragraph (iv), above, the Committee may
increase (but may not reduce) the $5 billion amount in paragraph (ii),
above.
(viii) Performance Bonuses may be paid in cash or in Shares or in any
combination thereof.
B-4
<PAGE>
(d) Other Stock-Based Awards
The Committee may, from time to time, grant Awards (other than the Awards
described above) under the Plan that consist of or are denominated in or
payable in, valued in whole or in part by reference to, or otherwise based on
or related to, Shares. These Awards may include Shares and/or hypothetical
Shares.
The Committee may subject these Awards to restrictions on transfer and/or
other restrictions on incidents of ownership as the Committee may determine.
The Committee may grant Awards under this Section 5(d) that do not require
the payment of additional consideration by the Participant (other than
services previously rendered or, as may be permitted by applicable law,
services to be rendered), either on the date of grant or the date any
restriction(s) thereon are removed.
The term of an Award that grants a Participant the right to purchase Shares
shall not exceed ten years from the date as of which the purchase price is
determined.
6. AWARD AGREEMENTS
An Award may be evidenced by an Award Agreement, the terms of which have
been approved by the Committee, setting forth the terms and conditions
applicable to the Award, including
(a) terms and conditions governing the extent (if any) to which the Award
may be exercised, paid, assigned or transferred,
(b) terms and conditions governing the disposition of the Award in the
event of retirement, disability, death or other termination of a
Participant's employment,
(c) a provision that a Participant shall have no rights as a shareholder
with respect to any Shares covered by an Award until the date on which the
Participant or his nominee becomes the holder of record of such Shares, and
(d) terms and conditions governing tax withholding.
7. PAYMENT OF AWARDS
(a) All payments of Awards shall be made on a date prescribed by the
Committee, unless the Participant has elected to defer payment in accordance
with the rules and regulations established by the Committee.
(b) At the discretion of the Committee, a Participant may be offered an
election to substitute an Award for another Award or Awards of the same or
different type.
(c) No fractional Shares shall be issued in connection with Awards under the
Plan. The Committee shall determine whether cash, other securities, or other
property shall be paid or transferred in lieu of fractional Shares, or whether
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(d) Subject to the provisions of Section 5 hereof, payments of Awards shall
be wholly in cash, wholly in Shares, or partly in cash and partly in Shares,
as determined by the Committee in its sole discretion. In the case of Shares,
the Committee, in its sole discretion, shall determine whether the Shares
shall be subject to restrictions on transfer and/or provisions regarding
forfeiture of said Shares.
B-5
<PAGE>
8. LIMITATION ON NUMBER OF SHARES
(a) Subject to the adjustment provisions of Section 10 hereof and the
provisions of subsections (b) through (e) of this Section 8, up to 43,000,000
Shares may be issued under the Plan.
(b) In addition to the Shares authorized by Section 8(a) hereof, the
following Shares may be issued under the Plan:
(i) Shares that are forfeited under the Prior Plan and Shares that are
not issued under the Prior Plan because of a payment of cash in lieu of
Shares, the cancellation, termination or expiration of awards, and/or other
similar events under the Prior Plan shall be available for issuance under
this Plan.
(ii) If a Participant tenders, or has withheld, Shares in payment of all
or part of the Grant Price under a stock option granted under the Plan or
the Prior Plan, or in satisfaction of withholding tax obligations
thereunder, the Shares tendered by the Participant or so withheld shall
become available for issuance under the Plan.
(iii) If Shares that are the issued under the Plan are subsequently
forfeited in accordance with the terms of the Award or an Award Agreement,
the forfeited Shares shall immediately become available for issuance under
the Plan.
(iv) If the Corporation repurchases any Shares and, in connection
therewith, the Board designates that any or all of the repurchased Shares
shall be available for issuance under the Plan, those repurchased Shares
allocated to the Plan shall become available for issuance under the Plan.
Notwithstanding paragraph (i), above, any Shares that were authorized to be
issued under the Prior Plan, but that are not issued or covered by awards
under the Prior Plan, shall not be available for issuance under this Plan.
(c) Subject to the adjustment provisions of Section 10 hereof, not more than
5,000,000 Shares shall be issued under Awards other than stock options and
stock appreciation rights, and no more than 15,000,000 Shares shall be issued
pursuant to incentive stock options (within the meaning of Section 422(b) of
the Code or any successor thereto).
(d) Subject to the foregoing provisions of this Section 8, if an Award may
be paid only in Shares or in either cash or Shares, the Shares shall be deemed
to be issued hereunder only when and to the extent that payment is actually
made in Shares. However, the Committee may authorize a cash payment under an
Award in lieu of Shares if there are insufficient Shares available for
issuance under the Plan.
(e) Subject to the adjustment provisions in Section 10 hereof, an individual
Participant may not receive, in any period of five consecutive calendar years,
stock options and stock appreciation rights with respect to more than 5% of
the number of Shares specified in Section 8(a) hereof.
9. AMENDMENT OR TERMINATION OF THE PLAN
The Board may, from time to time, alter, amend, suspend or terminate the
Plan as it shall deem advisable, subject to the provisions of Appendix A
hereto and also subject to any requirement for shareholder approval imposed by
applicable law. However, the Board may not, without the approval of the
Corporation's shareholders, amend the Plan to
(a) increase the number of Shares that may be issued under the Plan
(except for adjustments pursuant to Section 10 hereof),
(b) reduce the minimum Grant Price specified by Section 2 hereof, or
(c) increase the maximum permissible term of any Award specified by
Section 5 hereof.
B-6
<PAGE>
The termination of the Plan shall not cause any previously granted Awards to
terminate. After the termination of the Plan, any previously granted Awards
shall remain in effect and shall continue to be governed by the terms of the
Plan, the Awards, and any applicable Award Agreements. This paragraph applies
regardless of whether the termination of the Plan occurs pursuant to Section 1
hereof or pursuant to this Section 9.
10. ADJUSTMENT PROVISIONS
If the Committee determines that any dividend or other distribution (whether
in the form of cash, Shares, other securities, or other property),
extraordinary cash dividend, recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities, the exercisability of
stock purchase rights received under the Rights Plan, the issuance of warrants
or other rights to purchase Shares or other securities, or other similar
corporate transaction or event affects the Shares with respect to which Awards
have been or may be issued under the Plan and that an adjustment is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in a manner that the Committee deems appropriate to prevent
such dilution or enlargement, adjust any or all of
(a) the number and type of securities that thereafter may be issued under
the Plan,
(b) the number and type of securities subject to outstanding Awards, and
(c) the Grant Price, purchase price, or Market Price with respect to any
Award, or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award.
However, no adjustment shall be authorized with respect to incentive stock
options to the extent that the adjustment would cause the options to violate
Section 422(b) of the Code or any successor provision. In addition, the number
of securities subject to any Award denominated in Shares shall always be a
whole number.
In the event of an acquisition by the Corporation by means of a merger,
consolidation, acquisition of property or stock, reorganization or otherwise,
the Committee shall be authorized to cause the Corporation to issue or to
assume stock options or stock appreciation rights, whether or not in a
transaction to which Section 424(a) of the Code applies, by means of
substitution of new options or rights for previously issued options or rights
or an assumption of previously issued options or rights, but only if and to
the extent that the substitution or assumption is consistent with the other
provisions of the Plan and with any applicable law.
Subject to any required action by the Corporation's shareholders, if the
Corporation is a party to any merger or consolidation, a Participant holding
an outstanding Award valued directly or indirectly by Shares shall be entitled
to receive, upon the exercise of the Award, the same per Share consideration
on the same terms that a holder of the same number of Shares that are subject
to the Award would be entitled to receive pursuant to the merger or
consolidation.
11. TERMINATION OF GRANTS UNDER THE PRIOR PLAN
Effective upon the approval of this Plan by the Corporation's shareholders,
no further grants of options, rights, units or other awards are permitted
under the Prior Plan. All grants and awards under the Prior Plan that remain
outstanding shall be administered and paid in accordance with the provisions
of the Prior Plan, except that the Performance Bonus Awards for the 1995-1997
and 1996-1998 Award Cycles shall be governed by the provisions of this Plan.
B-7
<PAGE>
12. NO REQUIRED SEGREGATION OF ASSETS
Neither the Corporation nor any Related Company shall be required to
segregate any assets that may at any time be represented by Awards made
pursuant to the Plan.
13. COSTS
The Committee may require a Participant or beneficiary to bear all or part
of the cost of exercising an Award or issuing Shares under the Plan.
14. RIGHT OF DISCHARGE RESERVED
Neither the Plan nor any Award or Award Agreement shall guarantee any
Employee continued employment with the Corporation or a Related Company or
guarantee the grant of future Awards.
15. NATURE OF PAYMENTS
All Awards made pursuant to the Plan are in consideration of services for
the Corporation or the Related Companies. Any gain realized pursuant to Awards
under the Plan constitutes a special incentive payment to the Participant and
shall not be taken into account as compensation for purposes of any of the
employee benefit plans of the Corporation or any Related Company except as may
be determined by the Board or by the board of directors of the applicable
Related Company.
16. SEVERABILITY
If any provision of the Plan shall be held unlawful or otherwise invalid or
unenforceable in whole or in part, the unlawfulness, invalidity or
unenforceability shall not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect.
17. GOVERNING LAW
The Plan and all determinations made and actions taken thereunder, to the
extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of New York and construed accordingly.
B-8
<PAGE>
APPENDIX A
TO GTE CORPORATION
1997 LONG-TERM INCENTIVE PLAN
CHANGE IN CONTROL
1. INTRODUCTION
This Appendix A is a part of and governs the Plan in the event of a Change
in Control, and supersedes any conflicting provision in the Plan, an Award, or
an Award Agreement.
2. DEFINITIONS
The definitions set forth in Section 2 of the Plan apply to this Appendix A.
In addition, except where otherwise indicated, the following terms shall have
the definitions set forth below for purposes of this Appendix A:
"Acquiring Person" means any Person who or which, together with all
Affiliates and Associates of such Person, without the prior approval of the
Corporation, shall be the Beneficial Owner of securities representing 20% or
more of the Voting Power or who or which was such a Beneficial Owner at any
time after the date of the Rights Plan, whether or not such Person continues
to be the Beneficial Owner of securities representing 20% or more of the
Voting Power, but shall not mean
(i) the Corporation,
(ii) any Subsidiary,
(iii) any employee benefit plan of the Corporation or any of its
Subsidiaries, or
(iv) any entity holding securities of the Corporation organized,
appointed or established by the Corporation or any of its Subsidiaries for
or pursuant to the terms of any such plan;
provided, however, that if
(a) any New York State law shall be hereinafter promulgated or amended
(whether by amendment to the definition of "interested shareholder" as used in
Section 505(a)(2)(i) of the New York Business Corporation Law ("NYBCL") or
otherwise) to provide that a New York corporation may issue rights or options
which include restrictions or conditions of the type set forth in Section
505(a)(2)(i) of the NYBCL relating either
(1) to a Person holding a percentage (the "Lower Percentage") of the
outstanding voting stock of a New York corporation which is lower than 20%
or
(2) to any Person without regard to the percentage of the outstanding
voting stock of a New York corporation held by such Person, and
(b) such law or amendment is applicable to the Corporation,
then an "Acquiring Person" shall be deemed to mean, for all purposes under the
Plan as of the effective date of such law or amendment, the Beneficial Owner
of securities representing the greater of
(I) 10% of the Voting Power or
(II) the Lower Percentage of the Voting Power.
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.
B-9
<PAGE>
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own," any securities:
(a) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(b) which such Person or any of such Person's Affiliates or Associates
has (i) the right or obligation to acquire (whether such right or
obligation is exercisable or effective immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or upon the exercise of conversion rights,
exchange rights, rights (other than the rights granted pursuant to the
Rights Plan), warrants or options, or otherwise; provided that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (ii) the right to vote
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this clause (ii) if the
agreement, arrangement or understanding to vote such security (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (B) is not also
then reportable by such person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(c) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing), or with which
such Person or any of such Person's Affiliates have otherwise formed a
group for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in clause (ii)(A) of subparagraph (b), above)
or disposing of any securities of the Corporation.
"Change in Control" shall occur when and only when the first of the
following events occurs--
(a) an acquisition (other than directly from the Corporation) of
securities of the Corporation by any Person, immediately after which such
Person, together with all Affiliates and Associates of such Person, shall
be the Beneficial Owner of securities of the Corporation representing 20%
or more of the Voting Power or such lower percentage of the Voting Power
that, from time to time, would cause the Person to constitute an Acquiring
Person; provided that in determining whether a Change in Control has
occurred, the acquisition of securities of the Corporation in a Non-Control
Acquisition shall not constitute an acquisition that would cause a Change
in Control; or
(b) three or more directors, whose election or nomination for election is
not approved by a majority of the members of the "Incumbent Board" (as
defined below) then serving as members of the Board, are elected within any
single 12-month period to serve on the Board; provided that an individual
whose election or nomination for election is approved as a result of either
an actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
the Board (a "Proxy Contest"), including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest, shall be
deemed not to have been approved by a majority of the Incumbent Board for
purposes hereof; or
(c) members of the Incumbent Board cease for any reason to constitute at
least a majority of the Board; "Incumbent Board" means individuals who, as
of January 16, 1997, are members of the Board, provided that if the
election, or nomination for election by the Corporation's shareholders, of
any new director was approved by a vote of at least three-quarters of the
Incumbent Board, such new director shall, for purposes of the Plan, be
considered as a member of the Incumbent Board; provided further that no
individual shall be considered a member of the
B-10
<PAGE>
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened Election Contest or other actual or
threatened Proxy Contest, including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or
(d) approval by shareholders of the Corporation of:
(i) a merger, consolidation or reorganization involving the
Corporation, unless
(A) the shareholders of the Corporation, immediately before the
merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization,
at least 50% of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger,
consolidation or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting
securities immediately before such merger, consolidation or
reorganization,
(B) individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation or reorganization constitute at least a
majority of the board of directors of the Surviving Corporation, and
(C) no Person (other than the Corporation or any Subsidiary, any
employee benefit plan (or any trust forming a part thereof)
maintained by the Corporation, the Surviving Corporation or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of
securities representing 20% (or such lower percentage the
acquisition of which would cause a Change in Control pursuant to
subparagraph (a) of this definition of "Change in Control") or more
of the Voting Power) has Beneficial Ownership of securities
representing 20% (or such lower percentage the acquisition of which
would cause a Change in Control pursuant to subparagraph (a) of this
definition of "Change in Control") or more of the combined voting
power of the Surviving Corporation's then outstanding voting
securities;
(ii) a complete liquidation or dissolution of the Corporation; or
(iii) an agreement for the sale or other disposition of all or
substantially all of the assets of the Corporation to any Person (other
than a transfer to a Subsidiary).
"Change in Control Provisions" means the provisions of this Appendix A and
the provisions of any Award, Award Agreement, or deferral regulation under the
Plan that refer to, or become effective upon, a Change in Control and any
rule, regulation, procedure, provision, or determination made or adopted
pursuant to the Plan that becomes effective upon the occurrence of a Change in
Control.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor thereto.
"Non-Control Acquisition" means an acquisition by (l) an employee benefit
plan (or a trust forming a part thereof) maintained by (a) the Corporation or
(b) any of its Subsidiaries, (2) the Corporation or any of its Subsidiaries or
(3) any Person in connection with a "Non-Control Transaction."
"Non-Control Transaction" means a transaction described in clauses (A)
through (C) of subparagraph (d)(i) of the definition of "Change in Control" in
this Appendix A.
"Person" shall mean any individual, firm, corporation, partnership, joint
venture, association, trust or other entity.
"Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations under the
Exchange Act, as it may be amended from time to time.
B-11
<PAGE>
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or voting
interests is owned, directly or indirectly, by such Person, or which is
otherwise controlled by such Person.
"Target Award" means the amount specified as the target award in an Award or
Award Agreement governing a Performance Bonus or other performance-based
Award.
"Voting Power" means the voting power of all securities of the Corporation
then outstanding generally entitled to vote for the election of directors of
the Corporation.
3. EFFECT OF A CHANGE IN CONTROL
(a) Notwithstanding any contrary terms, conditions or provisions of the Plan
or any Award or Award Agreement, upon a Change in Control, all then-
outstanding stock options and stock appreciation rights shall immediately
become exercisable in full, and all then-outstanding Awards (determined, in
the case of each Performance Bonus or other performance-based Award, as though
the relevant performance targets have been achieved and as though the Target
Award will be paid), and the total of all projected dividend equivalents on
such then-outstanding Awards, shall immediately become nonforfeitable and
payable unless otherwise elected by the Participant in accordance with the
deferral regulations under the Plan.
(b) Upon or after a Change in Control, the Committee may not under any
circumstances change any determination of the basis on which any previously
granted Awards shall be measured or paid or change any other terms, conditions
or provisions affecting any previously granted Awards, if the change would
reduce or adversely affect the Award or the Target Award or the Participant's
rights thereto. This subsection (b) also shall apply before a Change in
Control occurs if the change is made at the direct or indirect request or
suggestion of a Person who effectuates the Change in Control.
(c) Without limiting the provisions of Section 3(a) of this Appendix A, the
Committee may, in its absolute discretion, include in an Award or Award
Agreement provisions that the Committee considers to be appropriate to assure
fair and equitable treatment of the Participant or a beneficiary in the event
of a Change in Control, including, but not limited to, provisions that:
(i) accelerate time periods for purposes of vesting in, or realizing gain
from, any Award;
(ii) offer to purchase any outstanding Award from the Participant for an
equivalent cash value as of the date of the Change in Control;
(iii) grant, to the grantee of a stock option or stock appreciation
right, a tandem limited right, exercisable within a limited period
following the Change in Control, that entitles the Participant to receive
upon exercise a cash payment equal to the difference between the Grant
Price and the value of the Shares in respect of which the right is
exercised that has been established on, or within a specified period of
time preceding, the date on which the Change in Control occurred; and
(iv) make adjustments or modifications to an Award that the Committee
deems appropriate to maintain and protect the rights and interests of the
Participant or a beneficiary following a Change in Control.
Any such action by the Committee shall be conclusive and binding on the
Corporation, Participants, beneficiaries and all other parties.
(d) Notwithstanding the provisions of Section 6 of this Appendix A and
Section 9 of the Plan, upon or after a Change in Control, no direct or
indirect alteration, amendment, suspension, termination or discontinuance of
the Plan, no establishment or modification of rules, regulations or procedures
under
B-12
<PAGE>
the Plan, no interpretation of the Plan or determination under the Plan, and
no exercise of authority or discretion vested in the Committee pursuant to the
Plan, under any provision of the Plan (collectively or individually, a
"Change") shall be made if the Change
(i) is not required by applicable law, or required to preserve an
exemption under Rule 16b-3 or to preserve the qualification of incentive
stock options under the Code, and
(ii) would have the effect of:
(A) eliminating, reducing or otherwise adversely affecting a
Participant's, former Participant's or beneficiary's rights with
respect to any Award, including without limitation any Award previously
deferred and unpaid (including any appreciation thereon or dividend
equivalents, interest, or other earnings thereon) in accordance with a
deferral election made prior to the Change and in accordance with any
investment or payment option permitted (irrespective of any requirement
for approval) pursuant to rules, regulations or procedures in effect on
the date immediately preceding the date on which the Change in Control
occurs,
(B) altering the meaning or operation of the Change in Control
Provisions, or
(C) undermining or frustrating the intent of the Change in Control
Provisions to secure for Participants, former Participants and
beneficiaries the maximum rights and benefits that can be provided
under the Plan.
This subsection (d) also shall apply before a Change in Control occurs if the
Change is made at the direct or indirect request or suggestion of a Person who
effectuates the Change in Control.
(e) Upon and after the occurrence of a Change in Control, all rights of all
Participants, former Participants and beneficiaries under the Plan (including
without limitation any rules, regulations or procedures promulgated under the
Plan) shall be contractual rights enforceable against the Corporation and any
successor to all or substantially all of the Corporation's business or assets.
4. ENFORCEMENT OF RIGHTS AND CLAIMS
After the date on which a Change in Control occurs, any Participant, former
Participant or beneficiary may apply to the trustee of the GTE Service
Corporation Benefits Protection Trust for assistance (which may include
without limitation legal counsel and the institution of litigation) in
enforcing his rights and pursuing any claims he might have under the terms of
the Plan, under any rules, regulations or procedures promulgated thereunder or
under an Award or Award Agreement. However, any Participant, former
Participant or beneficiary who applies for assistance shall be subject to and
bound by any limitations and conditions that said trustee may impose.
No Participant, former Participant or beneficiary shall be required to
notify or to seek the assistance of said trustee as a condition of or
prerequisite to any other action that might be taken by or on behalf of the
Participant, former Participant or beneficiary in order to enforce his rights
to pursue his claims under the Plan. The fees, expenses and costs that he may
incur in connection with any other action shall not be the responsibility of
the GTE Service Corporation Benefits Protection Trust or the trustee thereof.
5. DURATION
The Change in Control Provisions shall cease to be effective on July 1,
1998. However, the Change in Control Provisions shall automatically become
effective for an additional one-year period beginning on July 1, 1998, and on
each anniversary of that date (a "Renewal Date"), unless
(a) not later than the December 31 immediately preceding any such Renewal
Date, the Board adopts a resolution providing that the Change in Control
Provisions shall not be renewed upon the next succeeding Renewal Date and
B-13
<PAGE>
(b) a Change in Control does not occur prior to such next succeeding
Renewal Date.
Notwithstanding any provision hereof to the contrary, if while the Change in
Control Provisions are in effect, a Change in Control occurs, the Change in
Control Provisions shall be extended so as to remain in effect after the date
on which the Change in Control occurs, until such time, if any, as the Plan is
terminated in accordance with Section 9 of the Plan.
6. AMENDMENT
Notwithstanding any provision of the Plan to the contrary,
(a) the Change in Control Provisions may be amended, modified or
suspended at any time prior to the date on which a Change in Control
occurs, but
(b) except as may be required by law, and except pursuant to the
termination of the Plan in accordance with the provisions of Section 9 of
the Plan and subject to the provisions of this Appendix A, during the
effectiveness of the Change in Control Provisions, the Change in Control
Provisions may not in any way be amended, modified, or suspended, directly
or indirectly, and
(i) no other provision of the Plan or the regulations thereunder may
be amended, modified, or suspended, directly or indirectly,
(ii) no rules, regulations or procedures under the Plan may be
established or modified,
(iii) no interpretation of the Plan may be adopted,
(iv) no determination under the Plan may be made, and
(v) no authority or discretion vested in the Committee (whether
pursuant to the Plan or otherwise) may be exercised,
in a manner that would alter the meaning or operation of the Change in
Control Provisions or that would undermine or frustrate their purposes.
B-14
<PAGE>
LOCATION OF GTE ANNUAL MEETING
- ------------------------------
Hyatt Regency Tampa
Two Tampa City Center
Tampa, Florida 33602
(813) 225-1234
PARKING FOR THE MEETING
- -----------------------
The Florida Aquarium
701 Channelside Drive
Tampa, Florida 33602
(813) 273-4020
Entry to the parking area is on York Street. There will be no charge for parking
for GTE shareholders. When you enter the parking area, indicate that you are
attending the GTE Annual Meeting.
SHUTTLE SERVICE FROM PARKING
- ----------------------------
Shuttle service to and from the Annual Meeting will be provided. Shuttles will
be available from 12:00 noon to 5:00 pm. The trip to the Annual Meeting will
take approximately 10 minutes.
DIRECTIONS TO GTE PARKING
- -------------------------
FROM THE TAMPA INTERNATIONAL AIRPORT
. Follow signs to I-275 North.
. Take I-275 North to Exit 25 "Downtown East Scott Street -- Arena --
Aquarium -- Seaport."
. Take Scott Street and follow Aquarium signs to Jefferson Street.
. Right on Jefferson -- Go to sixth light (Twiggs Street).
. Left on Twiggs Street to Channelside Drive.
. Right on Channelside Drive to York Street.
. Left on York Street to GTE parking at the Aquarium.
FROM THE NORTH
. Take I-275 South to Exit 26 "Downtown East-Jefferson Street."
. At first light (Scott Street) follow Aquarium signs to Jefferson Street.
. Follow directions for "FROM THE TAMPA INTERNATIONAL AIRPORT" above.
FROM THE EAST
. Take I-4 West to 22nd Street "Exit 1, Port of Tampa - Ybor City."
. Left at second light (21st Street).
. From 21st Street, right on Palm Avenue
(second light). Follow Aquarium signs.
. Left at Nuccio Parkway. Continue to follow signs through two traffic
lights.
. Follow signs directing you to the left.
. After stop sign, continue following Aquarium signs. Stay to the right to
Channelside Drive.
. Take Channelside Drive to York Street.
. Left on York Street to GTE parking at the Aquarium.
FROM THE SOUTH
. Take I-75 North to Exit 50 "Crosstown Expressway West."
. Take Crosstown Expressway West to 22nd Street to Exit 9 "Ybor City
Historical District."
. Left on Adamo Drive through two lights (stay in the left lane) to
Channelside Drive.
. Left on Channelside Drive to York Street.
. Left on York Street to GTE parking at the Aquarium.
FROM THE WEST
. Take I-275 North to Route 92.
. Right on Route 92 "Gandy Causeway" to Gandy Bridge.
. Take Gandy Bridge to Crosstown Expressway.
. Take Crosstown Expressway to Exit 6B "Channelside Drive."
. Take Channelside Drive past the Aquarium to York Street.
. Right on York Street to GTE parking at the Aquarium.
[MAP OF TAMPA APPEARS HERE]
[MAP OF DOWNTOWN TAMPA APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
ADMISSION TICKET
- --------------------------------------------------------------------------------
[GTE LOGO]
GTE CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, APRIL 16, 1996
2:00 - 4:00 P.M.
DIRECTIONS TO GTE PARKING
-------------------------
LOCATION OF MEETING From the Tampa International . Follow signs directing you
- ------------------ Airport to the left.
Hyatt Regency Tampa . Follow sings to --275 North. . After stop sign, continue
Two Tampa City . Take I-275 North to Exit 25 following Aquarium signs.
Center "Downtown East-Scott Street - Stay to the right to
Tampa, Florida 33602 Arena - Aquarium - Seaport". Channelside Drive.
(813) 225-1234 . Take Scott Street and follow . Take Channelside Drive to
Aquarium signs to Jefferson York Street.
Street. . Left on York Street to
. Right on Jefferson - Go to GTE parking at the
PARKING FOR THE sixth light (Twiggs Street). Aquarium.
- --------------- . Left on Twiggs Street to
MEETING Channelside Drive. From the South
------- . Right on Channelside Drive . Take I-175 North to Exit
The Florida Aquarium to York Street. Left on 50 "Crosstown Expressway
701 Channelside York Street to GTE parking West."
Drive at the Aquarium. . Take Crosstown Expressway
Tampa, Florida 33602 West to 22nd Street to
(813) 273-4020 From the North Exit 9 - "Ybor City
. Take 1-275 South to Exit 26 Historical District."
Entry to the parking "Downtown East-Jefferson . Left on Adamo Drive
is on York Street. Street". through two lights (stay
There will be no . At first light (Scott in the left lane) to
charge for parking Street) follow Aquarium Channelside Drive.
for GTE shareholders. signs to Jefferson Street. . Left on Channelside Drive
When you enter the . Follow directions for to York Street.
parking area, "From the Airport" above. . Left on York Street to GTE
indicate that you parking at the Aquarium.
are attending the From the East
GTE Annual Meeting. . Take I-4 West to 22nd From the West
Street "Exit 1, Port of . Take I-275 North to Route
Tampa - Ybor City." 92.
SHUTTLE SERVICE . Left at second light . Right on Route 92 "Gandy
- --------------- (21st Street). Causeway" to Gandy Bridge.
FROM PARKING . From 21st Street, right . Take Gandy Bridge to
------------ on Palm Avenue (second Crosstown Expressway.
Shuttle service to light). Follow Aquarium . Take Crosstown Expressway
and from the Annual signs. to Exit 68 "Channelside
Meeting will be . Left at Nuccio Parkway. Drive."
provided. Shuttles Continue to follow signs . Take Channelside Drive
will be available through two traffic lights. past the Aquarium to York
from 12:00 noon to Street.
5:00 pm. The trip . Right on York Street to
to the Annual GTE parking at the
Meeting will take Aquarium.
approximately 10
minutes.
PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
PROXY
[GTE LOGO]
GTE Corporation
PROXY SOLICITED BY BOARD OF DIRECTORS FOR GTE CORPORATION'S ANNUAL MEETING
OF SHAREHOLDERS ON APRIL 16, 1997.
The owner of the shares represented by this proxy hereby appoints Charles R. Lee
and Marianne Drost, or either of them, Proxies to vote at GTE Corporation's
Annual Meeting of Shareholders on April 16, 1997 and any adjournments or
postponements thereof on the matters referred to on the opposite side of this
card as well as any other matters which may properly come before the Annual
Meeting, in accordance with and as more fully described in the Notice of Meeting
and Proxy Statement, receipt of which is acknowledged.
The Proxies will vote your shares in accordance with your directions on this
card. If you do not indicate your choices on this card, the Proxies will vote
your shares in accordance with the directors' recommendations.
PLEASE SIGN ON THE OPPOSITE SIDE AND RETURN SEE OPPOSITE
THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. SIDE
- --------------------------------------------------------------------------------
<PAGE>
[GTE LOGO]
GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
Telephone: 203-965-2000
March 3, 1997
The Annual Meeting of Shareholders of GTE Corporation will be held at 2:00 P.M.,
Local Time, on Wednesday, April 16, 1997 at the Hyatt Regency Tampa, Two Tampa
City Center, Tampa, Florida.
The Proxies will vote your shares in accordance with your directions on this
card. If you sign and return the card and do not indicate your choices on this
card, the Proxies will vote your shares in accordance with the directors'
recommendations.
Please fill in the boxes on the proxy card to indicate how your shares should be
voted, sign and date your proxy card and return it as soon as possible in the
enclosed post paid envelope. If you do not sign and return your proxy card, the
Proxies cannot vote your shares at the Annual Meeting.
Please note: If you plan to attend this year's Annual Meeting, you will need to
present the admission ticket on the reverse side of this letter. Please detach
the proxy card below and mark the box indicating that you plan to attend the
Annual Meeting. Please bring the admission ticket which is on the reverse side
of this letter with you to the Annual Meeting.
Marianne Drost
Secretary
PLEASE RETAIN THIS LETTER FOR ADMISSION TO THE MEETING
PLEASE DETACH PROXY CARD HERE
- --------------------------------------------------------------------------------
[X] Please mark
- votes as in
this example.
- --------------------------------------------------------------------------------
GTE'S Directors recommend a vote "FOR" proposals 1 through 4.
- --------------------------------------------------------------------------------
1. Election of directors FOR WITHHELD FOR AGAINST ABSTAIN
James R. Barker [_] [_] 3. Adopt the GTE 1997 [_] [_] [_]
Robert F. Daniell Executive Incentive
Richard W. Jones Plan.
Michael T. Masin. For all nominees
except as noted 4. Adopt the GTE 1997 [_] [_] [_]
below: Long-Term Incentive
Plan.
----------------
FOR AGAINST ABSTAIN
2. Ratification of [_] [_] [_]
appointment of
auditors.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GTE's Directors recommend a vote "AGAINST" proposals 5 through 8.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
5. Eliminate the staggered electon of directors. [_] [_] [_]
6. Report on foreign military sales. [_] [_] [_]
7. Redeem the Shareholder Rights Plan. [_] [_] [_]
8. Limit executives' compensation. [_] [_] [_]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please check any of the following that apply.
- --------------------------------------------------------------------------------
I plan to attend the Annual Meeting. [_] Please change my address. [_]
Please discontinue duplicate mailings. [_] I have commented on reverse
side. [_]
- --------------------------------------------------------------------------------
Signature _______________ Date ________ Signature _______________ Date _________
Please Sign This Proxy as Name(s) Appear Above and Mail in the Enclosed Envelope
- --------------------------------------------------------------------------------
<PAGE>
PROXY
[GTE LOGO]
GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
Telephone: 203-965-2000
PROXY SOLICITED BY BOARD OF DIRECTORS FOR GTE CORPORATION'S
ANNUAL MEETING OF SHAREHOLDERS ON APRIL 16, 1997
The owner of the shares represented by this proxy hereby appoints Charles R. Lee
and Marianne Drost, or either of them, Proxies to vote at GTE Corporation's
Annual Meeting of Shareholders on April 16, 1997 and any adjournments or
postponements thereof on the matters referred to on the opposite side of this
card as well as any other matters which may properly come before the Annual
Meeting, in accordance with and as more fully described in the Notice of Meeting
and Proxy Statement, receipt of which is acknowledged.
The Proxies will vote your shares in accordance with your directions on this
card. If you do not indicate your choices on this card, the Proxies will vote
your shares in accordance with the directors' recommendations.
Signature _________________ Date _______________
Title __________________________________________
Signature _________________ Date _______________
Title __________________________________________
PLEASE SIGN THIS PROXY AS NAME(S) APPEAR
- --------------------------------------------------------------------------------
<PAGE>
[X] Please mark
- votes as in
this example.
- --------------------------------------------------------------------------------
GTE'S Directors recommend a vote "FOR" proposals 1 through 4.
- --------------------------------------------------------------------------------
1. Election of directors FOR WITHHELD FOR AGAINST ABSTAIN
James R. Barker [_] [_] 3. Adopt the GTE 1997 [_] [_] [_]
Robert F. Daniell Executive Incentive
Richard W. Jones Plan.
Michael T. Masin. For all nominees
except as noted 4. Adopt the GTE 1997 [_] [_] [_]
below: Long-Term Incentive
Plan.
-----------------------
FOR AGAINST ABSTAIN
2. Ratification of [_] [_] [_]
appointment of
auditors.
- --------------------------------------------------------------------------------
GTE's Directors recommend a vote "AGAINST" proposals 5 through 8.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
5. Eliminate the staggered electon of directors. [_] [_] [_]
6. Report on foreign military sales. [_] [_] [_]
7. Redeem the Shareholder Rights Plan. [_] [_] [_]
8. Limit executives' compensation. [_] [_] [_]
- --------------------------------------------------------------------------------
PLEASE SIGN ON THE OPPOSITE SIDE AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE.
- --------------------------------------------------------------------------------
