[AT&T LOGO]
- ------------------
1996
Notice of
Annual Meeting
and
Proxy Statement
- ------------------
Wednesday, April 17, 1996
at 9:30 A.M. local time
James L. Knight International Center
Miami Convention Center
400 Southeast 2nd Avenue
Miami, Florida
<PAGE>
NOTICE OF MEETING
The 111th Annual Meeting of Shareholders of AT&T Corp. (the "Company")
will be held at the James L. Knight International Center, Miami Convention
Center, 400 Southeast 2nd Avenue, Miami, Florida, on Wednesday, April 17,
1996, at 9:30 A.M. local time, for the following purposes:
(bullet) To elect directors for the ensuing year (page 7);
(bullet) To ratify the appointment of auditors to examine the Company's
accounts for the year 1996 (page 13);
(bullet) To approve the AT&T 1996 Employee Stock Purchase Plan (page 13);
(bullet) To act upon such other matters, including shareholder proposals
(beginning on page 17), as may properly come before the meeting.
Holders of common shares of record at the close of business on February
27, 1996, will be entitled to vote with respect to this solicitation.
Marilyn J. Wasser
Vice President - Law and Secretary
February 27, 1996
<PAGE>
[AT&T LOGO]
32 Avenue of the Americas
New York, NY 10013-2412
ROBERT E. ALLEN
Chairman of the Board
February 27, 1996
Dear Shareholder:
It is a pleasure to invite you to your Company's 1996 Annual Meeting in
Miami, Florida, on Wednesday, April 17, beginning at 9:30 A.M. local time, at
the James L. Knight International Center. This will be AT&T's 111th Annual
Meeting of Shareholders and it marks a time of important transitions for the
Company and its investors. I hope that those who find the time and place
convenient will attend the meeting. An admission ticket, which will be
required, is attached to the proxy card.
The Center is fully accessible to disabled persons, and we will provide
hearing amplification and sign interpretation for our hearing- impaired
shareholders.
Whether you own a few or many shares of stock and whether or not you plan
to attend in person, it is important that your shares be voted on matters that
come before the meeting. I urge you to specify your choices by marking the
enclosed proxy card and returning it promptly. If you sign and return your
proxy card without specifying your choices, it will be understood that you
wish to have your shares voted in accordance with the directors'
recommendations.
Thank you for your interest.
Sincerely,
/s/ R. E. Allen
<PAGE>
AT&T CORP.
EXECUTIVE OFFICES
32 AVENUE OF THE AMERICAS
NEW YORK, NY 10013-2412
PROXY STATEMENT
This proxy statement and the accompanying proxy/voting instruction card
(proxy card) are being mailed beginning February 27, 1996, to holders of
common shares in connection with the solicitation of proxies by the board of
directors for the 1996 Annual Meeting of Shareholders in Miami, Florida.
Proxies are solicited to give all shareholders of record at the close of
business on February 27, 1996, an opportunity to vote on matters that come
before the meeting. This procedure is necessary because shareholders live in
all states and abroad and most will not be able to attend. Shares can be voted
only if the shareholder is present in person or is represented by proxy.
When your proxy card is returned properly signed, the shares represented
will be voted in accordance with your directions. You can specify your choices
by marking the appropriate boxes on the enclosed proxy card. If your proxy
card is signed and returned without specifying choices, the shares will be
voted as recommended by the directors. Abstentions marked on the proxy card
are voted neither "for" nor "against," but are counted in the determination of
a quorum.
If you wish to give your proxy to someone other than the Proxy Committee,
all three names appearing on the enclosed proxy card must be crossed out and
the name of another person or persons (not more than three) inserted. The
signed card must be presented at the meeting by the person or persons
representing you. You may revoke your proxy at any time before it is voted at
the meeting by executing a later-dated proxy, by voting by ballot at the
meeting, or by filing an instrument of revocation with the inspectors of
election in care of the Vice President-Law and Secretary of the Company at the
above address.
1
<PAGE>
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE
ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. If you
do attend, you may vote by ballot at the meeting, thereby cancelling any proxy
previously given.
As a matter of policy, proxies, ballots, and voting tabulations that
identify individual shareholders are kept private by the Company. Such
documents are available for examination only by the inspectors of election and
certain personnel associated with processing proxy cards and tabulating the
vote. The vote of any shareholder is not disclosed except as may be necessary
to meet legal requirements.
VOTING SHARES HELD IN DIVIDEND REINVESTMENT
AND SAVINGS PLANS
If a shareholder is a participant in the AT&T Shareowner Dividend
Reinvestment and Stock Purchase Plan ("DRISPP"), the proxy card will represent
the number of full shares in the DRISPP account on the record date, as well as
shares registered in the participant's name. If a shareholder is a participant
in the AT&T Employee Stock Ownership Plan, AT&T Long Term Savings Plan for
Management Employees, AT&T Long Term Savings and Security Plan, AT&T
Retirement Savings and Profit Sharing Plan, AT&T Long Term Savings and
Security Employee Stock Ownership Trust, AT&T of Puerto Rico, Inc. Long Term
Savings Plan for Management Employees, AT&T of Puerto Rico, Inc. Long Term
Savings and Security Plan, AT&T Capital Corporation Retirement and Savings
Plan, AT&T Capital Corporation Excess Benefit Plan, AGCS Savings Plan, or AGCS
Hourly Savings Plan, the proxy card will also serve as a voting instruction
for the trustees of those plans where all accounts are registered in the same
name. If cards representing shares in the above-named plans are not returned,
those shares will not be voted except for the AT&T Long Term Savings and
Security Plan and the AT&T Long Term Savings and Security Employee Stock
Ownership Trust where shares will be voted by the trustees of those plans.
2
<PAGE>
Shares allocated to the accounts of participants in the Savings Plan of NCR
Corporation, a wholly owned subsidiary of AT&T, may be voted through separate
participant direction cards that will be mailed to participants in the plan.
If a participant also owns shares outside the plan, the participant must
return both the proxy card and the participant direction card. The trustee of
the plan will vote the number of shares allocated to a participant's account
in accordance with the directions on the participant direction card if the
card is duly signed and received by April 10, 1996. Allocated shares for which
the trustee receives no instructions and all unallocated shares will be voted
by the trustee.
ANNUAL MEETING ADMISSION
IF YOU ARE A REGISTERED OWNER AND PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE DETACH AND RETAIN THE ADMISSION TICKET WHICH IS ATTACHED TO YOUR PROXY
CARD AND MARK THE APPROPRIATE BOX ON THE PROXY CARD. BENEFICIAL OWNERS WHO
PLAN TO ATTEND THE MEETING IN PERSON MAY OBTAIN ADMISSION TICKETS IN ADVANCE
BY SENDING WRITTEN REQUESTS, ALONG WITH PROOF OF OWNERSHIP, SUCH AS A BANK OR
BROKERAGE FIRM ACCOUNT STATEMENT, TO: MANAGER - SHAREOWNER RELATIONS, AT&T
CORP., 32 AVENUE OF THE AMERICAS, ROOM 2420E, NEW YORK, NY 10013-2412.
Shareholders who do not present admission tickets at the meeting will be
admitted upon verification of ownership at the admissions counter.
Highlights of the meeting will be included in the next quarterly report.
Information on obtaining a full transcript of the meeting will also be found
in that quarterly report.
Securities and Exchange Commission ("SEC") rules require that an annual
report precede or be included with proxy materials. Shareholders with multiple
accounts may be receiving more than one annual report, which is costly to AT&T
and may be inconvenient to these shareholders. Such shareholders may authorize
AT&T to discontinue
3
<PAGE>
mailing extra reports by marking the appropriate box on the proxy card for
selected accounts. At least one account must continue to receive an annual
report. Eliminating these duplicate mailings will not affect receipt of future
proxy statements and proxy cards. To resume the mailing of an annual report to
an account, please call the AT&T SHAREHOLDER SERVICES NUMBER, 1-800-348-8288.
On January 1, 1996, there were 1,596,005,351 common shares outstanding.
Each common share is entitled to one vote on each matter properly brought
before the meeting.
BOARD OF DIRECTORS
The board of directors has the responsibility for establishing broad
corporate policies and for overseeing the overall performance of the Company.
However, in accordance with corporate legal principles, it is not involved in
day-to-day operating details. Members of the board are kept informed of the
Company's business through discussions with the Chairman and other officers,
by reviewing analyses and reports sent to them each month, and by
participating in board and committee meetings.
The board held 12 meetings in 1995; the committees held 23 meetings. The
average attendance in the aggregate of the total number of meetings of the
board and the total number of committee meetings was 97%.
COMMITTEES OF THE BOARD
The board has established a number of committees, including the Audit
Committee, the Compensation Committee, and the Committee on Directors, each of
which is briefly described below. Other committees of the board are: the
Corporate Public Policy Committee, the Employee Benefits Committee, the
Executive Committee, the Finance Committee, and the Proxy Committee (which
votes the shares represented by proxies at the annual meeting of
shareholders).
4
<PAGE>
The Audit Committee meets with management to consider the adequacy of the
internal controls and the objectivity of financial reporting; the committee
also meets with the independent auditors and with appropriate Company
financial personnel and internal auditors about these matters. The committee
recommends to the board the appointment of the independent auditors, subject
to ratification by the shareholders at the annual meeting. Both the internal
auditors and the independent auditors periodically meet alone with the
committee and always have unrestricted access to the committee. The committee,
which consists of six non-employee directors, met five times in 1995.
The Compensation Committee administers management incentive compensation
plans, including stock option plans. The committee makes recommendations to
the board with respect to compensation of directors and of the officers as
listed on page 33. The committee, which consists of five non-employee
directors, met six times in 1995.
The Committee on Directors advises and makes recommendations to the board
on all matters concerning directorship and corporate governance practices and
the selection of candidates as nominees for election as directors. The
committee, which consists of seven non-employee directors, met three times in
1995. The committee recommended this year's candidates at the January 1996
board meeting.
In recommending board candidates, this committee seeks individuals of
proven judgment and competence who are outstanding in their respective fields;
it considers such factors as anticipated participation in board activities,
education, geographic location, and special talents or personal attributes.
Shareholders who wish to suggest qualified candidates should write to: Vice
President-Law and Secretary, AT&T Corp., 32 Avenue of the Americas, Room
2420E, New York, NY 10013-2412, stating in detail the qualifications of such
persons for consideration by the committee.
5
<PAGE>
COMPENSATION OF DIRECTORS
Directors who are not employees receive an annual retainer of $30,000 and a
fee of $1,500 for each board, committee, and shareholder meeting attended. The
chairpersons of the Audit Committee, Compensation Committee, and Finance
Committee each receive an additional annual retainer of $7,500. Other
non-employee directors who chair committees receive additional annual
retainers of $5,000. Pursuant to the Company's Deferred Compensation Plan for
Non-Employee Directors, 15% of the annual retainer for each non- employee
director is deferred and credited to a portion of a deferred compensation
account, the value of which is measured from time to time by the value of
Company common shares (the "AT&T shares portion"). Directors may elect to
defer the receipt of all or part of the remainder of their compensation into
the AT&T shares portion or the cash portion of the deferred compensation
account (the "cash portion"). The AT&T shares portion is credited on each
dividend payment date for AT&T common shares with a number of deferred shares
of common stock equivalent in market value to the amount of the quarterly
dividend on the shares then credited in the accounts. The cash portion of the
deferred compensation account earns interest, compounded quarterly, at an
annual rate equal to the average interest rate for ten-year United States
Treasury notes for the previous quarter, plus 5%. Non-employee directors with
at least five years' service are eligible for an annual retirement benefit
equal to their annual retainer at retirement. The benefit begins at age 70 and
is payable for life. The Company also provides non-employee directors with
travel accident insurance when on Company business. A non-employee director
may purchase life insurance sponsored by the Company. The Company will share
the premium expense with the director; however, all the Company contributions
will be returned to the Company at the earlier of (a) the director's death or
(b) the later of age 70 or 10 years from the policy's inception. This benefit
will continue after the non-employee director's retirement from the board.
Directors who are also employees of the Company or a subsidiary of the
Company receive no compensation for serving as directors.
6
<PAGE>
ELECTION OF DIRECTORS (ITEM A ON PROXY CARD)
The Proxy Committee intends to vote for the election of the eleven nominees
listed on the following pages unless otherwise instructed on the proxy card.
These nominees have been selected by the board on the recommendation of the
Committee on Directors. If you do not wish your shares to be voted for
particular nominees, please identify the exceptions in the designated space
provided on the proxy card. Directors will be elected by a plurality of the
votes cast. Any shares not voted (whether by abstention, broker non-vote, or
otherwise) have no impact on the vote.
If at the time of the meeting one or more of the nominees have become
unavailable to serve, shares represented by proxies will be voted for the
remaining nominees and for any substitute nominee or nominees designated by
the Committee on Directors or, if none, the size of the board will be reduced.
The Committee on Directors knows of no reason why any of the nominees will be
unavailable or unable to serve.
Directors elected at the meeting will hold office until the next annual
meeting or until their successors have been elected and qualified. For each
nominee there follows a brief listing of principal occupation for at least the
past five years, other major affiliations, and age as of January 1, 1996.
As reported previously, AT&T has announced plans to separate into three
publicly traded companies: a communications services company; a systems and
technology company; and a transaction- intensive computer company. To
facilitate a smooth transition to the new structure and to ensure continuity
of leadership and board expertise, certain of the directors elected to the
AT&T board at the 1995 annual meeting will be joining the board of the systems
and technology company, and will not stand for election to the AT&T board.
7
<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
ROBERT E. ALLEN, Chairman and Chief Executive Officer of AT&T
since 1988. Director of Bristol-Myers Squibb Co.; Chrysler [Picture Box]
Corporation; and PepsiCo, Inc. Director of AT&T since 1984;
Chairman of the Executive and Proxy Committees. Age 60.
KENNETH T. DERR, Chairman and Chief Executive Officer of
Chevron Corporation (international oil company) since 1989. [Picture Box]
Director of Chevron Corporation; Citicorp; and Potlatch
Corporation. Director of AT&T since December 1995. Age 59.
M. KATHRYN EICKHOFF, President of Eickhoff Economics Inc.
(economic consultants) since 1987. Associate Director for
Economic Policy, U.S. Office of Management and Budget
(1985-1987). Director of National Westminster Bancorp Inc.; [Picture Box]
Pharmacia & Upjohn, Inc.; and Tenneco Inc. Director of AT&T
since 1987; member of the Audit and Corporate Public Policy
Committees. Age 56.
WALTER Y. ELISHA, Chairman since 1983 and Chief Executive
Officer since 1981 of Springs Industries, Inc. (textile
manufacturing). Director of Springs Industries, Inc. and [Picture Box]
Cummins Engine Company, Inc. Director of AT&T since 1987;
member of the Compensation and Finance Committees and the
Committee on Directors. Age 63.
8
<PAGE>
BELTON K. JOHNSON, former owner of Chaparrosa Ranch for
more than 19 years. Chairman of Belton K. Johnson Interests
since 1981. Director of Tenneco Inc. Director of AT&T since [Picture Box]
1974; member of the Executive, Corporate Public Policy, and
Proxy Committees, and the Committee on Employee Benefits.
Age 66.
RALPH S. LARSEN, Chairman and Chief Executive Officer of
Johnson & Johnson (pharmaceutical, medical, and consumer
products) since 1989. Director of Johnson & Johnson; The [Picture Box]
New York Stock Exchange; and Xerox Corporation. Director
of AT&T since December 1995. Age 57.
ALEX J. MANDL, President and Chief Operating Officer of
AT&T since January 1996. Executive Vice President of AT&T
and Chief Executive Officer of AT&T Communications Services
Group (1993-1995). Chief Financial Officer and Group [Picture Box]
Executive of AT&T (1991-1993). Chairman and Chief Executive
Officer of Sea-Land Services, Inc. (1988-1991). Director of
Warner-Lambert Company. Director of AT&T since January 1996.
Age 52.
DONALD F. MCHENRY, President of IRC Group (international
relations consultants) since 1981; University Research
Professor of Diplomacy and International Relations, [Picture Box]
Georgetown University, since 1981. Director of Bank of
Boston Corp. and its subsidiary, First National Bank of
Boston; Coca-Cola Co.; International Paper Co.; and
SmithKline Beecham Corp. Director of AT&T since 1986;
Chairman of the Committee on Employee Benefits; member
of the Finance Committee. Age 59.
9
<PAGE>
MICHAEL I. SOVERN, President Emeritus and Chancellor
Kent Professor of Law at Columbia University; President
(1980-1993). Director of Chemical Banking Corporation
and its subsidiary, Chemical Bank; and Warner-Lambert [Picture Box]
Company. Director of AT&T since 1984; Chairman of the
Audit Committee; member of the Compensation Committee.
Age 64.
JOSEPH D. WILLIAMS, retired Chairman and Chief Executive
Officer of Warner-Lambert Company (pharmaceuticals,
health care, and consumer products) (1985-1991). Director
of Exxon Corp.; J.C. Penney Co., Inc.; Rockefeller [Picture Box]
Financial Services, Inc.; Rockefeller & Co.; Therapeutic
Antibodies Inc.; Thrift Drug, Inc.; and Warner-Lambert
Company. Director of AT&T since 1984; Chairman of the
Finance Committee; member of the Executive and Compensation
Committees. Age 69.
THOMAS H. WYMAN, Chairman of S.G. Warburg & Co. Inc.
since 1992 and Vice Chairman of S.G. Warburg Group plc
(1993- 1995) (investment banking). Chairman of UB
Investments US Inc. (food products). Chairman and Chief
Executive Officer of CBS Inc. (1983-1986). William H.
Donaldson Faculty Fellow, Yale School of Management [Picture Box]
(1987-1989). Director of General Motors Corporation,
Hughes Electronics Corp., United Biscuits (Holdings) plc
(Edinburgh); and Zeneca Group PLC (U.K.). Director of
AT&T since 1981; member of the Compensation and Finance
Committees and the Committee on Directors. Age 66.
10
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth information concerning the beneficial
ownership of the Company's common stock as of January 1, 1996, for (a) each
director elected to the board in 1995 and each of the nominees for director;
(b) each of the named officers (the "named officers" as defined in the
Compensation Committee Report, herein) not listed as a director; and (c)
directors and executive officers as a group. Except as otherwise noted, the
nominee or family members had sole voting and investment power with respect to
such securities.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------------------------------------
BENEFICIALLY DEFERRAL
NAME OWNED (1) PLANS (2) TOTAL
- -------------------------- -------------------- -------------- ------------
(a)
<S> <C> <C> <C>
Robert E. Allen ............. 716,482(3) 64,301 780,783
Kenneth T. Derr ............. 1,000 17 1,017
M. Kathryn Eickhoff ......... 3,000 408 3,408
Walter Y. Elisha ............ 8,619 1,858 10,477
Philip M. Hawley ............ 1,000(4) 1,440 2,440
Carla A. Hills ............. 400 3,061 3,461
Belton K. Johnson .......... 6,016 252 6,268
Ralph S. Larsen ............. 1,000 135 1,135
Drew Lewis .................. 4,000 252 4,252
Alex J. Mandl ............... 283,235(5) 2,227 285,462
Donald F. McHenry .......... 653 473 1,126
Victor A. Pelson ............ 161,749(6) 10,179 171,928
Donald S. Perkins .......... 2,254(7) 252 2,506
Henry B. Schacht ............ 1,055 1,584 2,639
Michael I. Sovern .......... 1,200 252 1,452
Franklin A. Thomas .......... 1,110 2,511 3,621
Joseph D. Williams .......... 20,000 252 20,252
Thomas H. Wyman ............. 1,000 842 1,842
(b)
William B. Marx, Jr. ....... 150,396(8) 12,406 162,802
Richard W. Miller .......... 71,481(9) 0 71,481
(c)
Directors and Executive
Officers as a Group ..... 5,176,964(10) 134,517 5,311,481
</TABLE>
11
<PAGE>
FOOTNOTES
1. No individual director or nominee for director or named officer
beneficially owns 1% or more of the Company's outstanding common shares or
the common shares of AT&T Capital Corporation, a majority- owned
subsidiary of the Company, nor do the directors and executive officers as
a group.
2. Share units held in deferred compensation accounts.
3. Includes beneficial ownership of 631,766 shares which may be acquired
within 60 days pursuant to stock options and 12,000 restricted shares
awarded under employee incentive compensation plans.
4. Mr. Hawley disclaims beneficial ownership of 455 common shares held by
Mrs. Hawley.
5. Includes beneficial ownership of 268,573 shares which may be acquired
within 60 days pursuant to stock options awarded under employee incentive
compensation plans.
6. Includes beneficial ownership of 157,913 shares which may be acquired
within 60 days pursuant to stock options awarded under employee incentive
compensation plans.
7. Mr. Perkins as an investment company trustee also has shared voting and
investment power over 3,251,450 common shares.
8. Includes beneficial ownership of 147,238 shares which may be acquired
within 60 days pursuant to stock options awarded under employee incentive
compensation plans.
9. Includes beneficial ownership of 62,187 shares which may be acquired
within 60 days pursuant to stock options awarded under employee incentive
compensation plans.
10. Includes beneficial ownership of 1,894,585 shares which may be acquired
within 60 days pursuant to stock options awarded under employee incentive
compensation plans as well as 3,251,450 shares over which they have sole
or shared voting and investment power as trustee.
12
<PAGE>
RATIFICATION OF APPOINTMENT OF AUDITORS
(ITEM B ON PROXY CARD)
Subject to shareholder ratification, the board of directors, upon
recommendation of the Audit Committee, has reappointed the firm of Coopers &
Lybrand L.L.P. ("Coopers & Lybrand") as the independent auditors to examine
the Company's financial statements for the year 1996. Coopers & Lybrand has
audited the Company's books for many years. YOUR DIRECTORS RECOMMEND THAT
SHAREHOLDERS VOTE FOR SUCH RATIFICATION. Ratification of the appointment of
auditors requires a majority of the votes cast thereon. Any shares not voted
(whether by abstention, broker non-vote, or otherwise) have no impact on the
vote. If the shareholders do not ratify this appointment, other independent
auditors will be considered by the board upon recommendation of the Audit
Committee.
Representatives of Coopers & Lybrand are expected to attend the annual
meeting and will have the opportunity to make a statement if they desire and
to respond to appropriate questions.
For the year 1995, Coopers & Lybrand also examined the financial statements
of the Company's subsidiaries and provided other audit services to the Company
and subsidiaries in connection with SEC filings, review of financial
statements, and audits of pension plans.
--------------------
DIRECTORS' PROPOSAL TO APPROVE THE AT&T 1996
EMPLOYEE STOCK PURCHASE PLAN
(ITEM C ON PROXY CARD)
In December 1995, the board adopted, subject to shareholder approval, the
AT&T 1996 Employee Stock Purchase Plan (the "Plan"). If approved by
shareholders, the Plan provides eligible employees (defined below) with an
opportunity to purchase AT&T common stock (the "Common Stock") through payroll
deductions. The Plan is intended to assist eligible employees in acquiring a
stock ownership interest in the Company pursuant to a plan that is intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code") to help eligible employees
provide for their future security and to encourage them to remain in the
employment of the Company and participating subsidiaries.
13
<PAGE>
SHARES RESERVED FOR THE PLAN
The aggregate number of shares of Common Stock which may be purchased under
the Plan shall not exceed 50 million, subject to adjustment in the event of
stock dividends, stock splits, combination of shares, recapitalizations, or
other changes in the outstanding Common Stock. Any such adjustment will be
made by the board. Shares issued under the Plan may consist, in whole or in
part, of authorized and unissued shares or treasury shares.
ELIGIBLE PARTICIPANTS
Full-time employees of the Company (or a subsidiary designated by the
Company) are eligible if they meet certain conditions. To be eligible the
employee must have completed six months of employment and the employee's
customary employment must be greater than 20 hours per week.
Approximately 200,000 employees would have been eligible to participate as
of December 31, 1995.
MATERIAL FEATURES OF THE PLAN
Beginning July 1, 1996, the Company may make grants of options on January 1
and/or July 1 of each year the Plan is in effect or on such other date as the
Committee (as defined herein) shall designate. Each option period shall last
for six months ending on the June 30 or December 31 immediately following the
grant of options or on such dates as the Committee determines.
Each eligible employee on a date of exercise shall be entitled to purchase
shares of Common Stock at a purchase price equal to 85% of the average of the
reported highest and lowest sale prices of shares of Common Stock on the New
York Stock Exchange on the applicable date of exercise. Dates of exercise
shall take place on the last day of each month Common Stock is traded on the
New York Stock Exchange during the applicable option period.
Payment for shares of Common Stock purchased under the Plan will be made by
authorized payroll deductions from an eligible employee's Eligible
Compensation (as defined herein) or, when authorized by the Committee, an
eligible employee may pay an equivalent amount for such shares. "Eligible
Compensation" means
14
<PAGE>
an eligible employee's total regular compensation payable from the Company or
a participating subsidiary of the Company during an option period.
Eligible employees who elect to participate in the Plan will designate a
stated whole percentage equaling at least 1%, but no more than 10% of Eligible
Compensation, to be deposited into a periodic deposit account. On each date of
exercise, the entire periodic deposit account of each participant in the Plan
is used to purchase whole and/or fractional shares of Common Stock. The
Company shall maintain a stock purchase account for each participant to
reflect the shares of Common Stock purchased under the Plan by each
participant. No participant in the Plan is permitted to purchase Common Stock
under the Plan at a rate that exceeds $25,000 in fair market value of Common
Stock, determined at the time options are granted, for each calendar year.
All funds received by the Company from the sale of Common Stock under the
Plan may be used for any corporate purpose.
NEW PLAN BENEFITS
It is not possible to determine how many eligible employees will
participate in the Plan in the future. Therefore, it is not possible to
determine with certainty the dollar value or number of shares of Common Stock
that will be distributed under the Plan. The Company anticipates, however,
that on the average approximately 10 million shares of Common Stock will be
distributed annually during the five- year term of the Plan. Based on a per
share price of $645/8 (the average of the reported highest and lowest sale
prices for Common Stock on the New York Stock Exchange on December 29, 1995),
the benefits of the Plan during 1995 would have been as follows:
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN
<TABLE>
<CAPTION>
NAME DOLLAR VALUE ($) NUMBER OF SHARES
---- --------------- ----------------
<S> <C> <C>
Robert E. Allen ........ 3,750 387
Victor A. Pelson ....... 3,750 387
Alex J. Mandl ........... 3,750 387
William B. Marx, Jr. .... 3,750 387
Richard W. Miller ..... 3,750 387
Executive Group ........ 41,250 4,257
Non-Executive Officer
Employee Group ....... 96,896,233 9,995,743
</TABLE>
15
<PAGE>
TAX TREATMENT
The Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Code, an employee who elects
to participate in an offering under the Plan will not realize income at the
time the offering commences or when the shares purchased under the Plan are
transferred to him or her. If an employee disposes of such shares after two
years from the date the offering of such shares commences and after one year
from the date of the transfer of such shares to him or her, the employee will
be required to include in income, as compensation for the year in which such
disposition occurs, an amount equal to the lesser of (i) the excess of the
fair market value of such shares at the time of disposition over the purchase
price, or (ii) 15% of the fair market value of such shares at the time the
offering commenced. The employee's basis in the shares disposed of will be
increased by an amount equal to the amount so includable in his or her income
as compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of the disposition will be a capital
gain or loss, either short-term or long-term, depending on the holding period
for such shares. In such event, the Company (or the subsidiary by which the
employee is employed) will not be entitled to any tax deduction from income.
If any employee disposes of the shares purchased under the Plan within such
two-year or one-year period, the employee will be required to include in
income, as compensation for the year in which such disposition occurs, an
amount equal to the excess of the fair market value of such shares on the date
of purchase over the purchase price. The employee's basis in such shares
disposed of will be increased by an amount equal to the amount includable in
his or her income as compensation, and any gain or loss computed with
reference to such adjusted basis which is recognized at the time of
disposition will be a capital gain or loss, either short-term or long-term,
depending on the holding period for such shares. In the event of a disposition
within such two-year or one-year period, the Company (or the subsidiary by
which the employee is employed) will be entitled to a tax deduction from
income equal to the amount the employee is required to include in income as a
result of such disposition.
16
<PAGE>
An employee who is a nonresident of the United States will generally not
be subject to the U.S. federal income tax rules described above with respect
to the shares of Common Stock purchased under the Plan.
PLAN ADMINISTRATION AND TERMINATION
The board of directors of the Company, or its delegate, shall appoint a
committee (the "Committee"), which shall be composed of one or more employees,
to administer the Plan on behalf of the Company. The Committee may delegate
any or all of the administrative functions under the Plan to such individuals,
subcommittees, or entities as the Committee considers appropriate. The
Committee may adopt rules and procedures not inconsistent with the provisions
of the Plan for its administration. The Committee's interpretation and
construction of the Plan is final and conclusive.
The board may at any time, or from time to time, alter or amend the Plan in
any respect, except that, without approval of the shareholders of AT&T, no
amendment may increase the number of shares reserved for purchase, or reduce
the purchase price per share under the Plan, other than as described above.
The board shall have the right to terminate the Plan or any offering at
any time for any reason. The Plan is anticipated to continue in effect
through June 30, 2001.
Adoption of this proposal requires an affirmative vote by the holders of a
majority of the outstanding Common Stock. Any shares not voted (whether by
abstention, broker non-vote or otherwise) have the effect of a negative vote.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AT&T
1996 EMPLOYEE STOCK PURCHASE PLAN.
SHAREHOLDER PROPOSALS
AT&T receives many suggestions from shareholders, some as formal
shareholder proposals. All are given careful consideration. After discussion
with Company representatives and clarification of the Company's position, many
proposals are withdrawn.
17
<PAGE>
Proponents of three shareholder proposals have stated that they intend to
present the following proposals at the annual meeting. Information on the
shareholdings of the proponents is available by writing to: Manager -
Shareowner Relations, AT&T Corp., 32 Avenue of the Americas, Room 2420E, New
York, NY 10013-2412. The proposals and supporting statements are quoted below.
The board has concluded it cannot support these proposals for the reasons
given.
SHAREHOLDER PROPOSAL 1:
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave., N.W.,
Suite 215, Washington, DC 20037, has submitted the following proposal:
"RESOLVED: That the shareholders recommend that the Board direct management
that within five days after approval by the shareholders of this proposal,
the management shall publish in newspapers of general circulation in the
cities of New York, Washington, D.C., Detroit, Chicago, San Francisco, Los
Angeles, Dallas, Houston and Miami, and in the Wall Street Journal and
U.S.A. Today, a detailed statement of each contribution made by the Company,
either directly or indirectly, within the immediately preceding fiscal year,
in respect of a political campaign, political party, referendum or citizens'
initiative, or attempts to influence legislation, specifying the date and
amount of each such contribution, and the person or organization to whom the
contribution was made. Subsequent to this initial disclosure, the management
shall cause like data to be included in each succeeding report to
shareholders. And if no such disbursements were made, to have that fact
publicized in the same manner.
"REASONS: This proposal, if adopted, would require the management to advise
the shareholders how many corporate dollars are being spent for political
purposes and to specify what political causes the management seeks to
promote with those funds. It is therefore no more than a requirement that
the shareholders be given a more detailed accounting of these special
purpose expenditures than they now receive. These political contributions
are made with dollars that belong to the
18
<PAGE>
shareholders as a group and they are entitled to know how they are being
spent. Last year the owners of 65,947,312 shares, representing approximately
6.3% of shares voting, voted FOR this proposal.
"If you AGREE, please mark your proxy FOR this resolution."
--------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. Last year this
proposal was defeated by more than 93% of the shares voted.
Corporate contributions to political candidates are barred under federal
law and many state laws. It is AT&T's policy to comply fully with the
contribution laws of those jurisdictions. Employees may contribute their own
funds to candidates or to political action committees ("PACs") that the
Company has established for eligible management employees who wish to
participate in the political process. Participation in the PACs is strictly
voluntary and the PACs operate under the regulations of federal and state
election laws. Under these laws, PACs must publicly disclose information about
PAC contributions. Therefore, this information about political expenditures is
already available without any additional disclosures by AT&T.
AT&T corporate expenditures in support of federal and state government
affairs activities on legislative and regulatory matters are a legitimate
business expense. These activities assure that public officials understand
AT&T's position on matters that are significant to the future of the Company.
It is AT&T's policy to comply fully with all rules governing the proper
accounting for these expenses on the Company's books. Moreover, some
jurisdictions require that various types of lobbying expenses be publicly
disclosed. Aside from complying with these legal disclosure obligations, AT&T
does not disclose sub-segments of its business expenses and does not believe
any useful shareholder purpose would be served by such disclosure.
Because many political expenditures are already disclosed to government
agencies, which make these disclosures publicly available, AT&T believes that
the additional incremental disclosure required by this proposal is not
justified by the time and costs associated with such disclosures. In addition,
this proposal would
19
<PAGE>
have the Company incur the costs of placing advertisements in newspapers even
if "no such disbursements" were made. For the reasons given above, your
directors believe that the proposal serves no useful purpose and would clearly
result in a waste of Company resources. THEREFORE, YOUR DIRECTORS AGAIN
RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
--------------------
SHAREHOLDER PROPOSAL 2:
Robert D. Morse, 212 Highland Ave., Moorestown, NJ 08057-2717, has submitted
the following proposal:
"That the company directors consider the discontinuance of all options,
rights, SAR's, etc. after termination of existing agreements with management
and directors. This does not include other employees of the company.
"REASONS: These increased benefits have failed to produce the claim that they
hold and retain qualified personnel.
"Notice the increasing number of management persons who have left simply
because of better corporate offers.
"We as shareowners are being gradually undervalued with each issuance. Call a
halt by voting YES!
"Many pages of a proxy are expended to promote self-benefits; then there are
unmentioned administrative costs of distribution and record keeping.
"Executives and directors are compensated enough to buy stock on the open
market, just as you and I, if we are so inclined.
"Again: Vote YES!"
--------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. As indicated in
the compensation philosophy statement on pages 25 through 30 of this proxy
statement, the Company's overall executive compensation levels are designed to
be competitive with a select group of large, market-focused, progressive
organizations with whom the Company competes for executive talent. These
overall compensation levels have two basic components: (1) an annual
component, made up of base salary and
20
<PAGE>
bonus, and (2) a long-term component, which may include such features as
performance shares and restricted stock, as well as stock options. Through
this compensation program, the Company has successfully recruited new
executives and retained executives key to the execution of its strategy.
In a company as large as AT&T, it is inevitable that some individuals
nonetheless will leave to join other firms. The fact is that, frequently,
AT&T's highly talented performers are approached by other firms. To attract
and retain a talented cadre of key executives, we must have a competitive
compensation package.
We disagree with Mr. Morse's assertion that the long-term component of our
executive compensation program does nothing to minimize the loss of talented
people and does not provide value for the shareowner. Absent such competitive
compensation, AT&T would be at risk of losing far greater numbers of talented
employees. In addition, from the perspective of creating shareowner value,
these long-term components of the compensation plan are designed to create
shareholder value because they are directly linked to an appreciation in the
price of the Company's common shares over a number of years. THEREFORE, YOUR
DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
--------------------
SHAREHOLDER PROPOSAL 3:
Mark Seidenberg, P.O. Box 6102, Woodland Hills, CA 91365, has submitted the
following proposal:
"The stockowners hereby recommend that the Board of Directors adopt the
following policies for all dealings with China and the former Soviet Union:
1. Goods or services produced in whole or part by slave or forced labor shall
not be acceptable for delivery to the corporation, its subsidiaries,
affiliates, or joint ventures. A suitable certificate of origin shall be
required.
2. Goods provided by the corporation, its subsidiaries, affiliates, or joint
ventures shall not be sold to or otherwise provided to any facility
utilizing slave or forced labor. A suitable certificate of use shall be
required.
21
<PAGE>
3. The right of on-site inspection to determine the existence of slave or
forced labor shall be vigorously pursued.
4. The corporation shall cooperate promptly, energetically, and fully with the
United States government and any international organization in their laws
or policies to discourage the use of slave or forced labor.
"For purposes of this resolution, the term 'former Soviet Union' shall mean
the countries of, and any combination thereof, Russia, Ukraine, Kazakhstan,
Georgia, Armenia, Azerbaijan, Uzbekistan, Belarus (Byelorussia), Kyrgyzstan
(Kirghizia), Moldova (Moldavia), Tajikistan (Tadzhikistan), and
Turkmenistan (Turkmenia)."
SUPPORTING STATEMENT:
"The outrageous arrest, incarceration, trial, and expulsion of American Harry
Wu last summer by the Chinese Communist regime put the spotlight on the
immense Chinese laogai forced labor system. Mr. Wu has been exposing this
hideous system for years.
"Slave and forced labor are widespread in China and the former Soviet Union.
China's laogai camps and factories include about 20,000,000 slave and forced
laborers, and the gulags of the former Soviet Union have about 4,000,000.
They produce a wide range of products, including sophisticated machinery and
electronics, and much of it is intended for export.
"AT&T has multi-million dollar deals with China and the former Soviet Union,
but has no comprehensive anti-slave labor policies, as proposed by this
resolution. Here's what AT&T's current policy lacks:
- --No by-law or corporate article includes it.
- --No board resolution includes it.
- --No agreement with joint ventures or affiliates includes it.
- --No specific written guideline for buyers, sales personnel, or other
employees or agents covers all sales or purchases.
- --No standard clause on it is in all purchase or sales contracts.
- --No specific penalty for violations by customers, suppliers, employees, or
agents exists.
22
<PAGE>
- --No relevant certificates of origin (for all purchases) or use (for all
sales) are utilized.
- --No mention is made in AT&T's Code of Conduct booklet 'A Personal
Responsibility' regarding the U.S. statute banning the importation of
slave-made goods, while several other laws are specifically enumerated.
"Much of AT&T's business is conducted overseas and is beyond the reach of
U.S. law, but not beyond managerial control.
"If you can imagine any convincing argument against having this anti-slave
labor policy, I can't. But, believe me, AT&T's board will think of
something. Please read the board's argument thoroughly to see if it has any
substance, and then vote your own conscience."
--------------------
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL. In 1994 this
proposal was opposed by more than 94% of the shares voted.
AT&T understands the international human rights concerns voiced in Mr.
Seidenberg's proposal. AT&T believes that it can best contribute to continuing
progress in human rights in China and the former Soviet Union by demonstrating
and practicing them in the workplace and in its business dealings. In
connection with our practices in the workplace and business dealings, AT&T has
a new Code of Conduct entitled "Living Our Common Bond" that addresses most,
if not all, of Mr. Seidenberg's concerns.
This Code of Conduct contains AT&T's operating principles for its global
business operations including China and the countries of the former Soviet
Union. These principles apply to all persons associated with AT&T including
its subsidiaries and affiliates. Under the Code of Conduct, all AT&T employees
are to treat each person with respect and dignity, valuing individual as well
as cultural differences. Additionally, the Code of Conduct requires that AT&T
employees be honest and ethical in all of the Company's business dealings.
Concerning the specific issue of slave or forced labor, the Company
confirms that it does not use components manufactured by prison labor. Most of
the components in our products are imported into China from the U.S., Europe,
or elsewhere in Asia. For those
23
<PAGE>
components that we procure in China, all of our suppliers must pass a
procurement qualification process, which includes on-site inspection. AT&T
undertakes substantial efforts to remain in compliance with all domestic and
foreign laws, including laws relating to human rights, employment, and
domestic and foreign customs and trade laws.
In our view, the proposal is unnecessary because these issues are already
addressed by current Company practices and policies and by applicable domestic
and foreign laws. THEREFORE, YOUR DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE
AGAINST THIS PROPOSAL.
--------------------
Approval of the preceding shareholder proposals would require a majority of
the votes cast thereon. Any shares not voted (whether by abstention, broker
non-vote, or otherwise) have no impact on the vote.
SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals intended for inclusion in next year's proxy statement should be
sent to: Vice President-Law and Secretary, AT&T Corp., 32 Avenue of the
Americas, New York, NY 10013-2412, and must be received by October 30,1996.
OTHER MATTERS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address by the
Chairman of the Board and a general discussion period during which
shareholders will have an opportunity to ask questions about the business.
If any matter not described herein should come before the meeting, the
Proxy Committee will vote the shares represented by it in accordance with its
best judgment. At the time this proxy statement went to press, the Company
knew of no other matters which might be presented for shareholder action at
the meeting.
24
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation Committee is composed of five independent non-employee
directors. The committee is responsible for setting and administering
executive officer salaries and the annual bonus and long-term incentive plans
that govern the compensation paid to all senior managers of the Company,
except that the board consisting of "outside directors" within the meaning of
Section 162(m) of the Code (other than directors who are employees) is
responsible for setting and administering salaries and the annual bonus for
the officers listed on page 33 (the "named officers") based upon
recommendations of the committee.
On September 20, 1995, the AT&T CEO announced a strategic restructuring of
AT&T designed to make AT&T more valuable to its customers, better able to
focus on its markets and as a result more valuable to its shareowners. This
restructuring will separate AT&T into three stand-alone companies each focused
on a major segment of the global information industry: communications services
(including wireless); communications systems and technology (from
infrastructure to end-user); and transaction-intensive computing. To protect
the AT&T talent base and ensure a smooth transition to this new environment
the Compensation Committee approved certain special equity incentive/retention
awards to key managers. The committee also recommended some changes in the
1995 and 1996 compensation plans that will govern management actions
throughout the transition. These awards and changes are described in the
appropriate sections of this report. The following report represents the
actions of the committee and the board regarding compensation paid to the
named officers during 1995.
COMPENSATION PHILOSOPHY
The Company's compensation programs are designed to link executives'
compensation to the performance of the Company. For example, the Chairman's
annual bonus and long-term awards are performance-driven incentives and
account for 80% of his total compensation structure. The other named officers
have approximately 72% of their total compensation at risk in
performance-driven incentive plans. AT&T targets executive compensation levels
at the mean of a
25
<PAGE>
select group of large, market-focused, progressive companies with whom it
competes for senior executive talent. The Company's competitors for executive
talent are not necessarily the same companies that would be included in a peer
group established to compare shareholder returns because the Company requires
skills and perspectives from a broader range of backgrounds. Thus, the
comparable companies for purposes of executive compensation are not the same
as the peer group index used in the five-year performance comparison graph
included in this proxy statement.
The target executive compensation levels described above for each of the
Company's top five officers exceed the annual limit for deductibility under
Section 162(m) of the Code. The Company, however, has taken steps to mitigate
the negative impact of this tax provision on the shareholders. For example,
elements of compensation under our annual bonus and long-term incentive plans
qualify for exemption from the limit on tax deductibility as
shareholder-approved performance-driven plans. In addition, we have a salary
and incentive deferral plan which permits compensation deferred under the plan
to be exempt from the limit on tax deductibility.
The committee has developed executive compensation governing principles
that provide guidance in the design and operation of the senior management
compensation plans. These principles address key areas of AT&T senior
executive compensation policy such as the markets to be surveyed and the
flexibility of the compensation programs to facilitate strategic executive
hires in global markets.
The committee also has utilized these governing principles for review of
officer performance. Among other things, these principles ensure that
executive officer compensation is linked to corporate performance levels.
The Company's executive compensation program consists of two key elements:
(1) an annual component, i.e., base salary and annual bonus, and (2) a
long-term component, i.e., performance shares, stock options, and restricted
stock. The policies with respect to each of these elements, as well as the
basis for determining the compensation of the Chairman of the Board and CEO,
Mr. Allen, are described below.
26
<PAGE>
(1) Annual Component: Base Salary and Annual Bonus
Base Salary: Base salaries for executive officers are determined with
reference to a position rate for each officer. These position rates are
determined annually by evaluating the responsibilities of the position and
comparing it with other executive officer positions in the marketplace. Annual
salary adjustments are determined by the Company's performance and the
individual's contribution to that performance. For those executive officers
responsible for particular business units, the financial and non- financial
results (e.g., recognition within respective industries) of their business
units are also considered.
The committee presents the salary recommendations for the named officers to
the board for approval. While there are no individual performance matrices or
pre-established weightings given to each factor, these salary recommendations
are based on performance criteria such as:
(bullet) financial performance with a balance between long- and short-term
earnings and revenue growth;
(bullet) long-term strategic decisions;
(bullet) initiatives to globalize the Company;
(bullet) development of the leadership team;
(bullet) response to a rapidly changing competitive environment; and
(bullet) relative position to salary structure.
Annual Bonus: The annual bonus for the Chairman and for the other named
officers is (i) .4% of the Company's "Net Cash Provided by Operating
Activities," for the annual performance period as adjusted, divided by the
total number of named officers with respect to such period, or (ii) a lesser
amount based on factors including the Company's performance relative to
pre-set financial, employee, customer, and individual performance targets.
The pre-set financial target is based on Economic Value Added ("EVA"),
which measures the return on investment that enhances shareholder value.
Employee attitude measures are determined by an index called People Value
Added ("PVA"). There are two components of the measurement: leadership of
people and contributions to the
27
<PAGE>
diversity of the Company. Components of this measurement are derived from an
annual employee survey that measures employee perceptions of executive
behavior such as: sharing roles and responsibilities, leadership, empowerment,
and respect for individuals. The customer measure is Customer Value Added
("CVA") and it measures the relative value that customers perceive when our
products are compared with those of our competitors. Targets for these
measures were reviewed and approved by the committee.
For the first three quarters of 1995 the executive officers had
approximately 90% of their annual bonus tied to a level of achievement of
annual EVA, CVA, and PVA targets. In connection with the restructuring
transition effort described above, for the fourth quarter of 1995, the senior
executive incentive plan for annual bonuses was adjusted to provide 50% of the
incentive on the EVA level of achievement and 50% based on successful
accomplishment of the restructuring transition work, including the impact on
PVA and CVA. The Compensation Committee approved senior executive performance
criteria for the restructuring transition work to assure accountability for
meeting shareowner, financial, customer, and employee objectives through the
transition.
(2) Long-Term Component: Performance Shares, Stock Options, and Restricted
Stock
To align shareholder and executive officer interests, the long- term
component of the Company's executive compensation program uses grants whose
value is related to the value of Company common shares. Grants of performance
shares, stock options, and restricted stock are made under the AT&T 1987 Long
Term Incentive Program which was approved by the shareholders. Historically,
performance shares and stock options have been granted annually based on
position rate, while restricted stock awards are granted on a selective basis.
The size of annual performance share and stock option award levels are related
to survey results of award levels of comparable companies in the marketplace.
The size of previous grants and the number of shares held by an executive are
not considered in determining annual award levels. Our target is to deliver
approximately half of this long-term incentive value via performance shares
and half via stock options. The awards provide
28
<PAGE>
rewards to executives upon creation of incremental shareholder value and the
attainment of long-term goals.
Performance Shares: Performance shares, which are awards of units
equivalent in value to AT&T common shares, are awarded annually in numbers
based on an executive's position rate. Payout of 0% to 150% of such
performance shares is made in the form of cash and/or AT&T common shares at
the end of a three-year performance period based on the Company's
return-to-equity ("RTE") performance compared with a target. However, if an
executive's annual compensation is subject to the limit on tax deductibility,
under Section 162(m) of the Code, in the last year of a performance period,
then the executive shall receive an Other Stock Unit Award payout, in lieu of
the performance share payout, and the value of the payout to each such
executive for the performance period shall be (i) 0.13% of the Company's "Net
Cash Provided by Operating Activities," as adjusted, for each year in the
performance period, divided by the total number of executives receiving such
payouts, or (ii) a lesser amount, based on factors, including targets for the
Company's RTE established for performance shares for such performance period.
The committee recognizes that the Company's impending restructure will render
obsolete the performance criteria established for the long-term cycles
1994-1996 and 1995-1997. To address this transition period, and the difficulty
of setting long-term financial targets while the restructure is in process,
the committee has recommended and approved that the criteria for performance
periods 1994-1996 and 1995-1997 are deemed to have been met at the target
level. The opportunity to earn a payout above 100% is eliminated, and all
other terms and conditions of the award continue to apply.
Stock Options and Restricted Stock: Stock options are granted annually to
executive officers also in numbers based on their position rate. Like
performance shares, the magnitude of such awards is determined annually by the
committee. Stock options are granted with an exercise price equal to or
greater than the fair market value of AT&T common shares on the day of grant.
Stock options are exercisable between one and ten years from the date granted.
Such stock options provide incentive for the creation of shareholder value
29
<PAGE>
over the long term since the full benefit of the compensation package cannot
be realized unless an appreciation in the price of Company common shares
occurs over a specified number of years.
Restricted stock awards are granted occasionally to executive officers
under the AT&T 1987 Long Term Incentive Program. Restricted stock is subject
to forfeiture and may not be disposed of by the recipient until certain
restrictions established by the committee lapse. Recipients of restricted
stock are not required to provide consideration other than the rendering of
services or the payment of any minimum amount required by law.
Following the September 20, 1995 restructuring announcement, the
Compensation Committee awarded special equity incentive/ retention grants of
stock options and restricted stock units to key employees. These special
grants are targeted to retain selected people during the three-to-four-year
transition period of restructuring. The size of the grants ranges from 1.5 to
4.5 times total compensation and the options are governed by price performance
terms. The grants vest after four years provided that aggressive price
performance criteria have been satisfied. These special grants will replace
the normal annual stock option grants these employees would have received for
1996. Details of these grants for named officers are on page 37.
CEO COMPENSATION
During 1995, the Company's most highly compensated officer was Robert E.
Allen, Chairman of the Board and CEO. Mr. Allen's 1995 performance was
reviewed by the committee and discussed with the non-employee directors and
Mr. Allen. The committee also made recommendations to the board concerning
the annual component (base salary and annual bonus) and approved the long-
term component (performance shares, stock options, and restricted stock) of
his compensation. These actions were predicated on the considerations
discussed below.
A substantial portion of Mr. Allen's annual bonus is based on measurements
of success with our three key stakeholders: shareholders, customers, and
employees.
The shareholder element was measured by success relative to an EVA target
for the year of $2.2 billion. Because of adjustments for the NCR (formerly
AT&T Global Information Solutions)
30
<PAGE>
writedown, the 1995 EVA target was not met and the portion of the Chairman's
annual bonus which relates to this target was reduced accordingly. The 1995
results for the PVA, CVA, and restructuring transition measurements were met.
An AT&T performance share payout was made in 1995 based on an aggressive
average RTE target for the performance period 1992-1994. The actual average
return achieved was 99.7% of the RTE target and these results yielded a payout
of 99.0% of the performance shares awarded to Mr. Allen at the beginning of
1992.
During 1995, Mr. Allen also led AT&T in bold strategic actions, including:
(bullet) Initiation of a massive restructuring of the Company into three
stand-alone, global, strategically focused companies;
(bullet) Strengthening of the Company's presence in the wireless arena by
transitioning McCaw Cellular into AT&T Wireless Services, developing
combined packages of wireless and other services, and acquiring
licenses for new wireless services known as personal communication
services, thereby extending AT&T's reach to 80 percent of the U.S.
population;
(bullet) Launching a new business, AT&T Solutions, to offer consulting,
systems integration and outsourcing services to large global
enterprises;
(bullet) Reaching agreement on a new three-year labor contract, a process
considered a model for building on common goals and shared
commitment.
THE COMPENSATION COMMITTEE
Philip M. Hawley, Chairman
Walter Y. Elisha
Michael I. Sovern
Joseph D. Williams
Thomas H. Wyman
31
<PAGE>
FIVE-YEAR PERFORMANCE COMPARISON
The graph below provides an indicator of cumulative total shareholder returns
for the Company as compared with the S&P 500 Stock Index and a Peer Group((1))
[GRAPH]
DOLLARS
1990
1991
1992
1993
1994
1995
Plot Points for AT&T CORP.
100 135 181 190 187 246
Plot Points for S&P 500
100 130 140 154 156 215
Plot Prints for PEER GROUP
100 108 112 135 142 202
ASSUMES $100 INVESTED ON DECEMBER 31, 1990 IN AT&T COMMON STOCK, THE S&P 500
INDEX, AND PEER GROUP COMMON STOCK
TOTAL SHAREHOLDER RETURNS ASSUME REINVESTMENT OF DIVIDENDS
FOOTNOTE
1. The peer group comprises the largest companies worldwide which compete
against the Company in its two industry segments of information movement and
management, and financial services and leasing. None of the companies
competing with AT&T in information movement and management offers a fully
comparable range of products and services, although each is widely recognized
as a competitor of AT&T. The returns of each company have been weighted
according to their respective stock market capitalization for purposes of
arriving at a peer group average. The members of the peer group are as
follows: American Express Company; Ameritech Corporation; Apple Computer,
Inc.; Bell Atlantic Corporation; BellSouth Corporation; Cable & Wireless
p.l.c.; Digital Equipment Corp.; GTE Corporation; Hewlett-Packard Co.; Intel
Corp.; International Business Machines Corporation; L. M. Ericsson
Telefonaktiebolaget; MCI Communications Corp.; Motorola, Inc.; NEC Corp.;
Northern Telecom Limited; NYNEX Corporation; Pacific Telesis Group; SBC
Communications Inc.; Sprint Corporation; Texas Instruments Incorporated; U S
WEST, Inc.; and Xerox Corporation. ITT Corporation has been removed from the
peer group because it restructured its business in 1995 into three new
publicly owned companies.
32
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
ANNUAL COMPENSATION (2) LONG-TERM COMPENSATION (2)
------------------------------ ------------------------------
AWARDS PAYOUTS
------------------ --------
OTHER
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK LTIP COMPEN-
SATION AWARD(S) OPTIONS/ PAYOUTS SATION
NAME AND SALARY BONUS (3) (4) SARS (5) (6)
PRINCIPAL POSITION(1) YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------ ---- --------- --------- ------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert E. Allen 1995 1,153,000 1,524,400 581,079 0 858,000 1,855,396 102,989
Chairman of the Board 1994 1,109,000 2,253,600 467,636 0 72,854 1,885,567 104,422
and CEO 1993 1,032,000 1,356,700 341,402 0 72,854 1,348,458 118,166
Victor A. Pelson 1995 732,000 538,600 221,540 0 44,055 523,783 61,497
Executive Vice 1994 685,000 972,600 173,555 0 34,629 502,640 57,278
President- 1993 606,334 489,600 127,267 0 34,629 226,726 56,422
AT&T and Chairman of
the Global Operations
Team
Alex J. Mandl
President and Chief 1995 670,000 543,700 79,047 2,540,000 438,484 403,424 70,391
Operating Officer of 1994 629,000 853,100 104,014 0 30,220 387,137 58,010
AT&T 1993 554,167 442,900 43,345 0 30,220 226,726 45,347
William B. Marx, Jr. 1995 659,000 440,500 176,782 571,500 138,484 523,783 62,500
Senior Executive Vice 1994 598,000 830,400 134,662 0 30,220 502,640 51,408
President (7) 1993 545,000 452,067 96,130 0 30,220 226,725 51,378
Richard W. Miller (8)
Senior Executive Vice
President-AT&T and 1995 595,000 466,200 82,658 1,333,500 281,281 439,703 133,022
Chief Financial 1994 572,000 712,800 50,881 0 25,880 421,951 131,652
Officer 1993 214,773 383,800 9,598 0 75,880 0 54,456
------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
FOOTNOTES
1. Includes Chairman of the Board and Chief Executive Officer and the four
other most highly compensated executive officers as measured by salary and
bonus.
2. Compensation deferred at the election of named officers is included in the
category (e.g., bonus, LTIP payouts) and year it would have otherwise been
reported had it not been deferred.
3. Includes (a) payments of above-market interest on deferred compensation,
(b) dividend equivalents paid with respect to long-term performance shares
prior to end of three-year performance period, and other earnings on
long-term incentive compensation paid during the year, (c) tax payment
reimbursements, and (d) the value of personal benefits and perquisites.
4. On December 31, 1995 Mr. Allen held an outstanding grant of restricted
stock, and Messrs. Mandl, Marx, and Miller held outstanding grants of
restricted stock units. Mr. Allen held 12,000 shares with a value of
$777,000. On September 25, 1995, an award of restricted stock units was
granted to Messrs. Mandl, Marx, and Miller as part of the Company's special
equity incentive/retention program in the amounts of 40,000 units, 9,000
units, and 21,000 units, respectively, with a value at December 31, 1995 of
$2,590,000, $582,750, and $1,359,750, respectively. These grants vest four
years after the date of grant provided that aggressive price performance
criteria have been satisfied and carry stringent penalties for competition
and other adverse activities against the Company. The value at grant of
these units is reflected in the table above.
5. Includes distribution in 1995 to Messrs. Allen, Pelson, Mandl, Marx, and
Miller of performance shares whose three-year performance period ended
December 31, 1994. The value of 12,000 AT&T Restricted Shares which vested
in 1995 is also reflected in the payout for that year for Mr. Allen.
6. In 1995, includes (a) Company contributions to savings plans (Mr. Allen
$6,000; Mr. Pelson $6,000; Mr. Mandl $6,000; Mr. Marx $6,000; and Mr.
Miller $6,000), (b) dollar value of the benefit of premiums paid for
split-dollar life insurance policies (unrelated to term life insurance
coverage) projected on an actuarial basis (Mr. Allen $58,883; Mr. Pelson
$34,296; Mr. Mandl $45,413; Mr. Marx $38,756; and Mr. Miller $127,022),
and (c) payments equal to lost Company savings match caused by IRS
limitations (Mr. Allen $38,106; Mr. Pelson $21,201; Mr. Mandl $18,978; and
Mr. Marx $17,744).
7. Mr. Marx will serve in this role for the to be separated systems and
technology company.
8. Mr. Miller was hired by the Company and became an executive officer of the
Company in August 1993. The compensation disclosed for 1993 relates only
to a partial year.
34
<PAGE>
AGGREGATED OPTION/STOCK APPRECIATION RIGHTS
("SAR") EXERCISES IN 1995 AND YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT YEAR END AT YEAR END
(#) ($)
------------ --------------
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME (1) ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- -------------------- ----------------- ------------------ ------------ --------------
<S> <C> <C> <C> <C>
Robert E. Allen ..... 16,539 629,516 595,766 15,002,754
983,000 3,737,806
Victor A. Pelson ..... 86,696 2,004,221 143,228 2,408,519
131,555 1,562,522
Alex J. Mandl ........ 0 0 255,745 5,462,737
513,484 1,799,918
William B. Marx, Jr... 84,046 1,983,425 134,410 2,352,580
225,984 1,593,198
Richard W. Miller .... 0 0 51,760 344,528
331,281 815,690
</TABLE>
LONG-TERM INCENTIVE PLANS--AWARDS IN 1995
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
OF PERFORMANCE SHARES
UNDER NON-STOCK PRICE
PERFORMANCE BASED PLAN (2)
NUMBER OF PERIOD UNTIL --------------------------
PERFORMANCE MATURATION TARGET
NAME (1) SHARES OR PAYOUT (#)
- -------------------- --------- ----------------- --------------------------
<S> <C> <C> <C>
Robert E. Allen ..... 27,257 1995-1997 27,257
Victor A. Pelson .... 12,084 1995-1997 12,084
Alex J. Mandl ....... 10,555 1995-1997 10,555
William B. Marx, Jr.. 10,555 1995-1997 10,555
Richard W. Miller ... 8,704 1995-1997 8,704
</TABLE>
35
<PAGE>
FOOTNOTES
1. Includes Chairman of the Board and Chief Executive Officer and the four
other most highly compensated executive officers as measured by salary and
bonus.
2. In January 1995, the Performance Shares listed in the table were awarded.
Normally, the payout of awards is tied to achieving specified levels of
return-to-equity ("RTE"). The target amount would be earned if 100% of the
targeted RTE rate is achieved. At its December 1995 meeting, the
Compensation Committee recommended and approved that the performance
criteria for the 1995-1997 performance cycle be deemed to have been met at
the target level. This action was taken in acknowledgment that the
Company's restructuring had rendered the original performance criteria
inapplicable and of the difficulty of establishing revised criteria while
the restructuring was in progress. Awards will be distributed as common
stock of the Company, or as cash in an amount equal to the value of those
shares, or partly in common stock and partly in cash. However, if an
executive's annual compensation is subject to the limit on tax
deductibility, under Section 162(m) of the Code, in the last year of a
performance period, then the executive shall receive an Other Stock Unit
Award payout, in lieu of the performance share payout, and the value of the
payout to each such executive for the performance period shall be (i) 0.13%
of the Company's "Net Cash Provided by Operating Activities," as adjusted,
for each year in the performance period, divided by the total number of
executives receiving such payouts, or (ii) a lesser amount, based on
factors, including targets for the Company's RTE established for
performance shares for such performance period.
36
<PAGE>
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF
SHARES GRANT
UNDERLYING % OF TOTAL DATE
OPTIONS OPTIONS EXERCISE PRESENT
GRANTED (2) GRANTED TO PRICE EXPIRATION VALUE (3)
NAME (1) # EMPLOYEES ($/SH) DATE ($)
- -------------------- ---------------------- ----------- ------ -------- -----------
<S> <C> <C> <C> <C> <C>
Robert E. Allen 108,000} 49.9375 1/3/05 1,138,320
750,000} 6.46 63.5000 9/25/05 9,705,000
Victor A. Pelson 44,055 0.33 49.9375 1/3/05 464,340
Alex J. Mandl 38,484} 49.9375 1/3/05 405,621
400,000} 3.30 63.5000 9/25/05 5,176,000
William B. Marx, Jr. 38,484} 49.9375 1/3/05 405,621
100,000} 1.04 63.5000 9/25/05 1,294,000
Richard W. Miller 31,281} 49.9375 1/3/05 329,702
250,000} 2.12 63.5000 9/25/05 3,235,000
</TABLE>
FOOTNOTES
1. Includes Chairman of the Board and Chief Executive Officer and the four
other most highly compensated executive officers as measured by salary and
bonus.
2. Includes the regular annual grant of options as well as a special equity
incentive/retention grant following the announcement of the Company's
intended restructuring. Options granted 1/3/95 become exercisable to the
extent of one-third of the grant on 1/3/96, 1/3/97, and 1/3/98,
respectively. Options granted 9/25/95 become exercisable four years after
the date of grant provided that aggressive price performance criteria have
been satisfied.
3. In accordance with Securities and Exchange Commission rules, the
Black-Scholes option pricing model was chosen to estimate the grant date
present value of the options set forth in this table. The Company's use of
this model should not be construed as an endorsement of its accuracy at
valuing options. All stock option valuation models, including the Black-
Scholes model, require a prediction about the future movement of the stock
price. The following assumptions were made for purposes of calculating the
Grant Date Present Value: for the January grant, an option term of 7 years,
volatility at .1769, dividend yield at 2.77%, interest rate at 7.83%, and a
3% per year discount for each year in the vesting period for risk of
forfeiture over the 3-year vesting schedule, and for the September grant,
an option term of 7 years, volatility at .1572, dividend yield at 2.66%,
interest rate at 6.40%, and a 3% per year discount for each year in the
vesting period for risk of forfeiture over the 4-year vesting schedule. The
real value of the options in this table depends upon the actual performance
of the Company's stock during the applicable period.
37
<PAGE>
PENSION PLANS
The Company maintains the AT&T Management Pension Plan, a non-contributory
pension plan which covers all management employees, including Messrs. Allen,
Pelson, Mandl, Marx, and Miller. The normal retirement age under this plan is
65; however, retirement before age 65 can be elected under certain conditions.
Under the AT&T Management Pension Plan, annual pensions are computed on an
adjusted career average pay basis. The adjusted career average pay formula is
the sum of (a) 1.6% of the average annual pay for the six years ending
December 31, 1992, times the number of years of service prior to January 1,
1993, plus (b) 1.6% of pay subsequent to December 31, 1992. Only the basic
salary is taken into account in the formula used to compute pension amounts.
Federal laws place limitations on pensions that may be paid from the
pension trust related to the AT&T Management Pension Plan. Pension amounts
based on the AT&T Management Pension Plan formula which exceed the applicable
limitations will be paid as an operating expense.
The Company also maintains the AT&T Non-Qualified Pension Plan. Under the
plan, annual pensions for Messrs. Allen, Pelson, Mandl, Marx, and Miller, and
other senior managers are computed based primarily on actual annual bonus
awards under the Company's Short Term Incentive Plan. Pension benefits under
this plan will generally commence at the same time as benefits under the AT&T
Management Pension Plan. The annual pension amounts payable under this plan
are equal to the greater of the amounts computed under the Basic or Alternate
Formula described below.
Basic Formula:
The sum of (a) 1.5% of the average of the actual annual bonus awards for the
three-year period ending December 31, 1989, times the number of years of
service prior to January 1, 1990, plus (b) 1.6% of the actual annual bonus
awards subsequent to December 31, 1989.
38
<PAGE>
Alternate Formula:
The excess of (a) 1.7% of the adjusted career average pay, over (b) 0.8% of
the covered compensation base, times years of service to retirement, minus
the benefit calculated under the AT&T Management Pension Plan formula
(without regard to limitations imposed by the Internal Revenue Code). For
purposes of this formula, adjusted career average pay is determined by
dividing the sum of the employee's total adjusted career income by the
employee's actual term of employment at retirement. Total adjusted career
income is the sum of (A) and (B), where (A) is the sum of (i) the employee's
years of service prior to January 1, 1993, multiplied by the employee's
average annual compensation (within the meaning of the AT&T Management
Pension Plan) for the three-year period ending December 31, 1992, without
regard to the limitations imposed by the Internal Revenue Code, plus (ii)
the employee's years of service prior to January 1, 1990, multiplied by the
average of the employee's actual annual bonus awards for the three-year
period ending December 31, 1989, and (B) is the sum of the employee's actual
compensation (within the meaning of the AT&T Management Pension Plan) after
December 31, 1992, without regard to the limitations imposed by the Internal
Revenue Code, and actual annual bonus awards subsequent to December 31,
1989. The covered compensation base used in this formula is the average of
the maximum wage amount on which an employee was liable for social security
tax for each year beginning with 1961 and ending with 1995. In 1995, the
covered compensation base was $25,800.
In 1993, an Alternative Minimum Formula ("AMF"), applicable to active
senior managers with five years of service who are participants in the AT&T
Non-Qualified Pension Plan as of December 31, 1993, was established. The
annual pension amount payable under the AMF is equal to the greater of the
amounts computed under formulas A and B plus an additional percent increase
factor as described below:
Formula A:
The sum of (a) 1.5% of the average of the total compensation for the
three-year period ending December 31, 1992, times the
39
<PAGE>
number of years of service prior to January 1, 1993, plus (b) 1.6% of the
total compensation from January 1, 1993, to December 31, 1993. For purposes
of this Formula A, total compensation shall be basic salary plus actual
annual bonus awards. The pension amounts resulting from this Formula A will
be reduced to reflect retirements prior to age 55.
Formula B:
The excess of (a) 1.7% of the adjusted career average pay, over (b) 0.8% of
the covered compensation base, times years of service to December 31, 1993.
For purposes of this Formula B, adjusted career average pay is determined by
dividing the sum of the employee's total adjusted career income used for
purposes of Formula A, by the employee's actual term of employment to
December 31, 1993. The covered compensation base used in this Formula B is
the average of the maximum wage amounts on which an employee was liable for
social security tax for each year beginning with 1959 and ending with 1993.
In 1993, the covered compensation base was $22,800. The pension amounts
resulting from this Formula B will be reduced to reflect retirements prior
to age 60.
An additional percent increase factor based on age and service is applied
to the pension amount resulting from the higher of Formula A or B. The total
AMF pension results in a fixed benefit and such amount is reduced by the
amount payable under the AT&T Management Pension Plan. It is anticipated that
after 1997, a senior manager's normal pension increases resulting from
additional age and service as well as possible future pension plan amendments
could cause the regular accrued pension benefit to exceed the fixed AMF
benefit. Pensions resulting from the AMF will be payable under the AT&T
Non-Qualified Pension Plan.
As part of their employment agreements, the Company entered into a
supplemental pension arrangement with Messrs. Mandl and Miller. Pursuant to
his arrangement, if Mr. Mandl's employment is terminated on or after age 55
for any reason other than Company-
40
<PAGE>
initiated termination for "cause," as defined, he will be entitled to
immediate pension benefits based on the higher of (1) a pension determined by
his actual net credited service and calculated under the then-existing Company
qualified and non-qualified pension formulas, but without reference to age and
service eligibility requirements, or (2) a fixed minimum monthly pension
schedule which ranges from $30,432 at age 55 to $74,459 at age 65. Pursuant to
Mr. Miller's arrangement, if employment is terminated for any reason other
than Company- initiated termination for "cause," as defined, after completion
of eight years of Company service, he will be entitled to immediate pension
benefits based on his actual net credited service and calculated under the
then-existing Company qualified and non-qualified pension formulas, but
without reference to age and service eligibility requirements. Pension
benefits payable under these arrangements will be paid out of the Company's
operating income, and will be offset by all amounts actually received by
Messrs. Mandl and Miller under any other Company qualified or non-qualified
retirement plan or arrangement. In addition, Messrs. Mandl and Miller will be
entitled to certain other post-retirement benefits that are generally made
available to retired executive officers and service pension-eligible senior
managers from time to time.
In the event Mr. Mandl's employment is terminated by the Company for any
reason other than for "cause," as defined, prior to age 55, he will be
eligible for a severance benefit equal to 200% of his then base salary under
the provisions of his employment agreement. The year 1996 is the final year of
a three-year severance agreement with Mr. Miller. In the event Mr. Miller's
employment is terminated by the Company for any reason other than for "cause,"
as defined, anytime prior to August 9, 1996, he will be eligible for a
severance benefit which ranges from 189% to 100% of base salary.
Senior managers (including Messrs. Mandl and Miller) and certain other
management employees who are hired at age 35 or over are covered by a
supplemental AT&T Mid-Career Pension Plan. For
41
<PAGE>
specified managers retiring with at least five years in level, the plan
provides additional pension credits equal to the difference between age 35 and
their maximum possible years of service attainable at age 65, but not to
exceed actual net credited service, at approximately one-half the rate in the
AT&T Management Pension Plan.
Pension amounts under either the AT&T Management Pension Plan formula, the
AT&T Non-Qualified Pension Plan, or the AT&T Mid-Career Pension Plan are not
subject to reductions for social security benefits or other offset amounts. If
Messrs. Allen and Marx continue in the positions given above and retire at the
normal retirement age of 65, the estimated annual pension amounts payable
under the AT&T Management Pension Plan formula and the AT&T Non-Qualified
Pension Plan would be $1,471,000, and $571,600, respectively. Mr. Pelson
announced his retirement effective the second quarter of 1996 and his pension
at such retirement would approximate $587,300. For Messrs. Mandl and Miller,
the estimated annual pension amounts payable under the AT&T Management Pension
Plan formula, the AT&T Non-Qualified Pension Plan, and the AT&T Mid-Career
Pension Plan would be $624,900 and $384,600, respectively. Amounts shown are
straight- life annuity amounts not reduced by a joint and survivorship
provision which is available to these officers named.
The Company has reserved the right to purchase annuity contracts to satisfy
its unfunded obligations to any of these officers under the AT&T Non-Qualified
Pension Plan. In the event the Company purchases an annuity contract for any
officer, the pension payments for such officer will vary from that set forth
above. Then there would be a tax gross-up payment to the officer and annuity
benefits paid by the annuity provider will be reduced to offset the tax
gross-up payment. The after-tax pension benefit will be the same as the
after-tax benefit the participant would otherwise have received under the AT&T
Non-Qualified Pension Plan.
42
<PAGE>
OTHER INFORMATION
A Directors' and Officers' Liability Policy was renewed effective July 1,
1995, with Lloyds of London and other carriers. The policy insures AT&T for
certain obligations incurred in the indemnification of its directors and
officers under New York law or under contract and insures directors and
officers when such indemnification is not provided by AT&T. The one-year
policy's cost is $1,416,000.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitations by mail, a number of regular
employees of the Company and of its subsidiaries may solicit proxies in person
or by telephone. The Company also has retained Morrow & Co. to aid in the
solicitation of proxies, at an estimated cost of $18,000 plus reimbursement of
reasonable out-of- pocket expenses.
The above notice and proxy statement are sent by order of the board of
directors.
Marilyn J. Wasser
Vice President-Law and
Secretary
Dated: February 27, 1996
43
<PAGE>
[BLANK PAGE]
<PAGE>
[AT&T LOGO]
32 Avenue of the Americas
New York, NY 10013-2412
Recycled
[LOGO] Paper
<PAGE>
PROXY [AT&T LOGO]
AT&T Corp.
32 Avenue of the Americas, New York, NY 10013
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING ON APRIL 17, 1996
=============================================================================
The undersigned hereby appoints R.E. Allen, B.K. Johnson and T.H. Wyman, and
each of them, proxies, with the powers the undersigned would possess if
personally present, and with full power of substitution, to vote all common
shares of the undersigned in AT&T Corp. at the annual meeting, of shareholders
to be held at the James L. Knight International Center in Miami, Florida, at
9:30 A.M. on April 17, 1996, and at any adjournment thereof, upon all subjects
that may properly come before the meeting, including the matters described in
the proxy statement furnished herewith, subject to any directions indicated on
the other side of this card. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE
FOR THE ELECTION OF ALL LISTED NOMINEES, IN ACCORD WITH THE DIRECTORS'
RECOMMENDATIONS ON THE OTHER SUBJECTS LISTED ON THE OTHER SIDE OF THIS CARD
AND, AT THEIR DISCRETION, ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE MEETING. (If you have indicated any changes or voting limitations on this
side of the card, please mark the "Special Attention" box on the other side.)
This card also provides voting instructions for shares held in the dividend
reinvestment plan and, if registrations are identical, shares held in the
various employee stock purchase and savings plans as described in the proxy
statement. Your vote for the election of directors may be indicated on the
other side. Nominees are--R.E. Allen, K.T. Derr, M.K. Eickhoff, W.Y. Elisha,
B.K. Johnson, R.S. Larsen, A.J. Mandl, D.F. McHenry, M.I. Sovern, J.D.
Williams, and T.H. Wyman. PLEASE SIGN ON THE OTHER SIDE AND RETURN PROMPTLY TO
P.O. BOX 8872, EDISON, NJ 08818-9241. IF YOU DO NOT SIGN AND RETURN A PROXY, OR
ATTEND THE MEETING AND VOTE BY BALLOT, YOUR SHARES CANNOT BE VOTED.
=============================================================================
DETACH HERE FROM PROXY VOTING CARD
111th ANNUAL MEETING
OF AT&T SHAREHOLDERS
---------------------------------------
Wednesday, April 17, 1996
9:30 am
James L. Knight International Center
[Travel Guide Map] Miami Convention Center
400 Southeast 2nd Avenue
Miami, Florida
Public transportation is available by
Metromover, which stops at the Knight
Center.
Public parking is available in garages
adjacent to the building.
<PAGE>
[BOX-W/X] 8777
DIRECTORS RECOMMEND A VOTE "FOR"
----------------------------------
WITHHELD
FOR ALL FROM ALL
nominees nominees
A. Election of
Directors
(page 7) [BOX] [BOX]
FOR ALL EXCEPT the following nominee(s):
- ------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
B. Ratification
of Auditors
(page 13) [BOX] [BOX] [BOX]
C. AT&T 1996
Employee Stock
Purchase Plan
(page 13) [BOX] [BOX] [BOX]
DIRECTORS RECOMMEND A VOTE "AGAINST"
THE SHAREHOLDER PROPOSALS REGARDING
--------------------------------------
FOR AGAINST ABSTAIN
1. Political Contributions
(page 18) [BOX] [BOX] [BOX]
2. Executive Compensation
(page 20) [BOX] [BOX] [BOX]
3. China and former
Soviet Union
operations
(page 21) [BOX] [BOX] [BOX]
SPECIAL ATTENTION
Mark here if you have noted [BOX]
voting limitations.
ANNUAL REPORT
Mark here to discontinue [BOX]
extra annual report (page 3).
ANNUAL MEETING
Mark here if you plan to [BOX]
attend the annual meeting.
SIGNATURE(S) DATE , 1996
----------------------------------------- ------------
Please sign this proxy as name(s) appears above and return it promptly whether
or not you plan to attend the meeting. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the capacity in which
you are signing. If you do attend the meeting and decide to vote by ballot,
such vote will supersede this proxy.
DETACH HERE FROM PROXY VOTING CARD
[AT&T LOGO]
ANNUAL MEETING
OF SHAREHOLDERS
Wednesday, April 17, 1996
Admission Ticket 9:30 am
- ---------------------------------- --------------------------------------
AGENDA
8:30 am Doors Open
9:30 Introduction and Welcome
Chairman's Remarks
Election of Directors
Ratification of Auditors
Directors' Proposal
Shareholder Proposals
11:00 Voting
General Discussion
Adjournment (noon)
- ------------------------------------------------------------------------------
Please present this ticket for admittance of shareholder(s) named above and a
guest. See reverse for map of area.
Hearing-amplification equipment and sign interpretation will be provided.
AT&T
1996 EMPLOYEE STOCK PURCHASE PLAN
AT&T Corp., a New York corporation, hereby adopts this AT&T 1996
Employee Stock Purchase Plan (the "Plan") as of the Effective Date. The
purposes of this Plan are as follows:
(1) To assist employees of the Company and its Participating
Subsidiaries in acquiring a stock ownership interest in the Company
pursuant to a plan which is intended to qualify as an "employee stock
purchase plan" under section 423 of the Internal Revenue Code of
1986, as amended.
(2) To help employees provide for their future security and
to encourage them to remain in the employment of the Company and its
Participating Subsidiaries.
1. Definitions
Whenever any of the following terms is used in the Plan with the
first letter or letters capitalized, it shall have the following meaning
unless the context clearly indicates to the contrary (such definitions to be
equally applicable to both the singular and plural forms of the terms
defined):
(a) "Code" means the Internal Revenue Code of 1986, as amended.
(b) "Committee" means the committee appointed to administer the Plan
pursuant to paragraph 10.
(c) "Company" means AT&T Corp., a New York corporation.
(d) "Dates of Exercise" means the dates as of which an Option is
exercised and the Stock subject to that Option is purchased. With respect to
any Option, the Dates of Exercise are the last day of each month on which Stock
is traded on the New York Stock Exchange during the Option Period in which that
Option was granted.
(e) "Date of Grant" means the date as of which an Option is granted,
as set forth in paragraph 3(a).
(f) "Eligible Compensation" means total cash compensation received
from the Company or a Participating Subsidiary as regular compensation during
an Option Period. By way of illustration, and not by way of limitation,
Eligible Compensation includes regular compensation such as salary, wages,
overtime, shift differentials, bonuses, commissions, and incentive
compensation, but excludes relocation expense reimbursements, foreign service
premiums, tuition or other reimbursements, income realized as a result of
participation in any stock option, stock purchase, or similar plan of the
Company or any Participating Subsidiary.
<PAGE>
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (continued)
(g) "Effective Date" means July 1, 1996.
(h) "Eligible Employee" means any employee of the Company or a
Participating Subsidiary who meets the following criteria:
(1) the employee does not, immediately after the Option is
granted, own (within the meaning Code ss.ss. 423(b)(3) and 424(d))
stock possessing five percent or more of the total combined voting
power or value of all classes of stock of the Company or of a
Subsidiary;
(2) the employee has completed six months of employment
for the Company or a Subsidiary; and
(3) the employee's customary employment is 20 hours or
more a week.
(i) "Option" means an option granted under the Plan to an Eligible
Employee to purchase shares of Stock.
(j) "Option Period" means with respect to any Option the period
beginning upon the Date of Grant and ending on the June 30 or December 31
immediately following the Date of Grant, whichever is earlier, or ending on
such other date as the Committee shall determine. No Option Period may exceed
5 years from the Date of Grant.
(k) "Option Price" with respect to any Option has the meaning set
forth in paragraph 4(b).
(l) "Participant" means an Eligible Employee who has complied with
the provisions of paragraph 3(b).
(m) "Participating Subsidiary" means any present or future Subsidiary
that the Committee designates to be eligible to participate in the Plan, and
that elects to participate in the Plan.
(n) "Periodic Deposit Account" means the account established and
maintained by the Company to which shall be credited pursuant to Section
3(c) amounts received from Participants for the purchase of Stock under the
Plan.
(o) "Plan" means this AT&T 1996 Employee Stock Purchase Plan.
(p) "Plan Year" means the calendar year.
(q) "Stock" means shares of common stock, par value $1.00 per share,
of the Company.
(r) "Stock Purchase Account" means the account established and
maintained by the Company to which shall be credited pursuant to Section 4(c)
Stock purchased upon exercise of an Option under the Plan.
<PAGE>
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued)
(s) "Subsidiary" means any corporation, other than the Company, in an
unbroken chain of corporations beginning with the Company, if at the time of
the granting of the Option, each of the corporations, other than the last
corporation, in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
2. Stock Subject to Plan
Subject to the provisions of paragraph 8 (relating to adjustment
upon changes in the Stock), the Stock which may be sold pursuant to Options
granted under the Plan shall not exceed in the aggregate 50,000,000 shares,
and may be newly issued shares or treasury shares or shares bought in the
market, or otherwise, for purposes of the Plan.
3. Grant of Options
(a) General Statement
The Company may grant Options under the Plan to all Eligible
Employees on January 1 and/or July 1 of each Plan Year or on such other date
as the Committee shall designate. The term of each Option shall end on the
last day of the Option Period with respect to which the Option is granted.
With respect to each Offering Period, each Eligible Employee shall be granted
an Option, on the Date of Grant, for as many full and fractional shares of
Stock as the Eligible Employee may purchase with up to 10% of the Compensation
he or she receives during the Option Period (or during any portion of the
Option Period as the Eligible Employee may elect to participate).
(b) Election to Participate
Each Eligible Employee who elects to participate in the Plan shall
communicate to the Company, in accordance with procedures established by the
Committee, an election to participate in the Plan whereby the Eligible
Employee designates a stated whole percentage equaling at least 1%, but no
more than 10% of his or her Eligible Compensation during the Option Period to
be deposited periodically in his or her Periodic Deposit Account under
subparagraph (c). The cumulative amount deposited in the Periodic Deposit
Account during a Plan Year with respect to any Eligible Employee may not
exceed the limitation stated in subparagraph (d). A Participant's election to
participate in the Plan shall continue in effect during the current and
subsequent Option Periods until changed pursuant to subparagraph 3(c).
(c) Periodic Deposit Accounts
The Company shall maintain a Periodic Deposit Account for each
Participant and shall credit to that account in U.S. dollars all amounts
received under the Plan from the Participant. No interest will be paid to any
Participant or credited to his or her Periodic Deposit Account
<PAGE>
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued)
under the Plan with respect to such funds. All amounts credited to a
Participant's Periodic Deposit Account shall be used to purchase Stock under
subparagraph 4(c) and no portion of a Participant's Periodic Deposit Account
shall be refunded to him or her.
Credits to an Eligible Employee's Periodic Deposit Account shall be
made by payroll deduction or by other alternate payment arrangements, in
accordance with rules and procedures established by the Committee. An Eligible
Employee may increase, decrease or eliminate the periodic credits to his or
her Periodic Deposit Account for future periods by filing a new election
amount at any time during an Option Period. The change shall become effective
in accordance with the Committee's rules and procedures as soon as practicable
after the Company receives the election, but the change will not affect the
amounts deposited with respect to Eligible Compensation sooner than the
Eligible Compensation payable with respect to the next pay period after the
Company receives the authorization.
(d) $25,000 Limitation
No Eligible Employee shall be permitted to purchase Stock under the
Plan or under any other employee stock purchase plan of the Company or of any
Subsidiary which is intended to qualify under Code ss. 423, at a rate which
exceeds $25,000 in fair market value of Stock (determined at the time the
Option is granted) for each calendar year in which any such Option granted to
such Participant is outstanding at any time.
4. Exercise of Options
(a) General Statement
On each Date of Exercise, the entire Periodic Deposit Account of each
Participant shall be used to purchase at the Option Price whole and/or
fractional shares of Stock subject to the Option. Each Participant
automatically and without any act on his or her part will be deemed to have
exercised his or her Option on each such Date of Exercise to the extent that
the amounts then credited to the Participant's Periodic Deposit Account under
the Plan are used to purchase Stock.
(b) Option Price Defined
The Option Price per share of Stock to be paid by each Participant on
each exercise of his or her Option shall be an amount in U.S. dollars equal to
85% of the fair market value of a share of Stock as of the applicable Date of
Exercise. The fair market value of a share of Stock as of an applicable Date
of Exercise shall be the average of the high and low price of a share of Stock
on the New York Stock Exchange on such date.
(c) Stock Purchase Accounts; Stock Certificates
The Company shall maintain a Stock Purchase Account for each
Participant to reflect the Stock purchased under the Plan by the Participant.
Upon exercise of an Option by a
<PAGE>
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued)
Participant pursuant to subparagraph 4(a), the Company shall credit to the
Participant's Stock Purchase Account the whole or fractional shares of Stock
purchased at that time.
Except as provided in paragraph 5, certificates with respect to Stock
credited to a Participant's Stock Purchase Account shall be issued only on
request by the Participant for a distribution of whole shares or when
necessary to comply with the transaction requirements outside the United
States. Upon issuance of such a Stock certificate to a Participant, the
Participant's Stock Purchase Account shall be adjusted to reflect the number
of shares of Stock distributed to the Participant.
5. Rights on Retirement, Death, Termination of Employment
If a Participant retires, dies, or otherwise terminates employment, or
if the corporation that employs a participant ceases to be a Participating
Subsidiary, then to the extent practicable, no further amounts shall be
credited to the Participant's Periodic Deposit Account from any pay due and
owing with respect to the Participant after such retirement, death, or other
termination of employment. All amounts credited to such a Participant's
Periodic Deposit Account shall be used on the next Date of Exercise in that
Option Period to purchase Stock under paragraph 4. Such a Participant's Stock
Purchase Account shall be terminated, and Stock certificates with respect to
whole shares of Stock and cash with respect to fractional shares of Stock shall
be distributed as soon as practicable after such Date of Exercise.
Notwithstanding anything in this Plan to the contrary and except to
the extent permitted under Code ss. 423(a), a Participant's Option shall not
be exercisable more than three months after the Participant retires or
otherwise ceases to be employed by the Company or a Participating Subsidiary,
including as a result of the corporation ceasing to be a Participating
Subsidiary.
6. Restriction Upon Assignment
An Option granted under the Plan shall not be transferable otherwise
than by will or the laws of descent and distribution, and is exercisable
during the Participant's lifetime only by the Participant. The Company will
not recognize and shall be under no duty to recognize any assignment or
purported assignment by a Participant, other than by will or the laws of
descent and distribution, of the Participant's interest in the Plan or of his
or her Option or of any rights under his or her Option.
7. No Rights of Stockholder Until Exercise of Option
A Participant shall not be deemed to be a stockholder of the Company,
nor have any rights or privileges of a stockholder, with respect to the number
of shares of Stock subject to an Option. A Participant shall have the rights
and privileges of a stockholder of the Company when, but not until, the
Participant's Option is exercised pursuant to paragraph 4(a) and the Stock
purchased by the Participant at that time has been credited to the
Participant's Stock Purchase Account.
<PAGE>
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued)
8. Changes in the Stock; Adjustments of an Option
If, while any Options are outstanding, the outstanding shares of
Stock have increased, decreased, changed into, or been exchanged for a
different number or kind of shares or securities of the Company, or there has
been any other change in the capitalization of the Company, through
reorganization, merger, recapitalization, reclassification, stock split,
reverse stock split, spinoff or similar transaction, appropriate and
proportionate adjustments may be made by the Committee in the number and/or
kind of shares which are subject to purchase under outstanding Options and to
the Option Exercise Price or prices applicable to such outstanding Options,
including, if the Committee deems appropriate, the substitution of similar
options to purchase shares of another company (with such other company's
consent). In addition, in any such event, the number and/or kind of shares
which may be offered in the Options shall also be proportionately adjusted. No
adjustments to outstanding Options shall be made for dividends paid in the
form of stock.
9. Use of Funds; Repurchase of Stock
All funds received or held by the Company under the Plan will be
included in the general funds of the Company free of any trust or other
restriction and may be used for any corporate purpose. The Company shall not
be required to repurchase from any Eligible Employee shares of Stock which
such Eligible Employee acquires under the Plan.
10. Administration by Committee
(a) Appointment of Committee
The board of directors of the Company, or its delegate, shall appoint
a Committee, which shall be composed of one or more members, to administer the
Plan on behalf of the Company. Each member of the Committee shall serve for a
term commencing on the date specified by the board of directors of the
Company, or its delegate, and continuing until he or she dies or resigns or is
removed from office by such board of directors, or its delegate.
(b) Duties and Powers of Committee
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to:
(1) determine when the initial and subsequent Option
Periods will commence;
(2) interpret the Plan and the Options;
(3) adopt such rules for the administration, interpretation,
and application of the Plan as are consistent with the
Plan and Code ss. 423; and
<PAGE>
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued)
(4) interpret, amend, or revoke any such rules.
In its absolute discretion, the board of the directors of the Company
may at any time and from time to time exercise any and all rights and duties
of the Committee under the Plan. The Committee may delegate any of its
responsibilities under the Plan by designating in writing other persons to
carry out any or all of such responsibilities.
(c) Majority Rule
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
(d) Compensation; Professional Assistance; Good Faith Actions
Each member of the Committee who is an employee of the Company or a
Subsidiary shall receive no additional compensation for his or her services
under the Plan. Each Committee member who is not an employee of the Company or
a Subsidiary shall receive such compensation for his or her services under the
Plan as may be determined by the board of directors of the Company, or its
delegate. All expenses and liabilities incurred by members of the Committee in
connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers, or other persons. The Committee, the Company, and its officers and
directors shall be entitled to rely upon the advice, opinions, or valuations
of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in
respect to any such action, determination or interpretation.
11. No Rights as an Employee
Nothing in the Plan nor any Option shall be construed to give any
person (including any Eligible Employee or Participant) the right to remain in
the employ of the Company or a Subsidiary or to affect the right of the
Company and Subsidiaries to terminate the employment of any person (including
any Eligible Employee or Participant) at any time with or without cause, to
the extent otherwise permitted under law.
12. Term of Plan
No Option may be granted during any period of suspension of the Plan
or after termination of the Plan, and in no event may any Option be granted
under the Plan after five years from the commencement of the initial Option
Period.
<PAGE>
AT&T 1996 EMPLOYEE STOCK PURCHASE PLAN (Continued)
13. Amendment of the Plan
The board of directors of the Company, or its delegate, may amend,
suspend, or terminate the Plan at any time; provided that approval by the vote
of the holders of more than 50% of the outstanding shares of the Stock
entitled to vote shall be required to amend the Plan to reduce the Exercise
Price or increase the number of shares of Stock reserved for the Options under
the Plan.
14. Effect Upon Other Plans
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary, except to the
extent required by law. Nothing in this Plan shall be construed to limit the
right of the Company or any Subsidiary (a) to establish any other forms of
incentives or compensation for employees of the Company or any Subsidiary or
(b) to grant or assume options otherwise than under this Plan in connection
with any proper corporate purpose, including, but not by way of limitation,
the grant or assumption of options in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business, stock or
assets of any corporation, firm or association.
15. Notices
Any notice to be given under the terms of the Plan to the Company
shall be addressed to the Company in care of the Committee and any notice to
be given to the Eligible Employee shall be addressed to the Eligible Employee
at his or her last address as reflected in the Company's records. By a notice
given pursuant to this paragraph, either party may hereafter designate a
different address for notices to be given to it or the Eligible Employee. Any
notice which is required to be given to the Eligible Employee shall, if the
Eligible Employee is then deceased, be given to the Eligible Employee's
personal representative if such representative has previously informed the
Company of his or her status and address by written notice under this
paragraph. Any notice shall have been deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office, branch post office, or other depository
regularly maintained by the United States Postal Services.
16. Titles
Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
