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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
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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
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GTE CALIFORNIA INCORPORATED
ONE GTE PLACE
THOUSAND OAKS, CALIFORNIA 91362-3811
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1999
Irving, Texas
April 14, 1999
To the Holders of the Cumulative Preferred Stock, $20 Par Value, 4 1/2% Series,
and the Common Stock:
We are notifying you, according to the Bylaws (the Bylaws) of GTE California
Incorporated (the Company), that the Annual Meeting of Shareholders of the
Company will be held at the office of GTE World Headquarters, 1255 Corporate
Drive, Irving, Texas 75038, at 10:00 a.m. on Wednesday, the 12th day of May,
1999, for the purpose of (1) electing a Board of Directors (the Board) 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 accountants for the Company and (3) transacting such other
business as may properly come before the meeting and any postponement or
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, April 7,
1999, 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,
MARIANNE DROST
Secretary
<PAGE> 3
GTE CALIFORNIA INCORPORATED
ONE GTE PLACE
THOUSAND OAKS, CALIFORNIA 91362-3811
PROXY STATEMENT
This Proxy Statement is being mailed on approximately April 14, 1999
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, May 12, 1999 at the office of GTE World Headquarters, 1255
Corporate Drive, Irving, Texas 75038, at 10:00 a.m., and at any and all
postponements or 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 April 7, 1999
are entitled to vote in person or by proxy at the Annual Meeting.
PROXY PROCEDURE
The Board is soliciting your proxy so that you will have 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
will be voted in accordance with your instructions on the proxy card. If you
attend the Annual Meeting, you may vote by ballot.
If you do not return a signed proxy card or do not attend the Annual
Meeting and vote in person, your 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 Annual
Meeting and, accordingly, are not counted towards a quorum.
If you return a signed proxy card but do not mark the boxes, the
shares represented by your 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. You may revoke your 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, 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.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Shareholders of record at the close of business on April 7, 1999, 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. You have cumulative voting
rights, as described below, in electing directors. You shall not be entitled to
cumulate votes for any candidate or candidates (i.e., cast for any one or more
candidates a number of votes greater than the number of your shares) unless
such candidate's or
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candidates' names have been placed in nomination prior to the voting and you
have given notice at the Annual Meeting, prior to the voting, of your intention
to cumulate your votes. If you or 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 Annual 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), representing 99.6% of the
outstanding voting securities of the Company.
VOTE REQUIRED
The persons named in the enclosed proxy have advised that 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.
BOARD OF DIRECTORS
The directors of the Company are elected annually. During 1998, all
actions of the Board were by unanimous consent resolutions.
The Board currently consists of three directors with no seats vacant.
The Company has concluded that it can operate efficiently with only three
directors on the Board in light of the decision to have only GTE employees
serve as directors of the Company.
The three 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 below. All of the nominees were elected as directors
of the Company at the last Annual Meeting. Also shown in the table are the
nominees' ages and principal occupations or employment during the last five
years. All of the nominees are executives of GTE Network Services, consisting
of all of GTE's incumbent local exchange carriers in the United States,
including the Company.
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The Board recommends a vote FOR all nominees.
<TABLE>
<CAPTION>
Name Age Director Since Business Experience
- -------------------------- -------- -------------------- -----------------------------------------------------------
<S> <C> <C> <C>
John C. Appel 50 1996 President, GTE Network Services, 1997; Executive Vice
President - Network Operations, GTE Telephone Operations,
1996; Executive Vice President - Network Operations, all
GTE domestic telephone subsidiaries of which he is not
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.
Mateland L. Keith, Jr. 56 1997 Senior Vice President - Regional Operations, GTE Network
Services, 1997; President, GTE California Incorporated,
1995; Assistant Vice President - Engineering, GTE
Telephone Operations, 1995; Area Vice President - Sales,
GTE North Incorporated, 1993.
Lawrence R. Whitman 47 1997 Vice President - Finance and Planning, Business
Development and Integration, 1997; Controller, GTE
Corporation, 1995; Vice President - Finance, TP&S, 1993.
</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
GTE's Executive Compensation and Organizational Structure Committee of
the Board of Directors of GTE Corporation (the Committee) 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
the approval of grant and payout targets and awards under those plans. The
Committee also evaluates the performance of senior management, including the
chief executive officer, and approves changes to the base salaries of senior
management of GTE and its related companies. This Committee annually reports to
the Board of Directors on its activities.
The Board has reviewed and approved the annual compensation paid to
David R. Bowman, who has served as the Company's President since July 1997, and
each of the other executive officers of the Company during 1998 listed in the
Summary Compensation Table on page 8 (collectively, the Named Executive
Officers). 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
footnote 2 to the table on page 8.
The compensation of Mr. Bowman and the other five Named Executive
Officers is recommended to and approved by the Committee.
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In the opinion of the Board, the compensation paid to the Named Executive
Officers of the Company is reasonable.
Compensation Philosophy
GTE's compensation philosophy, in which the Board concurs, is that
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 outstanding
results. GTE benchmarks its compensation (including salary and incentive pay)
by comparing its practices with those of a select group of companies. GTE's
comparison group for benchmarking competitiveness includes other major
companies, both in telecommunications and general industry.
The Committee is responsible for GTE's executive compensation
philosophy and policies, which form the basis for the Committee's decisions.
GTE has compared its ratio of base salary to total executive compensation to
the practices of the comparison companies. Under GTE's compensation philosophy,
base salary is intended to represent less than 40% of compensation for top
executives. 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 are at risk.
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
In keeping with GTE's stated compensation philosophy, the Committee
compares the total compensation of GTE's executives to that of its comparison
group. The Committee determines whether it is advisable to approve adjustments
in salary ranges and incentives. In doing so, the Committee evaluates each
executive's performance, the performance of the operations directed by that
executive, and the ranking 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 1998, the Committee reviewed the current position of GTE's
targeted base salary and the annual and long-term incentives and compared the
level and mix of pay opportunities to similar categories for the comparison
group. Based on this review, the Committee adjusted GTE's base salary and annual
incentives for 1998. On average, total annual compensation opportunities
increased 4.4% in order to maintain GTE's competitive position. GTE's long-term
performance-based award schedules, including stock options and performance bonus
units, were adjusted downward by 8% and 13%, respectively, as a result of the
increase in GTE's stock value. This represents the first change to GTE's stock
option and performance bonus grant schedules in two years.
The base compensation of the Named Executive Officers, whether or not
specifically allocated to the Company, increased during 1998 based on their
performance and the date of their last increase. The percentage increase for
Mr. Bowman was based on the performance of GTE Network Services and the Company
and his individual performance, including his performance with respect to
changes in executive
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responsibilities. The percentage increases for Messrs. Appel and Dinsmore were
based on the total performance of GTE Network Services and each individual's
performance, including his performance with respect to changes in executive
responsibilities. The base salaries paid by GTE Network Services to the Named
Executive Officers are included under the "Salary" column of the Summary
Compensation Table on page 8.
Incentive Compensation
Certain employees are eligible to receive awards under two incentive
plans in addition to their base salary.
Under the Executive Incentive Plan, a participating employee is
eligible to receive an award based on GTE's performance during the prior fiscal
year, the performance of the individual's business unit and his or her
achievement of previously established 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 GTE and the business units to determine the percentage payout
of incentive awards for each unit and the individual awards for certain senior
executives.
The awards for the Named Executive Officers are based on the total
performance of GTE and GTE Network Services during the last fiscal year and
each individual's performance. The award for Mr. Bowman is also based on the
Company's performance during the last fiscal year.
The award to Mr. Bowman under the GTE Executive Incentive Plan for
1998 was based on the performance of GTE as a whole, as well as individual
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 Network Services and the Committee. The
quantitative objectives included targets for net income, free cash flow, total
revenue, customer value of service and employee development, including
recruiting, training and affirmative action. Other objectives included new
product revenues, product price and positioning, network reliability, employee
safety and community leadership. Particular emphasis was given to the financial
performance of the Company and the quality of service provided to customers of
the Company in determining Mr. Bowman's award for 1998.
The Executive Incentive Plan awards for the Named Executive Officers
paid by GTE Network Services are included in the "Bonus" column of the Summary
Compensation Table on page 8.
Selected GTE employees also have an opportunity to earn incentive
payments under the Long-Term Incentive Plan. The primary purpose of the
Long-Term Incentive Plan is to help assure superior long-term financial and
operating performance by offering participants an incentive for achieving those
results. The Long-Term Incentive Plan provides for two types of grants -
performance bonuses and stock options. In approving the grants awarded under
the Long-Term Incentive Plan, the Committee compares GTE's grant levels to
competitive practices in the comparison group. GTE's objective is to link an
increasing amount of compensation to long-term performance. GTE's philosophy is
to be at the 60th percentile of the market of the comparison group of companies
in this area.
Senior executives of GTE, including the six executives named in the
Summary Compensation Table on page 8, are eligible to receive annual grants of
performance bonuses under the Long-Term Incentive Plan. These grants are earned
during a performance cycle that is typically three years in duration. Awards for
the three-year performance cycle ending in 1998 were based on GTE's actual
financial performance during the 1996-1998 cycle. GTE's actual financial
performance is compared to pre-established target levels for the following key
measures: revenues growth, earnings per share growth, earnings before interest,
taxes, depreciation and amortization growth, relative total shareholder return,
and return on investment.
In establishing the targeted performance levels for the five key
measures, 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 these key
measures 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 Long-Term Incentive Plan were established and a common stock
equivalent unit account was set up for each participant. Each equivalent unit
account represents an initial dollar amount for each account, which is referred
to as a target award, based on the
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competitive performance bonus grant practices of the market comparison group.
The value of the account was increased or decreased based on the market price
of GTE Common Stock. Each time a dividend was paid on GTE Common Stock, an
amount equal to the dividend 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 of the high and low prices of GTE Common Stock on the New York
Stock Exchange (NYSE) Composite Transactions Tape on the dividend payment date.
The resulting number of equivalent units was then credited to the account.
Under the performance criteria approved for the 1996-1998 cycle, the
1997-1999 cycle and the 1998-2000 cycle, the Committee established the minimum
level of performance, or threshold, for each of the key measures. If this
threshold is not met for a particular key measure, no award is paid for that
key measure. If performance for a key measure is at the threshold, participants
receive a payment of 20% of the target award for that key measure. However, if
GTE's performance for the total shareholder return key measure is at the
threshold, a payment of 50% of the award is made. The Committee determined that
this key measure was critical to GTE's success and set an exceptionally
demanding goal for total shareholder return. Accordingly, they determined that
if the threshold were met, a 60% payment would be made with respect to total
shareholder return. If GTE's performance meets the target for the key measure,
participants will receive the full value associated with achieving that key
measure. If GTE's performance exceeds the target, the award for that key
measure will exceed 100% of the target award, based upon the formula explained
in footnote 2 below the table on page 11 entitled, Long-Term Incentive Plan -
Awards in Last Fiscal Year. The formula is applied separately for each key
measure. 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 key measures. The cumulative attainment level is called the "Guideline
Performance Percentage." The value of the equivalent unit account is then
adjusted by the Guideline Performance Percentage.
Grants for the 1998-2000 cycle are shown in the Long-Term Incentive
Plan - Awards in Last Fiscal Year table on page 11.
The Committee normally approves grants of stock options under the
Long-Term Incentive Plan. These options are granted to the six executives named
in the Summary Compensation Table on page 8 and to a substantially larger group
of executives than those who are eligible to receive performance bonuses under
the Long-Term Incentive Plan.
The Committee did not take into account the number of options
currently held by any individual participant in determining individual grants
for 1998. Mr. Bowman and the other five most highly compensated officers
received the grants shown in the Summary Compensation Table on page 8. Mr.
Bowman's grant level was tied to competitive long-term compensation practices
for companies in GTE's comparison group.
In addition, GTE has established stock ownership guidelines for all
executives who are eligible to receive Long-Term Incentive Plan 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 times
his annual base salary. Other executives identified by the Committee are
encouraged to maintain stock holdings with a value ranging from one to four
times their annual base salaries. Compliance with the stock ownership
guidelines is monitored annually. Overall, ownership by the executive
population significantly exceeded these guidelines.
GTE executives also participate in the Equity Participation Program.
Under this program, a portion of certain executives' cash bonuses under the
Executive Incentive Plan and Long-Term Incentive Plan must be deferred and held
in restricted stock units for a minimum of three years, and then will be
payable in GTE Common Stock. Participants may also irrevocably elect to defer
an additional percentage of their Executive Incentive Plan and Long-Term
Incentive Plan cash bonuses into restricted stock units, provided that their
mandatory and voluntary deferrals do not exceed 25% of the combined Executive
Incentive Plan and Long-Term Incentive Plan awards. GTE will provide a matching
contribution in restricted stock units in the amount of one unit for every four
units deferred by the participant. These matching restricted stock units were
designed as an inducement to encourage full participation in the program and to
compensate the executives for their agreement not to realize the economic value
associated with the restricted stock units for a minimum of three years.
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Internal Revenue Service Rules Relating to Deductibility of
Compensation
In late December 1995, the Internal Revenue Service issued final
regulations that apply to Section 162(m) of the Internal Revenue Code of 1986,
as amended, limiting the tax deduction a publicly held corporation may take for
compensation paid to the executives listed on the Summary Compensation Table on
page 8. The Internal Revenue Service regulations limit the annual amount that
GTE may deduct for each of these executives to $1,000,000 unless the
compensation is performance-based.
Both the Executive Incentive Plan and Long-Term Incentive Plan include
provisions to provide for the deductibility of future amounts received under
these plans. The provisions include, but are not limited to, limiting positive
discretion, establishing the maximum aggregate awards payable, limiting the
number of stock options that may be granted to any one individual, and limiting
the maximum individual awards that may be paid to these executives.
Based on these requirements, the Executive Incentive Plan provides
that if GTE's return on equity exceeds 8%, then an amount equal to 5% of GTE's
consolidated net income is available for awards to participants. In calculating
consolidated net income under the terms of the Executive Incentive Plan, the
Committee excludes losses from unusual or extraordinary items such as the
impact of accounting changes or unusual charges related to business
combinations or discontinued operations. In addition, the Committee established
individual award limits with respect to the Executive Incentive Plan awards.
Each individual award limit is a percentage of the total available amount. 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%. GTE's 1998 return on
equity exceeded 8%, and awards under the Executive Incentive Plan were paid for
1998.
Based on these requirements, the Long-Term Incentive Plan provides
that if for each 3-year performance cycle, GTE's cumulative consolidated net
income exceeds $5 billion, awards can be made. In calculating cumulative
consolidated net income under the terms of the Long-Term Incentive Plan, the
Committee excludes losses from unusual or extraordinary items such as the
impact of accounting changes or unusual charges relating to business
combinations or discontinued operations. If cumulative consolidated net income
exceeds $5 billion, then an amount equal to 3% of cumulative consolidated net
income is available for awards to participants. Amounts of cumulative
consolidated net income in excess of $15 billion are not counted in determining
the size of the total available amount. In addition, the Committee established
individual award limits with respect to the award of the performance bonus. The
individual award limit is a percentage of the total available amount. 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%.
Other Compensation Plans
The Company 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, pursuant to the provisions of Section 401(k) of the
Internal Revenue Code, permit employees to invest in a variety of funds on a
pretax or after-tax basis. Matching contributions under those plans are made in
GTE Common Stock. The Company also maintains pension, insurance and other
benefit plans for its employees.
John C. Appel
Mateland L. Keith, Jr.
Lawrence R. Whitman
April 14, 1999
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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 individual who served as Principal Executive Officer of the Company in
1998, each of the other four most highly compensated executive officers of the
Company (other than the Chief Executive Officer) who served as such and were
compensated by the Company or GTE Network Services at the end of 1998 and the
additional individual who served as executive officer of the Company or GTE
Network Services in 1998 but did not serve as such or was not being compensated
by the Company or GTE Network Services at the end of 1998. The information in
this table under the caption "Annual Compensation" sets forth all compensation
paid to the Named Executive Officers by the Company and GTE Network Services.
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 2 to this table sets forth the
actual 1998 annual compensation for each of the Named Executive Officers that
was allocated to the Company.
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------------------
Annual Compensation (2) Awards Payouts
------------------------------ ----------------------- ---------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Salary Bonus Compensation Awards Options/ Payouts Compensation
Position in Group (1) Year ($) ($)(3) ($) ($)(4) SARs(#)(3) ($) ($)(5)
--------------------- ---- ------- ------- ------------ ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David R. Bowman 1998 169,538 104,400 -- 9,006 12,200 39,700 7,629
President 1997 146,739 83,400 -- 6,606 15,200 22,300 5,366
1996 130,169 52,400 -- -- 3,500 -- 5,678
John C. Appel 1998 386,538 420,800 -- 48,913 61,200 361,800 17,934
Executive Vice President - 1997 348,365 399,386 -- 59,881 76,000 548,700 11,320
Network Operations 1996 295,977 380,700 -- 51,229 124,400 439,200 10,572
Larry J. Sparrow 1998 334,808 249,600 -- 29,113 57,200 216,200 15,066
Vice President - 1997 315,565 256,400 -- 39,481 40,700 375,300 11,320
Wholesale Markets 1996 294,812 260,800 -- 41,561 81,400 404,100 10,613
Lawrence R. Whitman (6) 1998 268,672 240,952 -- 22,685 57,200 193,000 4,431
Vice President - 1997 262,615 223,700 -- 32,525 40,700 296,700 5,971
Finance and Planning 1996 232,615 210,900 -- -- 32,700 247,300 5,971
Richard L. Schaulin 1998 279,958 145,616 -- 18,200 19,000 136,800 13,358
Vice President - 1997 283,842 163,400 -- 25,025 25,500 237,000 11,320
Human Resources 1996 268,735 178,200 -- 27,088 25,500 255,200 6,750
Gerald K. Dinsmore (7) 1998 266,755 264,779 -- -- 46,500 271,400 15,542
Senior Vice President - 1997 302,532 314,807 -- 45,906 62,200 411,800 11,320
Finance and Planning 1996 288,619 263,700 -- 41,751 81,400 404,100 10,613
</TABLE>
(1) All persons named in the table are officers of the Company except as
otherwise noted.
(2) Annual Compensation represents the total annual cash compensation of
salaries, bonuses and other compensation. The Company's allocated share
for Messrs. Bowman, Appel, Sparrow, Whitman, Schaulin and Dinsmore, for
whom total annual amounts are shown above, is $273,938, $201,988,
$146,248, $127,570, $106,756 and $132,985, respectively.
(3) The data in these columns represents the amounts received in 1998 by each
of the Named Executive Officers under the GTE Corporation Executive
Incentive Plan and Long-Term Incentive Plan (which is referred to in all
tables as LTIP). In connection with GTE's Equity Participation Program, a
portion of this amount has been deferred into restricted stock units
payable at maturity (generally, a minimum of three years) in GTE Common
8
<PAGE> 11
Stock. 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 Transactions 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.
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 NYSE Composite Transactions Tape 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 described in
footnote 3 above. 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. GTE grants executives matching restricted stock units on the
basis of one stock unit for every four stock units deferred. The matching
restricted stock units were designed to increase focus on shareholder
value and to compensate the executive for agreeing not to realize the
economic value associated with deferred bonus amounts. 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 NYSE Composite Transactions Tape on the dividend declaration
date. Messrs. Bowman, Appel, Sparrow, Whitman, Schaulin and Dinsmore hold
a total of 1,440, 15,790, 10,992, 4,503, 7,029 and 8,956 restricted stock
units, respectively, which had a dollar value of $84,672, $977,950,
$685,721, $270,262, $438,865 and $582,117, respectively, based solely upon
the closing price of GTE Common Stock on December 31, 1998.
(5) The column "All Other Compensation" includes, for 1998, Company
contributions to the GTE Savings Plan of $7,200 for each of Messrs.
Bowman, Appel, Sparrow, Schaulin and Dinsmore, and $4,431 for Mr. Whitman.
This column also includes Company contributions to the GTE Executive
Salary Deferral Plan of $429 for Mr. Bowman, $10,194 for Mr. Appel, $7,866
for Mr. Sparrow, $6,158 for Mr. Schaulin and $8,342 for Mr. Dinsmore.
(6) Mr. Whitman was appointed Vice President - Finance and Planning of GTE
Service Corporation in May 1998. He had served as the Controller of GTE
Corporation since 1995, and before that as Vice President - Finance for
GTE Telephone Products and Services since 1993.
(7) Mr. Dinsmore was appointed President, Business Development and Integration
(a separate business unit of GTE) in June 1997. Mr. Dinsmore served as
Senior Vice President - Finance and Planning of the Company until April
30, 1998. Although Mr. Dinsmore retained his title with the Company
through April 30, 1998, he was compensated solely through his new position
from June 1997 until his retirement from the Company in January 1999.
9
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to the Named Executive
Officers of the Company in 1998, whether or not specifically allocated to the
Company. The options were granted under GTE's Long-Term Incentive Plan. In
addition, these stock option grants included a replacement stock option
feature. The replacement stock option feature provides that, if an executive
exercises a stock option granted in 1998 by delivering previously owned shares
that are sufficient to pay the exercise price plus applicable tax withholdings,
the executive will receive a one-time additional stock option grant. The number
of shares represented by that option will be equal to the number of previously
owned shares surrendered in this transaction. This replacement stock option
will be granted with an exercise price equal to fair market value on the date
of grant. No stock appreciation rights were granted to the Named Executive
Officers of the Company in 1998. 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. 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, the potential realizable
value of the options granted will be zero.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------- Potential Realizable Value at
Number of Percent of Assumed Annual Rate of
Securities Total Options Exercise Stock Price Appreciation
Underlying Granted to or Base for Option Term
Options Employees in Price Expiration ---------------------------------
Name Granted Fiscal Year ($/SH) Date 0% 5% 10%
---- ------- ----------- ------- ---------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Bowman 12,200 .08% 54.3750 2/20/08 -- 417,193 1,057,249
John C. Appel 62,200 .42% 54.3750 2/20/08 -- 2,092,804 5,303,576
Larry J. Sparrow 28,600 .19% 54.3750 2/20/08 -- 978,010 2,478,469
28,600 .19% 58.1565 2/20/08 -- 1,046,025 2,650,833
Lawrence R. Whitman 28,600 .19% 54.3750 2/20/08 -- 978,010 2,478,469
28,600 .19% 58.1565 2/20/08 -- 1,046,025 2,650,833
Richard L. Schaulin 19,000 .13% 54.3750 2/20/08 -- 649,727 1,646,535
Gerald K. Dinsmore 46,500 .32% 54.3750 2/20/08 -- 1,590,121 4,029,678
</TABLE>
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 18, 1998 was approximately $52.33
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
18, 2008 of the same number of shares would be approximately $85.24 billion. If
the price of GTE Common Stock increases by 10% per year, the aggregate market
value on February 18, 2008 would be approximately $135.72 billion.
10
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table provides information as to options and stock
appreciation rights exercised by each of the Named Executive Officers of the
Company during 1998. The table sets forth the value of options and stock
appreciation rights held by such officers at year end measured in terms of the
closing price of GTE Common Stock on December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Shares Options/SARs at FY-End at Fiscal Year-End ($)
Acquired Value ---------------------------- ----------------------------
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David R. Bowman 2,933 43,896 1,666 26,901 27,281 421,306
John C. Appel 41,900 796,504 46,066 174,068 1,125,017 3,758,302
Larry J. Sparrow 10,300 296,769 116,100 125,034 3,654,411 2,464,368
Lawrence R. Whitman 37,359 582,451 2,666 95,234 62,651 1,671,498
Richard L. Schaulin 15,000 355,313 25,500 44,500 630,334 887,558
Gerald K. Dinsmore 22,433 437,285 73,566 128,668 2,004,416 2,776,565
</TABLE>
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The Long-Term Incentive Plan provides for awards to participating
employees, including stock options, stock appreciation rights, performance
bonuses and other stock-based awards. The stock options awarded under the plan
to the Named Executive Officers in 1998 are shown in the table on the previous
page.
<TABLE>
<CAPTION>
Estimated Future Payouts
Performance Under Non-Stock Price Based Plans (1)
Number of Or Other Period ----------------------------------------------
Shares, Units Until Maturation Threshold Target
Name Or Other Rights Or Payout (# of Units) (# of Units) Maximum (2)
---- --------------- ---------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
David R. Bowman 1,200 3 Years 340 1,308
John C. Appel 9,600 3 Years 2,721 10,467
Larry J. Sparrow 4,500 3 Years 1,276 4,906
Lawrence R. Whitman 4,500 3 Years 1,276 4,906
Richard L. Schaulin 2,400 3 Years 680 2,617
Gerald K. Dinsmore 7,300 3 Years 2,069 7,959
</TABLE>
(1) 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, 1998. The target 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 average
closing price of GTE Common Stock, as reported on the NYSE Composite
Transactions Tape, during the last 20 business days of the award cycle.
(2) 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 key measures
11
<PAGE> 14
exceed the respective target levels. If GTE's actual results during the
cycle for the five key 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 +2%
cumulative revenue growth
</TABLE>
Thus, for example, if the revenue growth key measure exceeds its target
level by .5% while the remaining four key measures are precisely at their
respective target levels, then the performance bonus will equal 110% of
the combined target award.
GTE IMPLEMENTATION AND RETENTION BONUS PLAN
On November 3, 1998, the Committee approved the Implementation and
Retention Bonus Plan. This plan provides incentives to employees who are
critical to completing the GTE/Bell Atlantic merger or necessary to ensure the
continuity and effectiveness of GTE's businesses, and who are likely targets for
competitive offers from other companies.
GTE has entered into an agreement with Mr. Appel under which he will
receive an estimated cash payment equal to 1.5 times his base salary plus the
Executive Incentive Plan award. GTE has also entered into agreements with
Messrs. Bowman, Sparrow, Whitman, Schaulin and five other executive officers
under which each will receive estimated cash payments equal to 1.0 times base
salary plus the Executive Incentive Plan award.
Payment will be made in a lump-sum amount when the GTE/Bell Atlantic
merger becomes effective. If the merger is not completed, some of GTE's
executive officers will receive 25% of their anticipated payment under the
plan. Mr. Appel will only receive payment under the plan if the merger is
completed.
GTE EXECUTIVE SEVERANCE AGREEMENTS
In its desire to retain key executives, GTE previously entered into
executive severance agreements with seven individuals who have served as
executive officers of the Company at any time since January 1, 1998. These
individuals include Messrs. Appel, Sparrow, Whitman, Schaulin and three other
executive officers. These agreements provide benefits to be paid in the event
of a qualifying termination following a change in control of GTE. A change in
control of GTE will occur upon approval of the GTE/Bell Atlantic merger by GTE
shareholders.
Any executive who is terminated for reasons other than cause or who
resigns for good reason, both of which are defined under the executive
severance agreements, will generally receive:
o payment of two times the sum of the executive's base salary and annual bonus;
o eligibility for early retirement benefits;
o pension credits for the period covered by the severance payment;
o medical and life insurance coverage for up to two years;
o GTE retiree medical and life insurance; and
o financial and outplacement counseling.
The executive severance agreement with Mr. Appel also provides for an
additional payment to compensate the executive for any excise tax that may be
imposed by the Internal Revenue Service.
In connection with Mr. Dinsmore's retirement, he will generally
receive the same benefits as he would have received had he been terminated for
reasons other than cause following a change in control of GTE under a GTE
executive severance agreement.
12
<PAGE> 15
RETIREMENT PROGRAMS
Pension Plans
The following table illustrates the estimated annual benefits payable
under GTE's defined benefit pension plans. The table assumes normal retirement
at age 65 and is calculated on a single life annuity basis, based upon final
average earnings (integrated with social security as described below) and years
of service:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
Final Average ----------------------------------------------------------------------------------
Earnings 15 20 25 30 35
------------- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 42,101 $ 56,134 $ 70,168 $ 84,201 $ 98,235
300,000 63,851 85,134 106,418 127,701 148,985
400,000 85,601 114,134 142,668 171,201 199,735
500,000 107,351 143,134 178,918 214,701 250,485
600,000 129,101 172,134 215,168 258,201 301,235
700,000 150,851 201,134 251,418 301,701 351,985
800,000 172,601 230,134 287,668 345,201 402,735
900,000 194,351 259,134 323,918 388,701 453,485
1,000,000 216,101 288,134 360,168 432,201 504,235
1,200,000 259,601 346,134 432,668 519,201 605,735
1,500,000 324,851 433,134 541,418 649,701 757,985
2,000,000 433,601 578,134 722,668 867,201 1,011,735
2,500,000 542,351 723,134 903,918 1,084,701 1,265,485
</TABLE>
All executive officers of the Company are employees of GTE Service
Corporation, a wholly-owned subsidiary of GTE, which maintains the GTE Service
Corporation plan for Employees' Pensions. The GTE Service Corporation plan is 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. It provides a benefit based on a participant's years of
service and earnings. Pension benefits provided by GTE Service Corporation and
contributions to the GTE Service Corporation plan are related to basic salary
and incentive payments exclusive of overtime, differentials, certain incentive
compensation and other similar types of payments. Under the GTE 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 $31,100, which is 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 this level up to the statutory limit on compensation. As of
February 26, 1999, the credited years of service under the GTE Service
Corporation plan for Messrs. Bowman, Appel, Sparrow, Whitman and Schaulin are
35, 27, 31, 19 and 35, respectively. Mr. Dinsmore retired in January 1999 with
23 credited years of service.
Under federal law, an employee's benefits under a qualified pension
plan, such as the GTE Service Corporation plan, are limited to certain maximum
amounts. GTE maintains the Excess Pension Plan, which supplements the benefits
of any participant in the GTE Service Corporation plan in an amount by which
any participant's benefits under the GTE Service Corporation plan are limited
by law. In addition, the Supplemental Executive Retirement Plan provides
additional retirement benefits determined in a similar manner as under the GTE
Service Corporation plan on compensation accrued under certain management
incentive plans as determined by the Executive Compensation and Organizational
Structure Committee. The Supplemental Executive Retirement Plan and GTE Excess
Pension Plan benefits are payable in a lump sum or an annuity.
13
<PAGE> 16
Executive Retired Life Insurance Plan
GTE's Executive Retired Life Insurance Plan provides Messrs. Bowman,
Appel, Sparrow, Whitman, Schaulin and Dinsmore a postretirement life insurance
benefit of three times final base salary. Upon retirement, Executive Retired
Life Insurance Plan 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 in 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, the Chief Executive Officer and the other
Named 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 in the table.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned as of
Title of Class Name of Director or Nominee (1) (2) (3) December 31, 1998
------------------- --------------------------------------- -----------------
<S> <C> <C>
Common Stock of GTE John C. Appel 68,798
Corporation Mateland L. Keith, Jr. 23,210
Lawrence R. Whitman 33,805
-----------------
125,813
=================
Executive Officers (1) (2) (3)
---------------------------------------
David R. Bowman 11,301
John C. Appel 68,798
Larry J. Sparrow 51,815
Lawrence R. Whitman 33,805
Richard L. Schaulin 32,591
-----------------
198,310
=================
All directors and executive
officers as a group (1) (2) (3) 315,024
=================
</TABLE>
(1) Includes shares acquired through participation in the GTE Savings Plan.
(2) Included in the number of shares beneficially owned by Messrs. Bowman,
Appel, Sparrow, Whitman, Schaulin and all directors and executive officers
as a group, are 6,900, 61,867, 36,667, 31,333, 23,333 and 260,835 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.
CERTAIN TRANSACTIONS
GTE Supply (100% owned by GTE) provides construction and maintenance
equipment, supplies and electronic repair services to the Company. These
purchases and services amounted to $217.6 million, $176.9 million and $119.5
million for the years 1998-1996, respectively. Such purchases and services are
recorded in the accounts of the Company at the lower of cost, including a
return realized by GTE Supply, or fair market value.
14
<PAGE> 17
The Company is billed for data processing services and equipment
rentals, and receives management, consulting, research and development and
pension management services from other affiliated companies. The Company's
consolidated financial statements also include allocated expenses resulting
from the sharing of certain executive, administrative, financial, accounting,
marketing, personnel, engineering and other support services being performed at
consolidated work centers within GTE. The amounts charged for these affiliated
transactions are based on proportional cost allocation methodologies. These
charges amounted to $404.6 million, $175.4 million and $188.2 million for the
years 1998-1996, respectively. The significant increase in 1998 charges is due
to a reorganization of support functions within GTE. The cost of these support
functions, which was previously recorded directly by the Company, is now
allocated to the Company on a proportional cost basis.
GTE Funding Incorporated (an affiliate of the Company) provides
short-term financing and investment vehicles and cash management services for
the Company. The Company is contractually obligated to repay all amounts
borrowed on its behalf by GTE Funding Incorporated. Interest expense on these
borrowings amounted to approximately $17.8 million and $15.3 million for the
years 1998 and 1997, respectively.
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. In addition,
when Directories sells Yellow Page directory advertising to customers within
the Company's franchise area, the Company records a portion of the sale as
revenue. Revenues from these activities amounted to $121.8 million, $128.5
million and $130.6 million for the years 1998-1996, respectively. Also, the
Company is billed for certain printing and other costs associated with
telephone directories, including the cost of customer contact information pages
which are included in the Company's White Pages directories. These charges
amounted to $40.7 million, $9.0 million and $5.8 million for the years
1998-1996, respectively.
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 accountants 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.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal which a shareholder intends to present at the next Annual
Meeting of Shareholders, to be held in May 2000, must be received at the office
of the Company by November 26, 1999, if such proposal is to be considered for
inclusion in the Company's proxy statement and form of proxy relating to that
meeting.
15
<PAGE> 18
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 Service Corporation
Financial Reporting
1420 East Rochelle Blvd.
Suite 300, Building 6
MC: HQC03F35
Irving, TX 75039
By order of the Board of Directors,
Marianne Drost
Secretary
Dated: April 14, 1999
16
<PAGE> 19
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
GTE CALIFORNIA INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints T. W. Rabey, Jr., Charles J. Somes or Rosalynn
Christian as proxy, 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 1255 Corporate Drive,
Irving, Texas 75038, on Wednesday, May 12, 1999, at 10:00 a.m., and all
postponements or adjournments.
PROXIES CANNOT BE VOTED FOR A GREATER NUMBER OF DIRECTORS THAN THE NOMINEES
NAMED.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE> 20
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS YOU DIRECT. IF NO DIRECTION
IS MADE THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
1. Election of Directors.
Nominees: John C. Appel, Mateland L. Keith, Jr. and Lawrence R. Whitman.
FOR ALL WITHHELD
NOMINEES FROM ALL
NOMINEES
[ ] [ ]
[ ]
--------------------------------------
For all nominees except as noted above
2. Proposal to approve the appointment of Arthur Andersen LLP as independent
public accountant for the Company.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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 it appears on this proxy. If co-owner, both parties
should sign.)
Signature: Date:
-------------------------- --------------------
Signature: Date:
-------------------------- --------------------
