<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 sec. 240.14a-11(c) or sec. 240.14a-12
GTE California Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(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)(l) 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:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
GTE CALIFORNIA INCORPORATED
ONE GTE PLACE
THOUSAND OAKS, CALIFORNIA 91362-3811
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 9, 1997
Irving, Texas
March 28, 1997
To the Holders of the Cumulative Preferred Stock, $20 Par Value, 4 1/2%
Series, and the Common Stock:
Notice is hereby given that, in accordance with the Bylaws of GTE California
Incorporated (the Company), the Annual Meeting of Shareholders of the Company
will be held at the office of GTE Telephone Operations World Headquarters, 600
Hidden Ridge, Irving, Texas 75038, at 10:00 a.m., on Wednesday, the 9th day of
April, 1997, for the purpose of (1) electing a Board of Directors to serve for
the ensuing year and until their successors have been elected and qualified,
(2) voting upon the appointment of Arthur Andersen LLP as the independent
public accountant for the Company, and (3) transacting such other business as
may properly come before the meeting and any adjournment thereof. The nominees
for election as directors are named in the attached Proxy Statement, which is a
part of this notice. The Board does not presently know of any other business to
be considered.
Only shareholders of record at the close of business on Wednesday, March 5,
1997, will be entitled to vote at the meeting.
Please mark, sign and return the enclosed proxy as promptly as possible. If you
are present at the meeting, you may withdraw your proxy and vote your shares
personally.
By order of the Board of Directors,
CHARLES J. SOMES
Secretary
<PAGE> 3
GTE CALIFORNIA INCORPORATED
ONE GTE PLACE
THOUSAND OAKS, CALIFORNIA 91362-3811
PROXY STATEMENT
This Proxy Statement is being mailed on approximately March 28, 1997 to
shareholders of GTE California Incorporated (the Company) in connection with
the Annual Meeting of Shareholders of the Company (the Annual Meeting) to be
held on Wednesday, April 9, 1997, at the office of GTE Telephone Operations
World Headquarters, 600 Hidden Ridge, Irving, Texas 75038, at 10:00 a.m. and at
any and all adjournments thereof. The Company's Board of Directors (the Board)
is soliciting proxies to be voted at the Annual Meeting.
RECORD DATE
Only shareholders of record at the close of business on March 5, 1997 are
entitled to vote in person or by proxy at the Annual Meeting.
PROXY PROCEDURE
The Board 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 a shareholder 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.
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.
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. Otherwise, the signed proxy card 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 the Company, (ii) granting a subsequent proxy; or (iii)
appearing in person and voting at the Annual Meeting.
COST OF SOLICITATION
The Company is responsible for the cost of soliciting proxies. Proxies
may be solicited by directors, officers or regular employees of the Company in
person or by telephone, or by other means. The Company will also request
brokers or nominees who hold shares of Cumulative Preferred Stock, $20 Par
Value, 4 1/2% Series, in their names to forward proxy material at the Company's
expense to the beneficial owners of such stock.
-1-
<PAGE> 4
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record at the close of business on March 5, 1997, of the
280,312 outstanding shares of Cumulative Preferred Stock, $20 Par Value, 4 1/2%
Series, and the 70,000,000 outstanding shares of Common Stock are entitled to
notice of and to vote at the Annual Meeting. Shareholders have cumulative
voting rights, as described below, in electing directors. No shareholders shall
be entitled to cumulative votes (i.e., cast for any one or more candidates a
number of votes greater than the number of the shareholder's shares) unless
such candidate or candidates' names have been placed in nomination prior to the
voting and the shareholder has given notice at the meeting, prior to the
voting, of the shareholder's intention to cumulate the shareholder's votes. If
any one shareholder has given such notice, all shareholders may cumulate their
votes for candidates who have been nominated. If voting for directors is
conducted by cumulative voting, each share will be entitled to a number of
votes equal to the number of directors to be elected, which votes may be cast
for a single candidate or may be distributed among two or more candidates in
such proportions as the shareholder may determine. If voting is not conducted
by cumulative voting, each share will be entitled to one vote, and the holders
of a majority of the shares voting at the meeting will be able to elect all of
the directors if they choose to do so. In such event, the other shareholders
will be unable to elect any director or directors. The candidates receiving the
highest number of votes, up to the number of directors to be elected, shall be
elected. On all other matters, each share is entitled to one vote.
All of the 70,000,000 outstanding shares of Common Stock are owned of
record and beneficially by GTE Corporation (GTE or the Corporation),
representing 99.6 percent of the outstanding voting securities of the Company.
VOTE REQUIRED
The persons named in the enclosed proxy have advised they intend to vote
for the election of the nominees listed below as directors of the Company. If,
in the event of an unexpected occurrence, any nominee should not be available
for election, the proxies will be voted for the election of such substitute
nominee, if any, as the Board may propose. Each nominee is at present
available for election. The individuals listed below currently serve as
directors of the Company.
If voting for directors is conducted by cumulative voting, the persons
named on the enclosed form of proxy will have discretionary authority to
cumulate votes among the nominees with respect to which authority was not
withheld or, if the form of proxy either was not marked or was marked for all
nominees, among all nominees. In any case, the proxies may be voted for less
than the entire number of nominees if any situation arises which, in the
opinion of the proxy holders, makes such an action necessary or desirable.
-2-
<PAGE> 5
BOARD OF DIRECTORS
The directors of the Company are elected annually. During 1997, there was
one telephonic meeting of a Special Committee of the Board whose membership was
comprised of Gerald K. Dinsmore, Thomas W. White, and Michael B. Esstman.
Messrs. Dinsmore and Esstman attended this meeting. All other actions of the
Board were by unanimous consent resolutions.
The Board currently consists of five directors with two seats vacant. The
Company proposes to elect five members at the Annual Meeting thereby leaving
two seats on the Board vacant. The Company has concluded that it can operate
efficiently with only five directors on the Board in light of the decision to
have only GTE employees serve as directors of the Company. The five nominees
for election to hold office until the next annual election of directors and
until their successors shall be elected and qualified are listed in the
following table. The proxies submitted in response to this Proxy Statement
cannot be voted for a greater number of directors than the number of nominees
named. All of the nominees were elected as directors of the Company at the last
Annual Meeting. Also shown on the table are the nominees' ages and principal
occupations or employment during the last five years. All of the nominees are
executives of GTE Telephone Operations. The Board recommends a vote for all
nominees.
<TABLE>
<CAPTION>
Name Age Director Since Business Experience
---- --- -------------- -------------------
<S> <C> <C> <C>
John C. Appel 48 1996 Executive Vice President - Network Operations, GTE
Telephone Operations, 1996; Executive Vice President -
Network Operations, all GTE domestic telephone
subsidiaries of which he is not the President, 1996;
Director, all GTE domestic telephone subsidiaries,
1996; President - GTE South Incorporated and GTE North
Incorporated, 1995; Senior Vice President - Regulatory
Operations, GTE Telephone Operations, 1994; President -
GTE Southwest Incorporated, 1994; State President -
Texas / New Mexico, 1993; Vice President and General
Manager - California, GTE Telephone Operations West
Area, 1992.
Richard M. Cahill 58 1993 Vice President - General Counsel, GTE Telephone
Operations, 1988; Director, all GTE domestic telephone
subsidiaries, 1993 and/or 1994; Director, GTE Vantage
Incorporated, 1991; Vice President - General Counsel,
all GTE domestic telephone subsidiaries, 1995.
Gerald K. Dinsmore 47 1993 Senior Vice President - Finance and Planning, GTE
Telephone Operations, 1994; Senior Vice President -
Finance and Planning, all GTE domestic telephone
subsidiaries, 1994; Vice President - Finance, GTE
Telephone Operations, 1993; President of all South Area
Companies, GTE Telephone Operations, 1992; Director,
GTE Florida Incorporated and GTE South Incorporated,
1992; Director, all GTE domestic telephone
subsidiaries, 1993 and/or 1994.
</TABLE>
-3-
<PAGE> 6
<TABLE>
<CAPTION>
Name Age Director Since Business Experience
---- --- -------------- -------------------
<S> <C> <C> <C>
Michael B. Esstman 50 1993 Executive Vice President - Customer Segments, GTE
Telephone Operations, 1994; Executive Vice President -
Operations, GTE Telephone Operations, 1993; Director,
all Central Area Companies, 1991; Director, all other
GTE domestic telephone subsidiaries, 1993 and/or 1994.
Thomas W. White 50 1993 President, GTE Telephone Operations, 1995; Executive
Vice President - Network Operations, GTE Telephone
Operations, 1994; Executive Vice President - GTE
Telephone Operations, 1993; Director, all GTE domestic
telephone subsidiaries, 1993 and/or 1994; Director,
Quebec-Telephone.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company does not have any standing audit, nominating or compensation
committees of the Board. In light of the decision to have only GTE employees
serve on the Board, the Board concluded that such committees are not necessary.
DIRECTORS' COMPENSATION
The current directors, all of whom are employees of GTE, are not paid any
fees or remuneration, as such, for service on the Board.
EXECUTIVE COMPENSATION
Report on Executive Compensation
The Board has reviewed and approved the annual compensation paid to the
Company's President, M.L. Keith, Jr., and each of the other four highest paid
executive officers of the Company during 1996. Several of the executive
officers are also executive officers of affiliates of the Company. The
Company's pro rata share of salaries, bonuses and other cash compensation for
such executive officers is discussed in Note 1 to the table on page 9.
The compensation of Mr. Keith and the other four highest paid executive
officers (the named executive officers) are recommended to and approved by the
Executive Compensation and Organizational Structure Committee of the Board of
Directors of GTE Corporation (the Committee). The Committee also administers
GTE's executive incentive plans including the approval of awards under those
plans. In the opinion of the Board, the compensation paid to the named
executive officers of the Company is reasonable.
-4-
<PAGE> 7
Compensation Philosophy
The compensation philosophy of GTE, in which the Board concurs, is that
the compensation for the executive officers of the Company as a group should be
set at a level so that it attracts superior individuals, rewards sustained
performance and maximizes shareholder value. The Board also believes that
because the Company is a majority-owned subsidiary of GTE, and because most of
the named executive officers are also executive officers of other GTE
affiliates, their compensation should closely resemble the compensation paid to
other similarly situated employees of other GTE subsidiaries. The Board further
believes that the Company benefits from the policy of compensating its
employees on a similar basis to other employees with similar responsibilities
within GTE because it facilitates the ability of GTE to transfer employees
between companies, thereby providing the Company with a large group of skilled
and knowledgeable individuals from which to draw to fill key vacancies. This
policy also serves to attract talented people to the Company because they will
have an opportunity for additional experience and promotion throughout all of
GTE.
Executive Compensation
The base salary of the named executive officers is determined by reviewing
the individual's performance as well as the duties and responsibilities of the
respective executive management position. Each management position is given a
grade level with an attendant salary range. The grade levels are determined
using the Hay Job Evaluation System, an orderly and widely recognized system to
establish job levels. The Hay system emphasizes employee relations,
staffing/retention and equal opportunity considerations. The individual's
performance, years of experience and prior salary increase history, determine
where within the salary range the individual's base salary falls. The grade
levels of the executive officers are generally comparable to other similar
management positions within GTE.
The base compensation, whether or not specifically allocated to the
Company, of the named executive officers increased during 1996, based on their
performance and the date of their last increase. The percentage increases
ranged from 0.5% to 18.5%. Mr. Keith's percentage increase was based upon the
performance of GTE Telephone Operations and the Company and his individual
performance. The percentage increases for Messrs. White, Esstman, Appel and
Sparrow were based on the total performance of GTE Telephone Operations and
each individual's performance. The base salaries paid by the Company to the
named executive officers of the Company as of December 31, 1995, are included
under the "Salary" column of the Summary Compensation Table on page 9.
Incentive Compensation
Certain executives are also eligible to receive payments under two
incentive plans in addition to their base salary. Under the Executive
Incentive Plan (the EIP), awards are made, in the case of Mr. Keith, based upon
the performance of GTE, GTE Telephone Operations and the Company during the
last fiscal year and upon the individual participant's achievement of certain
goals for his business unit and other individual objectives. In the case of
Messrs. White, Esstman, Appel and Sparrow, awards are made based on the total
performance of GTE and GTE Telephone Operations and each individual's
performance.
No awards under the EIP are made for any year in which GTE's return on
equity (ROE) does not exceed 8%. However, under the terms of the EIP, the
Committee shall also take into consideration unusual or extraordinary items or
circumstances affecting GTE's financial performance, such as the impact of
mandated accounting changes or unusual charges related to acquisitions or
divestitures. GTE's 1996 ROE exceeded 8%, and awards under the EIP were made.
-5-
<PAGE> 8
The award to Mr. Keith under the GTE EIP for 1996 was based on the
performance of GTE as a whole as well as Mr. Keith's performance with respect
to critical pre-established qualitative and quantitative objectives related to
the Company established and approved by the Chief Executive Officer of GTE
Telephone Operations and the Committee. The quantitative objectives included
targets for net income, return on equity, free cash flow, customer value of
service and affirmative action. Other objectives included new product
revenues, product price and positioning, employee satisfaction and process
re-engineering. In determining Mr. Keith's award for 1996, particular emphasis
was given to the financial performance of the Company and the quality of
service provided to customers of the Company.
EIP awards for the named executive officers paid by the Company are
included in the "Bonus" column of the Summary Compensation Table on page 9 .
Selected GTE employees also have an opportunity to earn incentive payments
under GTE's Long-Term Incentive Plan (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 typically
is 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 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 Internal Revenue Code of 1986 (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.
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
LTIP were established, a common stock equivalent unit (Equivalent Unit) account
was set up for each participant in the 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
-6-
<PAGE> 9
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
Guideline 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, the participants will receive the full value associated with the
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 a formula explained in footnote
4 under the Long-Term Incentive Plan Awards table on page 13. 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 9. 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 12.
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 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. Keith and the other four most
highly compensated officers received the grants shown in the Summary
Compensation Table on page 9. Messrs. White, Esstman, Appel and Sparrow also
received additional options under a special grant as detailed in footnote 2
under the Option/SAR Grant table on page 11.
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.
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 EIP for 1996, and for Cycles under the 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 EIP and
LTIP.
-7-
<PAGE> 10
Other Compensation Plans
The Company also participates in various broad-based GTE 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.
The Company also maintains pension, insurance and other benefit plans for its
employees.
John C. Appel
Richard M. Cahill
Gerald K. Dinsmore
Michael B. Esstman
Thomas W. White
March 28, 1996
-8-
<PAGE> 11
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
1996 Principal Executive Officer of the Company and each of the other four most
highly compensated executive officers (the named executive officers) of GTE
Telephone Operations in 1996. The information in this table under the caption
"Annual Compensation" sets forth all compensation paid to the named executive
officers by GTE Telephone Operations. The caption "Long-Term Compensation"
sets forth all long-term compensation paid to the named executive officers
under employee benefit plans administered by GTE Corporation or GTE Service
Corporation. Footnote 1 to this table sets forth the actual 1996 annual
compensation for each of the named executive officers that was allocated to the
Company.
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------------------
Annual Compensation (1) Awards Payouts
------------------------- --------------------------------------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position in Group Year ($) (2) ($) (3) ($) ($) (4) SARs (#) ($) ($) (5)
- ----------------------- ----- --------- -------- ------------ ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M. L. Keith, Jr. 1996 $217,762 $117,300 $ -- $ 5,118 15,200 $ 87,600 $ 9,799
President 1995 204,308 104,000 -- -- 12,500 --
9,111
Thomas W. White 1996 463,115 533,700 -- 81,511 183,400 770,000 10,613
President - 1995 418,884 443,800 -- -- 98,800 331,800 10,613
GTE Telephone 1994 353,508 368,200 -- -- 53,700 164,100 7,075
Operations
Michael B. Esstman 1996 369,958 359,600 -- 61,702 124,400 627,400 10,613
Executive Vice President 1995 350,731 349,400 -- -- 63,500 305,900 7,238
-Customer Segments 1994 327,546 358,200 -- -- 53,700 158,300 4,998
GTE Telephone
Operations
John C. Appel 1996 295,977 380,700 -- 51,229 124,400 439,200 10,572
Executive Vice 1995 261,866 255,600 -- -- 36,400 211,300 10,613
President-
Network Operations 1994 260,662 233,800 -- -- 30,900 117,200 7,075
GTE Telephone
Operations
Larry J. Sparrow 1996 294,812 260,800 -- 41,561 81,400 404,100 10,613
President - 1995 261,866 255,600 -- -- 36,400 211,300 10,613
Carrier Markets 1994 260,662 233,800 -- -- 30,900 117,200 7,075
GTE Telephone
Operations
</TABLE>
(1) Annual Compensation represents the total annual cash compensation of
salaries, bonuses and other compensation. The Company's allocated share
for Messrs. Keith, White, Esstman, Appel and Sparrow for whom total annual
amounts are shown above, is $335,062; $224,403; $166,864; $159,222 and
$127,080, respectively.
(2) The data in the table includes fees of $15,692 and $16,607 received by Mr.
White for serving as director of BC TEL during 1996 and 1995. BC TEL, a
Canadian company, is an indirectly-owned subsidiary of GTE Corporation.
(3) The data in this column represents 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), 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
-9-
<PAGE> 12
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.
(4) The data in this column represents 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 3 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 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. Keith, White, Esstman, Appel and
Sparrow each hold a total of 540; 8,598; 6,509; 5,406 and 4,385 Restricted
Stock Units, respectively, which had a dollar value of $24,503; $390,134;
$295,346; $245,298 and $198,970, respectively, based solely upon the
closing price of GTE Common Stock on December 31, 1996.
(5) The column "All Other Compensation" includes, for 1996, company
contributions to the GTE Savings Plan of $6,750 for each of Messrs. Keith,
White, Esstman, Appel and Sparrow and company contributions to the GTE
Executive Salary Deferral Plan of $3,049 for Mr. Keith, $3,822 for Mr.
Appel, and $3,863 for each of Messrs. White, Esstman and Sparrow.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options and tandem stock
appreciation rights (SARs) to the named executive officers of the Company in
1996, whether or not specifically allocated to the Company. The options and
SARs were granted under the Long-Term Incentive Plan (LTIP). Pursuant to
Securities and Exchange Commission rules, the table also shows the value of the
options granted at the end of the option terms (ten years) if the stock price
were to appreciate annually by 5% and 10%, respectively. There is no assurance
that the stock price will appreciate at the rates shown in the table. The
table also indicates that if the stock price does not appreciate, there will be
no increase in the potential realizable value of the options granted.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation For
Individual Grants Option Term
------------------------------------------------------- ------------------------------
Percent of
Number of Total Options/
Securities SARs Granted Exercise
Underlying to Or Base
Options / SARs Employees in Price Expiration
Name Granted Fiscal Year ($/SH) Date 0% 5% 10%
- ------------------ -------------- -------------- --------- ---------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
M.L. Keith, Jr. 15,200 (1) .12% $43.75 2/20/06 $ -- $ 418,070 $1,059,388
Thomas W. White 91,700 (1) .69% 43.75 2/20/06 -- 2,522,173 6,391,179
91,700 (2) .69% 43.06 6/05/06 -- 2,482,539 6,290,746
Michael B. Esstman 62,200 (1) .47% 43.75 2/20/06 -- 1,710,787 4,335,129
62,200 (2) .47% 43.06 6/05/06 -- 1,683,903 4,267,005
John C. Appel 62,200 (1) .47% 43.75 2/20/06 -- 1,710,787 4,335,129
62,200 (2) .47% 43.06 6/05/06 -- 1,683,903 4,267,005
Larry J. Sparrow 40,700 (1) .31% 43.75 2/20/06 -- 1,119,438 2,836,652
40,700 (2) .31% 43.06 6/05/06 -- 1,101,847 2,792,076
</TABLE>
-10-
<PAGE> 13
(1) Each option was granted in tandem with a SAR, which will expire upon
exercise of the option. Under the 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) Messrs. White, Esstman, Appel and Sparrow 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 $80 or more per share
for 20 consecutive days (or, if earlier, on the seventh anniversary of the
grant date).
-11-
<PAGE> 14
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table provides information as to options and SARs exercised
by each of the named executive officers of the Company during 1996. The table
sets forth the value of options and SARs held by such officers at year-end
measured in terms of the closing price of GTE Corporation (GTE) Common Stock on
December 31, 1996.
<TABLE>
<CAPTION> Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Shares Options/SARs at FY-End at FY-End ($)
Acquired Value ---------------------------- ----------------------------
Name On Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ -------------- -------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
M.L.Keith, Jr. -- $ -- 20,532 25,368 $ 258,039 $150,442
Thomas W. White 43,800 697,575 120,132 267,168 1,474,402 1,377,266
Michael B. Esstman -- -- 95,766 184,634 1,180,292 1,019,121
John C. Appel 25,467 316,222 6,400 175,001 62,400 841,706
Larry J. Sparrow 48,466 601,963 37,567 115,967 469,003 606,460
</TABLE>
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The 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
LTIP to the named executive officers are shown in the table on page 10. The
LTIP is described in more detail on pages 6 and 7.
<TABLE>
<CAPTION>
Estimated Future Payouts
Performance Under Non-Stock Price Based Plans (1)
Number of Or Other Period --------------------------------------------
Shares, Units Until
Maturation Threshold (2) Target (3)
Name Or Other Rights Or Payout (# of Units) (# of Units) Maximum (4)
- -------------------- --------------- --------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
M.L. Keith, Jr. 1,800 3 Years 552 2,121
Thomas W. White 10,900 3 Years 3,164 12,169
Michael B. Esstman 7,400 3 Years 2,148 8,262
John C. Appel 7,400 3 Years 2,148 8,262
Larry J. Sparrow 4,900 3 Years 1,422 5,471
</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 (the
Award Limit) described on page 6. 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; 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
-12-
<PAGE> 15
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 Performance Target Added Percentage to Combined Awards
-------------------------- -----------------------------------
<S> <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.
-13-
<PAGE> 16
EXECUTIVE AGREEMENTS
GTE has entered into agreements (the Agreements) with Messrs. White,
Esstman and Appel 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
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, the Agreements with Messrs. White, Esstman and Appel provide
that in the event of a separation from service, they will receive 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 (SERP) and the GTE Corporation
Executive Retired Life Insurance Plan (ERLIP). 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 or her
eligibility for early retirement benefits. The Agreements provide that there
will be no duplication of benefits.
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.
-14-
<PAGE> 17
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>
$ 150,000 $ 31,388 $ 41,850 $ 52,313 $ 62,775 $ 73,238
200,000 42,263 56,350 70,438 84,525 98,613
300,000 64,013 85,350 106,688 128,025 149,363
400,000 85,763 114,350 142,938 171,525 200,113
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
</TABLE>
GTE Service Corporation, a wholly-owned subsidiary of GTE, maintains the
GTE Service Corporation Plan for Employees' Pensions (the Service Corporation
Plan), a noncontributory pension plan for the benefit of all GTE employees
based on years of service and earnings. Pension benefits to be paid from the
Service Corporation Plan 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 December 31, 1996, the credited
years of service under the the Service Compensation Plan for Messrs. Keith,
White, Esstman, Appel and Sparrow are 31, 28, 28, 25 and 29, 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 a 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
Committee. SERP benefits are payable in a lump sum or an annuity.
-15-
<PAGE> 18
Executive Retired Life Insurance Plan
The GTE Corporation Executive Retired Life Insurance Plan (ERLIP) provides
Messrs. White, Esstman, Appel and Sparrow a postretirement life insurance
benefit of three times final base salary and provides Mr. Keith a
postretirement life insurance benefit of two and one-half 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.
OWNERSHIP OF STOCK BY DIRECTORS, NOMINEES FOR DIRECTORS, EXECUTIVE OFFICERS AND
CERTAIN BENEFICIAL OWNERS
The table below sets forth the shares of GTE's 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. Unless otherwise indicated, all persons
named in the table have sole voting and investment power with respect to the
shares shown.
<TABLE>
<CAPTION>
Shares Beneficially
Owned as of
Title of Class Name of Director or Nominee (1) (2) (3) December 31, 1996
- ------------------------ --------------------------------------- ---------------------
<S> <C> <C>
Common Stock of GTE John C. Appel 45,162
Corporation Richard M. Cahill 78,150
Gerald K. Dinsmore 37,724
Michael B. Esstman 162,084
Thomas W. White 203,785
-------------------
526,905
===================
Executive Officers (1) (2) (3)
-------------------------------------------------------------
M. L. Keith, Jr. 32,702
Thomas W. White 203,785
Michael B. Esstman 162,084
John C. Appel 45,162
Larry J. Sparrow 86,892
-------------------
530,625
===================
All directors and executive
officers as a group (1) (2) (3) 1,442,682
===================
</TABLE>
(1) Includes shares acquired through participation in the GTE Savings Plan.
(2) Included in the number of shares beneficially owned by Messrs. Appel,
Cahill, Dinsmore, Esstman, White, Sparrow and Keith, and all directors and
executive officers as a group are 41,667; 72,100; 35,999; 155,566; 189,765;
73,566; 29,599 and 1,261,616 shares, respectively, which such persons have
the right to acquire within 60 days pursuant to stock options.
(3) 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-fifth of one percent of the total outstanding shares of GTE Common
Stock.
-16-
<PAGE> 19
DIRECTOR AND EXECUTIVE OFFICER SECURITIES REPORTS
CERTAIN TRANSACTIONS
GTE Supply, which is not a subsidiary of the Company, provides
construction and maintenance equipment, supplies and electronic repair services
to the Company. These purchases and services amounted to $119.5 million in
1996. Such purchases and services are recorded in the accounts of the Company,
at cost, which includes a normal return realized by GTE Supply.
The Company is billed for certain printing and other costs associated with
telephone directories, data processing services and equipment rentals, and
receives management, consulting, research and development and pension
management services from other affiliated companies. These charges amounted
$194 million in 1996. The amounts charged for these affiliated transactions
are based on a proportional cost allocation method.
The Company's consolidated financial statements include allocated expenses
based on the sharing of certain executive, administrative, financial,
accounting, marketing, personnel, engineering, and other support services being
performed at consolidated work centers among the domestic GTE Telephone
Operating Companies. The amounts charged for these affiliated transactions are
based on a proportional cost allocation method as filed with the Federal
Communications Commission.
The Company has an agreement with GTE Directories Corporation
(Directories) (100% owned by GTE), whereby the Company provides its subscriber
lists, billing and collection and other services to Directories. Revenues from
these activities amounted to $130.6 million in 1996.
INDEPENDENT PUBLIC ACCOUNTANTS
A proposal will be presented at the meeting that the selection by the
Board of Arthur Andersen LLP as the independent public accountants of the
Company be approved by the shareholders of the Company. An affirmative vote of
the holders of a majority of the shares represented at the meeting will be
required for such approval. In the event such approval is not obtained,
selection of the accountant will be reconsidered by the Board. Proxies
solicited by the Board will be voted for the proposal unless marked to the
contrary. The Board recommends a vote FOR the foregoing proposal.
A representative of Arthur Andersen LLP will not attend the shareholders'
meeting.
OTHER MATTERS
The Board 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 meeting, it is the intention of the
person named in the proxy to vote such proxy or proxies in accordance with the
judgment of the Board.
-17-
<PAGE> 20
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal which a shareholder intends to present at the next Annual
Meeting of Shareholders, to be held in April 1998, must be received at the
office of the Company by November 28, 1997, if such proposal is to be
considered for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
A copy of the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission is available free of charge by written
request to:
GTE Telephone Operations
Financial Reporting
1420 East Rochelle Blvd.
Suite 300, Building 6
MC: HQC03F29
Irving, TX 75039
By order of the Board of Directors,
Charles J. Somes
Secretary
Dated: March 28, 1997
-18-
<PAGE> 21
DETACH HERE
PROXY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
GTE CALIFORNIA INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints RICHARD M. CAHILL, PETER K. PLAUT and CHARLES
J. SOMES, and each of them, proxies, with power of substitution, to vote, as
designated on the reverse side, all shares of the undersigned at the annual
meeting of shareholders of GTE California incorporated to be held at 600 Hidden
Ridge, Irving, Texas 75038, on Wednesday, April 9, 1997 at 10 a.m., and all
adjournments.
PROXIES CANNOT BE VOTED FOR A GREATER NUMBER OF DIRECTORS THAN THE
NOMINEES NAMED.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
<PAGE> 22
DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
NOMINEES: Thomas W. White, John C. Appel, Michael B. Esstman, Gerald K.
Dinsmore and Richard M. Cahill
FOR WITHHELD
[ ] [ ]
[ ]
--------------------------------------------------
For all nominees except as noted on the line above
2. Proposal to approve the appointment of FOR AGAINST ABSTAIN
Arthur Andersen LLP as the independent [ ] [ ] [ ]
public accountant for the Company
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Please sign your name(s) as printed hereon. If co-owner, both parties
should sign.)
Signature Date
------------------------------------- -------------------
Signature Date
-------------------------------------- -------------------
